Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Confidential Submission #2, submitted to the Securities and Exchange Commission on April 23, 2021
This draft registration statement has not been publicly filed with the Securities and Exchange Commission
and all information herein remains strictly confidential.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
The Fresh Market Holdings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware | 5411 | 61-1789388 | ||
(State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
The Fresh Market Holdings, Inc.
300 N. Greene Street, Suite 1100
Greensboro, NC 27401
(336) 272 1338
(Address, including zip code, and telephone number, including
area code, of Registrants principal executive offices)
Carlos Clark
Senior Vice President, General Counsel and Corporate Secretary
The Fresh Market Holdings, Inc.
300 N. Greene Street, Suite 1100
Greensboro, NC 27401
(336) 272 1338
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Please send copies of all communications to:
Howard A. Kenny New York, NY 10178 (212) 309 6843 |
Marc Jaffe Michael Benjamin 885 3rd Avenue |
Approximate date of commencement of the proposed sale to the public: As soon as practicable after the date this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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. (Check one):
Large accelerated filer | ☐ | Non-accelerated filer | ☒ | |||
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 to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Proposed Maximum Aggregate Offering Price(1)(2) |
Amount of Registration Fee(1)(3) | ||
Common stock, par value $0.01 per share |
$ | $ | ||
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(1) | Includes the offering price of the additional shares of common stock that the underwriters have the option to purchase from the Registrant. See Underwriting. |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
(3) | To be paid in connection with the initial public filing of the registration statement. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated , 2021
PRELIMINARY PROSPECTUS
Shares
The Fresh Market Holdings, Inc.
Common Stock
This is the initial public offering of The Fresh Market Holdings, Inc., a Delaware corporation. We are offering shares of our common stock.
We expect the public offering price to be between $ and $ per share. Prior to this offering, no public market exists for the shares. We intend to apply to list our common stock on under the symbol TFM.
Following this offering, certain investment funds (the Apollo Funds) managed by affiliates of Apollo Global Management, Inc. (together with its subsidiaries, Apollo) will beneficially own approximately % of our outstanding common stock (or approximately % if the underwriters exercise in full their option to purchase additional shares of our common stock). As a result, we will be a controlled company within the meaning of the corporate governance standards for listed companies and will be exempt from certain corporate governance requirements of such standards. See Risk FactorsRisks Related to This Offering and Ownership of Our Common Stock, ManagementControlled Company Exemption and Certain Relationships and Related Party Transactions.
Investing in our common stock involves risks that are described in the Risk Factors section beginning on page 24 of this prospectus.
Neither the Securities and Exchange Commission (SEC) nor any other regulatory body or state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per |
Total | |||
Initial public offering price |
$ | $ | ||
Underwriting discounts and commissions(1) |
$ | $ | ||
Proceeds to us, before expenses |
$ | $ |
(1) | We refer you to the section Underwriting on page 134 of this prospectus for additional information regarding compensation payable to the underwriters. |
We have granted the underwriters the option, for a period of 30 days from the date of this prospectus, to purchase up to an additional shares of common stock from us at the initial public offering price, less the underwriting discounts and commissions.
The underwriters expect to deliver shares of our common stock against payment in New York, New York on , 2021.
Credit Suisse
The date of this prospectus is , 2021.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS AND SUMMARY OF RISK FACTORS |
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24 | ||||
52 | ||||
53 | ||||
54 | ||||
55 | ||||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
57 | |||
79 | ||||
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F-1 |
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
You should rely only on the information contained in this prospectus and any related free writing prospectus that we may provide to you in connection with this offering. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States. See Underwriting.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
We use various trademarks, trade names and service marks in our business, including without limitation The Fresh Market® and TFM®. This prospectus contains references to our trademarks and service marks. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
INDUSTRY AND MARKET DATA
We include in this prospectus statements regarding factors that have impacted our industry. Such statements are statements of belief and are based on industry data and forecasts that we have obtained from industry publications and surveys, including those published by Consumer Reports and Nielsen, as well as internal company sources. We also cite figures from a survey recently conducted by Integrated Insight (the Integrated Insight Survey). Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. In addition, while we believe that the industry information included herein is generally reliable, such information is inherently imprecise. While we are not aware of any misstatements regarding the industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption Risk Factors in this prospectus.
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BASIS OF PRESENTATION
In this prospectus, unless otherwise indicated or the context otherwise requires, references to the Company, the Issuer, we, us, our and Holdings refer to The Fresh Market Holdings, Inc. (f.k.a. Pomegranate Parent Holdings, Inc.), a Delaware corporation, and its consolidated subsidiaries. References to The Fresh Market Intermediate Holdings or Intermediate Holdings refer to The Fresh Market Intermediate Holdings, Inc. (f.k.a. Pomegranate Holdings, Inc.), a Delaware corporation, and a wholly owned subsidiary of the Company. References to The Fresh Market and TFM refer to The Fresh Market, Inc., a Delaware corporation, a wholly owned subsidiary of Intermediate Holdings and an indirect wholly owned subsidiary of the Company.
This prospectus contains the consolidated financial statements of The Fresh Market Holdings, Inc. We operate on a 52- or 53-week fiscal year that ends on the Sunday nearest to January 31. Each quarterly period has 13 weeks, except for a 53-week year, when the fourth quarter has 14 weeks. The fiscal years ended January 26, 2020 and January 27, 2019 each consisted of 52 weeks. The fiscal year ended January 31, 2021 consisted of 53 weeks. References to fiscal 2020 are to the fiscal year ended January 31, 2021. References to fiscal 2019 are to the fiscal year ended January 26, 2020. References to fiscal 2018 are to the fiscal year ended January 27, 2019.
On March 11, 2016, the Companys subsidiary, Intermediate Holdings and Pomegranate Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Intermediate Holdings (Merger Sub) entered into an agreement and plan of merger (the Merger Agreement) with The Fresh Market. The Company, Intermediate Holdings and Merger Sub were controlled by the Apollo Funds. On April 27, 2016, pursuant to the Merger Agreement, Merger Sub merged with and into The Fresh Market with The Fresh Market surviving the merger (the Acquisition) and becoming a wholly owned subsidiary of Intermediate Holdings and an indirect wholly owned subsidiary of the Company. On March 5, 2021, the Company changed its legal name from Pomegranate Parent Holdings, Inc. to The Fresh Market Holdings, Inc. and Intermediate Holdings changed its legal name from Pomegranate Holdings, Inc. to The Fresh Market Intermediate Holdings, Inc. The Company continues to be controlled by the Apollo Funds as of the date of this prospectus.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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USE OF NON-GAAP FINANCIAL MEASURES
We believe that our financial statements and the other financial data included in this prospectus have been prepared in a manner that complies, in all material respects, with accounting principles generally accepted in the United States (GAAP) and the regulations published by the SEC. However, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Specifically, we present in this prospectus EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin, which are not recognized terms under GAAP. We believe that the presentation of these non-GAAP financial measures is appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future, as well as other items. Further, we believe that these measures provide a meaningful measure of operating profitability because we use them for performance evaluations and compensation measures for our executives, to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
These measures should not be considered as alternatives to net income, operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. These measures have important limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. For a discussion of the use of these measures and a reconciliation to the most directly comparable GAAP measures, see Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
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Welcome to The Fresh Market! Founded in 1982 in Greensboro, North Carolina, we are a convenience focused specialty retailer with 159 stores across 22 states. We offer an amazing selection of the very best fresh food the world has to offer with a focus on quality service for our guests. The original store and experience were inspired by our founder Ray Berrys trip to Europe and seeks to emulate the charm and essence of a European-style fresh food market. Our guests can see the quality of our food and smell the fresh aromas in the store as they discover what makes The Fresh Market special. Our roots as a specialty retailer have evolved to meet guests demand for the best ingredients which we thoughtfully cut, season, and prepare to provide convenient restaurant-quality meals within the home. Exceptional service is a hallmark of The Fresh Market experience, as our team members provide high-touch service and highlight the best of our differentiated offering. We invite our potential investors to experience our exceptionally clean, convenient stores located close to home, where they will discover:
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
LETTER FROM OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear Potential Stockholders -
When I joined The Fresh Market in March of 2020, I was thrilled at the opportunity to work with a brand that has a rich heritage and reputation for offering the very best food, experience, and service delivered by exceptional team members. This is a rare and powerful combination, which has worked since inception and we believe, as shown by our results in fiscal 2020 and our preliminary, unaudited results for fiscal 2021 to date, positions us well for strong performance. It is a privilege to partner with Andy Jhawar, our Chairman and highly experienced investor, and Ray Berry, the visionary founder of The Fresh Market.
Our rich heritage dates back to 1982 when Ray Berry and his wife opened the first store in Greensboro, North Carolina after returning from a trip to Europe. Ray and his wife were inspired to bring the charm and essence of an open, Old World European-style fresh food market to America. Our founders wanted to offer a more intimate and personalized shopping experience that is different from a typical warehouse-style supermarket. Their vision was to establish an epicurean experience by offering high-quality fresh food including hand-selected produce, premium meats, fresh cut flowers, daily made bread and baked goods in a differentiated in-store atmosphere. Today, we believe the taste and quality of our food is exceptional with daily procurement and in-store preparation, custom cuts offered at our meat counters, and gourmet seasonings and recipes. We maintain strict product freshness control measures implemented by our merchandising team, and in collaboration with our distributors as well as 40 family-run farms within 100 miles of our stores, we deliver an extensive assortment of high quality products to our 159 stores across 22 states.
We were publicly traded from 2010 to 2016, when we were taken private by the Apollo Funds, along with an investment by the Berry family. Since that time, we have implemented several key strategic initiatives designed to overcome challenges we faced at and after this going private transaction. These initiatives included: a merchandising refocus on our core premium fresh food, introduction of new curated meal offerings, competitive prices on frequently shopped items such as bananas, avocados, milk, lemons and butter, improved in-store execution, and investments in omni-channel capabilities and technology. I saw an opportunity to passionately pursue these initiatives with the goal of guests choosing us first, across three important trips: (i) fresh food, (ii) food for special occasions, and (iii) curated meal offerings for the home. The cornerstone of our strategy to gain share in these eating occasions is to serve our guests the best tasting food the world has to offer, with a culture of service and excellence that our dedicated team members uphold.
Our core product offering of high-quality fresh food, hard-to-find ingredients and specialty foods, local items, and curated meal offerings is resonating with our guests, both old and new. We believe The Fresh Market is positioned to capture the secular trend of consumer preference for higher-quality, fresh food. Our stores have consistently been regarded as exceptionally clean, and we have established safety and sanitation committees to ensure every store meets new enhanced protocols under the COVID-19 environment. As others in the industry have become more conventional, we have continued to differentiate our offering to create excitement about our brands reputation.
With this offering, we will return to the public markets, which we believe will allow us significant flexibility in funding our strategy, including allowing us to refinance a significant portion of our debt.
In fiscal 2020, our comparable store sales growth was 22.3%. This compares to comparable store sales changes of (1.8)% and 0.4%, for fiscal 2019 and fiscal 2018, respectively. While our recent performance is partly attributable to the impact of the COVID-19 pandemic, we believe the initiatives noted above, as well as broader changes in the food-at-home and food-away-from-home markets, also contributed significantly and will continue to spur our performance. We also believe our recent performance in this challenging environment was only able to materialize because of the amazing determination and dedication of our team members. It is truly a testament to the commitment and fortitude of
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our team members. They continually act as true brand ambassadors that showcase the best of our offerings, which reinforces our focus on reputation and service. I want to personally thank every store team member for working to make The Fresh Market one of Americas most loved brands. Through the pandemic, we prioritized being a leader in guest and employee safety; we believe we were one of the first companies to implement mask mandates and establish a cross-functional team focused on maintaining a convenient and safe guest experience. Separately, as an effort to do our part during these difficult times, we have partnered with our communities and together donated $1.6 million to Feeding America in response to the food insecurity caused by COVID-19 and also donated to the NAACP Legal Defense Fund and to the International Civil Rights Museum here in Greensboro.
During the pandemic, our guests (both existing and new) had the opportunity to experience The Fresh Markets fresh offering and service. I am confident that we will continue to earn our guests trust as we implement new initiatives that enhance our mission to make our guests everyday eating extraordinary. We look forward to having you as a part of The Fresh Markets future success as we continue to accelerate our overall mission and embark on this exciting journey together.
Jason Potter
President and Chief Executive Officer
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The Fresh Market Experience At The Fresh Market, our guests discover an amazing selection of the best food the world has to offer. We invite our guests to browse well-stocked, exceptionally clean, convenience-focused stores located close to their homes. The guest experience is our number one focus and our team members deliver impeccable service that we believe makes each trip special and memorable. Guest experience " Our team members greet guests and welcome them into our stores " We strive to inspire our guests to try new flavors by highlighting the best of our offering " Clear path to promotion and increased bonus eligibility for our team members helps retention and results in high-quality service " Make every effort to never let a guest leave our store less than completely satisfied Welcoming atmosphere " Elevated, sensory experience through fresh aromas, classical music and dim lighting " Guests describe our stores as intimate and relaxing " Exceptional cleanliness through daily deep cleaning to maintain the highest sanitation standards
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Prime cut meats Custom cuts offered daily by in-store butchers, creating a local butcher shop feel Zero trim policy ensuring every bite is enjoyed and there is no excess fat on our steaks, just the wonderful marbling High-quality USDA prime, premium choice, and grass fed natural beef dry-aged for 14 days minimum Chairman's Reserve prime pork is carefully inspected and hand selected based on key attributes and outperforms conventional pork Expertly prepared, marinated, or seasoned proteins such as our gourmet burgers that are ground fresh into 13 varieties Best-in-class produce Freshest fruits and vegetables that are sourced at their peak ripeness, contain the highest level of sugars, and have the most appetizing textures 200+ organic items every day Each store has rolled out a new, re-merchandised produce department featuring an improved layout and competitive prices 100 daily hand cut fruits and vegetables that add tremendous time savings for our guests Only purchase large specs of fruits and vegetables from our growers Fresh seafood Commitment to variety and freshness - from the docks to our stores in 72 hours First to market for seasonal specialties such as Copper River Salmon Locally sourced oysters, mussels, clams, and shrimp from several coastal states Restaurant quality meals Designed to serve various eating occasions - ready-to-cook, ready-to-heat, and ready-to-eat meals designed by our corporate chef Little Big Meals program offers a great value for a complete meal for four with protein and sides Market Meal Kits offer one pan meals that our guests can prepare in a few easy steps within 20 minutes Our Ultimate Steak Dinner program provides premium, restaurant quality steaks and sides seasoned in-house by our butchers Signature ready-to-eat chicken salad uses fresh roasted chicken, real mayonnaise, cage free eggs, and fresh chopped celery from our produce department
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Curated floral " Placed at the front of the store so guests are greeted with an abundance of color and aromas from fresh cut flowers " Rare and exotic flowers such as orchids from Hawaii " These orchids are a signature item and set the tone for the feel of the store the moment our guest walks in Fresh and imported baked goods " Imported from patisseries in France or made in our fresh bakery, our sweet and savory baked goods are high-quality and delicious " Guest favorite fruit tart is hand crafted in-store with a European tart shell, fresh cream, and one pound of fresh fruit " Signature sourdough bread is baked over three days, resulting in a tangy flavor and perfectly bubbled crust Hard-to-find and specialty items " Curated assortment of distinctive grocery products that provide the finishing touch to a great recipe or meal " Hundreds of natural, organic, specialty items throughout the grocery, dairy, and frozen food aisles that complement our high-quality fresh items " Includes unique spices or ingredients such as our wide variety of olive oil " We also have exceptional imported items such as Italian olive oil and local items supporting our communities such as Old Florida Gourmet chips and salsa Special occasions " Our premium offering is perfect for special occasions and holidays " Each holiday has a specific offering, whether it be Ham or Lamb for Easter, autumn cookie platter for Halloween, or Chateaubriand for Valentines Day " Local offerings are tailored to our communities through a carefully curated assortment that resonates with locals and visitors alike
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The following summary contains selected information about us and about this offering. It does not contain all of the information that is important to you and your investment decision. Before you make an investment decision, you should review this prospectus in its entirety, including matters set forth under Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. Some of the statements in the following summary constitute forward-looking statements. See Cautionary Note Regarding Forward-Looking Statements and Summary of Risk Factors.
Who We Are
We are a specialty retailer offering a variety of high quality, fresh foods and difficult-to-find items in a small, convenient, intimate store footprint (average 21,000 sq. ft.) where guests can see all the sightlines across the store. The store ambiance is like an Old-World European marketplace layout with an elevated, sensory experience with fresh aromas, classical music, spotlights, and exceptional cleanliness. High-touch guest service is a hallmark of The Fresh Market, as our team members strive to make guests feel like they are at home. Our combination of premium food, strong reputation for special occasions, personalized guest service, and omni-channel capabilities has resulted in comparable store sales growth of 22.3% in fiscal 2020 (compared to comparable store sales changes of (1.8)% and 0.4% for fiscal 2019 and fiscal 2018, respectively). While our fiscal 2020 results may be attributed in part to the impact of the COVID-19 pandemic, we believe they also demonstrate the effectiveness of our strategy and the initiatives we have taken, as well as broader changes in the food-at-home and food-away-from-home markets. Based on our preliminary, unaudited results to date in fiscal 2021 as the COVID-19 pandemic has begun to subside, we believe we are well positioned for continued strong performance.
Our focus is on delivering the very best for our guests fresh food trip, special occasions, and dinner tonight. Approximately 70% of our sales in fiscal year 2020 and fiscal year 2019 have come from fresh foods. This highly curated assortment primarily consisting of produce, meat, seafood, dairy, and ready-to-cook or ready-to-eat meal offerings is supported by specialized and difficult-to-find non-perishable items that account for approximately 29% of our sales, while general commoditized consumer goods, which a consumer finds in conventional retailers, account for less than 1% of our sales over the same time period. Our team members and quality experts have a merchandising approach that requires careful assembly of the food experience with consideration to numerous food attributes. Creative and visually appealing merchandising sets us apart and inspires our guests to create intricate meals for their home, best exemplified by waffles, whipped cream, and strawberries placed together on the produce floor for a delicious, chef-quality dish.
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Each of our stores cuts, seasons and prepares our food daily for optimal taste and freshness and a convenient guest experience. For example, our Peak of Flavor program allows a guest to purchase a ripe avocado or banana to eat that night, in addition to fruit that will peak in the next day or two. In order to deliver on our mission with guests and our stores, our supply chain and distribution partners supply us with the highest quality and freshest food from farm to shelf in 14 days or less. We source from both a leading national specialty distributor, along with 40 family-run farms within 100 miles of our stores, providing us the ability to continuously offer our guests high quality, fresh food. Before any item is made available in our stores, our buyers hold tastings where potential new items are tasted and evaluated. We also have partnerships with certain growers that allow us to bring in limited edition offerings, like batches of berries with exceptional sweetness as well as international specialties, such as Tasmanian cherries or stone fruit flown-in from South America to maximize freshness.
We also have a dedicated team that curates and sources local products based on a series of specifications to ensure differentiation from conventional retailers. For instance, this focus on working with local farmers and bakers whenever possible allows us to offer our guests Louisiana King Cake for Mardi Gras, North Carolina pickles, or milk in glass bottles from Battenkill Valley Creamery in upstate New York. We also source our own private label products through our small and medium sized vendors with the goal of offering the best items in select categories. We believe smaller batch sizes and proprietary formulas and recipes allow these items to outperform leading brands in terms of quality of ingredients, flavor variety, and taste. Furthermore, we take pride in making a variety of guests favorites on a daily basis including roasted chicken salad, fresh-baked nut breads, and flavored gourmet coffee.
We strive to procure sustainably farmed produce and humanely raised meats while promoting environmentally conscious brands that are in-line with our values. Our private label canned tuna is sourced from the first tuna fishery to become MSC Certified Sustainable, utilizing pole and line caught fish. We also partner with growers who are vested in taking care of the environment, such as Fair-Trade Certified squash and avocados, Rainforest Alliance Certified grapes and Fair for Life apples. Our seasonal fresh produce is purchased from 40 family-run farms within 100 miles of our stores. These examples are a small part of our commitment to creating a better future for our planet. In fiscal 2020, we donated 2.5 million pounds of food to Feeding Americas network of food banks while reducing our footprint through recycling all cardboard used in our stores.
Our small-box stores enable us to operate in established neighborhoods in close proximity to our target high-income guests (annual household incomes in excess of $75,000) and supporting our guests preference to efficiently and conveniently shop for their families. This small-box format in high population density areas near our guests homes also supports our growing curbside pickup business, which is an important component to providing our guests with an omni-channel shopping experience. Moreover, we have a strong geographic presence in the attractive Southeast markets and our stores benefit from key advantages such as lower labor costs, attractive demographics, lower lease costs and significant real estate availability. Although curbside pickup and delivery are becoming a growing part of our business, our stores are a highly differentiated showcase of an epicurean experience for inspiration and special occasion shopping that draws our guests to shop in a clean and enjoyable environment. Our team members focus on offering solutions to our guests through food pairings and inviting displays.
We were named the #1 customers favorite grocery store brand in the 2021 USA Today 10Best Readers Choice poll. The poll included all the top national grocery brands and was open for voting this spring and the winners were announced on April 23, 2021. The survey covered consumer experiential brands across multiple industries such as food, lodging and travel destinations. Further, Consumer Reports rated us amongst the cleanest grocery stores in America in 2019 and Newsweek/Statista rated us #5 for best guest service in grocery in America in 2020. We believe our exceptional store conditions gained the trust of our guests especially during the COVID-19 pandemic as guests demanded and relied upon a safe environment where they could shop. We believe we were one of the first retailers to require all team members and guests to wear personal protective equipment in our stores. In addition, our stores undergo a deep cleaning every day to ensure the safety of our team members and guests and continue to foster their trust.
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Our approximately 10,500 non-union team members are our brand ambassadors that showcase the best of our offerings. The Fresh Market experience is brought to life because of the high-touch service provided to our guests. Approximately 50% of our team members are full-time which demonstrates our commitment to providing an exceptional work environment and ongoing support to our team. According to an internal survey of customers, 91% of our guests are highly satisfied with our service experience. In each of our stores, our team members are constantly ensuring our products meet our high-quality fresh standards. We have dedicated team members in each store who cut our fresh produce daily, our butchers prepare meats to our guests specifications and our chefs prepare ready-to-eat and ready-to-cook meals. Through a simplified organizational structure that provides a visible path to promotion, numerous training opportunities and increased store-level bonus eligibility, our team members are motivated and incentivized to create a memorable guest experience.
We have spent the last few years bringing The Fresh Market back to its roots of providing a highly differentiated specialty food offering and improving the in-store and omni-channel experience. Along with the Apollo Funds support and a strengthened new management team, with five additions to the senior leadership team in 2020 (including both Jason Potter as President and Chief Executive Officer and Jim Heaney as Chief Financial Officer), we have recently delivered exceptional financial performance. We believe our results for fiscal 2020 and our preliminary, unaudited results for fiscal 2021 to date, while partly attributable to the positive impact of the COVID-19 pandemic on grocery retailers, also demonstrate the effectiveness of these initiatives in addressing challenges we faced at and immediately after our take-private transaction by the Apollo Funds in 2016, as well as broader changes in the food-at-home and food-away-from-home markets. We believe we are well positioned for continued strong performance. For fiscal 2020 compared to fiscal 2019, we achieved the following results:
| Increase in net sales from $1,522 million to $1,887 million, representing period-over-period growth of 24.0%; |
| Increase in net (loss) income from $(65.4) million to $26.9 million; |
| Total comparable store sales growth of 22.3%, which we believe is one of the highest growth rates compared to other food and specialty retailers. This compares with a change in comparable store sales of (1.8)% for fiscal 2019. Transaction count (i.e., the number of discrete sales transactions with our guests) growth was (3.0)% for fiscal 2020, compared to (3.4)% for fiscal 2019. For the three-month period ended January 31, 2021, our comparable store sales grew 25.8% compared to the prior year, with transaction count growth of 4.7%, and tonnage was up 26.6% compared to the prior year; |
| Increase in Adjusted EBITDA from $118.0 million to $219.4 million, representing period-over-period growth of 86.0%; |
| Ten consecutive quarters of Adjusted EBITDA growth compared to the comparable quarter in the prior year |
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Adjusted EBITDA is a non-GAAP financial measure. For a description of our non-GAAP financial measures and a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, see Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures.
Our Industry
Our distinctive offering allows us to compete in both consumer occasions for food-at-home and food-away-from-home. During fiscal 2020, we believe our increased net sales resulted from market share gains from food competitors (grocery and restaurants) due to our premium and fresh offering as well as the increased food-at-home spending during the COVID-19 pandemic. Additionally, the closure of more than 70 competing stores in our core markets contributed to these gains.
The following chart compares our comparable store sales growth with that of the retail grocery industry (defined as all competitors which we consider traditional grocery (i.e., Albertsons, Kroger, Publix), specialty grocery (i.e., Sprouts Farmers Market, Natural Grocers, Trader Joes), and including Mass channels (i.e., Target and Walmart) and excluding Club channels (i.e., Costco)) from May 1, 2020, following the immediate disruptions of the onset of the COVID-19 pandemic, though the end of our fiscal year on January 31, 2021.
We also believe that consumer focus on high-quality fresh and specialty foods, as well as natural and organic offerings, will continue to benefit our brand. Based on research from the Specialty Food Association, specialty food spending grew at a historical compound annual growth rate (CAGR) of 7.1% from 2017 to 2020 versus total food-at-home spending of 4.9%. (Note that the foregoing CAGR includes the positive impact on food retailers of the COVID-19 pandemic in 2020). For purposes of this study, specialty food spending is defined as spending on food, beverages, and confections that are of the highest grade, style, and/or quality in their respective categories, and the broader industry as supermarkets and grocery stores that retail general lines of food product, as well as delicatessens primarily retailing food. According to Nielsen, our core product categories of meat, produce, and prepared foods have grown 7.4%, 7.6%, and 6.2%, respectively, from 2017 to 2020. We
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believe there is no other retailer offering our differentiated assortment, with many conventional grocers primarily sourcing from commoditized consumer brands in contrast to our specialty, value-added fresh food and locally relevant product offerings.
We believe, based in part on our preliminary, unaudited performance to date in fiscal 2021, that we will continue to benefit from industry trends through alignment with changing consumer preferences:
| Consumer focus on high-quality fresh foods as well as natural and organic offerings |
| Omni-channel capabilities |
| Significant shift in consumer demand from food-away-from-home to food-at-home |
Our Competitive Strengths
High-quality offering focused on fresh food that is differentiated from conventional grocery
We are intensely focused on curating an assortment of what we believe are the freshest available foods and specialty items in a small, convenient, intimate store. In a recently conducted guest survey, 81% of the respondents rank our quality and freshness as Excellent or Very Good compared to an average statistic of 68% for a select number of competitors within a 10-mile radius. We believe our high-quality fresh food offering can be a true source of differentiation. For example, 42% of our beef sales come from prime meat while we believe many of our competitors do not offer prime meat. Within our fresh food offering, we believe our expertly prepared, value-add food further differentiates us versus competitors. We offer our guests the convenience of pre-cut fruit and vegetables and pre-seasoned meats that save preparation time, as well as curated meal offerings.
In addition to our sourcing relationships with national distributors, we work with local farmers to procure in-season produce from the Carolinas, Florida, Georgia, and Virginia. Our partner growers allow us to bring in limited edition, heirloom products such as the sweetest batches of berries from Florida and the Carolinas. Our Peak of Flavor program allows guests to choose ripe avocados and bananas that can be enjoyed that night or fruit that will peak in a day or two. Internationally sourced produce is flown-in (versus transported by boat) for premium items like Tasmanian cherries or stone fruit from South America.
We offer restaurant-quality meals
While our high-quality, premium fresh food serves as the basis to our differentiation, we take a step further to curate meals-focused offerings that are distinct from other grocers or food retailers. Examples of our meals offering include Market Meal Kits (provides ingredients and recipes for 20 minute one-pan preparation, perfect for convenience-focused guests looking for daily meal ideas), Little Big Meals ($20 offering to feed a family of four, offering a high-quality meal at an exceptional value), and the special dinner programs (restaurant quality dinner programs especially highlighting our superior meat and seafood offerings). Our Market Meal Kits, one of the fastest growing offerings, are assembled in-store, with fresh meats and vegetables cut by hand and expertly paired with sauces and ingredient packs. Sales of Market Meal Kits grew by approximately 45% in fiscal 2020.
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As an example, our Honey Balsamic Pork meal kit features pork tenderloin medallions with honey balsamic glaze, green beans and mashed sweet potatoes to create a delicious dinner in 20 minutes. We also suggest wine and dessert pairings to accompany many of our curated meal offerings. Our meals for special occasions include family dinners for the important holidays and the ultimate special dinner or brunch. Sales from our meals for special occasions grew by approximately 90% in fiscal 2020. We believe our commitment to delivering the best quality curated meal offerings helped us to win with both existing and new guests who experienced a heightened engagement with food-at-home in 2020, and our curated meal offerings accounted for approximately 15% of sales in fiscal 2020.
The Fresh Market strives to be the go-to food destination for entertaining needs, especially during the holiday seasons. We believe this is a result of our high-quality food offering that meets the expectation for special occasions as well as our attractive holiday meals programs. From intimate dinners to large catered gatherings, The Fresh Market has you covered. Our Dinner for Two on Valentines Day offers guests the ability to create a romantic meal at home with a prime Chateaubriand steak and Chilean Sea Bass. For tailgating at home, we offer our fan favorite platter including pot roast and caramelized onion sliders, pepperoni pinwheels with all the appetizers and fresh baked cookies. We believe we are our guests number 1 destination for holiday and special occasion meal offerings which results in significantly increased sales during holiday weeks compared to non-holiday weeks.
Conveniently located, easy to navigate small-box format
Our fresh-focused offering is complemented by our small-box stores in established neighborhoods that are close to our target, higher-income guests with average annual household income of over $75,000. We address on-the-go consumer demand for convenience through simple in-store navigation. Average stores are approximately 21,000 square feet versus a conventional food retailer at approximately 60,000 square feet, which allows us to fit in high-density areas where conventional grocers cannot. The store ambiance is an Old-World European marketplace layout with an elevated, sensory experience with fresh aromas, classical music, spotlights, and exceptional cleanliness. We generate very productive marketing and, per the Integrated Insight Survey, achieve an 86% household brand awareness in our markets. In addition, the small-box format in high population density areas near our guests homes supports our convenience-focused curbside pickup business, which we believe is an important part of providing our guests with an omni-channel shopping experience.
We operate 159 stores on the East Coast and in the Midwest, with our core market being the Southeastern portion of the United States. We benefit from attractive operating dynamics in the Southeast, including lower labor costs and exposure to stronger growing demographics and metropolitan statistical areas (MSAs). We believe there is significant whitespace to expand unit count with 75 immediately actionable opportunities within our core markets and an opportunity to double our store count over the next 10 years.
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Loyal guest following with attractive demographics
Our customers have a heightened engagement with food and actively seek out high quality fresh and perishable items. According to the Integrated Insight Survey, 37% of our target market will pay more for high quality food and value high quality fresh foods more than getting a deal on other products. We attract guests from a high-income demographic who seek out and have a higher willingness to pay for high quality, fresh food. Approximately 62% of our guests have an average household income above $75,000. Households that have shopped with us have exhibited higher monthly grocery spending than households that do not shop with us.
We have attracted a loyal guest followingour top 10% of guests represented almost 60% of our revenue and visited our stores approximately twice per month in fiscal 2020. This populations heightened engagement with food has been one factor in our strong fiscal 2020 and fiscal 2021 to date performance (based on preliminary, unaudited results for fiscal 2021), as our guests have reported more significant increases in their level of spending and shopping frequency compared to non-guests. Additionally, our guests are vocal advocates for our brandapproximately 90% of survey respondents who shop our stores indicated a high likelihood to recommend us. This likelihood to recommend has converted to our reputation spreading by word of mouth, as survey respondents listed a recommendation by a friend as the most common reason for their first visit to our stores. According to the Integrated Insight Survey, over three-quarters of our target market expects to maintain or increase their level of food spending even after the COVID-19 pandemic subsides, and we believe based on the foregoing that we are well positioned to compete for a significant portion of this food spending.
Dedicated store team members making guest experiences enjoyable
Our team members are passionate about quality food and love to highlight unique items within our stores, promoting the treasure hunt discovery experience that we provide. We utilize an extensive training program to encourage personalized service to our guests. Approximately 50% of our team members are full-time with a high level of retention and an established, clear path to promotion. None of our team members are subject to collective bargaining agreements. In response to the COVID-19 pandemic, we quickly set a high standard for safety and sanitation within our stores. Due to our store team members unrelenting focus, 96% of surveyed guests gave us positive ratings for cleanliness.
Our leadership team has revamped our culture to (i) ensure our stores have the freshest available products and offer quality guest service in a clean and safe environment and (ii) be extremely nimble and entrepreneurial in trying out various initiatives to improve our guests experience. Such measures include investing in guest wait time so that no guest has to wait longer than 30 seconds to check out and increasing team member training to provide for a better guest experience. At the corporate level, we have elevated our Head of Food Safety to directly report to our CEO given our enhanced focus on guest experience and guest loyalty. In our stores, we have streamlined and simplified direct reports to our store managers so that they can better focus on assisting guests and delivering on our in-store experience. Store team members have access to a number of training resources and are encouraged to grow within the organization. We also foster an environment of transparency, where all store and corporate office team members participate in weekly town halls with the CEO and management team.
Strong financial profile
Our management team and the Apollo Funds have taken significant steps in order to address challenges we have faced and to position us for long-term and sustainable growth, and we believe our results for fiscal 2020 and our preliminary, unaudited results for fiscal 2021 to date demonstrate the benefit of these steps. These steps include changes to the management team; refocusing TFMs merchandise offering on high quality fresh food and difficult-to-find specialty items while also introducing new curated meal offerings; actions to enhance in-store operational execution; exiting unprofitable stores in non-core markets such as California and Texas; changes in pricing strategy for TFMs frequently shopped products; and implementing upgraded technology.
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Our differentiated strategy of offering a fresh-focused, premium product mix, together with strategic initiatives focused on cost optimization in labor, shrink, and procurement are designed to provide an attractive margin profile compared to other more traditional food retailers. Gross margins were 34.9% in fiscal 2020, compared to 31.5% and 33.2% in fiscal 2019 and 2018, respectively. In the same three fiscal years, Adjusted EBITDA margins were 11.6%, 7.7% and 6.3%. In addition, savings from the cost initiatives can be reinvested in the business to further drive profitable growth. For further discussion of Adjusted EBITDA margin and a reconciliation of Adjusted EBITDA to net income, see Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures.
At the store level, average unit sales, or AUV, were $11.9 million, $9.5 million and $9.7 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively, and 99% of our stores were profitable in fiscal 2020 (compared to 93% and 92% in fiscal 2019 and fiscal 2018, respectively). We believe we are one of the most productive food and specialty retailers on a profit per square foot basis when also taking into consideration real estate ownership.
We incurred a significant amount of debt in connection with the Acquisition and in the years following ($934.0 million outstanding as of January 31, 2021), and we intend to use the proceeds of this offering to refinance a significant portion of this debt, which will reduce our ongoing debt service obligations.
Our improved financial performance generated strong cash flow from operations of $152.2 million in fiscal 2020. Our net capital investment required to support the business over the same period was $25.7 million or less than 17% of the cash flow from operations. The end of year cash balance in fiscal 2020 increased to $206.4 million which is up over 50% versus the end of year balance in fiscal 2019.
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Our Competitive Strengths and Initiatives Are Proven by Our Results
Our average weekly sales (excluding holidays sales, which are generally well above non-holidays sales) continue to accelerate, demonstrating that our competitive differentiation and our initiatives have resonated with our guests. Even in major markets where COVID-19-related restrictions have been lifted and restaurants have been open for much longer, we are seeing limited impact to our growth even as the percentage of seated diners measured vs 2019 levels recovers.
Our Growth Strategies
We see a significant opportunity to drive long-term growth across our business by executing on the following growth strategies:
Further invest behind key capabilities to provide a consistent guest experience and drive comparable store sales growth
We will continue to invest in our highly differentiated offering
We have seen strong momentum in our business in fiscal 2020 and fiscal 2021 to date (based on preliminary, unaudited results for fiscal 2021) and we believe we have an opportunity to showcase our enhanced, differentiated shopping experience to our existing and new guests. While our strong performance is partly attributable to the positive impact of the COVID-19 pandemic, we believe we are capturing market share in the food-at-home and food-away-from-home markets through continued leadership in our high-quality, fresh premium offerings and innovation in curated meal offerings. We believe that delayed recovery in the restaurant industry and lack of differentiation in the conventional grocery space provide an opportunity for additional
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market share gains. We have been focused on owning tonights meal (being top-of-mind to the consumer when it comes to planning and purchasing dinner), and continue to innovate with the introduction of new items and dining occasions to increase relevance to consumers.
We will continue our efforts to systematically upgrade the quality and freshness of our products, with a focus on the produce category. Our produce buyers work directly with growers and have developed long-term relationships to ensure we procure many of the sweetest berries, the finest fruits, and the greatest variety of vegetables. We have launched an extensive training course for the members of the produce department so they can learn how to become produce gurus, learning to offer suggestions and tell guests about the story behind the food. These initiatives have resulted in an increasing score on produce satisfaction in guest surveys (from 92.7% in fiscal 2019 to 94.5% in fiscal 2020) and in produce unit growth of 31.4% outpacing total unit growth of 21.7% during fiscal 2020. We believe the continued focus on instituting a systematic approach to improving quality and freshness will accelerate comparable store sales growth.
Our new Kitchen Square concept targets the substantial opportunity to serve our guests in ready-to-eat dining occasions. We expect to pilot this new concept in two to three stores in fiscal 2021 by redesigning the layout of the floorspace to allow for a completely new restaurant look and feel. This will become a convenient destination for dine-in, order ahead and grab and go focused guests. An inviting atmosphere filled with inspiring selections will transition throughout the day from a morning coffee and croissant, to a made to order salad for lunch, to a pizza and real Carolina BBQ for dinner. The goal is to provide additional restaurant quality choices for our guests and attract a younger demographic to our stores.
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Similarly, we are investing in our ready-to-cook curated meal offerings, with a $7 million capital investment into Market Meal Kit walk-around cases in 120 of our stores. We expect this investment to have a payback period of less than 3 years as Market Meal Kits are a key driver in building a bigger basket. These cases provide access to Market Meal Kits, Little Big Meal, Create Your Own Kit, and Ready-to-Heat options. Our Market Meal Kits are assembled in-store, with meats and vegetables cut by hand and expertly paired with sauces and ingredient packs. We also suggest wine and dessert pairings to accompany many of our curated meal offerings.
We have reduced prices across approximately 50 items our guests purchase frequently, such as bananas, avocados, milk and others, so that our most basic items are now priced competitively. In the last year, we have invested approximately 70 basis points of merchandise margin across a number of categories in all our stores, and we plan to continue to reinvest price back in a clinical manner to benefit our guests in select products where price matters the most. We are also pursuing center-of-the-store re-alignments which will optimize shelf space and increase sales productivity by enabling the application of computer-generated ordering. We believe this in turn will improve margin through standardization of shelf alignment and a reduction in shrink.
Improvement of in-store execution and operations will further drive sales and productivity
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We are working to enhance profitability by improving our operational efficiencies. We will continue to optimize our merchandise presentation through strategic store remodeling and enhanced visual storytelling. We are installing computer-generated ordering software to improve inventory management, increase our in-stock position and build on our demand forecasting abilities. We are developing engineered labor standards to ensure the right resources are in the right place at the right time to optimize our service levels. These operational improvements will not only drive efficiencies, but will also ensure a more consistent and delightful guest experience.
Our team is constantly evaluating the right in-store presentation to deliver the best experience to our guests. To that effect, we will continue to pursue store refreshes with attractive returns, focusing on enhanced produce refrigeration, aspirational displays, walk-around cases highlighting our curated meal offerings, and new point of sale machines in all 159 of our stores. We plan to finish six store refreshes in fiscal 2021, targeting return on invested capital of greater than 20%. Over the next five years we expect to have modernized more than 75 stores with varying degrees of capital to strengthen our brand, especially in areas where we are adding new stores.
Our exemplary guest service scores are a direct result of our talented and motivated in-store managers and team members. We have recently completed a realignment of our reporting and compensation structure to increase accountability and further incentivize performance. We have seen a significant increase in performance by raising the number of team members that are eligible for store-based performance bonuses. The simplified store organizational structure has increased transparency into promotion opportunities as we look to develop talent through investments in training and performance reviews. Our team members are a critical component of our growth story, providing high-touch service to support our specialty offering.
We are constantly evaluating our operations to identify areas for improvement in our cost structure while also enhancing the guest experience. At the store level, we are introducing engineered labor standards which will more efficiently allocate our highly talented team members, create labor efficiencies between departments and improve overall engagement with our guests. Maximizing the freshness of our high-quality offering while minimizing out-of-stock items is key to ensuring a consistent guest experience. We have engaged in the implementation of an automated demand forecasting system to ensure our best-selling products are available for our guests while also reducing shrink from over-ordering. Continued performance against our growth initiatives will result in additional margin benefit as we leverage our corporate and store overhead, part of which will be reinvested into the business.
Focusing our marketing to deepen engagement with our guests
We have significantly increased our marketing efforts through targeted digital campaigns, innovative print content and aspirational signage. Our brand benefits from an attractive household brand awareness, which per the Integrated Insight Survey, reached 86% in our markets. To further engage with our loyal guest base, we plan to use targeted marketing campaigns employing a variety of channels, including loyalty marketing, email marketing, social media marketing, geo-targeted mobile ads, and in-store marketing. We want to leverage our marketing and eCommerce platforms to help guests discover our new products and menus for tonights meal and for all their special meal occasions and events. In fiscal 2020, we increased our marketing spend by approximately 60% and we expect to continue investing in our marketing spend. In fiscal 2021, we plan to have our marketing team run campaigns to protect market share where our competitors are entering with new stores.
Capitalize on substantial whitespace opportunity with a focus on expanding store footprint through de-risked in-fill opportunities
We made a strategic decision to pause new store openings over the last three fiscal years to focus on our core business. While we believe our business is now on a sustainable growth trajectory and with tremendous momentum, we plan on returning to a disciplined store growth strategy. Our methodology for selecting new sites
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includes an analysis of population and spending data, existing competitors and rigorous site level standards. Our internal analysis, in concert with our real estate advisors, has resulted in a methodical, multi-stage expansion plan that focuses on stores within our core market in the Southeast. We believe we have the ability to expand beyond our core markets in the long term, by increasing the penetration of our secondary markets and expansion of our core geographies. We plan to open one new store in fiscal 2021 and, beginning in fiscal 2022, we plan to open seven to 12 new stores per year for the following four years.
Our primary focus is to expand into in-fill locations and surrounding metro areas within core markets. Examples of our near-term focus area include Florida and the Carolinas. We believe our core near-term opportunities include approximately 75 locations and offer high visibility into low-risk expansion. Existing store AUVs above our average in combination with strong market share performance within our core Southeast geography supports the viability of our expansion. These 75 locations provide an ample pipeline for our near-term store openings and exceed the number of new store openings planned for the next five years.
We also consider secondary markets where our locations have a strong brand awareness but limited penetration. We believe there is approximately an incremental 275 locations that could accommodate our preferred size of stores in secondary markets we would consider. Beyond our core and secondary markets, we believe our greenfield opportunity currently includes an additional 300 locations nationally.
We seek to open new stores with the following economics:
| Sales per new store of $12 to $14 million per year |
| Strong store-level EBITDA margins of 12% to 14% |
| Total cost per new location of $5 to $6 million (including pre-opening costs and tenant improvement allowances) |
| Return on invested capital of at least 25% and a payback period of 3 to 4 years |
Store-level EBITDA margins are calculated as store EBITDA (which excludes corporate expenses) divided by the stores sales; return on invested capital is computed as store EBITDA divided by our initial cash investment in the store.
Enhance guest engagement with a full-scale loyalty program and improved eCommerce capabilities
We expect to launch a loyalty program in the fall of fiscal 2021. In order to promote our loyalty program, we intend to leverage our existing database of over 1.75 million email addresses currently subscribed to our digital promotions to drive conversion and penetration early on. The program will center around experiential rewards and personalized use cases that reinforce our brand, with the goal of increasing visit frequency and basket size for all guests. Through a points accumulation system, our top guests will enjoy the benefit of targeted savings for their loyalty and continued support of The Fresh Market. Our goal would be to reinvest the EBITDA impact of the resulting sales uplift back into the program so that it is a self-sustaining initiative.
Our loyalty program is designed to replicate the signature TFM discovery and joy of shopping experience by educating, surprising, delighting and rewarding guests who join the loyalty program including: (i) special loyalty pricing and personalized offers, (ii) promotions and giveaways, (iii) curated clubs and rewards, (iv) social giving and (v) earning special personalized experiences with our distinguished roster of curators and taste makers. Extensive consumer acceptance testing of the loyalty program prototype completed in fiscal 2020 indicated that our loyalty program member guests would visit more often, spend more on each visit, purchase more items per visit and would shift more of their visits to TFM from other competitors where they shop. Importantly, these guests stated that the program enhanced their perception of the TFM brand, our value and our
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commitment to our guests and communities and that they are eagerly awaiting the launch of our first ever loyalty program. In addition, the loyalty program will deliver a previously unavailable, robust level of guest purchase behavior data that will inform future merchandising, marketing and operating strategies.
We are in the process of redesigning our eCommerce sales portal, a project that began in the second half of fiscal 2020. We believe this program and improvements to our curbside pickup experience with our Personal Shopper store team members hand-picking products has significantly increased our eCommerce sales. We believe curbside pickup will be the driver of growth within our digital business, where we can differentiate the experience through our expertise in high-touch guest service. Our continued efforts in our omni-channel capabilities have increased penetration from an average of 5.6% in fiscal 2020 to 6.9% in the week ended January 31, 2021.
Apollo Global Management and the Berry Family
We believe we benefit from Apollos food retail expertise, their support on various strategic initiatives and their ability to attract talented senior management to our organization. Moreover, we believe the continued support of the Berry Family, with their long-standing influence and commitment to The Fresh Market is integral to our continued success. Both the Apollo Funds and the Berry Family will continue to have significant ownership positions in the Company following the completion of this offering. For information regarding the Apollo Funds and the Berry Familys ownership in us after this offering, see Principal Stockholders.
Apollo Global Management.
Founded in 1990, Apollo is a leading alternative asset manager with 15 offices globally in New York, Los Angeles, Houston, San Diego, Bethesda, London, Frankfurt, Luxembourg, Madrid, Singapore, Hong Kong, Shanghai, Tokyo, Delhi, and Mumbai. As of December 31, 2020, Apollo had assets under management of approximately $455 billion in its affiliated private equity, credit-oriented capital markets, and real assets funds invested across a core group of industries where Apollo has considerable knowledge and resources.
Apollo Funds are one of the most active private equity investors in retail and consumer businesses, especially in the food retail sector, with a best-in-class track record of generating equity value for stockholders. Apollo Funds investments in retail and consumer sectors include or have included The Fresh Market, Smart & Final, Albertsons, Sprouts Farmers Markets, Hostess Brands, Ralphs Grocery Company, Dominicks Supermarkets, General Nutrition Centers, Qdoba Restaurant Corporation, CKE Restaurants (parent company to Carls Jr. and Hardees), amongst others. Apollo Funds investments in the food retail sector over the last 20 years have been led by Apollo Senior Partner Andrew Jhawar, who is the current Chairman of the Board of The Fresh Market and Smart & Final, and who was the prior Chairman of the Board of Sprouts Farmers Market.
The Berry Family.
Ray Berry is the founder of The Fresh Market and served as President and Chief Executive Officer of the Company from 1981 until 2007. Prior to founding The Fresh Market, Mr. Berry held positions at numerous grocery and retail companies, including Vice President of Stores at The Southland Corporation (former parent of 7-Eleven, Inc.) where he was responsible for the operations of approximately 4,000 7-Eleven stores. Ray Berrys son Brett Berry has also served in various roles at The Fresh Market including as Chief Executive Officer from 2007 until 2009. The Berry family has been a longtime stockholder and a strategic sponsor of The Fresh Market.
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Corporate Information
We were organized under the laws of the State of Delaware as a corporation on March 29, 2016. Our principal executive offices are located at 300 N. Greene Street, Suite 1100, Greensboro, North Carolina 27401. Our telephone number is (336) 272-1338. Our website is located at www.thefreshmarket.com. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and are not considered part of, this prospectus.
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The Offering
Issuer |
The Fresh Market Holdings, Inc. |
Common stock offered by us |
shares (or shares, if the underwriters exercise their option to purchase additional shares of common stock in full as described below). |
Option to purchase additional shares |
We have granted the underwriters an option to purchase up to an aggregate of additional shares of common stock from us at the initial public offering price, less underwriting discounts and commissions. The underwriters may exercise this option at any time within 30 days from the date of this prospectus. See Underwriting. |
Common stock to be outstanding after this offering |
shares (or shares if the underwriters exercise their option to purchase additional shares of common stock in full). |
Use of proceeds |
We estimate that our net proceeds from this offering will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting underwriting discounts and commissions, based on an assumed initial offering price of $ per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus). |
We intend to use approximately $ million of the net proceeds from this offering to pay related fees and expenses. The remaining net proceeds may be used to refinance a portion of existing indebtedness and for general corporate purposes. See Use of Proceeds. |
Controlled company exemption |
Upon completion of this offering, the Apollo Funds will continue to beneficially own more than 50% of our outstanding common stock. As a result, we intend to avail ourselves of the controlled company exemptions under the rules of the , including exemptions from certain of the corporate governance listing requirements. See ManagementControlled Company Exemption. |
Voting rights |
Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. |
Dividend policy |
We do not currently intend to pay dividends on our common stock. We plan to retain any earnings for use in the operation of our business and to fund future growth. Any declaration and payment of future dividends to holders of our common stock may be limited by restrictive covenants in the agreements governing our indebtedness, will be at the sole discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other |
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considerations that our board of directors deems relevant. See Dividend Policy. |
Proposed stock exchange symbol |
We have applied to list our common stock on under the symbol TFM. |
Risk Factors |
You should read the section titled Risk Factors beginning on page 21 of this prospectus for a discussion of the risks and uncertainties you should carefully consider before deciding to invest in our common stock. |
The number of shares of our common stock to be outstanding immediately after the closing of this offering is based on shares of common stock outstanding as of , 2021 and, except as otherwise indicated, all information in this prospectus, reflects and assumes the following:
| assumes an initial public offering price of $ per share of common stock, the midpoint of the price range on the cover of this prospectus; |
| assumes no exercise of the underwriters option to purchase additional shares of common stock in this offering; |
| does not reflect any additional shares of our common stock reserved for future grant under our new equity incentive plan, which we expect to adopt in connection with this offering; and |
| does not reflect any additional shares of our common stock issuable upon exercise of outstanding options under our existing equity incentive plan. |
16
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SUMMARY CONSOLIDATED HISTORICAL AND OTHER DATA
The following tables present our summary consolidated financial and other data as of and for the periods indicated.
The summary consolidated statements of operations data for the fiscal years ended January 31, 2021, January 26, 2020 and January 27, 2019, and the summary consolidated balance sheet data as of January 31, 2021 and January 26, 2020 are derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that should be expected in any future period.
The summary historical financial data presented below are not necessarily indicative of the results that may be expected in the future and do not purport to project our financial position or results of operations for any future date or period, and should be read together with the information under the sections titled Capitalization, and Managements Discussion and Analysis of Financial Condition and Results of Operations, and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.
Year Ended | ||||||||||||
January 31, 2021 | January 26, 2020 | January 27, 2019 | ||||||||||
(dollars in thousands, except per share data) | ||||||||||||
Consolidated Statements of (Loss) Income Data |
| |||||||||||
Sales |
$ | 1,887,452 | $ | 1,522,555 | $ | 1,595,448 | ||||||
Cost of goods sold |
1,229,161 | 1,042,282 | 1,065,956 | |||||||||
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Gross profit |
658,291 | 480,273 | 529,492 | |||||||||
Selling, general and administrative expenses |
466,952 | 387,842 | 440,070 | |||||||||
Transaction and related costs |
16,460 | 1,414 | (223 | ) | ||||||||
Impairments and store closure costs |
3,533 | 5,387 | 27,262 | |||||||||
Depreciation |
44,363 | 49,902 | 59,563 | |||||||||
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Income from operations |
126,983 | 35,728 | 2,820 | |||||||||
Interest expense |
96,625 | 98,252 | 97,642 | |||||||||
(Gain) loss on extinguishment of debt |
(132 | ) | | 3,202 | ||||||||
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Income (loss) before income taxes |
30,490 | (62,524 | ) | (98,024 | ) | |||||||
Tax provision (benefit) |
3,576 | 2,893 | (19,427 | ) | ||||||||
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Net income (loss) |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
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Per Share Data |
| |||||||||||
Net Loss per sharebasic and diluted |
$ | $ | $ | |||||||||
Weighted-average shares outstandingbasic and diluted |
||||||||||||
Non-GAAP Financial Measures |
| |||||||||||
EBITDA(1) |
$ | 171,478 | $ | 85,630 | $ | 59,181 | ||||||
Adjusted EBITDA(1) |
219,407 | 117,972 | 101,120 | |||||||||
Other Operating Data (unaudited) |
| |||||||||||
Number of stores (at period end) |
159 | 159 | 161 | |||||||||
Percentage change in comparable store sales(2) |
22.3 | % | (1.8 | )% | 0.4 | % | ||||||
Gross square footage at end of period (in thousands) |
3,362 | 3,362 | 3,410 | |||||||||
Average comparable store size (gross square feet)(3) |
21,147 | 21,169 | 21,152 | |||||||||
Comparable store sales per gross square foot during period(3) |
$ | 551 | $ | 448 | $ | 449 | ||||||
Balance Sheet Data (end of period) |
| |||||||||||
Total Assets |
$ | 1,495,401 | $ | 1,437,787 | ||||||||
Total long-term obligations(4) |
$ | 1,079,079 | $ | 1,063,941 | ||||||||
Total stockholders equity |
$ | 134,489 | $ | 180,213 |
17
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(1) | EBITDA, a measure used by management to assess operating performance, is defined as net income plus interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA, another measure used by management to assess operating performance, is defined as EBITDA adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant compliance under our debt agreements. For a discussion of the use of these measures and further information, see the table below and Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures. |
(2) | Our practice is to include sales from a store in comparable store sales beginning on the first day of the sixteenth full month following the stores opening. We believe that comparability is achieved approximately 15 months after opening. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. Generally, a store is removed from comparable store sales in the period it is closed. Additionally, comparable store sales include sales from the first 52 weeks of fiscal 2020. There may be variations in the way that our competitors calculate comparable or same store sales. As a result, data in this prospectus regarding our comparable store sales may not be comparable to similar data made available by our competitors. |
(3) | Average comparable store size and comparable store sales per gross square foot are calculated using the gross square footage and sales for stores included within our comparable store base for each month during the given period. |
(4) | Total long-term obligations as of January 31, 2021 and January 26, 2020 include our long-term indebtedness and operating lease liabilities. |
The following table provides a reconciliation of net income or loss as reported to EBITDA and Adjusted EBITDA:
Fiscal 2020 |
Fiscal 2019 |
Fiscal 2018 |
||||||||||
(amounts in thousands) | ||||||||||||
Net income (loss) as reported |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
Depreciation |
44,363 | 49,902 | 59,563 | |||||||||
Tax provision |
3,576 | 2,893 | (19,427 | ) | ||||||||
Interest expense |
96,625 | 98,252 | 97,642 | |||||||||
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EBITDA |
$ | 171,478 | $ | 85,630 | $ | 59,181 | ||||||
(Gain) loss on extinguishment of debt (1) |
$ | (132 | ) | $ | | $ | 3,202 | |||||
Non-cash share-based compensation (2) |
406 | (1,503 | ) | 388 | ||||||||
Impairments (3) |
| 6,009 | 3,094 | |||||||||
Store closure costs (4) |
3,533 | (622 | ) | 24,168 | ||||||||
Corporate severance and other charges (5) |
4,760 | 3,086 | 4,686 | |||||||||
Non-cash rent expense (6) |
11,307 | 20,239 | (144 | ) | ||||||||
Tenant allowance receipts (7) |
868 | 655 | 2,386 | |||||||||
Amortization of favorable and unfavorable leases (8) |
| | 466 | |||||||||
Sponsor fees (9) |
1,533 | 1,598 | 1,635 | |||||||||
Transaction and related costs (10) |
16,460 | 1,414 | (223 | ) | ||||||||
Business optimization expenses (11) |
4,710 | 965 | 1,759 | |||||||||
Litigation expenses (12) |
| (9 | ) | 165 | ||||||||
Coronavirus expenses (13) |
4,041 | | | |||||||||
Loss on disposal of assets (14) |
443 | 510 | 357 | |||||||||
Adjusted EBITDA |
$ | 219,407 | $ | 117,972 | $ | 101,120 | ||||||
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18
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(1) | Amounts recorded for the difference between the carrying value and redemption value of debt when the debt is extinguished. |
(2) | Non-cash share-based compensation related to equity awards granted to our employees and independent directors. The net benefit for fiscal 2019 is due to forfeitures. |
(3) | Impairment charges of stores or long-lived assets. See our Consolidated Financial Statements, Note 5, Fair Value Measurements in our Notes to the Consolidated Financial Statements, for further details. |
(4) | Gains or losses upon disposal of property and equipment, reserve adjustments and other lease costs, liquidation of inventory, and other costs associated with store closures. See our Consolidated Financial Statements, Note 6, Impairments and Store Closure Costs in our Notes to the Consolidated Financial Statements, for further details. |
(5) | Severance and related employee benefits associated with certain terminations of leadership positions as well as recruiting and on-boarding costs for replacements for certain positions. |
(6) | Adjustments to account for (i) the difference in GAAP straight line rent expense and cash rent expense and (ii) the non-cash amortization of tenant allowances. Beginning with fiscal 2019 and the adoption of ASC 842, Leases, incremental non-cash rent expense was recognized primarily related to the amortization of the former favorable lease intangible assets over a shorter period, the remaining lease term, as required under ASC 842, Leases. The shorter amortization period resulted in incremental non-cash expense of $11.2 million in fiscal 2020 and $19.8 million in fiscal 2019 and is expected to result in incremental non-cash expense of $8.3 million in fiscal 2021, $5.2 million in fiscal 2022, and $3.2 million in fiscal 2023 assuming there is no subsequent re-evaluation of the lease terms for lease modifications that may occur in the future. See our Consolidated Financial Statements, Note 7, Leases in our Notes to the Consolidated Financial Statements, for further details. |
(7) | Cash received from landlords for tenant allowances. |
(8) | Amortization of lease related assets and liabilities recorded as part of purchase accounting. |
(9) | The annual management and other fees and related expenses, including those paid on a pro rata basis to an affiliate of Apollo and the Rollover Stockholders. See our Consolidated Financial Statements, Note 14, Related-Party Transactions in our Notes to the Consolidated Financial Statements, for further details. The obligation to pay such fees and expenses will terminate upon the completion of this offering and accordingly, the costs are not reflective of our ongoing performance post-offering. |
(10) | The transaction and related costs in connection with our Acquisition in fiscal 2016, including litigation expenses associated with stockholder class action lawsuits. The fiscal 2020 amount includes a $15.1 million settlement charge for a stockholder class action lawsuit associated with our Acquisition. See our Consolidated Financial Statements, Note 15, Commitments and Contingencies in our Notes to the Consolidated Financial Statements, for further details. |
(11) | Costs related to our business optimization projects, which we expect to be non-recurring. Items included in this line item are discrete charges that are primarily related to third-party assessments of various strategic business processes and the related implementation. A breakdown of major business optimization projects is presented below: |
Fiscal 2020 |
Fiscal 2019 |
Fiscal 2018 |
||||||||||
(amounts in thousands) | ||||||||||||
Business Optimization |
||||||||||||
Operational process assessment and labor standards development |
$ | 1,649 | $ | | $ | | ||||||
Merchandising organizational analysis |
940 | | | |||||||||
Digital strategy |
752 | | | |||||||||
New Kitchen Square concept |
698 | | | |||||||||
IPO readiness |
583 | | | |||||||||
Pricing strategy |
| 878 | | |||||||||
Center store strategic resets |
| 46 | 1,578 | |||||||||
Other |
88 | 41 | 181 | |||||||||
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$ | 4,710 | $ | 965 | $ | 1,759 |
19
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(12) | Expenses related to wage and hour litigation. |
(13) | Costs specifically attributed to the COVID-19 pandemic, including employee appreciation bonuses and paid time off while under a doctor-ordered quarantine. |
(14) | Losses on the disposal of fixed assets at open store and corporate locations. |
20
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
AND SUMMARY OF RISK FACTORS
This prospectus contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally, but not always, identified by the use of forward-looking terminology, including the terms anticipate, believe, could, estimate, expect, intend, may, plan, potential, predict, project, should, target, will, would and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. Our actual results and the outcome and timing of certain events may differ significantly from the expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the factors set forth below:
| Risks Related to Our Business and Industry |
| the impact of various operating factors and downturns or volatility in general economic conditions, including as a result of the current novel coronavirus (COVID-19) pandemic affecting the food retail industry; |
| the impacts of the relaxation of COVID-19 related restrictions and the return to normal operations for other food service businesses; |
| competition in our industry and our ability to compete successfully; |
| the impact of higher wage and benefit costs on our business; |
| our ability to attract, train and retain new team members; |
| the impacts of any union attempts to organize our team members; |
| our ability to achieve past levels of comparable same store sales growth; |
| our dependence on a few key third-party vendors to provide logistical services for our stores, including services related to inventory replenishment and the storage and transportation of many of our products; |
| our ability to return to a growth strategy or the burden of new stores on our existing resources; |
| the impacts of our significant lease obligations; |
| the impact of economic conditions on consumer spending; |
| the occurrence of, and our ability to respond to, any disruptions or compromises to our information technology, administrative, or outsourcing systems, including a security breach; |
| our ability to maintain the privacy and security of confidential customer and business information; |
| our ability to protect or maintain our intellectual property, including The Fresh Market trademark; |
| our ability to identify, source, and market new products that meet our high standards and customer; preferences and our ability to offer our customers an aesthetically pleasing shopping environment; |
| our stores heavy reliance on sales of perishable products and the impact of ordering errors or product supply disruptions; |
| the impact of increased commodity prices on our profitability; |
| the geographic concentration of our stores in the southeastern United States and exposure to local economies, regional downturns or severe weather or catastrophic occurrences; |
| the impact of future consumer, employment or other litigation; |
| any future requirement to recognize store asset impairment charges and the impact of any decline in the fair value of an intangible asset or our business; |
21
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
| the result of changes in accounting standards, subject assumptions and estimates by our management relating to complex accounting matters; |
| the impact of any insurance plan claims or actuarial estimates; |
| changes in energy costs; |
| unexpected side effects, illness, injury or death that could result from the products we sell and the potential discontinuance or exposure to lawsuits resulting from any such occurrences; |
| our ability to maintain our reputation and the value of our brand; and |
| changes in federal, state and local laws and regulations and our ability to comply with these laws and regulations. |
| Risks Related to Our Indebtedness |
| our ability to fund our operations and capital expenditures in light of our substantial indebtedness; |
| the impacts of our potential incurrence of additional indebtedness in the future; |
| our ability to generate sufficient cash to service our existing or future indebtedness; |
| the impacts resulting from any default by us on our indebtedness; and |
| volatility and weakness in bank and capital markets. |
| Risks Related to this Offering and Ownership of Our Common Stock |
| significant fluctuations in our stock price may occur; |
| our ability to incur significantly increased costs and devote substantial management time as a result of operating as a public company; |
| our ability to comply with requirements to design, implement and maintain effective internal control over financial reporting; |
| the effectiveness of our disclosure controls and procedures in detecting errors or acts of fraud; |
| the impacts of the Apollo Funds substantial control following the completion of this offering; |
| the impacts of being a controlled company under the rules of ; |
| our reliance, as a holding company, on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations; |
| dilution resulting from this offering; |
| future dilution may result from the issuance of additional common stock or convertible securities in connection with our incentive plans, acquisitions or otherwise; |
| there is no prior public market for our common stock, and there can be no assurances that a viable public market for our common stock will develop; |
| we do not anticipate paying dividends on our common stock in the foreseeable future; |
| the impacts if equity research analysts or industry analysts do not publish research or reports about our business, publish negative reports or change their recommendations regarding our stock adversely; |
| if we issue preferred stock, the terms of such preferred stock could adversely affect the voting power or value of our common stock; |
| our amended and restated certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities; |
22
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
| anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under the Delaware General Corporation Law (DGCL) may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock; and |
| our designation of the Delaware Court of Chancery in our amended and restated certificate of incorporation as the exclusive forum for certain types of stockholder legal proceedings could limit our stockholders ability to obtain a more favorable forum for disputes with us or our directors, officers or team members. |
These forward-looking statements are not statements of historical fact, and reflect our views based on current expectations, estimates and projections about industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in Risk Factors and the other cautionary statements included in this prospectus, which you should consider and read carefully. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus, and our future levels of activity and performance, may not occur and actual results could differ materially and adversely from those described or implied in the forward-looking statements. As a result, you should not regard any of these forward-looking statements as a representation or warranty by us or any other person or place undue reliance on any such forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus.
In addition, statements that contain we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. While we believe that this information provides a reasonable basis for these statements, this information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
You should read this prospectus and the documents filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures or investments we may undertake. We qualify all of our forward-looking statements by the cautionary statements contained in this section and elsewhere in this prospectus.
23
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
You should carefully consider the risks and uncertainties described below, as well as the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, and Managements Discussion and Analysis of Financial Condition and Results of Operations, before deciding to invest in our common stock. Any of the following risks could materially and adversely affect our business, financial condition and results of operations, in which case the trading price of our common stock could decline and you could lose all or part of your investment.
Risks Related to Our Business and Industry
Various operating factors and downturns or volatility in general economic conditions, including as a result of the current novel coronavirus (COVID-19) pandemic affecting the food retail industry, may disrupt our business and could negatively impact our financial condition.
The global outbreak of the novel coronavirus (COVID-19) that began in the early part of 2020 and has recently resurged in many parts of the country has disrupted our business and could continue to do so for the foreseeable future until the impact of the pandemic subsides.
Although our grocery store operations are generally deemed essential operations by federal, state and local authorities, thereby allowing our stores to remain open despite government mandated stay-at-home or similar shelter-in-place orders, there can be no assurance that our stores will continue to be allowed by governmental authorities to remain open while the COVID-19 pandemic persists or if it worsens. A closure of stores would adversely impact our net sales, and any alleged failure to comply with such orders or any other governmental regulations promulgated in response to the COVID-19 crisis could result in costly litigation, enforcement actions and penalties and could also be harmful to our reputation. Even if our stores remain open, we have been required to implement restrictions on the number of customers allowed in our stores at a given time to promote social distancing. Store traffic may further decline as customers shop less frequently, choose other retail or online outlets to minimize potential exposure to COVID-19 or return to restaurants and other outlets to purchase and consume food as state economies reopen.
Although our operations have generally stabilized since the onset of the pandemic, there can be no assurances that the spread of COVID-19 will not strain our supply chain, store operations and merchandising functions in the future. This could create difficulties and delays in obtaining products from our distributors, delivering products to our stores and adequately staffing our stores and distribution centers. If we are unable to continue to source, transport and stock products in our stores or to maintain adequate staffing levels in our stores and distribution centers due to disruptions caused by the COVID-19 crisis, we will be unable to maintain inventory levels and continue to operate our stores at levels to meet customer demand. Further, if we do not identify and source appropriate products in response to our customers evolving needs during the COVID-19 crisis, we may lose existing customers and fail to attract new customers, which could cause our sales to decrease, resulting in a material adverse effect on our business, financial condition, results of operations and cash flows.
We may experience material and adverse impacts to our business and financial condition as a result of any economic recession or depression that has occurred or may occur as a result of efforts to curb the spread of COVID-19. For example, during March 2020 through April 2020, the United States experienced a rapid and significant increase in unemployment claims and other indications of a significant economic slowdown believed to be related to the COVID-19 pandemic. Consumers perception or uncertainty related to the economy, as well as a decrease in their personal financial condition, could hurt overall consumer confidence and reduce demand for many of our product offerings. Consumers may reduce spending on non-essential items, purchase value-oriented products or increasingly rely on food discounters in an effort to secure the food products that they need, all of which could impact our sales and profit.
24
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We have incurred, and expect to continue to incur, significant costs to support our store team members, including expenses for added labor, store bonuses, enhanced benefits and safety measures. If, as a result of the impact of the COVID-19 pandemic, we are unable to continue to provide our team member with appropriate compensation and protective measures, we may be unable to retain current or attract new team members to meet our needs. In addition, nearly all of administrative and our store support team members remain in a remote work environment in an effort to mitigate the spread of COVID-19. Our failure to provide appropriate technological resources and maintain adequate safeguards around our remote work environment could result in loss of productivity. In addition, the remote work environment may increase certain risks to our business, including phishing and other cybersecurity attacks.
We have experienced instances of our team members contracting COVID-19, and in response we follow CDC and other health authority guidelines to report positive test results and reduce further transmission. Any widespread transmission of COVID-19 among our team members within a particular store or geographical area might necessitate that we temporarily close impacted stores, which may negatively affect our business and financial condition, as well as the perception of our company. Further, if individuals believe they have contracted COVID-19 in our stores or believe that we have not taken appropriate precautionary measures to reduce the transmission of COVID-19, we may be subject to costly and time-consuming litigation.
Our growth plans for 2021 and beyond may be negatively impacted by the COVID-19 pandemic if our new store construction projects are placed on hold or delayed due to restrictions on construction work or constraints on necessary resources, and we expect such delays may continue for as long as the COVID-19 pandemic persists.
Measures taken by governmental authorities to reduce the transmission of COVID-19, including stay-at-home orders and business closures, as well as lack of subsequent economic stimulus initiatives, have resulted in wide-scale unemployment and financial hardship for a large portion of the U.S. population. Shifts in demand to lower priced options and reduced traffic from stockpiling in preparation for the pandemic or from consuming less food at home as restaurants and other businesses reopen may negatively impact sales in subsequent periods. The economic fallout of the COVID-19 pandemic on the geographic areas where we operate may adversely affect our business.
The full extent to which the COVID-19 pandemic impacts our business and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the pandemic and the actions necessary to contain COVID-19 or treat its impact.
As certain restrictions imposed as a result of the COVID-19 pandemic are relaxed, and restaurants and other food service businesses begin to resume normal operations, consumers may prepare less food at home, which may adversely affect our business, financial condition and results of operations.
The global COVID-19 pandemic and its sudden and significant effects on the economy have and will continue to impact many of our customers, consumers and suppliers and, as a result, it has and will continue to impact us for an indeterminable period of time. As more people across the country receive COVID-19 vaccines and social distancing measures and governmental directions to close non-essential businesses are relaxed, specifically with respect to the restaurant and hospitality industries, our operating results may be adversely affected by reduced consumer spending on groceries and food prepared at home and by increased competition. For a further discussion and comparison of our results of operations prior to and during the COVID-19 pandemic, please see Managements Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this prospectus.
We face intense competition in our industry, and our failure to compete successfully may have an adverse effect on our profitability and operating results.
Food retail is a large and competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller
25
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
specialty stores, and farmers markets. We also compete in the food-at-home and food-away-from-home markets. Each of our competitors competes with us on the basis of product selection and quality, customer service, store format, location, and price, or a combination of these factors. Some of these competitors may have been in business longer or may have greater financial or marketing resources than we do and may be able to devote greater resources to sourcing, promoting, and selling their products. We have seen an increase in pricing pressure on our products and, due to increasing competition, we may face continued pricing pressure on our products, which could have a material negative impact on our gross margin. In addition, a recovery in the restaurant industry as the COVID-19 pandemic subsides could adversely impact our recent market share gains in the food-at-home and food-away-from-home markets.
Some competitors are aggressively expanding their number of stores or their product offerings, including within our core markets in the southeastern United States. In their new or remodeled stores, our competitors often increase the space allocated to perishable food and specialty food categories, which are our core categories, and are lowering the prices of many of those items. If competitors are able to offer perishable and specialty products comparable to those we sell, while also offering a wide range of traditional grocery and non-food items that we do not sell, customers may reduce the number of trips they make to our stores. In addition, if competitors offer lower prices than we do, and we do not make competitive price changes in response, consumers may perceive us as a higher-priced merchant and shop us only on special occasions, or not at all. Increased competition in proximity to our existing or future stores also may make obtaining suitable sites for new stores and employee retention more difficult and could raise our occupancy costs and our cost of hiring and retaining qualified team members.
As a result of consumers growing desire to shop online, including as a result of the COVID-19 pandemic, we also face increasing competition from both our existing competitors that have incorporated the internet as a direct-to-consumer channel and online providers that sell grocery products and specialty foods. Although we have invested in growing our eCommerce platform, including to respond to increased customer demand as a result of the COVID-19 pandemic, and offering our customers the ability to shop online for curbside pickup, there is no assurance that these online initiatives will be successful. Moreover, we have incurred incremental eCommerce fees as more customers adopt our digital solutions, and expect to incur additional incremental costs if this trend continues. These initiatives may have an adverse impact on our profitability as a result of greater operating costs to compete.
As competition intensifies or competitors open stores within close proximity to our stores, our results of operations may be negatively impacted through a loss of sales, reduction in margin from competitive price changes, and greater operating costs, including increased marketing expense. Our response, or failure to respond effectively, to these competitive pressures could adversely affect our profitability and operating results. Further, any attempt by a competitor to copy or mimic our smaller-box format or operating model could materially impact our business, results of operations, and financial condition by causing a decrease in our market share and our sales and operating results.
Higher wage and benefit costs could adversely affect our business.
Increasingly, our wage and labor-related costs are potentially affected by federal, state, and local legislative or administrative actions. For example, the federal government has considered raising the national minimum wage, and various states and local jurisdictions have sought to increase retail employee wages by raising minimum wage rates or scheduling future increases in such rates, which may also cause wage rates above the minimum to increase in those markets. In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our customer service to suffer, while increasing our wages could cause our earnings to decrease. If we are unable to attract, train and retain team members capable of meeting our business needs and expectations, our business, brand image and ability to pursue growth opportunities may be impaired. Any failure to meet our staffing needs or any material increase in turnover rates of our team members may adversely affect our business, results of operations, and financial condition.
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If we are unable to attract, train and retain team members, we may not be able to grow or successfully operate our business.
The food retail industry is labor intensive, and our success depends in part upon our ability to attract, train, and retain a sufficient number of qualified team members who understand and appreciate our culture, represent our brand effectively, and establish credibility with our business partners and consumers. Our strategy of offering high quality services and assistance for our customers requires a highly trained and engaged workforce. The turnover rate in the retail industry is relatively high, and there is an ongoing need to recruit and train new team members in existing stores while also staffing any new stores. Our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the workforce in the markets in which we are located, unemployment levels within those markets, unionization of the available workforce, prevailing wage rates, changing demographics, health and other insurance costs, and changes in laws and regulations governing the employment relationship. Factors that affect our ability to maintain sufficient numbers of qualified team members include employee morale, our reputation, competition from other employers, and our ability to offer appropriate compensation packages.
Union attempts to organize our team members could negatively affect our business.
None of our team members are currently subject to a collective bargaining agreement. If unions attempt to organize all or part of our employee base at certain stores or within certain regions, responding to such organization attempts may distract management and team members and may have a negative financial impact on individual stores or on our business as a whole.
Our inability to return to or achieve past levels of comparable store sales growth could have a material adverse effect on our business, financial condition, and results of operations.
Our comparable store sales have declined for four of the previous five fiscal years. In addition, our overall comparable store sales have fluctuated in the past and will likely fluctuate in the future. A variety of factors affect comparable store sales, including consumer preferences, buying trends and spending levels, economic conditions, price inflation or deflation, product pricing and availability, in-store merchandising-related activities, consumer perceptions of our stores, the frequency with which consumers visit our stores, and our ability to source and distribute products efficiently. In addition, competition and pricing pressures from competitors (including new competitive entrants with new or recently remodeled stores near our stores) coupled with our inability to remodel or provide the updated equipment in our older stores as quickly as originally planned may also materially adversely impact our operating margins. These factors may cause our comparable store sales results to continue to be materially lower than in past periods, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, we have modified our real estate process to grow at a more measured pace, with fewer future store openings, relocations, and remodels than originally planned. As a result, overall revenue growth will be heavily dependent upon the performance of comparable stores from the existing store base.
We are substantially dependent on a few key third-party vendors to provide logistical services for our stores, including services related to inventory replenishment and the storage and transportation of many of our products. Any delays or disruptions in the purchase, storage, transportation or delivery of inventory, or in our ability to procure products, may have a negative effect on our business, results of operations, and financial condition.
Our business relies upon independent third-party service providers for a majority of product shipments to our stores. Since early fiscal 2017, we have relied on one third-party service provider, SuperValu, Inc. (SuperValu), to provide key services related to inventory management, warehousing and transportation for all of our stores. During fiscal 2018, SuperValu was acquired by United Natural Foods, Inc. (UNFI), who was our
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second largest sourcing and distribution provider. The combination of our two largest vendors compounded our dependence on one third-party vendor and may affect our costs and service levels or reduce our supply options. Additionally, any unresolved difficulties associated with integration of the two businesses may result in disruptions to our service. Products sourced and distributed through UNFI accounted for almost two-thirds of the merchandise we purchased in fiscal 2019.
Although we have not experienced any significant difficulty in our inventory management, warehousing, and transportation of products to our stores with UNFI, interruptions could occur in the future and the effects of which may include increases in out-of-stock items, loss of sales, higher costs, and excessive inventory shrinkage. Further, although we expect that UNFI and our other key vendors will have sufficient capacity to accommodate our anticipated needs, they may not have the resources to do so. Any significant disruptions in our relationship with UNFI to service our stores prior to the end of the current term of our agreement, or significant disruptions in our relationships with our other key vendors, including due to their inability to accommodate our needs, would make it difficult for us to continue to operate our existing business or pursue our strategic plans until we execute replacement agreements or develop and implement self-distribution processes. Further, any voluntary change of key vendors could have a short-term disruptive effect on our business. Our initial contractual term with UNFI of three years has expired and we are currently operating under one year auto-renewals unless either party gives 180 days notice of non-renewal. We are contractually committed with SuperValu through fiscal 2022. In addition, if our vendors fail to comply with transportation or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. The loss of one or more of our existing significant vendors, particularly UNFI, or our inability to develop relationships with new vendors could reduce our competitiveness and cause our sales and operating results to be materially adversely affected.
While we believe that other third-party service providers could provide similar services on reasonable terms, they are limited in number, and we cannot assure you that we would be able to find a replacement distributor on a timely basis or that such distributor would be able to fulfill our demands on commercially reasonable terms, which could have a material adverse effect on our business, results of operations, and financial condition. We also believe that other distribution strategies may be available, but any such strategies could require significant time to implement, and there is no assurance that such strategies would result in cost savings or adequate service levels. Our third-party service providers (and those they depend upon in turn for materials and services) are subject to a number of risks, including labor disputes, constraints or shortages, union organizing activities, financial liquidity, inclement weather, natural disasters, significant public health and safety events, long-term disruptions to the national and international transportation infrastructure, reduction in capacity, industry-specific regulations, such as hours-of-service rules, supply constraints and general economic and political conditions, any or all of which could limit their ability to provide us with quality products. In addition, these risks may preclude delivery of products to us on a timely basis or at all, which could have an adverse effect on our business, results of operations, and financial condition.
We may not be able to return to a growth strategy on a timely basis or at all. Additionally, new stores may place a burden on our existing resources and adversely affect our existing business.
We have significantly reduced the number of new stores we plan to open while we take steps to improve our core business. We plan to grow at a measured pace. Our growth depends, in part, on our ability to open new stores and to operate those stores successfully. Successful return to sustained growth and implementation of this strategy depends upon, among other things:
| the identification of suitable and available sites for store locations, including sites in new markets; |
| the negotiation of acceptable lease terms for store sites; |
| the ability to continue to attract customers to our stores through favorable word-of-mouth publicity and targeted marketing activities; |
| the hiring, training, and retention of skilled store personnel; |
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| the identification and relocation of experienced store management personnel; |
| the effective management of inventory to meet the needs of our stores on a timely basis; |
| the availability of sufficient levels of cash flow or necessary financing to support our remodels, relocations or new store expansion; and |
| the ability to successfully address competitive merchandising, distribution and other challenges encountered in connection with strategic expansion into new markets. |
We may not identify suitable and available sites that meet our investment criteria. The sites that are identified may not produce the levels of sales we predict or that are necessary for a new store to operate profitably. Further, new store openings in markets where we have existing stores may result in reduced sales volumes at our existing stores in those markets. Any new stores that we do open may not achieve sustained sales and operating levels consistent with our mature store base on a timely basis or at all. We cannot assure you that any new store openings will be successful or result in greater sales and profitability. Any failure to successfully open and operate new stores in the time frames and at the costs estimated by us could adversely affect our financial condition and operating results.
We have significant lease obligations, which may require us to continue paying rent for store locations that we no longer operate.
All of our stores are leased, and we are subject to risks associated with our current and future real estate leases for our stores. Our costs could increase because of changes in the real estate markets, entry into new, higher cost markets and supply or demand for real estate sites. We generally cannot cancel our leases, so if we decide to close or relocate a location, we may nonetheless be committed to perform our obligations under the applicable lease, including paying the base rent for the remaining lease term, and we may not find acceptable assignees or sublessees for such locations. We have closed stores, or elected not to open stores in locations where we had signed leases, for which we are still paying rent and other lease expenses while we attempt to negotiate assignment or termination. Finally, as leases for stores that are in operation expire, we may fail to negotiate renewals, either on commercially acceptable terms or any terms at all, and we may not be able to find replacement locations that will provide for the same success as current store locations. Any or all of these factors and conditions could materially adversely affect our growth and profitability.
Economic conditions that impact consumer spending could materially affect our business.
Our results of operations may be materially affected by economic conditions that impact consumer confidence and spending, including discretionary spending. This risk may be exacerbated if customers choose lower-cost alternatives to our product offerings in response to economic conditions, or if consumers perceive our stores as destinations for special occasions rather than regular shopping. Future economic conditions affecting disposable consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, interest rates, tax rates, and fuel and energy costs, could reduce consumer spending or cause consumers to shift their spending to lower-priced competitors. In addition, inflation or deflation can impact our business. Food deflation could reduce sales growth and earnings, while food inflation, combined with reduced consumer spending, could reduce gross profit margins. As a result, our results of operations could be materially adversely affected.
Our business could be harmed by disruptions of or compromises to our information technology, administrative, or outsourcing systems.
We rely on our information technology (IT), administrative, and outsourcing systems to effectively manage our business data, communications, supply chain, order entry and fulfillment, to enhance our customer service and other business processes, such as our financial and reporting systems. If we were to experience
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failures, breakdowns, substandard performance or other adverse effects to these systems, or difficulties accessing the data stored in these systems, this could disrupt our business and result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business to suffer. In addition, events affecting our third-party payment processors or our integration with them, including cyber-attacks, Internet or other infrastructure or communications impairment or other events that could interrupt the normal operation of our payment processors or our integration with them, or result in unauthorized access to customer information, could have a material adverse effect on our business. In addition, our IT, administrative, and outsourcing systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures that could result in the compromise of confidential or sensitive customer, employee or Company data, and usage errors or other actions by an employee.
Failure to maintain the privacy and security of confidential customer and business information, and the resulting unfavorable publicity, could have a material adverse effect on our business, financial condition and results of operations.
Our business relies on our ability to collect, use, retain and share confidential business information and certain personal information relating to our customers, team members, suppliers, advertisers and other third parties in connection with our retail business, our payment systems, our online shopping capabilities, our loyalty program and marketing and human resources organizations, and entrust certain of that information to third-party service providers. We also depend on the secure transmission of customer payments and other sensitive or confidential information over external networks. These activities are regulated by a variety of federal, state, local and foreign privacy, data security and data protection laws and regulations. While we actively manage IT security risks within our control to protect against viruses, other malware and security breaches, including breaches of our transaction processing or other systems (including by hackers), and take considerable efforts to secure our computer networks, there can be no assurance that our security wont be compromised and that such breaches will not occur, or be detected in a timely manner, even if we are compliant with industry security standards. Due to the evolving nature of cyber security threats, and the techniques that criminals use to obtain unauthorized access to systems and data changing frequently, we may not be able to anticipate these frequently changing techniques or implement adequate preventative measures. Therefore, the scope and impact of any potential security breach or other incident caused by improper activities by third parties, including hackers and criminals, cannot be accurately predicted.
Any such breach, damage, or interruption could have a material adverse effect on our business, result in the disclosure of confidential, sensitive, or proprietary business information, cause us to face significant liability, fines and penalties, customer notice obligations, or costly litigation, as we cannot be certain that it would be covered by insurance, expose us to government enforcement actions, possible assessments from the card brands if credit card data was involved, reduce customers confidence in our ability to protect their personal information and otherwise harm our reputation with our customers, which could cause them to alter their spending behavior, including amount of spend or frequency of visits to our store, reduce customers willingness to use credit and debit cards in our stores, require us to expend significant time and expense developing, maintaining, or upgrading our IT, administrative, or outsourcing systems or prevent us from paying our suppliers or team members, receiving payments from our customers, or performing other IT, administrative, or outsourcing services on a timely basis. Security breaches are increasing in frequency and sophistication and breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new federal and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject to more extensive requirements to protect the financial and personal information that we handle, and incur significant compliance costs.
Additionally, as a merchant that accepts debit and credit cards for payment (and our customers engage in a large number of credit and debit card transactions with us each year), we are subject to the Payment Card Industry (PCI) Data Security Standard (PCI DSS), issued by the PCI Council. PCI DSS is a multifaceted
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security standard that contains compliance guidelines and standards with regard to our security surrounding the physical administrative and technical storage, processing and transmission of individual cardholder data. By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute (ANSI) data encryption standards and payment network security operating guidelines. Failure to be PCI compliant or to meet other payment card standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us. As well, the Fair and Accurate Credit Transactions Act (FACTA) requires systems that print payment card receipts to employ personal account number truncation so that the customers full account number is not viewable on the slip.
Despite our efforts to comply with PCI DSS, ANSI and FACTA or other payment card standards and security measures, we may become subject to claims that we have violated such laws or standards, based on past, present and future business practices, which could have an adverse impact on our business and reputation. In addition, we have experienced phishing attacks, hacking incidents and other unauthorized access to certain data and information, and we cannot be certain that all of our IT and cybersecurity systems and processes will be able to prevent, contain or detect all cyber-attacks or intrusions from known malware or malware that may be developed in the future, particularly as we grow our technology platforms and expand our eCommerce offerings. In addition, as a public company following this offering, we may become the target of an increasing number of such attacks or incidents. To the extent that any disruption results in the loss, damage or misappropriation of information, we may be adversely affected by claims from customers, financial institutions, regulatory authorities, payment card associations and others. A security breach, whether of our systems or those of key third parties, may compromise the security of such systems, credit and debit card transactions, or personal information, as well as confidential or sensitive corporate information, and may continue undetected for a period of time, increasing the potential impact on such data.
We are subject to rapidly changing and increasingly stringent laws and industry standards relating to data privacy, protection and security. The restrictions and costs imposed by these laws, or our actual or perceived failure to comply with them, could subject us to liabilities that adversely affect our business, operations, and financial performance.
The collection, use, retention and sharing of personal information by us and our third-party service providers is subject to federal, state and local data privacy, protection and security laws and regulations, which have become increasingly stringent and recently changing over recent years. Many states throughout the United States have enacted laws regulating the online collection, use, and disclosure of personal information and requiring that companies implement reasonable data security measures. For example, the California Consumer Privacy Act of 2018 (CCPA) took effect on January 1, 2020. The CCPA gives California residents expanded rights relating to their personal information, provides civil penalties for violations, as well as a private right of action for certain data breaches, which may increase data breach litigation. Additionally, a California ballot initiative, the California Privacy Rights Act (CPRA), recently passed in California. The majority of the CPRAs provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes will likely be required. Similar laws have been proposed in other states, including Virginia, and at the federal level. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging and costly.
Laws in all states throughout the United States also require businesses to notify affected individuals, governmental entities, and/or credit reporting agencies of certain security breaches affecting personal information. These laws are not consistent, and compliance with them in particular in the event of a widespread data breach is complex and costly. We strive to comply with evolving and applicable laws and regulations relating to data privacy, protection and security but despite our best efforts, we may not be successful in achieving compliance with such laws and regulations and attempting to achieve full compliance may be costly and adversely affect our business operations and financial performance. The the regulatory framework for data privacy, protection and security is, and is likely to remain, uncertain for the foreseeable future, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that is inconsistent
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from one jurisdiction to another and may conflict with other rules or our practices. New laws, regulations and industry standards concerning data privacy, protection and security proposed and enacted in various jurisdictions could have a significant impact on our current and planned data privacy, protection and security-related practices, our collection, use, sharing, retention and safeguarding of customer, consumer and/or employee information, as well as any other third-party information we receive, and some of our current or planned business activities.
Any actual or perceived non-compliance with existing and new laws and regulations relating to data privacy, protection and security could result in litigation and proceedings against us by governmental entities, customers or others, fines and civil or criminal penalties, limited ability or inability to operate our business, offer services, or market our platform in certain jurisdictions, negative publicity and harm to our brand and reputation, and reduced overall demand. Such occurrences could adversely affect our business, financial condition, and results of operations.
In addition, the Telephone Consumer Protection Act (TCPA), imposes significant restrictions on the ability to make telephone calls or send text messages to mobile telephone numbers without the prior consent of the person being contacted. The actual or perceived improper making of telephone calls or sending of text messages may subject to us to potential risks, including liabilities or claims relating to consumer protection laws. Claims that we have violated the TCPA could be costly and time consuming to defend, and if successful, expose us to substantial statutory damages. We could also be required to change some portions of our business model, could face negative publicity and our business, financial condition and results of operations could be adversely affected. Even an unsuccessful challenge of our telephone call or text messaging practices by our customers, regulatory authorities or other third parties could result in negative publicity and could require a costly response from and defense by us.
We may be unable to protect or maintain our intellectual property, including The Fresh Market trademark, which could adversely affect our business.
We believe that our intellectual property has substantially contributed to the success of our business and the value of our brand. In particular, our trademarks, including our registered The Fresh Market and TFM trademarks, are valuable assets that reinforce our customers favorable perception of our stores.
From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we believe, have infringed our intellectual property rights. We cannot guarantee that we will successfully uncover all unauthorized third-party uses of our trademarks and other intellectual property. If we are unable to do so, or if we are otherwise unable to prevent third parties from using our names and trademarks, the value of our trademarks may be adversely affected, and customer confusion may result. In order to protect or enforce our intellectual property and other proprietary rights, we may need to initiate litigation or other proceedings against third parties. Any lawsuits or proceedings that we initiate could be expensive, take significant time and divert managements attention from other business concerns, and we cannot guarantee that such efforts to enforce our trademarks and other intellectual property rights will be successful.
Third parties have, from time to time opposed our trademarks and challenged our intellectual property rights. We respond to these actions on a case-by-case basis. The outcomes of these actions have included both negotiated out-of-court settlements and litigation. Defending against allegations and litigation can be expensive, take significant time and divert managements attention from other business concerns. We may also be required to pay substantial damages or be subject to a court order prohibiting us from engaging in certain activities. Any claims of intellectual property infringement, even those without merit, could therefore have a material adverse effect on our business, financial condition and results of operations.
In the ordinary course of our business, we evaluate the branding of our stores and products and how they are perceived by our customers. As part of this evaluation, we regularly develop new marks and explore using existing marks in new ways. In the future, we may decide (i) to continue to use The Fresh Market name and
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related design, (ii) to use our other existing trademarks on a wider or different basis, or (iii) to develop new trademarks, which could also incorporate The Fresh Market name. If we undertake such efforts, we cannot assure you that they would be successful in strengthening our brand or improving our brand recognition or image to our customers.
Our success depends on our ability to identify, source, and market new products that meet our high standards and customer preferences and our ability to offer our customers an aesthetically pleasing shopping environment.
Our success depends on our ability to identify, source, and market new products that both meet our standards for quality and appeal to customers preferences. Consumer preferences may change rapidly and without warning. A change in consumer preferences away from our offerings could have a material adverse effect on our business. A small number of our team members, including our in-house merchants, are primarily responsible for both sourcing products that meet our high specifications and identifying and responding to changing customer preferences. Failure to source and market such products, or to accurately forecast changing customer preferences, could lead to a decrease in the number of customer transactions at our stores and a decrease in the amount customers spend when they visit our stores. In addition, the sourcing of our products is dependent, in part, on our relationships with our vendors. If we are unable to maintain these relationships, we may not be able to continue to source products at competitive prices that both meet our standards and appeal to our customers.
We also attempt to create a pleasant and appealing shopping experience. If we are not successful in creating a pleasant and appealing shopping experience, we may lose customers to our competitors. If we do not succeed in maintaining good relationships with our vendors and in introducing and sourcing new products that consumers want to buy, or if we are unable to provide a pleasant and appealing shopping environment or maintain our level of customer service, our sales, operating margins, and market share may decrease, resulting in reduced profitability.
Our stores rely heavily on sales of perishable products, and ordering errors or product supply disruptions may have an adverse effect on our profitability and operating results.
We have a significant focus on perishable products. Sales of perishable products accounted for more than 70% of our total sales in fiscal 2020. We rely on various suppliers and vendors to provide and deliver our perishable product inventory on a continuous basis and we do not have significant control over the availability or cost to us of many of the products offered for sale in our stores. We could suffer significant product inventory losses in the event of the loss or shutdown of a major supplier or vendor, disruption of our distribution network, extended power outages, natural disasters, or other catastrophic occurrences. For example, due to the COVID-19 pandemic and the resulting dislocation of workplaces and the economy, the ability of vendors to supply required products may be impaired because of the illness or absenteeism in their workforces, government-mandated shutdown orders or impaired financial conditions. Supplier performance issues may also result in inventory losses. We have implemented certain systems to ensure our ordering is in line with demand and to reduce our rate of inventory shrinkage. Moreover, while the supply of each of our products may return to pre-COVID-19 levels at different times, including as a result of resurgences of the COVID-19 pandemic, and there can be no assurance that our efforts to ensure product inventory for all of the products that our customers require will be successful. Further, we cannot assure you, however, that our ordering systems will always work efficiently, in particular in connection with the opening of new stores, which have no, or a limited, ordering history. If we were to over-order, we could suffer inventory losses, which would negatively impact our operating results, while under-ordering could leave us unable to meet consumer demand. Any or all of these factors could impact our business, financial condition and operating results.
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Increased commodity prices may impact profitability.
Many of our products include inputs such as wheat, corn, oils, milk, sugar, cocoa, and other commodities. Commodity prices worldwide may fluctuate widely and are, at times, volatile. While commodity prices do not typically represent the substantial majority of our product costs, any increase in commodity prices may cause our vendors to seek price increases from us (including, for example, prices for proteins and the ingredients for prepared foods). Although we typically are able to pass on modest commodity price increases or mitigate vendor efforts to increase costs to us, we may be unsuccessful in doing so, either in whole or in part, if commodity prices increase materially. In addition, our vendors have incurred additional costs to respond the COVID-19 pandemic, and may seek to pass those costs through to us. In the event we are unable to mitigate or resist our vendors requests to obtain price increases, we may in turn consider raising our prices, and our customers may respond negatively or resist any such price increases including by reducing purchases at our stores. Our profitability may be impacted through increased costs to us, which may impact margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions, all of which may have adverse effect on our performance, financial condition and operating results.
The geographic concentration of our stores in the southeastern United States creates an exposure to local economies, regional downturns or severe weather or catastrophic occurrences that may materially adversely affect our financial condition and results of operations.
As of January 31, 2021, we operated 46 stores in Florida, making Florida our largest market and representing approximately 29% of our total stores. We also have store concentration in North Carolina, Virginia, and Georgia, operating 21 stores, 13 stores, and 12 stores in those states, respectively. As a result, our business is more susceptible to regional conditions than the operations of more geographically diversified competitors, and we are vulnerable to economic downturns in those regions. Any unforeseen events or circumstances that negatively affect these areas could materially and adversely affect our revenues and profitability. These factors include, among other things, changes in demographics, economic conditions, population.
The geographic concentration of our stores in the southeastern United States also makes us vulnerable to severe weather conditions and other catastrophic occurrences in areas in which we have stores or from which we obtain products may materially adversely affect our results of operations. Such conditions may result in physical damage to our stores, the inability to re-open stores that may close as a result of damage to the store and/or operating area in a timely manner, closure of one or more of our stores, inadequate work force in our markets, temporary disruption in the manufacture, transport and supply of products, delays in the delivery of products to our stores, our ability to fund losses of inventory, a reduction in the availability of products in our stores, reductions in customer traffic to our stores and our ability to collect on insurance coverage, which is subject to its own inherent risks including the solvency of our insurance carriers, their approval of our claims and the timing of claims processing and payment. In addition, adverse climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops yielded by food producers may adversely affect the availability or cost of certain products within the grocery supply chain. Any of these factors may disrupt our businesses and materially adversely affect our financial condition and results of operations.
Future consumer, employment or other litigation could adversely affect our financial condition and results of operation.
Our retail operations are characterized by transactions involving a wide array of product selections, including prepared food, and consequently carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. We have been, are, and may in the future become a party to individual personal injury, products liability, intellectual property and other legal actions in the ordinary course of our business. While these actions are generally routine in nature, incidental to the operation of our business and immaterial in scope, if our assessment of any action or actions should prove inaccurate, our financial condition and results of operations could be adversely affected.
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Additionally, we are occasionally exposed to industry-wide or class-action claims arising from the products we carry or industry-specific business practices. Products that we sell may carry claims, whether stated or implied, as to their origin, ingredients or health benefits, including, by way of example, the use of terms such as natural. The use of these terms may not be subject to uniform standards, and the resulting uncertainty has led to legal challenges. Plaintiffs have commenced legal actions, including class actions, against a number of food companies, asserting claims for alleged false, misleading, and deceptive advertising and labeling. Should we become subject to similar claims, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded. Adverse publicity about these matters may discourage consumers from buying our products. Due to the nature of class action litigation, the cost of defending against any such claims could be significant. Any loss of confidence on the part of consumers in the truthfulness of our labeling or ingredient claims would be difficult and costly to overcome and may significantly reduce our brand value. Any of these events could adversely affect our reputation and brand and decrease our sales, which would have a material adverse effect on our business, financial condition, and results of operations.
We also have been, are, and may in the future become subject to claims for discrimination, harassment, wages and hours, and other federal and or/state employment matters, including claims that may be brought on behalf of a putative class of team members. Certain claims asserted in such lawsuits, if resolved against us, could give rise to substantial damages. Our defense costs and any resulting damage awards or settlement amounts may not be covered by insurance. Thus, an unfavorable outcome or settlement of one or more of these lawsuits could have a material adverse effect on our financial position, liquidity, and results of operations in a particular period or periods.
We have recorded store asset impairment charges in the past and may be required to recognize impairment charges in the future.
Pursuant to U.S. generally accepted accounting principles, we are required to recognize an impairment charge when circumstances indicate that the carrying value of long-lived assets may not be recoverable. Our judgment regarding the existence of circumstances that indicate an assets carrying value may not be recoverable, and therefore potentially impaired, is based on several factors, including a decision to close a store or negative or declining operating cash flows. If a determination is made that the assets carrying value is not recoverable over its estimated useful life, the asset is written down to its estimated fair value, if lower. We recognized store asset impairment charges of $5.7 million and $3.1 million in fiscal 2019 and fiscal 2018, respectively. Our cash flow projections look several years into the future and include assumptions concerning variables such as the potential impact of operational changes, competitive factors, inflation, and the economy. Our estimate of fair value used in calculating an impairment loss is based on market values, if available, or our estimated future cash flow projections discounted to their present value. If these estimates or projections change, we may be required to record impairment charges on certain of these assets, which would negatively impact our results.
Our financial statements include a significant amount of goodwill and intangible assets. A decline in the fair value of an intangible asset or our business could result in an asset impairment charge, which would be recorded as an operating expense in our financial statements and could be material.
Our policy is to evaluate goodwill and indefinite-lived intangible assets for possible impairment as of the first day of the fourth quarter of each fiscal year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying amount. In addition, intangible assets that are being amortized are tested for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. We have identified that our business operates as a single operating segment and is a single reporting unit for purposes of testing goodwill impairment. For these impairment tests, we use various valuation methods to estimate the fair value of our business and intangible assets. If the fair value of an asset is less than its carrying value, we would recognize an impairment charge for the difference.
It is possible that we could have an impairment charge for goodwill or tradename intangible assets in future periods if (i) overall economic conditions in 2020 or future years vary from our current assumptions, (ii) business
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
conditions or the strategies for our business change from our current assumptions, or (iii) enterprise values of comparable publicly traded companies, or of actual sales transactions of comparable companies, were to decline, resulting in lower comparable multiples of revenues and earnings before interest, taxes, depreciation, and amortization and, accordingly, lower implied values of goodwill and intangible assets. A future impairment charge for our goodwill or tradename could have a material effect on our consolidated financial statements and related disclosures.
Changes in accounting standards, subjective assumptions and estimates by management related to complex accounting matters may materially impact reporting of our financial condition and results of operations.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations for many aspects of our business, such as accounting for inventories, impairment of long-lived assets, insurance reserves, closed store reserves, leases, unclaimed property laws, income taxes, and share-based compensation, are highly complex and involve subjective judgments. Changes in these rules or their interpretation or changes in underlying estimates, assumptions, or judgments by our management could significantly change our reported or expected earnings.
Also, new accounting guidance and standards may require systems and other changes that could increase our operating costs or change our financial statements. Implementing future accounting guidance related to leases and other areas may be impacted by the newly issued accounting pronouncements and standards. For example, our adoption of ASC 842, Leases impacted our reported financial results. For additional information, see Note 2, Summary of Significant Accounting Policies in the Notes to our Consolidated Financial Statements, included elsewhere in this prospectus.
The adoption of new tax legislation could affect our financial performance.
We are subject to income and other taxes in the United States. Our effective tax rate in the future could be adversely affected by changes in the valuation of deferred tax assets and liabilities and changes in tax laws. The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income.
President Biden has provided some informal guidance on what tax law changes he would support. Among other things, his proposals would raise the rate on both domestic and foreign income and impose a new alternative minimum tax on book income. If these proposals are ultimately enacted into legislation, they could materially impact our tax provision, cash tax liability and effective tax rate. If any or all of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could have a negative impact on the Companys effective tax rate.
We may be unable to fully realize the benefits of our net operating loss, or NOL, carry forwards if an ownership change occurs.
If we were to experience a change in ownership under Section 382 of the Internal Revenue Code, or Section 382, the NOL carryforward limitations under Section 382 would impose an annual limit on the amount of the future taxable income that may be offset by our NOL generated prior to the change in ownership. If a change in ownership were to occur, we may be unable to use a significant portion of our NOL to offset future taxable income that we might otherwise be able to use. In general, a change in ownership occurs when, as of any testing date, there has been a cumulative change in the stock ownership of the corporation held by 5% stockholders of more than 50 percentage points over an applicable three-year period. For these purposes, a 5% stockholder is generally any person or group of persons that at any time during an applicable three-year period has owned 5% or more of our outstanding common stock. In addition, persons who own less than 5% of the outstanding common stock are grouped together as one or more public group 5% stockholders. Under Section 382, stock ownership would be determined under complex attribution rules and generally includes shares held directly, indirectly
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
through intervening entities, and constructively by certain related parties and certain unrelated parties acting as a group.
Risks associated with insurance plan claims and actuarial estimates could increase future expenses and may have a materially adverse effect on our business, financial condition and results of operations.
We use a combination of insurance and self-insurance to provide for potential liability for workers compensation, automobile and general liability, product liability, director and officers liability, employee health care benefits, and other risks, including casualty and property risks. However, there are types of losses we may incur but against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crime, certain wage and hour and other employment-related claims, including class actions, actions based on certain customer protection laws, certain cyber or data privacy events and some natural and other disasters or similar events. If we incur such losses and they are material, our business could suffer. The liability for these claims has been determined using actuarial estimates of the aggregate liability for claims incurred and an estimate of incurred but not reported claims, on an undiscounted basis. Any actuarial projection of losses is subject to a high degree of variability related to, among other things, future interest and inflation rates, future economic conditions, litigation trends and benefit-level changes. Changes in legal trends and interpretations, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect the level of reserves required and could cause material future expense to maintain reserves at appropriate levels. Any deviation of actual claims and other expenses related to these and other risks in excess of our assumptions, estimates, and historical trends may have a material adverse effect on our business, financial condition and results of operations.
Energy costs are a significant component of our operating expenses and increasing energy costs, unless offset by more efficient usage or other operational responses, may impact our profitability.
We utilize natural gas, water, sewer, and electricity in our stores, and our third-party logistics providers use gasoline and diesel fuel in the trucks that deliver products to our stores. Increases in energy and fuel costs, frequently influenced by international, political and economic circumstances have experiences volatility over time and whether driven by increased demand, decreased or disrupted supply, or an anticipation of any such events, may result in increased costs of operating our stores and may increase the costs of our products. We may not be able to recover such rising costs, should they occur, through increased prices charged to our customers, and any increased prices may exacerbate the risk of customers choosing lower-cost alternatives. In addition, if we are unsuccessful in attempts to protect against increases in energy costs through energy contracts, improved energy procurement, improved efficiency, and other operational improvements, the overall costs of operating our stores will increase, which could adversely impact our profitability, financial condition and results of operations.
Products we sell could cause unexpected side effects, illness, injury, or death that could result in their discontinuance or expose us to lawsuits, either of which could result in unexpected costs and damage to our reputation and could have an adverse effect on our operating results.
There is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury, or death caused by products we sell, whether food or non-food, or concerns about these items, could result in the discontinuance of sales of these products or prevent us from achieving market acceptance of the affected products. Concerns regarding the quality or safety of our food products or our food supply chain could cause consumers to avoid purchasing certain products from us, or to seek alternative sources of food, even if the basis for the concern is unfounded, has been addressed, or is outside of our control. Adverse publicity about these concerns, including on social media, whether or not ultimately based on fact or involving products sold at our stores, could discourage consumers from buying our products, which could have an adverse effect on our reputation, brand, and operating results. Any lost confidence on the part of our customers would be difficult and costly to reestablish. Any such adverse effect could be exacerbated by our position in the market as
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
a purveyor of fresh, high-quality food products and could significantly reduce our brand value. Issues regarding the safety of any food items sold by us, regardless of the cause, could have a substantial and adverse effect on our sales and operating results.
Further, such side effects, illnesses, injuries, and death could also expose us to product liability or negligence lawsuits. In particular, the sale of food products entails an inherent risk of product liability claims, product recalls, and the resulting negative publicity. Food products containing contaminants or allergens could be inadvertently manufactured, prepared, or distributed by us, and if processing at the consumer level does not eliminate them, these contaminants or allergens could result in illness or death. In addition, food products we sell may be subject to deliberate contamination. We cannot assure you that product liability claims will not be asserted against us or that we will not be obligated to perform product recalls in the future, whether on food or other products. Any such claims (even if unsuccessful or not fully pursued), recalls, or adverse publicity with respect to our private-label products or other products may have an even greater negative effect on our sales and operating results in addition to generating negative and adverse publicity for our private-label brand or other products. Additionally, the U.S. Food and Drug Administration (the FDA) has promulgated a number of regulations, including under the Food Safety Modernization Act (the FSMA), which impose more stringent requirements at various steps in the supply chain and may result in increased compliance costs, which may be passed down to us by our suppliers, or in supply chain disruptions. These include new rules on food traceability proposed in September 2020, which may increase the risk of supply disruption or increased compliance costs. The real or perceived sale of contaminated or harmful products may cause negative publicity with to us, or our brand or products, including on social media. which could in turn harm our reputation and net sales, and could have a material adverse effect on our business, results of operations, or financial condition.
Any consumer claims brought against us may exceed our existing or future insurance policy coverage or limits, or not be covered by any rights to indemnity or contribution we have against others. Our insurance carriers may contest their coverage obligations. Any judgment against us that is in excess of our available insurance coverage would have to be paid from our cash reserves, which would reduce our capital resources. Further, we may not have sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets.
If we fail to maintain our reputation and the value of our brand, our sales may decline.
We believe our continued success depends on our ability to maintain and grow the value of The Fresh Market brand. Maintaining, promoting, and positioning our brand and reputation will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high-quality customer experience. Brand value is based in large part on perceptions of subjective qualities, and even isolated incidents can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations, or litigation. Our brand could be adversely affected if we fail to achieve these objectives, or if our public image or reputation was tarnished by negative publicity.
Various aspects of our business are subject to federal, state, and local laws and regulations. Our compliance with these laws and regulations may require additional capital expenditures and could materially adversely affect our ability to conduct our business as planned.
We are subject to numerous and frequently changing federal, state, and local laws and regulations, relating to matters such as product labeling, weights and measures, taxation, zoning, land use, environmental protection, labor and employment including workplace safety, food safety, public health, community right-to-know, information security and data privacy and alcohol and beverage sales. States in which we operate and several local jurisdictions regulate the licensing of supermarkets and the sale of alcoholic beverages. In addition, certain local regulations may limit our ability to sell alcoholic beverages at certain times. We are also subject to laws governing our relationship with team members, including minimum wage requirements, overtime, working conditions, benefits such as paid sick leave, immigration, disabled access, and work permit requirements, as well as laws governing the employment of minors.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Federal and state regulatory agencies may impose additional regulations that raise the cost of operating our business or cause us to make changes to our operations. Such regulations may include, but are not limited to, any changes to the Department of Labors criteria for exempt status under the Fair Labor Standards Act, the FDAs rulemaking regarding menu labeling, the various rules promulgated under the FSMA, and the forthcoming regulations relating to disclosure on products made with bioengineered foods. Compliance with new laws and regulations in these areas, or with new or stricter interpretations of existing requirements, could reduce the revenue and profitability of our stores and could otherwise materially adversely affect our business, financial condition, or results of operations. Such changes in applicable law also may cause us to alter the types of products or services that we offer or affect our ability to profitably operate stores in certain jurisdictions. Further, our new store openings could be delayed or prevented or our existing stores could be impacted by difficulties or failures in our ability to obtain or maintain required approvals or licenses. Our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated critical violations, closure of the store until a re-inspection demonstrates that we have remediated the problem. For example, we have had to comply with recent new laws in many of the states or counties in which we operate regarding actions to mitigate the spread of COVID-19. We cannot predict the nature of future laws, regulations, interpretations, or applications or determine what effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state, and local regulatory schemes would have on our business in the future.
Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our ability to fund our operations and capital expenditures, and limit our ability to react to changes in the economy or our industry or pay our debts.
We have, and expect to continue to have, a substantial amount of debt. As of January 31, 2021, we had $934 million face value of outstanding indebtedness, represented by our secured notes due 2023 issued on April 27, 2016 (Senior Secured Notes) and our secured notes due 2025 issued on March 13, 2020 (New Superpriority Secured Notes) to refinance certain previously outstanding notes (the Superpriority Notes). For fiscal 2020, we had debt service obligations of $78 million to the holders of the Senior Secured Notes and estimated aggregate debt service obligations of $14 million to the holders of the Superpriority Secured Notes and the New Superpriority Secured Notes, excluding the prepayment penalty for the Superpriority Secured Notes. We primarily depend on cash flow from operations to fund our business and growth plans, and such debt service obligations require us to dedicate a substantial portion of our cash flow from operations to the servicing and repayment of our indebtedness, thereby reducing funds available to us for other purposes and limiting our ability to operate and expand our business, to pursue capital expenditures (including for new store growth, relocations, remodels and refreshes, strategic initiatives, or other purposes), or to respond to competitive pressures.
Our outstanding indebtedness and any additional indebtedness we incur may have important consequences for us, including, without limitation:
| it may be more difficult for us to satisfy our obligations with respect to our indebtedness, including the Senior Secured Notes and New Superpriority Secured Notes, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes; |
| we may be required to dedicate a significant portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby limiting the availability of our cash flow for other purposes, such as capital expenditures |
| we may be limited in our flexibility in planning for, or reacting to, changes in our operations, business or the industry in which we operate; |
| we may be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
| impact our rent expense on leased space; |
| increase our vulnerability to general economic downturns in our business, the food industry and competitive pressures; |
| restrict us from making strategic acquisitions, engaging in development activities, opening new stores, or exploiting business opportunities that may arise; |
| cause us to make non-strategic divestitures; |
| limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets; |
| prevent us from raising the funds necessary to repurchase all Senior Secured Notes tendered to us or redeem all New Superpriority Secured Notes upon the occurrence of certain changes of control, which failure to repurchase would constitute a default under the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes; or |
| expose us to the risk of increased interest rates, as certain of our borrowings are at variable rates of interest. |
In addition, the agreements governing our indebtedness contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Our ability to service our debt obligations and achieve compliance with affirmative and negative debt covenants will largely depend on our future operating performance, which cannot be assured. A failure by us to comply with the covenants or financial ratios contained in the agreements governing our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes, could result in an event of default and could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of default, if not cured or waived, the noteholders and lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements governing our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes. If our indebtedness were to be accelerated, our future financial condition could be materially adversely affected.
We may incur additional indebtedness in the future, including secured debt, which could adversely affect our financial health, our ability to react to changes to our business and could further exacerbate the risks associated with our substantial leverage.
We may incur additional indebtedness in the future. Although the terms of the agreements governing our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes, contain restrictions on our and our subsidiaries ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring obligations that do not constitute indebtedness. In addition to the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes, the covenants under any other existing or future debt instruments could allow us to incur a significant amount of additional indebtedness and, subject to certain limitations, such additional indebtedness could be secured and have priority ahead of the Senior Secured Notes under the payment waterfall. Any increase in the amount of our indebtedness could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets, or issue equity to obtain necessary funds. We do not know whether we will be able to take any of such actions on a timely basis, on terms satisfactory to us, or at all.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Our level of indebtedness may:
| require us to use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to us for working capital, capital expenditures, including new store growth, relocations, remodels, and refreshes, and other general corporate purposes; |
| limit our ability to pay future dividends or certain other distributions on our capital stock or repurchase our capital stock and prepay subordinated indebtedness; |
| limit our ability to obtain additional financing (either through additional debt or equity financing) for working capital, capital expenditures, expansion plans, and other investments, which may limit our ability to implement our business strategy; |
| restrict our ability to prepay, redeem or repurchase certain debt; |
| restrict or limit our ability to make certain loans, investments or other restricted payments; heighten our vulnerability to downturns in our business, the food retail industry, or the general economy and limit our flexibility in planning for, or reacting to, changes in our business and the food retail industry; or |
| prevent us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our store base and product offerings. |
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in amounts sufficient to enable us to make payments on our existing or any future indebtedness to fund our operations.
We may not be able to generate sufficient cash to service all of our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.
Our ability to pay principal and interest on the Senior Secured Notes and the New Superpriority Secured Notes and to satisfy our other debt obligations depends upon, among other things, our future financial and operating performance, which will be affected by prevailing economic, industry, and competitive conditions and financial, business, legislative, regulatory, and other factors, many of which are beyond our control.
We cannot assure you that our business will generate cash flow from operations, or that we will be able to issue additional notes under the New Superpriority Secured Notes Indenture or otherwise borrow funds, in an amount sufficient to fund our liquidity needs, including the payment of principal and interest on the Senior Secured Notes and the New Superpriority Secured Notes.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We cannot assure you that we will be able to restructure or refinance any of our debt on commercially reasonable terms or at all. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as sales of assets, sales of equity or negotiations with our lenders to restructure the applicable debt. In addition, the terms of existing or future debt agreements, including the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes, may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. Our equityholders have no continuing obligation to provide us with debt or equity financing. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could result in a material adverse effect on our business, results of operations, and financial condition and could negatively impact our ability to satisfy our obligations under the Senior Secured Notes and the New Superpriority Secured Notes.
If we cannot make scheduled payments on our indebtedness, we will be in default, and holders of the Senior Secured Notes and the New Superpriority Secured Notes could declare all outstanding principal and interest to be due and payable, our secured lenders (including the holders of the Senior Secured Notes and the New Superpriority Secured Notes) could foreclose against the assets securing their notes, and we could be forced into bankruptcy or liquidation.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Senior Secured Notes and the New Superpriority Secured Notes.
Any default under the agreements governing our indebtedness, including defaults under the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes that are not waived by the required holders, and the remedies sought by the holders of such indebtedness could leave us unable to pay principal, premium, if any, or interest on the Senior Secured Notes and the New Superpriority Secured Notes and could substantially decrease the market value of the Senior Secured Notes and the New Superpriority Secured Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, or interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including the agreements governing the Senior Secured Notes and the New Superpriority Secured Notes), we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to (i) declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest and (ii) institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. Upon any event of default, all payments will be made to repay the New Superpriority Secured Notes before the Senior Secured Notes are repaid.
If our operating performance declines, we may in the future need to seek waivers from the required holders under the New Superpriority Secured Notes Indenture to avoid being in default. If we breach our covenants under the New Superpriority Secured Notes Indenture and seek a waiver, we may not be able to obtain a waiver from the required holders. In such a case, we would be in default, the holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation.
In the future, we may be dependent upon our lenders for financing to execute our business strategy and to meet our liquidity needs. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow, it could have a material adverse effect on our business, financial condition, and results of operations.
During periods of volatile credit markets, there is risk that lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments. If our lenders are unable to fund borrowings under their revolving credit commitments or we are unable to borrow, it could be difficult to obtain sufficient funding to execute our business strategy or to meet our liquidity needs, which could have a material adverse effect on our business, financial condition, and results of operations.
Volatility and weakness in bank and capital markets may adversely affect credit availability and related financing costs for us.
Banking and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
adversely affected. Although we currently can access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. These factors, including the tightening of credit markets, could adversely affect our ability to obtain cost-effective financing. Increased volatility and disruptions in the financial markets also could make it more difficult and more expensive for us to refinance outstanding indebtedness and to obtain financing. In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws, or new interpretations or the enforcement of older laws and regulations applicable to the financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit. Disruptions in the financial markets can also adversely affect our lenders, insurers, customers, and other counterparties. Any of these results could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to this Offering and Ownership of Our Common Stock
Our stock price may fluctuate significantly.
The market price of our common stock could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our common stock, you could lose a substantial part or all of your investment in our common stock. The following factors could affect the trading price of our common stock:
| our operating and financial performance; |
| actual or anticipated variations in our quarterly results of operations; |
| the public reaction to our press releases, our other public announcements and our filings with the SEC; |
| strategic actions by our competitors; |
| changes in operating performance and the stock market valuations of other companies; |
| announcements related to media reports or other public forum comments related to litigation, claims or reputational charges against us; |
| negative publicity arising from altercations or food safety incidents at one or more of our venues; |
| our failure to meet revenue or earnings estimates made by research analysts or other investors; |
| changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; |
| speculation in the press or investment community; |
| investor perceptions of us and the industries in which we or our customers operate; |
| sales of our common stock by us or our stockholders, or the perception that such sales may occur; |
| changes in accounting principles, policies, guidance, interpretations or standards; |
| additions or departures of key management personnel; |
| actions by our stockholders; |
| general market conditions within the broader stock market; |
| the development and sustainability of an active trading market for our common stock; |
| domestic and international economic, political, legal and regulatory factors unrelated to our performance; and |
| the realization of any risks described under this Risk Factors section, or other risks that may materialize in the future. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a companys securities. Such litigation, if instituted against us, could result in very substantial costs, divert our managements attention and resources and harm our business, financial condition and results of operations.
We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Exchange Act and be required to comply with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, and the listing requirements of , on which our common stock will be traded, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. We will need to institute a comprehensive compliance function and establish internal policies to ensure we have the ability to prepare on a timely basis financial statements that are fully compliant with all SEC reporting requirements and establish an investor relations function. We expect that compliance with these requirements will increase our legal, accounting and financial compliance costs and will make some activities more time consuming and costly. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under securities laws, as well as rules and regulations implemented by the SEC and . In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to continue to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of the Sarbanes-Oxley Act. In that regard, we have to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Furthermore, these rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. These rules and regulations are often 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. In addition, if we fail to comply with these rules and regulations, we could be subject to a number of penalties, including the delisting of our common stock, fines, sanctions or other regulatory action or civil litigation.
Failure to comply with requirements to design, implement and maintain effective internal control over financial reporting could materially impact our business and stock price.
As a private company, we have not been required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
As a public company, our management will have the responsibility for significant requirements for enhanced financial reporting and internal controls. The process of designing, implementing and maintaining effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business and the economic and regulatory environments. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and adversely affect our operating results. In addition, we will be required, pursuant to Section 404, to furnish a report by our management on, among other things, the effectiveness of our internal control over financial reporting in the second annual report following the closing of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing and maintaining internal controls may divert our managements attention from other matters that are important to our business.
Furthermore, as a public company following the closing of this offering, we may, during the course of our testing of our internal controls over financial reporting, or during the subsequent testing by our independent registered public accounting firm, identify deficiencies which would have to be remediated to satisfy the SEC rules for certification of our internal controls over financial reporting. As a consequence, we may have to disclose in periodic reports we file with the SEC significant deficiencies or material weaknesses in our system of internal controls. The existence of a material weakness would preclude management from concluding that our internal controls over financial reporting are effective, and would preclude our independent auditors from issuing an unqualified opinion that our internal controls over financial reporting are effective. In addition, disclosures of this type in our SEC reports could cause investors to lose confidence in the accuracy and completeness of our financial reporting and may negatively affect the trading price of our common stock, and we could be subject to sanctions or investigations by regulatory authorities. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal controls over financial reporting, it could negatively impact our business, results of operations and reputation.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon the closing of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected which could limit our ability to report our financial results accurately and timely, and could expose us to litigation
45
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Our principal stockholder, the Apollo Funds, will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control, and Apollos interests may conflict with our interests and the interests of other stockholders.
Following this offering, our principal stockholder, the Apollo Funds, will own % of our outstanding common stock (or % of our outstanding common stock if the underwriters exercise their option to purchase additional shares in full). See Principal Stockholders. As a result, the Apollo Funds will have effective control over the outcome of votes on all matters requiring approval by our stockholders, including entering into significant corporate transactions such as mergers, tender offers and the sale of all or substantially all of our assets and issuance of additional debt or equity. Moreover, the Apollo Funds will have significant influence over the management and affairs of our company. The interests of the Apollo Funds could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by the Apollo Funds could delay, defer or prevent a change of control of our company or impede a merger, takeover or other business combination which may otherwise be favorable for us. Additionally, the Apollo Funds are in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete, directly or indirectly with us. The Apollo Funds may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as the Apollo Funds continue to directly or indirectly own a significant amount of our equity, even if such amount is less than a majority, the Apollo Funds will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions. This concentration of ownership may also affect the prevailing market price of our common stock due to investors perceptions that conflicts of interest may exist or arise. As a result, this concentration of ownership may not be in your best interests.
We will be a controlled company within the meaning of rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
Following this offering, the Apollo Funds will continue to control a majority of the voting power of our outstanding voting stock, and as a result we will be a controlled company within the meaning of the corporate governance standards. Under rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:
| a majority of the board of directors consist of independent directors; |
| the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| there be an annual performance evaluation of the nominating and corporate governance and compensation committees. |
These requirements will not apply to us as long as we remain a controlled company. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of .
We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.
We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries ability to pay dividends or other distributions to us. See Managements Discussion and Analysis of
46
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Financial Condition and Results of OperationsLiquidity and Capital Resources. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.
Investors in this offering will experience immediate and substantial dilution.
Based on our pro forma net tangible book value per share as of and an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus), purchasers of our common stock in this offering will experience an immediate and substantial dilution of $ per share, representing the difference between our pro forma net tangible book value per share and the assumed initial public offering price. This dilution is due in large part to earlier investors having paid substantially less than the initial public offering price when they purchased their shares. For additional information on the dilution you may experience as a result of investing in this offering, see Dilution.
You may be diluted by the future issuance of additional common stock or convertible securities in connection with our incentive plans, acquisitions or otherwise, which could adversely affect our stock price.
After this offering, we will have shares of common stock authorized but unissued (assuming no exercise of the underwriters option to purchase additional shares). Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. We have reserved shares for issuance upon exercise of outstanding stock options and for issuances under our new equity incentive plan. Any common stock that we issue, including under our new equity incentive plan or other equity incentive plans that we may adopt in the future, as well as under outstanding options would dilute the percentage ownership held by the investors who purchase common stock in this offering.
From time to time in the future, we may also issue additional shares of our common stock or securities convertible into common stock pursuant to a variety of transactions, including acquisitions. Our issuance of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.
There has been no prior public market for our common stock, and there can be no assurances that a viable public market for our common stock will develop.
Prior to this offering, our common stock was not traded on any market. The initial public offering price for the shares was determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the trading market following the closing of this offering and although we intend to list our shares of common stock on , an active, liquid and orderly trading market for our common stock may not develop or be maintained after this offering. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors purchase and sale orders. We cannot predict the extent to which investor interest in our common stock will lead to the development of an active trading market on the or otherwise or how liquid that market might become. If an active public market for our common stock does not develop, or is not sustained, it may be difficult for you to sell your shares you purchase in this offering at a price that is attractive to you or at all. An inactive trading market may also impair our ability to raise capital by selling shares of our common stock and enter into strategic partnerships or acquire other complementary products, technologies or businesses by using shares of our common stock as consideration. Furthermore, although we intend to list our shares of common stock on , there can be no guarantee that we will continue to satisfy the continued listing standards of the . If we fail to satisfy the continued listing standards, we could be de-listed, which would negatively impact the value and liquidity of your investment.
47
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We do not anticipate paying dividends on our common stock in the foreseeable future.
We do not anticipate paying any dividends in the foreseeable future on our common stock. We intend to retain all future earnings for the operation and expansion of our business and the repayment of outstanding debt. As a result, capital appreciation, if any, of our common stock may be your major or sole source of gain from ownership of our common stock for the foreseeable future. Investors seeking dividends should not purchase shares of our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and subject to, among other things, our compliance with applicable law, and depending on, among other things, our business prospects, financial condition, results of operations, cash requirements and availability, debt repayment obligations, capital expenditure needs, the terms of any preferred equity securities we may issue in the future, covenants in the agreements governing our current and future indebtedness, other contractual restrictions, industry trends, the provisions of the Delaware General Corporation Law (the DGCL) affecting the payment of dividends and distributions to stockholders and any other factors or considerations our board of directors may regard as relevant. Furthermore, because we are a holding company, our ability to pay dividends on our common stock will depend on our receipt of cash distributions and dividends from our direct and indirect wholly owned subsidiaries, which may be similarly impacted by, among other things, the terms of any preferred equity securities these subsidiaries may issue in the future, debt agreements, other contractual restrictions and provisions of applicable law. Moreover, our existing debt arrangements contain, and any future indebtedness likely will contain, restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to pay dividends and make other restricted payments. While we may change this policy at some point in the future, we cannot assure you that we will make such a change. See Dividend Policy.
If equity research analysts or industry analysts do not publish research or reports about our business, publish negative reports or change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock, should one develop, will be influenced by the research and reports that industry or equity research analysts publish about us or our business. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with us, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. If no or few securities or industry analysts commence coverage of us, the trading price for our common stock will be negatively impacted. In the event we do obtain industry or equity research analyst coverage, we will not have any control over the analysts content and opinions included in their reports. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, financial performance, stock price or otherwise, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our common stock or if our operating results do not meet their expectations, our stock price could decline and result in the loss of all or a part of your investment in us.
We may issue preferred stock, the terms of which could adversely affect the voting power or value of our common stock.
Our amended and restated certificate of incorporation will authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.
48
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Our amended and restated certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.
The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity. The doctrine of corporate opportunity is intended to preclude officers, directors and other fiduciaries from personally benefiting from opportunities that belong to the corporation. Our amended and restated certificate of incorporation, which will become effective upon the closing of this offering, will provide that the doctrine of corporate opportunity will not apply with respect to Apollo and will further provide for the allocation of certain corporate opportunities between us and Apollo. Under these provisions, neither Apollo, Apollo-managed funds, their portfolio companies or other affiliates (together, the Apollo Entities), nor any of their officers, directors, agents, stockholders, members or partners will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate. For instance, a director of our company who also serves as a director, officer, partner or employee of the Apollo Entities may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated to the Apollo Entities instead of to us. The terms of our amended and restated certificate of incorporation are more fully described in Description of Capital Stock.
Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under the DGCL may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.
Our amended and restated certificate of incorporation and amended and restated bylaws include certain provisions that could have the effect of discouraging, delaying or preventing a change of control of our company or changes in our management that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions include, among other things:
| restrictions on the ability of our stockholders to fill a vacancy on the board of directors; |
| our ability to issue preferred stock with terms that the board of directors may determine, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
| specify that special meetings of our stockholders can be called only upon the request of the chairman of our board of directors or by a resolution adopted by a majority of our board of directors; |
| in the event the Apollo Entities cease to beneficially own more than 50% of the outstanding common stock, our directors may only be removed from the board of directors for cause by the affirmative vote of the holders of at least 662/3% of the voting power of outstanding shares of our common stock entitled to vote thereon; |
| the absence of cumulative voting in the election of directors, which may limit the ability of minority stockholders to elect directors; and |
| advance notice requirements for stockholder proposals and nominations, which may discourage or deter a potential acquirer from soliciting proxies to elect a particular slate of directors or otherwise attempting to obtain control of us. |
These provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage, delay or prevent a transaction involving a change of control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock that investors might be willing to pay in the future for shares of our common stock if they are viewed as discouraging future takeover attempts.
49
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 203 of the DGCL may affect the ability of an interested stockholder to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an interested stockholder. An interested stockholder is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation. Accordingly, Section 203 could have an anti-takeover effect with respect to certain transactions that the Board of Directors does not approve in advance. The provisions of Section 203 may encourage companies interested in acquiring the company to negotiate in advance with the board of directors because the stockholder approval requirement would be avoided if the board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder.
However, Section 203 also could discourage attempts that might result in a premium over the market price for the shares held by stockholders. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests. Our amended and restated certificate of incorporation provides that we will not be governed by Section 203 of the DGCL. Our amended and restated certificate of incorporation will contain a provision that provides us with protections similar to Section 203 of the DGCL, and will prevent us from engaging in a business combination with an interested stockholder for a period of three years from the date such person acquired such common stock unless (with certain exceptions) the business combination is approved in a prescribed manner, including if board of directors approval or stockholder approval is obtained prior to the business combination, except that they will provide that the Apollo Funds shall not be deemed an interested stockholder for purposes of this provision of our amended and restated certificate of incorporation and therefore not subject to the restrictions set forth in this provision.
Our designation of the Delaware Court of Chancery in our amended and restated certificate of incorporation as the exclusive forum for certain types of stockholder legal proceedings could limit our stockholders ability to obtain a more favorable forum for disputes with us or our directors, officers or team members.
Our amended and restated certificate of incorporation will provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, team members or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our amended and restated bylaws will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Our decision to adopt such a federal forum provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that our federal forum provision should be enforced in a particular case, application of our federal forum provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and our amended and
50
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
restated bylaws will provide that the exclusive forum provision does not apply to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the federal forum provision, provided, however, that stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Additionally, our stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, team members or agents, which may discourage such lawsuits against us and such persons. See Description of Capital StockForum Selection. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
51
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We expect to receive approximately $ of net proceeds (based upon the assumed initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus) from the sale of the common stock offered by us, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Assuming no exercise of the underwriters option to purchase additional shares of common stock, each $1.00 increase (decrease) in the public offering price would increase (decrease) the net proceeds we receive in this offering by approximately $ million. We estimate that the net proceeds to us, if the underwriters exercise their right to purchase the maximum of additional shares of common stock from us, will be approximately $ , after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus.
We intend to use approximately $ million of the net proceeds from this offering to pay related fees and expenses. The remaining net proceeds may be used to refinance a portion of existing indebtedness and for general corporate purposes. The debt to be refinanced consists of our Senior Secured Notes, which bear interest at 9.75% per annum and will mature in May 2023, and our New Superpriority Secured Notes, which bear interest at variable rates (effective rate of 9.75% for fiscal 2020) and will mature in March 2025. Affiliates of the underwriters may hold certain of these notes, and thus would receive a portion of the net proceeds of this
offering to the extent such proceeds are used to refinance the notes held by such affiliates of the underwriters.
52
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We currently intend that we will retain all of our future earnings for use in the operation and expansion of our business and, therefore, we currently do not anticipate declaring or paying cash dividends on shares of our common stock in the foreseeable future. Subject to the foregoing, the declaration and payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, including our secured credit facilities and senior notes, and any other factors deemed relevant by our board of directors. As a holding company, our ability to pay dividends on our common stock will depend on our receipt of cash distributions and dividends from our direct and indirect wholly owned operating subsidiaries, which may be similarly impacted by, among other things, the terms of any preferred equity securities these subsidiaries may issue in the future, debt agreements, other contractual restrictions and provisions of applicable law.
Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them. See Risk FactorsRisks Relating to this Offering and Ownership of Our Common StockWe do not anticipate paying dividends on our common stock in the foreseeable future.
Immediately prior to the end of fiscal 2020 in January 2021, in anticipation of this offering, we made a onetime distribution of approximately $73.0 million in cash and assets, consisting of $62.5 million aggregate principal amount of the Senior Secured Notes, that had been held at the Company level.
53
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The following table sets forth our cash and cash equivalents and our capitalization as of January 31, 2021 (i) on an actual basis and (ii) on an as adjusted basis to give effect to the filing of our amended and restated certificate of incorporation and the sale of shares in this offering at an assumed initial public offering price of $ , the midpoint of the price range shown on the cover of this prospectus, after deducting underwriting discounts, commissions and estimated offering expenses payable by us in this offering.
You should read this table together with the information included elsewhere in this prospectus, including Prospectus SummarySummary Consolidated Financial and Other Data, Use of Proceeds, Managements Discussion and Analysis of Financial Condition and Results of Operations, and our Consolidated Financial Statements.
As of January 31, 2021 | ||||||||
Actual | As Adjusted | |||||||
(In millions, except share and per share data) |
||||||||
Cash and cash equivalents (excluding restricted cash) |
$ | 206.4 | $ | |||||
|
|
|
|
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Total Debt(1) |
$ | 934.0 | $ | |||||
Stockholders equity; |
||||||||
Common stock$0.01 par value; shares authorized, shares issued and outstanding (actual); shares issued and outstanding (as adjusted) |
0.7 | |||||||
Preferred stock$0.01 par value; shares authorized, no shares issued and outstanding (actual and as adjusted) |
| |||||||
Additional paid-in capital |
604.1 | |||||||
Accumulated deficit |
(470.3 | ) | ||||||
|
|
|
|
|||||
Total stockholders equity(2) |
134.5 | |||||||
|
|
|
|
|||||
Total capitalization(2) |
$ | 1,068.5 | $ | |||||
|
|
|
|
(1) | Our total debt as of January 31, 2021 primarily included (i) $800.0 million aggregate principal amount of Senior Secured Notes and $134.0 million aggregate principal amount of New Superpriority Secured Notes. Our total debt as of January 31, 2021 does not include $2.4 million of unamortized original issue discount and premium, net, and $10.4 million of unamortized debt issuance costs. |
(2) | Each $1.00 increase (decrease) in the offering price per share of our common stock would increase (decrease) our as adjusted total capitalization and equity by $ . |
The foregoing table:
| assumes no exercise of the underwriters option to purchase additional shares of common stock in this offering; |
| does not reflect any additional shares of our common stock reserved for future grant under our new equity incentive plan, which we expect to adopt in connection with this offering; and |
| does not reflect any additional shares of our common stock issuable upon exercise of issued and outstanding options. |
54
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after this offering.
Our historical net tangible book value as of was $ . Our historical net tangible book value represents the amount of our total tangible assets (total assets less total intangible assets) less total liabilities. Historical net tangible book value per share represents historical net tangible book value divided by the number of shares of common stock issued and outstanding as of .
Our pro forma net tangible book value (deficit) as of was $ , or $ per share of our common stock. Pro forma net tangible book value (deficit) per share represents our pro forma net tangible book value (deficit) divided by the total number of shares outstanding as of , after giving effect to the sale of shares of common stock in this offering at the assumed initial public offering price of $ per share (the midpoint of the estimated price range on the cover page of this prospectus) and the application of the net proceeds from this offering. This amount represents an immediate increase in net tangible book value of $ per share of common stock to our existing stockholders before this offering and an immediate and substantial dilution in net tangible book value of $ per share of common stock to new investors purchasing shares of common stock in this offering. We determine dilution by subtracting the as pro forma net tangible book value per share of common stock after this offering from the amount of cash that a new investor paid for a share of common stock in this offering. The following table illustrates this dilution, assuming the underwriters do not exercise their option to purchase additional shares of common stock:
Assumed initial public offering price per share of common stock |
$ | |||||||
Historical net tangible book value per share as of |
||||||||
Increase per share of common stock attributable to the pro forma adjustments described above |
||||||||
|
|
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Pro forma net tangible book value per share of common stock after this offering |
||||||||
|
|
|||||||
Dilution in pro forma net tangible book value per share |
$ | |||||||
|
|
The following table summarizes, as of , the total number of shares of common stock owned by existing stockholders and to be owned by new investors, the total consideration paid, and the average price per share paid by our existing stockholders and to be paid by new investors in this offering at the assumed initial public offering price of $ per share, calculated before deduction of estimated underwriting discounts and commissions.
Shares Purchased | Total Consideration | Average Price per Share |
||||||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||||||
Existing Stockholders |
% | $ | % | $ | ||||||||||||||||
Investors in the Offering |
% | % | ||||||||||||||||||
Total |
100 | % | $ | 100 | % |
A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) total consideration paid by new investors, total consideration paid by all stockholders and average price per share paid by new investors by $ , $ and $ per share, respectively. An increase (decrease) of 1,000,000 in the number of shares offered by the selling stockholder, assuming no changes in the assumed initial public offering price per share would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by $ and $ , respectively.
55
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
To the extent the underwriters option to purchase additional shares is exercised, there will be further dilution to new investors.
If the underwriters were to fully exercise their option to purchase additional shares of our common stock, the percentage of common stock held by existing investors would be %, and the percentage of shares of common stock held by new investors would be %.
The foregoing tables and calculations are based on shares of our common stock outstanding as of , 2021, and except as otherwise indicated, reflects and assumes the following:
| assumes an initial public offering price of $ per share of common stock, the midpoint of the price range on the cover of this prospectus; |
| assumes no exercise of the underwriters option to purchase additional shares of common stock in this offering; |
| does not reflect an additional shares of our common stock reserved for future grant under our new equity incentive plan, which we expect to adopt in connection with this offering; and |
| does not reflect any additional shares of our common stock issuable upon exercise of outstanding options under our existing equity incentive plan. |
We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this managements discussion and analysis of financial condition and results of operations in conjunction with our audited consolidated financial statements and related notes which are included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those described under Cautionary Note Regarding Forward-Looking Statements and Summary Risk Factors and Risk Factors and included elsewhere in other this prospectus.
We report our results of operations on a 52- or 53-week fiscal year ending on the last Sunday in January. The year ended January 31, 2021 was a 53-week fiscal year; the years ended January 26, 2020 and January 27, 2019 were 52-week fiscal years. We refer to the year ended January 31, 2021 as fiscal 2020, the year ended January 26, 2020 as fiscal 2019, the year ended January 27, 2019 as fiscal 2018.
Unless otherwise noted, our financial results have been presented on a GAAP basis. In limited instances, we have presented our financial results on a GAAP and non-GAAP (adjusted) basis, which is described in the section entitled Non-GAAP Financial Measures.
Overview
We are a specialty retailer offering a variety of high quality food products with an emphasis on fresh, premium perishable and other specialty items, including enticing convenient meal solutions. We operate our stores in a small-box format seeking to provide an attractive, convenient shopping environment with a high level of customer service. Our customers are typically medium-to-high income earners who enjoy healthy, premium products. Our stores feature colorful and visually appealing product presentation, accent lighting, and other elements that help create a neighborhood grocer feel.
The Fresh Market opened its first store in Greensboro, North Carolina in 1982. As of January 31, 2021, we operated 159 stores in 22 states.
Key Factors Affecting Our Results of Operations
Overall Macroeconomic Trends
The overall economic environment and related changes in consumer behavior can have a significant impact on our business. In general, positive economic conditions promote greater consumer spending, while economic weakness generally results in a reduction in consumer spending. Our results of operations may be materially affected by economic conditions that impact consumer confidence and spending, including discretionary spending. This risk may be exacerbated if customers choose lower-cost alternatives to our product offerings in response to economic conditions, or if consumers perceive our stores as destinations for special occasions rather than regular shopping. However, certain changes in consumer behavior, such as increased dining at home in weak economic times, can have a positive, mitigating effect on our results. Macroeconomic conditions affecting disposable consumer income include employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, interest rates, tax rates, and fuel and energy costs. In addition, during periods of high employment, we may experience higher labor costs.
Competition
Food retail is a large and competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller
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specialty stores, and farmers markets. In addition, we compete with restaurants and other dining options in the food-at-home and food-away-from-home markets. The opening and closing of competitive stores, as well as restaurants and other dining options, in regions where we operate will affect our results. In addition, changing consumer preferences with respect to food choices and to dining out or at home can impact us.
Recent Operational Changes
We have spent the last few years bringing The Fresh Market back to its roots of providing a highly differentiated specialty food offering and improving the in-store and omni-channel experience. Along with the Apollo Funds support and a strengthened new management team, with five additions to the senior leadership team in 2020 (including both Jason Potter as President and Chief Executive Officer and Jim Heaney as Chief Financial Officer), we have recently delivered exceptional financial performance.
Our Response to the COVID-19 Pandemic
We are proud to provide our guests with high quality, fresh foods and restaurant quality meals, delivered
with impeccable service in an exceptionally clean and well-stocked store. As the COVID-19 pandemic continues to impact our communities, we have continued to follow the safety measures that we put in place in our stores from the start of the pandemic and regularly implement additional safety measures. Such safety measures include requiring our guests and team members to wear face coverings, adding social distancing markers throughout the store, enhancing our cleaning and disinfection protocols, providing face masks and gloves to team members, conducting wellness and temperature checks before every shift, and installing plexiglass at cash registers and protective film on credit card machines. As a result of the successful execution of our team and our various safety measures, we were honored to be recognized as one of the Cleanest Grocery Stores in America by Consumer Reports and will continue to earn our guests trust with every shopping trip. As described in Risk Factors under the risk Various operating factors and downturns or volatility in general economic conditions, including as a result of the current novel COVID-19 pandemic affecting the food retail industry, may disrupt our business and could negatively impact our financial condition, the COVID-19 pandemic has presented many risks and challenges that we must manage. While we have experienced many challenges, including but not limited to, product shortages, staffing difficulties, and evolving customer shopping behaviors, our focus remains on both offering our customers a high quality service experience and supporting our essential front-line team members. Though we have successfully managed these challenges to date, our operations and financial condition could still be negatively affected by the COVID-19 pandemic and future developments, which are highly uncertain and cannot be predicted.
Fifty-Three Week Fiscal Years
We report our results of operations on a 52- or 53-week fiscal year ending on the last Sunday in January. Fiscal 2020 was a 53-week fiscal year; fiscal 2019 and fiscal 2018 were each 52-week fiscal years. Fiscal years in which there are 53 weeks will have additional sales and expenses from the additional week.
Public Company Expenses
Following the offering, our financial results will be impacted by the significant annual public company legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Exchange Act and be required to comply with rules and regulations applicable to public companies, including the listing requirements of .
Key Performance Measures
In assessing our performance, we consider a variety of performance and financial measures. The key measures that we assess to evaluate the performance of our business are (i) number of stores, (ii) the percentage
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change in comparable store sales, (iii) annual average unit sales, or AUV, and (iv) Adjusted EBITDA. The following table sets out or key performance measures for fiscal 2020, fiscal 2019 and fiscal 2018
Fiscal Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
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Store count (at period end) |
159 | 159 | 161 | |||||||||
Percentage change in comparable store sales |
22.3 | % | (1.8 | )% | 0.4 | % | ||||||
AUV (in thousands) |
$ | 11,869 | $ | 9,522 | $ | 9,654 | ||||||
Adjusted EBITDA (in thousands) |
$ | 219,407 | $ | 117,972 | $ | 101,120 |
Store Count
Store count reflects the number of stores we operate at the end of the relevant period.
Percentage Change in Comparable Store Sales
Our practice is to include sales from a store in comparable store sales beginning on the first day of the sixteenth full month following the stores opening. We believe that comparability is achieved approximately 15 months after opening. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. Generally, a store is removed from comparable store sales in the period it is closed. There may be variations in the way that our competitors calculate comparable or same store sales. As a result, data in this Prospectus regarding our comparable store sales may not be comparable to similar data made available by our competitors.
Various factors may affect comparable store sales, including:
| overall economic trends and conditions, including general price levels in the economy; |
| consumer confidence, preferences, and buying trends; |
| our competition, including competitor store openings or closings near our stores; |
| our competitors expanding their offerings of premium/perishable products; |
| the pricing of our products, including the effects of inflation, deflation, and our promotional activities which we evaluate and adjust in the ordinary course of our business; |
| the number of customer transactions at our stores; |
| our ability to provide an assortment of distinctive, high-quality product offerings to generate new and repeat visits to our stores; |
| the level of customer service that we provide in our stores; |
| our in-store merchandising-related activities; |
| our ability to source products efficiently; |
| our opening of new stores in the vicinity of our existing stores; |
| the number of stores we open, remodel, relocate, or refresh in any period; and |
| severe or unfavorable weather conditions. |
In particular, competition (including competitor store openings or closings near our stores and competitor expansion of offerings of premium/perishable products) may affect comparable store sales.
When we open new stores, a percentage of our sales will not be included in comparable store sales. Accordingly, comparable store sales is only one measure we use to assess our performance.
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AUV
Average unit sales, or AUV, is based on the same stores included in comparable store sales. It is calculated as the total aggregated annual stores sales divided by the end of year comparable store count. We review AUV on an annual basis and do not intend to report it quarterly.
Adjusted EBITDA
Adjusted EBITDA is defined as net income plus interest expense, income taxes, and depreciation and amortization, or EBITDA, adjusted to exclude unusual items and other adjustments that management believe are not reflective of the ongoing performance of the business and that are required or permitted in calculating covenant compliance under our debt agreements. Adjusted EBITDA is a non-GAAP financial measure. Refer to the tables included in the section titled Non-GAAP Financial Measures for more information and a reconciliation of Adjusted EBITDA to net income.
Components of our Results of Operations
Sales
Our sales comprise gross sales net of coupons, commissions, and discounts.
Gross Profit
Gross profit is equal to our sales minus our cost of goods sold. Cost of goods sold is directly correlated with sales and includes the direct costs of purchased merchandise, inventory shrinkage, distribution and supply chain costs, packaging, store supplies, and store occupancy costs. Store occupancy costs include rent, common area maintenance, real estate taxes, personal property taxes, insurance, licenses, utilities, and other non-cash amortization charges. Rebates and discounts from vendors are recorded as the related purchases are made and are recognized as a reduction to cost of goods sold as the related inventory is sold. Cost of goods sold does not contain depreciation expense because we outsource all aspects of our supply chain, including warehousing and distribution, and rely upon independent third-party service providers for product shipments to our stores. The components of our cost of goods sold may not be identical to those of our competitors. As a result, data in this prospectus regarding our gross profit and gross margin rate may not be comparable to similar data made available by our competitors.
Gross margin rate measures gross profit as a percentage of our sales. Gross margin rates are driven by economies of scale from our store base, pricing strategy, inventory shrinkage as a percentage of sales, leverage of fixed costs of sales, productivity through process and merchandising programs, promotional activities, and pricing on select items. Changes in the mix of products sold may also impact our gross margin rate.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include retail store and corporate compensation (both cash and share-based), buying costs, pre-opening expenses, marketing and advertising, and other store and corporate administrative costs. Pre-opening expenses are costs associated with new store openings or grand re-openings, including costs associated with rent, store labor, travel, recruiting, relocating and training personnel, advertising, and other miscellaneous costs, while grand re-opening expenses are primarily related to advertising. Pre-opening costs and costs incurred for producing and communicating advertising are expensed when incurred.
Labor and corporate administrative costs generally fluctuate as a percentage of sales as a result of an increase or decrease in our sales. Accordingly, selling, general and administrative expenses as a percentage of sales are usually higher in lower-volume quarters and lower in higher-volume quarters. Store-level compensation costs are generally the largest component of our selling, general and administrative expenses. The components of
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our selling, general and administrative expenses may not be identical to those of our competitors. As a result, data in this prospectus regarding our selling, general and administrative expenses may not be comparable to similar data made available by our competitors.
Impairments and Store Closure Costs
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Factors we consider important which could trigger an impairment review include a decision to close a store or negative or declining operating cash flows. The carrying value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset and its eventual disposition. Our estimates of future cash flows attributable to our long-lived assets require significant judgment based on our historical and anticipated results and are subject to many factors. A decline in sales or other factors could expose us to future impairment charges that could be material.
Prior to the adoption of ASC 842, Leases, we recorded a reserve for future lease obligations associated with closed stores or unopened leased locations that we decided not to pursue. The fair value of the lease liability was estimated using a discount rate to calculate the present value of the remaining noncancelable lease payments at the cease use date for the store, net of an estimate of subtenant income. Our expectations of potential subtenant income were based on various factors, including our knowledge of the geographical area in which the leased property was located, the remaining lease term, and existing conditions. We also sought advice from local brokers and agents, commercial market analysts, and third-party fair value reports to develop our assumptions. Changes in market and economic conditions could have caused us to change our assumptions and adjust the reserves.
Income from Operations
Income from operations consists of gross profit minus selling, general and administrative expenses, impairments and store closure costs, transaction and related costs, and depreciation.
Income Taxes
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our financial statements in the period that includes the enactment date.
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In this process, certain relevant criteria are evaluated including: the taxable income in prior carryback years that can be used to absorb net operating losses and credit carrybacks, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, prudent and feasible tax planning strategies, and future expected taxable income. We establish a valuation allowance for deferred tax assets when it is estimated to be more likely than not that the tax assets will not be realized.
Consolidated Results of Operations
The following table summarizes key components of our results of operations for the periods indicated as a percentage of sales.
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Year Ended | ||||||||||||||||||||||||
January 31, 2021 (1) |
January 26, 2020 |
January 27, 2019 |
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(53 weeks) | (52 weeks) | (52 weeks) | ||||||||||||||||||||||
Consolidated Statements of Operations Data: |
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Sales |
$ | 1,887,452 | 100.0 | % | $ | 1,522,555 | 100.0 | % | $ | 1,595,448 | 100.0 | % | ||||||||||||
Cost of goods sold (2) |
1,229,161 | 65.1 | % | 1,042,282 | 68.5 | % | 1,065,956 | 66.8 | % | |||||||||||||||
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Gross profit |
658,291 | 34.9 | % | 480,273 | 31.5 | % | 529,492 | 33.2 | % | |||||||||||||||
Selling, general and administrative expenses |
466,952 | 24.7 | % | 387,842 | 25.5 | % | 440,070 | 27.6 | % | |||||||||||||||
Transaction and related costs |
16,460 | 0.9 | % | 1,414 | 0.1 | % | (223 | ) | 0.0 | % | ||||||||||||||
Impairments and store closure costs |
3,533 | 0.2 | % | 5,387 | 0.4 | % | 27,262 | 1.7 | % | |||||||||||||||
Depreciation |
44,363 | 2.4 | % | 49,902 | 3.3 | % | 59,563 | 3.7 | % | |||||||||||||||
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Income from operations |
126,983 | 6.7 | % | 35,728 | 2.3 | % | 2,820 | 0.2 | % | |||||||||||||||
Interest expense |
96,625 | 5.1 | % | 98,252 | 6.5 | % | 97,642 | 6.1 | % | |||||||||||||||
(Gain) loss on extinguishment of debt |
(132 | ) | 0.0 | % | | | % | 3,202 | 0.2 | % | ||||||||||||||
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Income (loss) before income taxes |
30,490 | 1.6 | % | (62,524 | ) | (4.1 | )% | (98,024 | ) | (6.1 | )% | |||||||||||||
Tax provision (benefit) |
3,576 | 0.2 | % | 2,893 | 0.2 | % | (19,427 | ) | (1.2 | )% | ||||||||||||||
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Net income (loss) |
$ | 26,914 | 1.4 | % | $ | (65,417 | ) | (4.3 | )% | $ | (78,597 | ) | (4.9 | )% |
Percentage totals in the above table may not equal the sum of the components due to rounding.
(1) | The 53rd week for the year ended January 31, 2021 was January 25, 2021 through January 31, 2021 and its impact including sales, gross profit, and selling, general and administrative expenses was approximately $35.5 million, $14.1 million, and $8.7 million, respectively. |
(2) | Cost of goods sold included an incremental $11.2 million and $19.8 million in non-cash amortization expense for the years ended January 31, 2021 and January 26, 2020 associated with the change in accounting principle with the adoption of ASC 842, Leases, on January 28, 2019. See our Consolidated Financial Statements, Note 7, Leases for additional information. |
Year Ended January 31, 2021 Compared to the Year Ended January 26, 2020
Sales
Sales increased 24.0%, or $364.9 million, to $1,887.5 million for fiscal 2020, compared to fiscal 2019. The increase in sales and larger basket size were primarily driven by changes in customer shopping behaviors due to the ongoing coronavirus pandemic, including increased consumption of food at home and customers consolidating purchases during less frequent shopping trips. Additionally, sales were positively affected by changes to merchandising that is focused on improving the at-home eating experience, as well as the fifty-third week in fiscal 2020 contributing $35.5 million in sales. There were 159 comparable stores and no non-comparable stores as of as of January 31, 2021 and January 26, 2020.
The following table provides our comparable store sales data for the first fifty-two weeks of fiscal 2020 and fiscal 2019, respectively.
Year Ended | ||||||||
January 31, 2021 |
January 26, 2020 |
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Percentage change in comparable store sales |
22.3 | % | (1.8 | )% | ||||
Percentage change in number of transactions |
(3.0 | )% | (3.4 | )% | ||||
Percentage change in average customer transaction size |
26.0 | % | 1.6 | % | ||||
Average customer transaction size |
$ | 41.61 | $ | 33.00 |
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Gross Profit
Gross profit increased 37.1%, or $178.0 million, to $658.3 million for fiscal 2020, compared to fiscal 2019. The increase in gross profit was due to $115.1 million attributable to increased sales volume and an increase of $62.9 million in connection with an improved gross margin rate. The fifty-third week in fiscal 2020 contributed approximately $14.1 million of gross profit in total.
Our cost of goods sold increased $186.9 million to $1,229.2 million for fiscal 2020, compared to fiscal 2019, which was primarily attributable to $194.0 million in increased merchandise purchases attributable to increased sales volume, partially offset by a decrease of $8.1 million in store occupancy costs.
Due to the adoption of ASC 842, Leases, the amortization period for former favorable lease assets was shortened and resulted in more non-cash amortization expense being recognized in the initial years after adoption. The effect of the acceleration of amortization expense was an increase to cost of goods sold of $11.2 million and $19.8 million for fiscal 2020 and fiscal 2019, respectively.
The gross margin rate increased 340 basis points to 34.9% for fiscal 2020, compared to fiscal 2019. The increase in rate was primarily driven by a 190 basis point decrease in store occupancy costs as a result of reduced non-cash amortization expenses and leverage achieved through higher sales volume reducing occupancy costs as a percentage of sales. Leverage through higher sales volume also resulted in a 140 basis points increase in merchandise margin due to a reduction of shrink as a percentage of sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 20.4%, or $79.1 million, to $467.0 million for fiscal 2020, compared to fiscal 2019. During fiscal 2020, improved operating results and increased sales volume drove increases of $31.6 million in store compensation expense, $11.5 million in corporate compensation expense, $7.4 million in e-commerce expenses, predominantly due to fees associated with increased Instacart volume, and $3.7 million in business optimization investments. Additionally, we incurred $4.0 million in one-time, non-recurring expenses related to the coronavirus pandemic, including deep cleaning our stores, employee appreciation bonuses, and paid time off while under a doctor-ordered quarantine, as well as an increase of $7.3 million in expenses related to cleaning and maintaining our stores and $6.3 million in marketing expenses. Selling, general and administrative expenses incurred during the fifty-third week in fiscal 2020 were approximately $8.7 million.
As a percentage of sales, selling, general and administrative expenses decreased to 24.7% for fiscal 2020, compared to 25.5% for fiscal 2019. Leverage on our store compensation and benefit expenses due to higher sales volume resulted in a decrease of 170 basis points relative to the prior year. The decrease was partially offset by increases of 30 basis points related to corporate compensation expense and 40 basis points for e-commerce expenses.
Transaction and Related Costs
We incurred transaction and related costs of $16.5 million during fiscal 2020, compared to $1.4 million during fiscal 2019. The fiscal 2020 costs include a $15.1 million settlement of a stockholder class action lawsuit associated with our Acquisition in fiscal 2016. Additionally, both periods include legal fees associated with this litigation. See our Consolidated Financial Statements, Note 15, Commitments and Contingencies in our Notes to the Consolidated Financial Statements, for further details.
Impairments and Store Closure Costs
Impairments and store closure costs decreased $1.9 million, to $3.5 million for fiscal 2020, compared to fiscal 2019. For fiscal 2020, the store closure costs were primarily attributable to charges related to ongoing
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closed store activities partially offset by net reserve adjustments associated with lease terminations. In fiscal 2019, the costs included $6.0 million in impairment charges predominantly associated with write-downs for certain store locations, partially offset by a net credit of $0.6 million in store closure costs driven by net reserve adjustments with lease terminations. See our Consolidated Financial Statements, Note 6, Impairments and Store Closure Costs in our Notes to the Consolidated Financial Statements, for further details.
Depreciation Expense
Depreciation expense decreased 11.1%, or $5.5 million, to $44.4 million for fiscal 2020, compared to fiscal 2019. The decrease was attributable to a larger percentage of our fixed assets being fully depreciated and reduced capital investments in recent years.
Depreciation expense as a percentage of sales decreased by 90 basis points to 2.4% for fiscal 2020, compared to 3.3% for fiscal 2019.
Income from Operations
Income from operations improved $91.3 million to $127.0 million for fiscal 2020, compared to $35.7 million for fiscal 2019. The increase in income from operations was primarily attributable to increased sales volume and gross profit partially offset by an increase in selling, general and administrative expenses and transaction and related costs.
Income from operations as a percentage of sales was 6.7% for fiscal 2020, compared to 2.3% for fiscal 2019.
Interest Expense
Interest expense decreased 1.7%, or $1.6 million, to $96.6 million for fiscal 2020, compared to fiscal 2019. The decrease was primarily attributable to our purchase of Senior Secured Notes in open market transactions during July 2020, which effectively retired the bonds and eliminated the associated interest expense. See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Gain on Extinguishment of Debt
The gain on the extinguishment of debt was $0.1 million for fiscal 2020 as a result of two extinguishment of debt transactions during fiscal 2020.
During March 2020, we redeemed the Superpriority Secured Notes and incurred a loss of $7.6 million on the extinguishment of debt. The loss on extinguishment of debt included a make whole redemption premium payment of $4.9 million to redeem the Superpriority Secured Notes and the write off the remaining unamortized original issue discount of $1.6 million and debt issuance costs of $1.0 million.
During July 2020, we purchased Senior Secured Notes in open market transactions, which effectively retired the bonds. We recognized a $7.7 million gain on the extinguishment of debt, which is the difference between the bonds cash redemption price of $53.5 million and carrying value of $61.2 million on the purchase date.
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Tax Provision (Benefit)
Income tax expense increased $0.7 million to $3.6 million for fiscal 2020, compared to $2.9 million for fiscal 2019. The increase in income tax expense is associated with increased income from operations and
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recording discrete items arising from the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act resulted in valuation allowances on certain deferred tax assets, mainly related to increasing the valuation allowance on the deferred tax asset for our federal net operating loss carryforward.
Income taxes for fiscal 2020 resulted in an effective tax rate of 11.7%, compared to the effective tax rate of negative 4.6% for fiscal 2019. For fiscal 2020, the primary driver for the variance of the Companys effective rate from the statutory rate of 21.0% was a decrease in the valuation allowance because we utilized net operating loss carryforwards, for which a valuation allowance was previously established. For fiscal 2019, the primary driver of the variance of the Companys effective rate from the statutory rate of 21.0% was adjustments made to the valuation allowance associated with certain deferred tax assets.
Net Income
Net income increased $92.3 million to $26.9 million for fiscal 2020, compared to a net loss of $65.4 million for fiscal 2019. The increase in our net income during fiscal 2020 was primarily attributable to increased income from operations.
Our net income as a percentage of sales was 1.4% for fiscal 2020, compared to a net loss as a percentage of sales of 4.3% for fiscal 2019.
Year Ended January 26, 2020 Compared to the Year Ended January 27, 2019
Sales
Sales decreased 4.6%, or $72.9 million, to approximately $1,522.6 million for fiscal 2019, compared to fiscal 2018. The closure of two stores during fiscal 2019 contributed $3.6 million to the decrease and the closure of 15 stores in July of 2018 contributed $40.8 million. The remainder of the decrease was predominantly related to lower comparable store sales and a result of fewer transactions driven by the competitive environment, including increased promotional activity. There were 159 comparable stores and no non-comparable stores as of as of January 26, 2020, compared to 161 comparable stores and no non-comparable stores open at January 27, 2019.
The following table provides our comparable store sales data for fiscal 2019 and fiscal 2018, respectively.
Year Ended | ||||||||
January 26, 2020 |
January 27, 2019 |
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Percentage change in comparable store sales |
(1.8 | )% | 0.4 | % | ||||
Percentage change in number of transactions |
(3.4 | )% | (2.5 | )% | ||||
Percentage change in average customer transaction size |
1.6 | % | 2.9 | % | ||||
Average customer transaction size |
$ | 33.00 | $ | 32.48 |
Gross Profit
Gross profit decreased 9.3%, or $49.2 million, to $480.3 million for fiscal 2019, compared to fiscal 2018. The decrease in gross profit was due to $24.2 million attributable to decreased sales volume and a decrease of $25.0 million in connection with a lower gross margin rate.
Our cost of goods sold decreased $23.7 million to $1,042.3 million for fiscal 2019, compared to fiscal 2018, which was primarily attributable to decreases of $40.0 million in merchandise product costs and $1.9 million in supplies expense, partially offset by an increase of $18.2 million in store occupancy costs. The decreases in merchandise product costs and supplies expense were primarily due to fewer stores in operations and lower comparable store sales.
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Due to the adoption of ASC 842, Leases, store occupancy costs included an incremental non-cash amortization expense of $19.8 million, primarily driven by a shortened amortization period for former favorable lease assets, and additional rent expense of $1.8 million for operating leases formerly accounted for as financing leases. In the prior year, the associated lease cost for financing leases would have been recorded as depreciation and interest expense. With the adoption of ASC 842, Leases, we evaluated these leases and determined the leases are operating leases beginning in fiscal 2019. Excluding the effects of ASC 842, Leases, store occupancy costs decreased $3.6 million, primarily due fewer stores in operation.
The gross margin rate decreased 170 basis points to 31.5% for fiscal 2019, compared to fiscal 2018. The decrease in rate was primarily driven by a 150 basis point increase in store occupancy costs as a result of adopting ASC 842, Leases, as well as additional increases in promotional activity and distribution and transportation costs, partially offset by reduced supplies expense, as a percentage in sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased 11.9%, or $52.2 million, to $387.8 million for fiscal 2019, compared to fiscal 2018. $13.0 million of the decrease is related to having fewer stores in operations. Excluding the impact of closed stores, overall compensation and benefits expenses decreased by $33.7 million with declines of $8.9 million in reduced bonus expenses, $17.2 million in other store compensation and benefit expenses, and $7.5 million in other corporate compensation and benefits expenses. The decreases were primarily driven by initiatives to reduce labor and benefit costs and from underperformance against bonus measures. We additionally experienced reductions in marketing expenses, leadership change costs, and other corporate general and administrative expenses relative to fiscal 2018 due to changing strategic priorities and cost management initiatives.
As a percentage of sales, selling, general and administrative expenses decreased to 25.5% for fiscal 2019, compared to 27.6% for fiscal 2018. The decrease was predominantly due to a decrease of 190 basis points related to overall compensation and benefit expenses.
Transaction and Related Costs
We incurred transaction and related costs of $1.4 million during fiscal 2019, compared to a benefit of $0.2 million during fiscal 2018. Transaction and related costs for both periods are associated with legal fees from our Acquisition in fiscal 2016.
Impairments and Store Closure Costs
Impairments and store closure costs decreased $21.9 million, to $5.4 million for fiscal 2019, compared to fiscal 2018. In fiscal 2019, the costs include $6.0 million in impairment charges predominantly associated with write-downs for certain store locations, partially offset by a net credit of $0.6 million in store closure costs. See our Consolidated Financial Statements, Note 6, Impairments and Store Closure Costs in our Notes to the Consolidated Financial Statements, for further details.
In fiscal 2018, we recorded $24.2 million in store closure costs and $3.1 million in impairments, primarily related to 15 store locations closed in July 2018. Additionally, we recorded charges for locations in which there were lease obligations that we decided not to pursue and for ongoing closed store activities, with offsets to these charges as previously recorded reserves were adjusted based on the timing of expected subtenant income or for the assignment or termination of certain leases.
Depreciation Expense
Depreciation expense decreased 16.2%, or $9.7 million, to $49.9 million for fiscal 2019, compared to fiscal 2018. The decrease was primarily attributable to a larger percentage of our fixed assets being fully depreciated
66
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
and fewer stores in operation. Fiscal 2018 includes $0.5 million in depreciation expense associated with financing leases for locations where we were considered the accounting owner. With the adoption of ASC 842, Leases, on January 28, 2019, we concluded the leases related to these locations were operating and did not recognize depreciation expense for these leases during fiscal 2019.
Depreciation expense as a percentage of sales decreased by 40 basis points to 3.3% for fiscal 2019, compared to 3.7% for fiscal 2018.
Income from Operations
Income from operations improved $32.9 million to $35.7 million for fiscal 2019, compared to $2.8 million for fiscal 2018. The increase in income from operations was primarily attributable to decreases in selling, general and administrative expenses and impairments and store closure costs, partially offset by reduced gross profit.
Income from operations as a percentage of sales was 2.3% for fiscal 2019, compared to 0.2% for fiscal 2018.
Interest Expense
Interest expense increased 0.6%, or $0.6 million, to $98.3 million for fiscal 2019, compared to fiscal 2018. The increase was primarily attributable to the issuance of the Superpriority Secured Notes on March 15, 2018 and the related interest, amortization of debt issuance costs and the original issue discount, and payment of commitment fees on Delayed Draw Superpriority Secured Notes. See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details. Fiscal 2018 includes $1.4 million in interest associated with finance leases for locations where we were considered the accounting owner. With the adoption of ASC 842, Leases, on January 28, 2019, we concluded the leases related to these locations were operating and did not recognize interest expense for these leases during fiscal 2019.
Loss on Extinguishment of Debt
The loss on the extinguishment of debt was $3.2 million for fiscal 2018. The Company incurred the loss when the Revolving Credit Facility was terminated on March 15, 2018 in connection with the issuance of the Superpriority Secured Notes, and the remaining unamortized debt issuance costs were written off. See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Tax Provision (Benefit)
Income tax expense increased $22.3 million to $2.9 million for fiscal 2019, compared to an income tax benefit of $19.4 million for fiscal 2018. The increase in income tax expense is due to improved income from operations and our recording of a valuation allowance on the deferred tax asset associated with limitations in deducting interest expense under the Tax Cuts and Jobs Act.
Income taxes for fiscal 2019 resulted in an effective tax rate of negative 4.6%, compared to the effective tax rate of 19.8% for fiscal 2018.
Net Loss
We incurred a net loss of $65.4 million for fiscal 2019, compared to $78.6 million for fiscal 2018. The decrease in our net loss during fiscal 2019 was primarily affected by improved income from operations, partially offset by increased interest expense and increased income tax expense.
67
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Our net loss as a percentage of sales was 4.3% for fiscal 2019, compared to a net loss as a percentage of sales of 4.9% for fiscal 2018.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA, a measure used by management to assess operating performance, is defined as net income plus interest expense, income taxes, and depreciation and amortization.
Adjusted EBITDA, another measure used by management to assess operating performance, is defined as EBITDA adjusted to exclude unusual items and other adjustments that management believe are not reflective of the ongoing performance of the business.
In addition, as discussed below in more detail, certain additional adjustments are permitted by the indentures governing our outstanding debt and are used in calculating EBITDA for calculating covenant compliance.
We also use certain measures derived from Adjusted EBITDA. Adjusted EBITDA margin is defined as Adjusted EBITDA for a period, divided by the sales for such period.
Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments. In addition, EBITDA provides more comparability between the historical operating results and operating results that reflect the new capital structure. Management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. Management uses Adjusted EBITDA to make operating decisions and believes it is helpful to investors, because it allows period-to-period comparisons of the Companys ongoing operating results. The information can also be used to perform trend analyses and to better identify operating trends that may otherwise be masked or distorted. Finally, the Company believes such information provides a higher degree of transparency.
Each of the above described EBITDA-based measures is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance.
EBITDA and Adjusted EBITDA have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. For example, EBITDA:
| excludes certain tax payments that may represent a reduction in cash available to us; |
| does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; |
| does not reflect changes in, or cash requirements for, our working capital needs; and |
| does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness. |
In addition, Adjusted EBITDA:
| does not include one-time expenditures; |
| excludes the gain or loss on the extinguishment of debt |
| excludes the impairment of stores or long-lived assets and gains or losses upon disposal of property or equipment; |
68
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
| excludes lease costs, liquidation of inventory, and other costs associated with store closures; |
| excludes non-cash equity-based compensation expense; |
| excludes executive severance and other charges related to leadership changes; and |
| does not include management and other fees and related expenses payable to our equity holders. |
Our definition of Adjusted EBITDA allows us to add back certain non-cash and non-recurring charges or costs that are deducted in calculating net income. However, some of these are expenses that involve cash, may recur, vary greatly and are difficult to predict. They can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes.
Because of these limitations, we rely primarily on our GAAP results and use EBITDA and Adjusted EBITDA only as supplemental information.
Non-GAAP Adjusted Financial Results
EBITDA and Adjusted EBITDA
The following table provides a reconciliation of net loss as reported to EBITDA and Adjusted EBITDA:
Fiscal 2020 |
Fiscal 2019 |
Fiscal 2018 |
||||||||||
(amounts in thousands) | ||||||||||||
Net income (loss) as reported |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
Depreciation |
44,363 | 49,902 | 59,563 | |||||||||
Tax provision |
3,576 | 2,893 | (19,427 | ) | ||||||||
Interest expense |
96,625 | 98,252 | 97,642 | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
$ | 171,478 | $ | 85,630 | $ | 59,181 | ||||||
(Gain) loss on extinguishment of debt (1) |
$ | (132 | ) | $ | | $ | 3,202 | |||||
Non-cash share-based compensation (2) |
406 | (1,503 | ) | 388 | ||||||||
Impairments (3) |
| 6,009 | 3,094 | |||||||||
Store closure costs (4) |
3,533 | (622 | ) | 24,168 | ||||||||
Corporate severance and other charges (5) |
4,760 | 3,086 | 4,686 | |||||||||
Non-cash rent expense (6) |
11,307 | 20,239 | (144 | ) | ||||||||
Tenant allowance receipts (7) |
868 | 655 | 2,386 | |||||||||
Amortization of favorable and unfavorable leases (8) |
| | 466 | |||||||||
Sponsor fees (9) |
1,533 | 1,598 | 1,635 | |||||||||
Transaction and related costs (10) |
16,460 | 1,414 | (223 | ) | ||||||||
Business optimization expenses (11) |
4,710 | 965 | 1,759 | |||||||||
Litigation expenses (12) |
| (9 | ) | 165 | ||||||||
Coronavirus expenses (13) |
4,041 | | | |||||||||
Loss on disposal of assets (14) |
443 | 510 | 357 | |||||||||
Adjusted EBITDA |
$ | 219,407 | $ | 117,972 | $ | 101,120 | ||||||
|
|
|
|
|
|
(1) | Amounts recorded for the difference between the carrying value and redemption value of debt when the debt is extinguished. |
(2) | Non-cash share-based compensation related to equity awards granted to our employees and independent directors. The net benefit for fiscal 2019 is due to forfeitures. |
(3) | Impairment charges of stores or long-lived assets. See our Consolidated Financial Statements, Note 5, Fair Value Measurements in our Notes to the Consolidated Financial Statements, for further details. |
69
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(4) | Gains or losses upon disposal of property and equipment, reserve adjustments and other lease costs, liquidation of inventory, and other costs associated with store closures. See our Consolidated Financial Statements, Note 6, Impairments and Store Closure Costs in our Notes to the Consolidated Financial Statements, for further details. |
(5) | Severance and related employee benefits associated with certain terminations of leadership positions as well as recruiting and on-boarding costs for replacements for certain positions. |
(6) | Adjustments to account for (i) the difference in GAAP straight line rent expense and cash rent expense and (ii) the non-cash amortization of tenant allowances. Beginning with fiscal 2019 and the adoption of ASC 842, Leases, incremental non-cash rent expense was recognized primarily related to the amortization of the former favorable lease intangible assets over a shorter period, the remaining lease term, as required under ASC 842, Leases. The shorter amortization period resulted in incremental non-cash expense of $11.2 million in fiscal 2020 and $19.8 million in fiscal 2019 and is expected to result in incremental non-cash expense of $8.3 million in fiscal 2021, $5.2 million in fiscal 2022, and $3.2 million in fiscal 2023 assuming there is no subsequent re-evaluation of the lease terms for lease modifications that may occur in the future. See our Consolidated Financial Statements, Note 7, Leases in our Notes to the Consolidated Financial Statements, for further details. |
(7) | Cash received from landlords for tenant allowances. |
(8) | Amortization of lease related assets and liabilities recorded as part of purchase accounting. |
(9) | The annual management and other fees and related expenses, including those paid on a pro rata basis to an affiliate of Apollo and the Rollover Stockholders. See our Consolidated Financial Statements, Note 14, Related-Party Transactions in our Notes to the Consolidated Financial Statements, for further details. The obligation to pay such fees and expenses will terminate upon the completion of this offering and accordingly, the costs are not reflective of our ongoing performance post-offering. |
(10) | The transaction and related costs in connection with our Acquisition in fiscal 2016, including litigation expenses associated with stockholder class action lawsuits. The fiscal 2020 amount includes a $15.1 million settlement charge for a stockholder class action lawsuit associated with our Acquisition. See our Consolidated Financial Statements, Note 15, Commitments and Contingencies in our Notes to the Consolidated Financial Statements, for further details. |
(11) | Costs related to our business optimization projects which we expect will be non-recurring. Items included in this line item are discrete changes that are primarily related to third-party assessments of various strategic business processes and the related implementation. A breakdown of major business optimization projects is presented below: |
Fiscal 2020 |
Fiscal 2019 |
Fiscal 2018 |
||||||||||
(amounts in thousands) | ||||||||||||
Business Optimization |
||||||||||||
Operational process assessment and labor standards development |
$ | 1,649 | $ | | $ | | ||||||
Merchandising organizational analysis |
940 | | | |||||||||
Digital strategy |
752 | | | |||||||||
New Kitchen Square concept |
698 | | | |||||||||
IPO readiness |
583 | | | |||||||||
Pricing strategy |
| 878 | | |||||||||
Center store strategic resets |
| 46 | 1,578 | |||||||||
Other |
88 | 41 | 181 | |||||||||
|
|
|
|
|
|
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Business optimization projects |
$ | 4,710 | $ | 965 | $ | 1,759 |
(12) | Expenses related to wage and hour litigation. |
(13) | Costs specifically attributed to the Coronavirus, including employee appreciation bonuses and paid time off while under a doctor-ordered quarantine. |
(14) | Losses on the disposal of fixed assets at open store and corporate locations. |
70
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The indentures governing or Senior Secured Notes and our New Superpriority Secured Notes include covenants which place restrictions on our ability to make investments, incur debt, and pay dividends, among other things, based on the ratio of our EBITDA, as defined in such indentures, for the four consecutive fiscal quarters then ending to consolidated fixed charges for such four fiscal quarter period. In general, EBITDA for purposes of calculating covenant compliance is defined as our Adjusted EBITDA presented herein, further adjusted for the following items: (i) pre-opening expenses incurred in connection with the opening of new stores (primarily consisting of rent, employee wages and travel costs during the pre-opening period, (ii) adjustments reflecting the incremental rent expense associated with the conversion of financing leases under ASC 840, Leases, to operation leases under ASC 842, Leases, for our former accounting owner locations, (iii) non-capital professional fees associated with new store projects, and (iv) EBITDA losses related to the operation of two stores during fiscal 2019 and 15 stores closed during fiscal 2018. For fiscal 2020, fiscal 2019 and fiscal 2018 these additional adjustments totaled (in thousands) $1,974, $2,607 and $5,974, respectively, and accordingly, for purposes of covenant compliance under our debt agreements, EBITDA for fiscal 2020, fiscal 2019 and fiscal 2018 was (in thousands) $221,381, $120,579 and $107,094, respectively.
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations and cash on hand. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within a few days of the related sale. Our primary uses of cash are working capital requirements, debt service requirements, capital expenditures, and corporate taxes. Based on our current level of operations and available cash, we believe our cash flows from operations, combined with the ability to incur additional debt, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements, and capital spending requirements over the next twelve months and the foreseeable future.
We cannot assure you, however, that our business will generate cash flows from operations in an amount sufficient to enable us to pay our indebtedness, including the Senior Secured Notes and New Superpriority Secured Notes, or to fund our other liquidity needs. Our ability to do so depends on prevailing economic conditions, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness, including the Senior Secured Notes and the New Superpriority Secured Notes, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions will likely require additional capital, and there can be no assurance that any such capital will be available to us on acceptable terms or at all.
At January 31, 2021, we had $229.8 million in cash, cash equivalents, and restricted cash.
A summary of our operating, investing, and financing activities is shown in the following table:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
(in thousands) | ||||||||||||
Net cash provided by (used in) operating activities |
$ | 152,191 | $ | (11,488 | ) | $ | 309 | |||||
Net cash used in investing activities |
(25,663 | ) | (12,093 | ) | (15,492 | ) | ||||||
Net cash (used in) provided by financing activities |
(58,768 | ) | (1,250 | ) | 119,485 | |||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
$ | 67,760 | $ | (24,831 | ) | $ | 104,302 | |||||
|
|
|
|
|
|
71
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Operating Activities
Cash provided by (used in) operating activities consists primarily of net income (loss) adjusted for non-cash items, including depreciation and amortization, operating lease costs, realized gains or losses on disposal of property and equipment, impairment charges, share-based compensation, changes in deferred taxes, and the effect of changes in assets and liabilities.
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
(in thousands) | ||||||||||||
Net income (loss) |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||
Depreciation and amortization |
44,363 | 49,917 | 60,029 | |||||||||
Non-cash operating lease cost |
39,965 | 46,402 | | |||||||||
Non-cash interest expense |
5,271 | 5,243 | 4,707 | |||||||||
Loss on disposals of property and equipment |
565 | 808 | 3,545 | |||||||||
Impairments of long-lived assets |
| 6,009 | 3,094 | |||||||||
Share-based compensation |
406 | (1,503 | ) | 387 | ||||||||
(Gain) loss on extinguishment of debt |
(132 | ) | | 3,202 | ||||||||
Deferred income taxes |
3,339 | 2,749 | (19,129 | ) | ||||||||
Change in assets and liabilities |
31,500 | (55,696 | ) | 23,071 | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
$ | 152,191 | $ | (11,488 | ) | $ | 309 | |||||
|
|
|
|
|
|
Net cash provided by operating activities was $152.2 million for the year ended January 31, 2021, compared to $11.5 million of net cash used in operating activities for the year ended January 26, 2020. The net cash provided by operating activities increased $163.7 million from the prior year, primarily due to higher sales and net income and changes in working capital.
For the year ended January 26, 2020, net cash used in operating activities increased $11.8 million from the prior year. Net cash used in operating activities included a $55.7 million change in assets and liabilities that was primarily attributable to decreases of $32.7 million in operating lease liabilities, and $9.6 million in compensation-related accruals. This was partially offset by $46.4 million net cash provided by non-cash operating lease cost from the amortization of a right to use asset.
Investing Activities
Cash used in investing activities consists primarily of cash used for capital expenditures for on-going store maintenance as well as investments in information technology and merchandising enhancements.
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
(in thousands) | ||||||||||||
Purchases of property and equipment |
$ | (25,792 | ) | $ | (13,494 | ) | $ | (17,367 | ) | |||
Proceeds from sales of property and equipment |
129 | 1,401 | 1,875 | |||||||||
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|
|
|
|
|
|||||||
Net cash used in investing activities |
$ | (25,663 | ) | $ | (12,093 | ) | $ | (15,492 | ) | |||
|
|
|
|
|
|
Capital expenditures increased 91.1%, or $12.3 million, to $25.8 million for the year ended January 31, 2021, compared to $13.5 million for the year ended January 26, 2020. The increase was attributable to increased investments in strategic initiatives and maintenance capital expenditures.
72
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Capital expenditures decreased 22.3%, or $3.9 million, to $13.5 million for the year ended January 26, 2020, compared to $17.4 million for the year ended January 27, 2019. The decrease was attributable to reduced real estate capital expenditures and a lower investment in strategic initiatives, partially offset by increased maintenance capital expenditures.
Financing Activities
Cash (used in) provided by financing activities consists principally of proceeds from the issuance of debt and borrowings, payments under our various credit facilities, and a one-time dividend payment.
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
(53 weeks) | (52 weeks) | (52 weeks) | ||||||||||
(in thousands) | ||||||||||||
Proceeds from issuance of New Superpriority Secured Notes |
$ | 133,650 | $ | | $ | | ||||||
Proceeds from issuance of Superpriority Secured Notes |
| | 122,500 | |||||||||
Payments made on Superpriority Secured Notes |
(123,125 | ) | (1,250 | ) | (625 | ) | ||||||
Payments made on New Superpriority Secured Notes |
(1,011 | ) | | | ||||||||
Payments made for the redemption premium on Superpriority Secured Notes |
(4,925 | ) | | | ||||||||
Payments made for debt issuance costs |
(1,338 | ) | | (1,480 | ) | |||||||
Payments made for Senior Secured Notes |
(54,638 | ) | | | ||||||||
Payments made on financing lease obligations |
| | (910 | ) | ||||||||
Dividends paid in cash |
(7,381 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Net cash (used in) provided by financing activities |
$ | (58,768 | ) | $ | (1,250 | ) | $ | 119,485 | ||||
|
|
|
|
|
|
Net cash used in financing activities for the year ended January 26, 2020 was $58.8 million. The primary driver of the net cash used in financing activities was the $54.6 million in Senior Secured Notes purchased at the Company-level during the fiscal year and $7.4 million in dividends paid in cash.
In March 2020, we redeemed all of our outstanding Superpriority Secured Notes, including a redemption premium of $4.9 million, in connection with the issuance of New Superpriority Secured Notes.
Net cash used in financing activities for the year ended January 26, 2020 was $1.3 million related to payments made on our Superpriority Secured Notes.
Net cash provided by financing activities for the year ended January 27, 2019 was $119.5 million primarily related to $122.5 million in proceeds from the issuance of our Superpriority Secured Notes.
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Senior Secured Notes
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
73
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
New Superpriority Secured Notes
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Superpriority Secured Notes
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
Termination of Revolving Credit Facility
See our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, for further details.
From time to time, the Company, its subsidiaries or any stockholder of the Company and their respective affiliates may purchase, repurchase or retire portions of the Companys outstanding debt in open market purchases, privately negotiated transactions, tender offer transactions or otherwise. Any repurchase or retirement by the Company or its subsidiaries is dependent on prevailing market conditions, the Companys liquidity requirements, contractual restrictions, and other factors.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements at January 31, 2021 consist of outstanding standby letters of credit discussed in our Consolidated Financial Statements, Note 3, Long-Term Debt in our Notes to the Consolidated Financial Statements, found elsewhere in this document. We have no other off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on our consolidated financial statements or changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Seasonality
The food retail industry and our sales are affected by seasonality. Our average weekly sales fluctuate during the year and are usually highest in the fourth quarter when customers make holiday purchases.
Inflation
Our financial performance is impacted by relative rates of inflation or deflation at cost and retail, which are subject to competitive market conditions. We believe the effects of inflation and deflation on our results of operations and financial condition were moderate for fiscal 2020. We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation and deflation in the future.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances and are affected by managements application of accounting policies. On an ongoing basis, management evaluates its estimates and judgments. Actual results may differ significantly from these estimates. Future results may differ from our estimates under different assumptions or conditions.
74
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our consolidated financial statements.
For further information on our critical and other significant accounting policies, see the notes to our consolidated financial statements included elsewhere in this prospectus.
Leases
The most significant estimates used by management in accounting for leases and the impact of these estimates are as follows:
Expected lease term - Our expected lease term includes both contractual lease periods and cancelable option periods that are determined to be reasonably certain to be exercised. The expected lease term is used in determining whether the lease is accounted for as an operating lease or a finance lease. An increase in the expected lease term will increase the probability that a lease may be considered a finance lease. Lease expenses for finance leases are charged to interest and depreciation expense. The expected lease term is also used in determining the depreciable life of the asset for a finance lease.
Incremental borrowing rate - We use the incremental borrowing rate to determine the present value of minimum lease payments not yet paid. The present value is used on the lease commencement date to establish the lease asset and liability on its Consolidated Balance Sheets.
The incremental borrowing rate is also used in determining whether the lease is accounted for as an operating lease or a finance lease. A lease is considered a finance lease if the net present value of the minimum lease payments is greater than 90% of the fair market value of the property. An increase in the incremental borrowing rate decreases the net present value of the minimum lease payments and reduces the probability that a lease will be considered a finance lease.
For finance leases, the incremental borrowing rate is used in allocating our rental payments between interest expense and a reduction of the outstanding lease obligation. If our calculation of the net present value of minimum lease payments is greater than the fair value of the leased asset, the incremental borrowing rate is adjusted so the net present value of the minimum lease payments does not exceed the fair value of the leased asset.
Fair market value of leased asset - The fair market value of leased retail property is generally estimated based on comparable market data as provided by third-party sources. Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease. A lease is considered a finance lease if the net present value of the minimum lease payments equals or exceeds 90% of the fair market value of the property. A higher fair market value reduces the likelihood that a lease will be considered a finance lease.
Inventories
The Companys inventories are stated at the lower of cost or net realizable value. The cost is valued using the first-in, first-out (FIFO) basis. The FIFO value of inventories includes cost of goods and freight, net of vendor rebates and discounts.
The Company performs physical counts of all store inventories at least once a quarter. The Company records a shrink estimate for the period between the last physical count and the balance sheet date, where applicable.
Goodwill and Tradename Intangible Asset
The excess of the purchase price over fair value of net identifiable assets and liabilities of an acquired business (goodwill), and the indefinite-lived tradename intangible asset are not amortized, but rather tested for
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impairment at least annually. The Company assesses the recoverability of the carrying amount of its goodwill and indefinite-lived tradename intangible asset annually as of the first day of the fourth quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
When assessing the recoverability of goodwill and indefinite-lived tradename intangible asset, the Company may first assess qualitative factors. If an initial qualitative assessment indicates that it is more likely than not that the carrying amount exceeds the fair value, a quantitative analysis may be required. The Company may also elect to skip the qualitative assessment and proceed directly to the quantitative analysis.
Recoverability of the carrying value of goodwill is measured at the reporting unit level. The reporting unit level is The Fresh Market, Inc. as the Chief Operating Decision Maker does not evaluate financial results at the geography level and the Company operates under one name. In performing a quantitative analysis, the Company used a combination of the expected present value of future cash flows (income approach) and comparable public companies (market approach) to determine the fair value of the reporting unit. These approaches use primarily unobservable inputs, including discount rates, sales growth rates, and gross margin rates, which are considered Level 3 fair value measurements. See the description of the fair value hierarchy in our Consolidated Financial Statements, Note 5, Fair Value Measurements in our Notes to the Consolidated Financial Statements, for further details. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, tax rates, cash flow projections, and terminal value rates. The discount rates, growth rates, terminal value rates, and cash flow projections are the assumptions most sensitive and susceptible to change as they require significant management judgment, including expected operating performance as well as overall trends in the grocery and supermarket industry. If the carrying amount of the Companys reporting unit exceeds the fair value of the reporting unit, an impairment loss is recorded to write down the carrying amount of goodwill equal to the excess carrying amount of the reporting unit compared to its fair value.
In performing a quantitative analysis, the Company tests its indefinite-lived tradename intangible asset for impairment utilizing the relief from royalty method to determine the estimated fair value for the intangible asset, which is classified as a Level 3 fair value measurement. The relief from royalty method estimates the Companys theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rate, growth rates, tax rates, sales projections, and terminal value rates. The discount rates, royalty rate, growth rates, terminal value rates, and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated for the weighted average cost of capital considering any differences in company-specific risk factors. See our Consolidated Financial Statements, Note 5, Fair Value Measurements in our Notes to the Consolidated Financial Statements, for further details.
In fiscal 2020, 2019, and 2018, we performed the quantitative analyses for our annual goodwill and indefinite-lived tradename intangible impairment tests as of the first day of the fourth quarter and determined the fair value of the Companys reporting unit and indefinite-lived tradename intangible asset exceeded the respective carrying amounts. Therefore, no impairment charges were recorded. In its most recent impairment tests, the Company determined that the fair value of goodwill exceeded its carrying value by approximately 42% and the fair value of the indefinite-lived tradename intangible asset exceeded its carrying value by approximately 50%.
Impairment of Long-Lived Assets
We assess our long-lived assets, principally property and equipment, for possible impairment whenever events or changes in circumstances indicate the carrying value of a long-lived asset or group of assets may not be recoverable. Impairment evaluations for individual stores take into consideration a stores operating cash flows,
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the period of time the store has been open, and managements expectations of operating performance. Recoverability is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If impairment is indicated, a loss is recognized for any excess of the carrying value over the estimated fair value of the asset.
Our judgment regarding the existence of circumstances that indicate an assets carrying value may not be recoverable, and therefore potentially impaired, is based on several factors, including a decision to close a store or negative operating cash flows. Determining whether impairment exists requires that we use estimates and assumptions of projected cash flows and operating results for the asset or assets being assessed. Our cash flow projections look several years into the future and include assumptions concerning variables such as the potential impact of operational changes, competitive factors, inflation, and the economy. Our estimate of fair value used in calculating an impairment loss is based on market values, if available, or our estimated future cash flow projections discounted to their present value, which are considered Level 3 inputs. Using different assumptions could result in a change in our estimates of cash flows and fair value and those differences could produce materially different results.
Store Closure Costs
Store closure costs include related ongoing occupancy costs, employee severance costs, write-down and loss on disposal of assets, and other costs.
Prior to the adoption of ASC842, Leases, store closure costs also included lease obligation costs related to closed stores, which represented the present value of the remaining noncancelable lease payments required under operating leases for the closed stores, less an estimate of subtenant income.
Insurance Reserves
We use a combination of insurance and self-insurance to provide for potential liability for workers compensation, automobile and general liability, product liability, directors and officers liability, employee health care benefits, and other risks, including casualty and property risks. Liabilities associated with the risks that are retained by us are estimated, in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions. While we believe that our assumptions are appropriate, the estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.
Because of the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. A 10% change in our insurance liabilities at January 31, 2021 would have affected our annual operating income by approximately $3 million.
Income Taxes
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the fiscal year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in income tax rates is recognized in income in the period that includes the enactment date.
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some
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portion or all of the deferred tax assets will not be realized. In this process, certain relevant criteria are evaluated including: the taxable income in prior carryback years that can be used to absorb net operating losses and credit carrybacks, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, prudent and feasible tax planning strategies, and future expected taxable income. We establish a valuation allowance for deferred tax assets when it is estimated to be more likely than not that the tax assets will not be realized.
We apply the provisions of the authoritative guidance on accounting for uncertainty in income taxes that was issued by the Financial Accounting Standards Board, or FASB. Pursuant to this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative guidance also addresses other items related to uncertainty in income taxes, including derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Share-based Compensation
We expense the fair value of share-based compensation awards granted to our employees on a straight-line basis over the period that services are required to be provided in exchange for the award, which typically is the period over which the award vests. We measure share-based compensation expense related to our stock options at the time of grant.
Recent Accounting Pronouncements
See our Consolidated Financial Statements, Note 2, Summary of Significant Accounting Policies in our Notes to the Consolidated Financial Statements, for further details.
Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
As of January 31, 2021, our principal exposure to market risk relates to changes in interest rates on borrowings under our New Superpriority Secured Notes. These agreements carry floating interest rates that are tied to LIBOR, Eurodollar, the federal funds rate or the base rate, and therefore, our statements of operations and our cash flows will be exposed to changes in interest rates to the extent that we have outstanding balances under such agreements and do not have effective hedging arrangements in place. Based upon a sensitivity analysis at January 31, 2021, a hypothetical 1.0% change in interest rates would change our annual interest expense by approximately $1.3 million. We do not use derivative financial instruments for speculative or trading purposes; however, this does not preclude our adoption of specific hedging strategies in the future.
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Who We Are
We are a specialty retailer offering a variety of high quality, fresh foods and difficult-to-find items in a small, convenient, intimate store footprint (average 21,000 sq. ft.) where guests can see all the sightlines across the store. The store ambiance is like an Old-World European marketplace layout with an elevated, sensory experience with fresh aromas, classical music, spotlights, and exceptional cleanliness. High-touch guest service is a hallmark of The Fresh Market, as our team members strive to make guests feel like they are at home. Our combination of premium food, strong reputation for special occasions, personalized guest service, and omni-channel capabilities has resulted in comparable store sales growth of 22.3% in fiscal 2020 (compared to comparable store sales growth of (1.8)% and 0.4% for fiscal 2019 and fiscal 2018, respectively). While our fiscal 2020 results may be attributed in part to the impact of the COVID-19 pandemic, we believe they also demonstrate the effectiveness of our strategy and the initiatives we have taken, as well as broader changes in the food-at-home and food-away-from-home markets. Based on our preliminary, unaudited results to date in fiscal 2021 as the pandemic has begun to subside, we believe we are well positioned for continued strong performance.
Our Product Offering
We are focused on providing high-quality, premium offerings across both our fresh and non-perishable departments. We believe the following product categories are the key differentiating elements of our business:
| Fresh produce with seasonal specialties that are hand-picked to ensure each item is perfectly ripe to achieve the best taste and texture; |
| Meat counter with in-store butchers that offer personalized guest service to create a local butcher shop feel; |
| High-quality prime meats with minimum 14-day dry-aged beef; |
| Fresh, on-ice seafood counters committed to freshness and variety; |
| Convenient, ready-to-cook or ready-to-heat meal offerings with restaurant-quality ingredients; |
| Hard-to-find ingredients and curated specialty foods that encourage a fun treasure hunt discovery shopping experience that is unique to The Fresh Market; |
| Expertly curated floral offerings, including rare and exotic orchids; |
| Curated seasonal assortments that focus on special occasions and holidays. |
Our focus is on delivering the very best for our guests fresh food trip, special occasions, and dinner tonight. Approximately 70% of our sales in fiscal year 2020 and fiscal year 2019 have come from fresh foods. This highly curated assortment primarily consisting of produce, meat, seafood, dairy, and ready-to-cook or ready-to-eat meal offerings is supported by specialized and difficult-to-find non-perishable items that account for approximately 29% of our sales, while general commoditized consumer goods, which a consumer finds in conventional retailers, account for less than 1% of our sales over the same time period. Our team members and quality experts have a merchandising approach that requires careful assembly of the food experience with consideration to numerous food attributes. Creative and visually appealing merchandising sets us apart and inspires our guests to create intricate meals for their home, best exemplified by waffles, whipped cream, and strawberries placed together on the produce floor for a delicious, chef-quality dish.
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Each of our stores cuts, seasons and prepares our food daily for optimal taste and freshness and a convenient guest experience. For example, our Peak of Flavor program allows a guest to purchase a ripe avocado or banana to eat that night, in addition to fruit that will peak in the next day or two. In order to deliver on our mission with guests and our stores, our supply chain and distribution partners supply us with the highest quality and freshest food from farm to shelf in 14 days or less. We source from both a leading national specialty distributor, along with 40 family-run farms within 100 miles of our stores, providing us the ability to offer our guests the high quality, fresh food. Before any new item is displayed in our stores, our buyers hold tastings where potential new items are tasted and evaluated. We also have partnerships with certain growers that allow us to bring in limited edition offerings, like batches of berries with exceptional sweetness as well as international specialties, such as Tasmanian cherries or stone fruit flown-in from South America to maximize freshness.
We also have a dedicated team that curates and sources local products based on a series of specifications to ensure differentiation from conventional retailers. For instance, this focus on working with local farmers and bakers whenever possible allows us to offer our guests Louisiana King Cake for Mardi Gras, North Carolina pickles, or milk in glass bottles from Battenkill Valley Creamery in upstate New York. We also source our own private label through our small and medium sized vendors with the goal of offering the best product in select categories. We believe smaller batch sizes and proprietary formulas and recipes allow these items to outperform leading brands in terms of quality of ingredients, flavor variety, and taste. Furthermore, we take pride in making a variety of guests favorites on a daily basis including roasted chicken salad, fresh-baked nut breads, and flavored gourmet coffee.
We strive to procure sustainably farmed produce and humanely raised meats while promoting environmentally conscious brands that are in-line with our values. Our private label canned tuna is sourced from the first tuna fishery to become MSC Certified Sustainable, utilizing pole and line caught fish. We also partner with growers who are vested in taking care of the environment, such as Fair Trade Certified squash and avocados, Rainforest Alliance Certified grapes and Fair for Life apples. Our seasonal fresh produce is purchased from 40 family-run farms within 100 miles of our stores. These examples are a small part of our commitment to creating a better future for our planet. In fiscal 2020, we donated 2.5 million pounds of food to Feeding Americas network of food banks while reducing our footprint by recycling all cardboard used in our stores.
Our Guests and Their Experience
We attract guests from a high-income demographic who seek out and have a higher willingness to pay for high quality, fresh food. Approximately 62% of our guests have an average household income above $75,000. Households that have shopped with us have exhibited higher monthly grocery spending than households that do not shop with us.
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Our guests understand what sets us apart from other food retailers, both in terms of our offering and the special experience that we work hard to provide. In 2019 Consumer Reports rated us in the top 10 of food retailers in each of our markets, and in the top 15 nationally, despite our presence only in the East Coast and Midwest. More recently, approximately 80% of shoppers indicated on an internal survey that they were satisfied with our offerings overall. Results from the Integrated Insight Survey demonstrated that we are executing on our strategy of attracting guests for three important trips: (i) fresh food, (ii) food for special occasions, and (iii) curated meal offerings for the home. According to the Integrated Insight Survey, our products quality and freshness received more excellent ratings than competitors in our core markets and we received the highest ratings for being a trusted destination for special occasions and holidays. Our guests specifically ranked our meat and seafood departments as market leaders in some of our core markets for their freshness, quality, and taste. In addition, seven out of the top ten reasons that these survey respondents listed for shopping with us were related to the fresh food that we offer and its unique and seasonal attributes. Over 70% of our regular shoppers said our curated meal offerings were among the top three options in their market. Additionally, the Integrated Insight Survey ranked us as a top-rated food retailer for store ambiance and store cleanliness, both of which are integral to our brand reputation.
Our Stores and Operations
We operate 159 small-box stores (each approximately 21,000 square feet) that provide our guests with a convenient shopping experience and a more personal level of guest service. We strive to create a warm and inviting atmosphere within our stores by crafting a sensory experience for our guests. Classical music and spotlights create an elevated environment which is further supported by the aromas of flowers upon entry and our fresh baked bread. Unique merchandise pairings inspire our guests while providing a curated environment, where rose wine is located next to dessert options, and dark chocolate chips conveniently placed near the waffle mix. We have 15% average store-level EBITDA margins and approximately 92%, 93% and 99% of our operating stores were profitable in fiscal 2018, fiscal 2019 and fiscal 2020, respectively. We believe this store-level profitability is primarily driven by our differentiated product mix that commands 40+% merchandise margins as well as the productive small-store layout that optimizes fixed costs such as occupancy and store labor expenses.
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Our small-box stores enable us to operate in established neighborhoods in close proximity to our target high-income guests (annual household incomes in excess of $75,000) and supporting our guests preference to efficiently and conveniently shop for their families. This small-box format in high population density areas near our guests homes also supports our growing curbside pickup business, which is an important component to providing our guests with an omni-channel shopping experience. Moreover, we have a strong geographic
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presence in the attractive Southeast markets and our stores benefit from key advantages such as lower labor costs, attractive demographics, lower lease costs and significant real estate availability. Although curbside pickup and delivery are becoming a growing part of our business, our stores are a highly differentiated showcase of an epicurean experience for inspiration and special occasion shopping that draws our guests to shop in a clean and enjoyable environment. Our team members focus on offering solutions to our guests through food pairings and inviting displays.
We were named the #1 customers favorite grocery store brand in the 2021 USA Today 10Best Readers Choice poll. The poll included all the top national grocery brands and was open for voting this spring and the winners were announced on April 23, 2021. The survey covered consumer experiential brands across multiple industries such as food, lodging and travel destinations. Further, Consumer Reports rated us amongst the cleanest grocery stores in American in 2019 and Newsweek/Statista rated us #5 for best guest service in grocery in America in 2020. We believe our exceptional store conditions gained the trust of our guests especially during the COVID-19 pandemic as guests demanded and relied upon a safe environment where they could shop. We believe we were one of the first retailers to require all team members and guests to wear personal protective equipment in our stores. In addition, our stores undergo a deep cleaning every day to ensure the safety of our team members and guests and continue to foster their trust.
States we are currently present in have seen strong population growth of over two times the national average over the last several years. As a result of COVID-19, we have seen an increase in households, as individuals change residence to the states in which we operate. According to interstate moving data, Florida and the Carolinas are among the top 10 states benefitting from inbound moves in 2020, which are our two of our strongest markets (48% of our stores are located within Florida and the Carolinas).
Our approximately 10,500 non-union team members are our brand ambassadors that showcase the best of our offerings. The Fresh Market experience is brought to life because of the high-touch service provided to our guests. Approximately 50% of our team members are full-time which demonstrates our commitment to providing an exceptional work environment and ongoing support to our team. According to an internal survey of customers, 91% of our guests are highly satisfied with our service experience. In each of our stores, our team members are constantly ensuring our products meet our high-quality fresh standards. We have dedicated team members in each store who cut our fresh produce daily, our butchers prepare meats to our guests specifications and our chefs prepare ready-to-eat and ready-to-cook meals. Through a simplified organizational structure that provides a visible path to promotion, numerous training opportunities and increased store-level bonus eligibility, our team members are motivated and incentivized to create a memorable guest experience.
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Our growing eCommerce platform leverages our store network to provide an omni-channel experience as the needs of our guests evolve. While most of our guests enjoy shopping in our stores and experiencing the sight and feel of our specialty offering, we have partnered with Instacart as the backend software provider for our digital platform to meet incremental guest demand for an integrated omni-channel offering. We are continuously improving the platforms design to make it easier to navigate and complete purchases, while also enabling a sense of discovery of a new menu or tonights meal. We have implemented personalization algorithms based on our guests purchase history that enhances discovery. We have completed the rollout of curbside pickup to all 159 stores (approximately 35% of eCommerce fulfillment). Our curbside orders are hand-picked by our store team members whom we call Personal Shoppers, which enhances the guest experience and ensures a high-quality
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basket backed up with a 100% Satisfaction Guarantee for all items. For fiscal 2020, our eCommerce penetration was 5.6% and we plan to continue investing in enhancing our guests digital experience. We are also launching our new loyalty program in the fall of 2021, which is a key factor in our goal of providing a convenient, seamless digital experience through The Fresh Market app and website that goes hand-in-hand with our brand reputation for personalized guest service whether guests shop in-store or online. We extensively tested our loyalty program in fiscal 2020, which showed member guests would visit more often, spend more on each visit, and shift more of their visits to TFM from other competitors.
Recent Financial Performance
We have spent the last few years bringing The Fresh Market back to its roots of providing a highly differentiated specialty food offering and improving the in-store and omni-channel experience. Along with the Apollo Funds support and a strengthened new management team, with five additions to the senior leadership team in 2020 (including both Jason Potter as President and Chief Executive Officer and Jim Heaney as Chief Financial Officer), we have recently delivered exceptional financial performance. We believe our results for fiscal 2020 and our preliminary, unaudited results for fiscal 2021 to date, while partly attributable to the positive impact of the COVID-19 pandemic on grocery retailers, also demonstrate the effectiveness of these initiatives in addressing challenges we faced at and immediately after our take-private transaction by the Apollo Funds in 2016, as well as broader changes in the food-at-home and food-away-from-home markets. We believe we are well positioned for continued strong performance. For fiscal 2020 compared to fiscal 2019, we achieved the following results:
| Increase in net sales from $1,522 million to $1,887 million, representing period-over-period growth of 24.0%; |
| Increase in net (loss) income from $(65.4) million to 26.9 million; |
| Total comparable store sales growth of 22.3%, which we believe is one of the highest growth rates compared to other food and specialty retailers. This compares with a change in comparable store sales of (1.8)% for fiscal 2019. Transaction count (i.e., the number of discrete sales transactions with our guests) changed (3.0)% for fiscal 2020, compared to (3.4)% for fiscal 2019. For the three-month period ended January 31, 2021, our comparable store sales grew 25.8% compared to the prior year, with transaction count growth of 4.7%, and tonnage was up 26.6% compared to the prior year; |
| Increase in Adjusted EBITDA from $118.0 million to $219.4 million, representing period-over-period growth of 86.0%; |
| Ten consecutive quarters of Adjusted EBITDA growth compared to the comparable quarter in the prior year |
Adjusted EBITDA is a non-GAAP financial measure. For a description of our non-GAAP financial measures and a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, net income, see Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures.
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Our Industry
Our distinctive offering allows us to compete in both consumer occasions for food-at-home and food-away-from-home. During fiscal 2020, we believe our increased net sales resulted from market share gains from food competitors (grocery and restaurants) due to our premium and fresh offering as well as the increased food-at-home spending during the COVID-19 pandemic. Additionally, the closure of more than 70 competing stores in our core markets contributed to these gains.
The following chart compares our comparable store sales growth with that of the retail grocery industry (defined as all competitors which we consider traditional grocery (i.e., Albertsons, Kroger, Publix), specialty grocery (i.e., Sprouts Farmers Market, Natural Grocers, Trader Joes), and including Mass channels (i.e., Target and Walmart) and excluding Club channels (i.e., Costco)) from May 1, 2020, following the immediate disruptions of the onset of the COVID-19 pandemic, though the end of our fiscal year on January 31, 2021.
We also believe that consumer focus on high-quality fresh and specialty foods, as well as natural and organic offerings, will continue to benefit our brand. Based on research from the Specialty Food Association, specialty food spending grew at a historical CAGR of 7.1% from 2017 to 2020 versus total food-at-home spending of 4.9%. (Note that the foregoing CAGR includes the positive impact on food retailers of the COVID-19 pandemic in 2020.) For purposes of this study, specialty food spending is defined as spending on food, beverages, and confections that are of the highest grade, style, and/or quality in their respective categories, and the broader industry as supermarkets and grocery stores that retail general lines of food product, as well as delicatessens primarily retailing food. According to Nielsen, our core product categories of meat, produce, and prepared foods have grown 7.4%, 7.6%, and 6.2%, respectively, from 2017 to 2020. We believe there is no other retailer offering our differentiated assortment, with many conventional grocers primarily sourcing from commoditized consumer brands in contrast to our specialty, value-added fresh food and locally relevant product offerings.
We believe, based in part on our preliminary, unaudited performance to date in fiscal 2021, that we will continue to benefit from industry trends through alignment with changing consumer preferences:
| Consumer focus on high-quality fresh foodsover 60% of grocery shoppers indicate that high-quality fresh food is the most important consideration when choosing a food retailer according to R5 independent research conducted in 2020. We have unique, seasonal heirloom produce which is hand sorted by our quality control experts. We offer only fully mature produce with optimal texture and level of sugars. |
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| Natural and organic offeringssales of natural and organic food have grown at a CAGR of 6.8% from 2017 to 2020, reaching a total market size of $252 billion in the United States and are expected to continue to grow at a CAGR of 6.0% from 2020 to 2023. Our penetration of organic produce is 6.0% of our total sales in fiscal 2020. |
| Omni-channel capabilitieswhile more guests are willing to do their grocery shopping online, our guests prefer and attain pleasure from visiting our store. Our specialized, fresh-focused offering drives trip frequency and is supported by our integrated omni-channel capabilities for those that also prefer to pick-up at our store or have product delivered to their home. We believe our experiential and fresh offering provides clearly less competition from online threats. For example, one tin of berries deteriorates eight hours of life for every hour unrefrigerated. |
| Significant shift from food-away-from-home to food-at-homethe environment during the COVID-19 pandemic has initiated a strong shift to increase spend on food-at-home. This has led to food-at-home spending, as measured by the USDA, to grow 8.5% in calendar year 2020 and we believe a significant portion of this will continue at least in the near term as (i) consumers have become accustomed to and re-discovered the enjoyment of cooking at home and (ii) more than 110,000 restaurants, or 17% of restaurants, have closed down and it will take time for the restaurants to recover (following the 2007-2009 Great Recession, the restaurant industry took 2 years to recover to its prior peak). We have made investments in high-quality prepared food to capitalize on disruption in the restaurant industry. Our restaurant quality ready-to-eat and ready-to-heat meal offerings are creating new meal occasions that bring guests frequently into our stores. Guests consistently give our prepared foods offering a high-quality ranking and we believe we have created a significant, long-term opportunity to take share from the food-away-from-home category. |
Our Performance Improvement Initiatives as a Private Company
As a private company, we have undertaken significant performance improvement initiatives to improve in-store execution and provide high-quality products to our guests, which contributed to the recent financial performance and created a foundation for our future growth. The key initiatives include:
| Refocused our offering with our mission to serve as a premium specialty retailer with a strong focus on fresh foodSince our acquisition by the Apollo Funds in 2016, we have improved and refocused our offering towards high-quality, premium products across both our fresh and non-perishable departments. Our biggest focus has been ensuring that we offer produce and meat that exceeds the quality of our competitors. Our guest satisfaction scores in every department have continuously improved since 2019. Over the past year, our guest approval ratings have improved five percentage points or more to over 80% satisfaction in quality and friendliness of staff. We have also concentrated on emphasizing the specialty nature of our product offering generally by differentiating ourselves through value-added products, hard-to-find ingredients and specialty foods to replace commoditized consumer packaged goods. For example, over the last few years we have returned to many of our previous growers and relationships, as well as developed new ones, and have focused on purchasing a larger spec for our produce items (e.g. bigger apples and lemons or sweeter cherries and stone fruit). Given our merchandising initiatives, we believe a significant percentage of our products are not available in conventional grocers. |
| Introduced new offerings to address our guests needs for a curated meal offeringWe have greatly expanded our pre-existing curated meal offerings by introducing a variety of products that caters to both individuals and families at different price points and serves every occasion. This includes Market Meal Kits (provides ingredients and recipes for 20 minute one-pan preparation, perfect for convenience focused guests looking for daily meal ideas), Little Big Meals ($20 offering to feed a family of four, offering a high-quality meal at exceptional value), and the special dinner programs (restaurant quality dinner programs especially highlighting our superior meat and seafood offerings). We continue to introduce new, innovative offerings to create an enhanced guest experience with regards to curated meal offerings, which includes our new Kitchen Square in our stores. We are piloting this new concept in three stores this |
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year by re-designing the layout of the floorspace to allow for a completely new restaurant look and feel. This will become a convenient destination for dine-in, order ahead, and grab and go focused guests. We plan to open 2 to 3 stores by the end of fiscal 2021 and 2 to 3 stores in fiscal 2022. |
| Strengthened leadership teamOur leadership team comprises 7 highly experienced and proven individuals, with 6 joining in the last 2 years. Our management team is led by Jason Potter, President and Chief Executive Officer, who brings over 30 years of experience in the grocery industry, most recently at Sobeys Inc. (a Canadian grocer focused on fresh offerings), and a track record of enhancing stockholder value. Our leadership team is also led by Jim Heaney, Senior Vice President and Chief Financial Officer, who most recently was the Chief Financial Officer of Carnival Cruise Line and brings over 30 years of experience in distinguished experiential businesses such as Disney Parks and Resorts and Sea World. Jims tenure in leading experiential entertainment companies is highly relevant for our focus on creating an exciting guest shopping experience. |
| Built a culture of excellenceOur new leadership team has revamped our teams culture to ensure our store team members feel that they are true ambassadors of our brand with a sense of ownership and pride. We have created a nimble organization with a consistent playbook for adding innovative programs that drive profitable growth. At the corporate level, we have elevated our Head of Food Safety to directly report to our CEO given our enhanced focus on guest experience and guest loyalty. In the stores, we have streamlined and simplified direct reports to our store managers so that they can better focus on assisting guests and delivering on our in-store experience. Store team members have access to a number of educational resources and are encouraged to grow within the organization. We also foster an environment of transparency, where all store and office team members participate in weekly town halls with the CEO and management team. |
| Built omni-channel capabilitiesHistorically, we have been underpenetrated in eCommerce but we have made significant progress over the last year with our eCommerce revenue increasing over 900% in fiscal 2020, from $10.2 million in fiscal 2019 to $102.4 million in fiscal 2020. We offer delivery and curbside pickup service at all 159 stores through our partnership with Instacart. Given the strategic importance of curbside pickup, we reimagined and relaunched our curbside guest service program in December 2020. Branded The Friendliest Curbside Experience in America, the new program features: (i) Dedicated Personal Shoppers to ensure quality and freshness, (ii) a 100% Satisfaction Guarantee of all items in a curbside basket, (iii) all items double checked and verified by the Personal Shopper and Store Manager, and (iv) wow moments for curbside guests like Personal Shoppers dressed as Santa during the holiday season. Since launching the program, we have seen the total curbside pickup sales increase significantly, wait times decrease below five minutes, general guest satisfaction scores at the top of the industry average and higher fulfillment rates. We have also implemented a personalized algorithm, based on each of our guests purchase histories, to the landing page of our shop.com eCommerce app further enhancing guests discovery and basket building. Our eCommerce penetration for fiscal 2020 was 5.6% of total sales. |
| Pricing initiatives for frequently shopped itemsPrior management teams made the decision to raise prices on seemingly inelastic items, which resulted in insult pricing within certain departments of our business. To correct previous management decisions, we have reduced prices across approximately 50 items, such as bananas, avocados, milk and others so that our most basic items are now priced competitively. In the last year, we have invested approximately 70 basis points of merchandise margin across a number of categories in all our stores. The improved pricing perception of the most basic items has encouraged our guests to shop at our stores and provided an additional opportunity to build their basket with higher margin, premium products. |
| Improved in-store executionFollowing our acquisition by the Apollo Funds in 2016, we have focused on the improvement of in-store execution. We increased quality standards across our fresh departments and improved labor efficiencies by implementing standards and controls for in-store team members to provide consistent and exceptional guest service. In addition to our simplified organization structure within the store, each team member now receives performance reviews and is incentivized to give high-touch service through increased bonus eligibility. Furthermore, our team focused on the deep cleaning of |
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every store, which has successfully positioned TFM to address the current environment during the COVID-19 pandemic. We also provided and required personal protective equipment for all our team members as well as our guests. We believe we were one of the first food retailers to take such measures which helped us continue to earn the trust of our guests. |
| Technology tools to scale and optimize the businessWe are investing in information technology tools to improve critical operational, merchandising, and marketing capabilities in our existing store base. These initiatives include improving inventory and labor management through the implementation of demand forecasting tools and computer-generated ordering and store labor planning applications, as well as data driven decision making to better inform our omni-channel capabilities and understanding of our guests shopping behaviors. Demand forecasting and inventory management help our store team members focus on the guest while automating menial tasks, ensure we have the right level of staffing to meet guests needs appropriately, and keep our shelves stocked with the appropriate level of product. We also benefit from decreased labor hours and reduced shrink, both which flow to margin enhancements. Leveraging data in our sales channels and marketing allow us to drive higher trips and basket sizes from our guests, which in turn drives revenue growth. |
Our Competitive Strengths
High-quality offering focused on fresh food that is differentiated from conventional grocery
We are intensely focused on curating an assortment of what we believe are the freshest available foods and specialty items in a small, convenient, intimate store. In a recently conducted guest survey, 81% of the respondents rank our quality and freshness as Excellent or Very Good compared to an average statistic of 68% for a select number of competitors within a 10-mile radius. We believe our high-quality fresh food offering can be a true source of differentiation. For example, 42% of our beef sales come from prime meat. Within our fresh food offering, we believe our expertly prepared, value-add food further differentiates us versus competitors. We offer our guests the convenience of pre-cut fruit and vegetables and pre-seasoned meats that save preparation time, as well as curated meal offerings.
In addition to our sourcing relationships with national distributors, we work with local farmers to procure in-season produce from the Carolinas, Florida, Georgia, and Virginia. Our partner growers allow us to bring in limited edition, heirloom products such as the sweetest batches of berries from Florida and the Carolinas. Our Peak of Flavor program allows guests to choose ripe avocados and bananas that can be enjoyed that night or fruit that will peak in a day or two. Internationally sourced produce is flown-in (versus transported by boat) for premium items like Tasmanian cherries or stone fruit from South America.
We offer restaurant-quality meals
While our high-quality, premium fresh food serves as the basis to our differentiation, we take a step further to curate meals focused offerings that are distinct from other grocers or food retailers. Examples of our meals offering include Market Meal Kits (provides ingredients and recipes for 20 minute one-pan preparation, perfect for convenience-focused guests looking for daily meal ideas), Little Big Meals ($20 offering to feed a family of four, offering a high-quality meal at an exceptional value), and the special dinner programs (restaurant quality dinner programs especially highlighting our superior meat and seafood offerings). Our Market Meal Kits, one of the fastest growing offerings, are assembled in-store, with fresh meats and vegetables cut by hand and expertly paired with sauces and ingredient packs. Sales of Market Meal Kits grew by approximately 45% in fiscal 2020. As an example, our Honey Balsamic Pork meal kit features pork tenderloin medallions with honey balsamic glaze, green beans and mashed sweet potatoes to create a delicious dinner in 20 minutes. We also suggest wine and dessert pairings to accompany many of our curated meal offerings. Our meals for special occasions include family dinners for the important holidays and the ultimate special dinner or brunch. Sales from our meals for special occasions grew by approximately 90% in fiscal 2020. We believe our commitment to delivering the best quality curated meal offerings helped us to win with both existing and new guests who experienced a heightened
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engagement with food-at-home in 2020, and our curated meal offerings accounted for approximately 15% of sales in fiscal 2020.
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The Fresh Market strives to be the go-to food destination for entertaining needs, especially during the holiday seasons. We believe this is a result of our high-quality food offering that meets the expectation for special occasions as well as our attractive holiday meals programs. From intimate dinners to large, catered gatherings, The Fresh Market has you covered. Our Dinner for Two on Valentines Day offers guests the ability to create a romantic meal at home with a prime Chateaubriand steak and Chilean Sea Bass. For tailgating at home, we offer our fan favorite platter including pot roast and caramelized onion sliders, pepperoni pinwheels with all the appetizers and fresh baked cookies. We believe we are our guests number 1 destination for holiday and special occasion meal offerings which results in significantly increased sales during holiday weeks compared to non-holiday weeks.
Conveniently located, easy to navigate small-box format
Our fresh-focused offering is complemented by our small-box stores in established neighborhoods that are close to our target, higher-income guests with average annual household income of over $75,000. We address on-the-go consumer demand for convenience through simple in-store navigation. Average stores are approximately 21,000 square feet versus a conventional food retailer at approximately 60,000 square feet, which allows us to fit in high-density areas where conventional grocers cannot. The store ambiance is an Old-World European marketplace layout with an elevated, sensory experience with fresh aromas, classical music, spotlights, and exceptional cleanliness. We generate very productive marketing and, per the Integrated Insight Survey, achieve an 86% household brand awareness in our markets. In addition, the small-box format in high population density areas near our guests homes supports our convenience-focused curbside pickup business, which we believe is an important part of providing our guests with an omni-channel shopping experience.
We operate 159 stores on the East Coast and in the Midwest, with our core market being the Southeastern portion of the United States. We benefit from attractive operating dynamics in the Southeast, including lower labor costs and exposure to stronger growing demographics and metropolitan statistical areas (MSAs). We believe there is significant whitespace to expand unit count with 75 immediately actionable opportunities within our core markets and an opportunity to double our store count over the next 10 years.
Loyal guest following with attractive demographics
Our customers have a heightened engagement with food and actively seek out high quality fresh and perishable items. According to the Integrated Insight Survey, 37% of our target market will pay more for high quality food and value high quality fresh foods more than getting a deal on other products. We attract guests from a high-income demographic who seek out and have a higher willingness to pay for high quality, fresh food. Approximately 62% of our guests have an average household income above $75,000. Households that have shopped with us have exhibited higher monthly grocery spending than households that do not shop with us.
We have attracted a loyal guest followingour top 10% of guests represented almost 60% of our revenue and visited our stores approximately twice per month in fiscal 2020. This populations heightened engagement
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with food has been one factor in our strong fiscal 2020 and fiscal 2021 to date performance (based on preliminary, unaudited results for fiscal 2021), as our guests have reported more significant increases in their level of spending and shopping frequency compared to non-guests. Additionally, our guests are vocal advocates for our brandapproximately 90% of survey respondents who shop our stores indicated a high likelihood to recommend us. This likelihood to recommend has converted to our reputation spreading by word of mouth, as survey respondents listed a recommendation by a friend as the most common reason for their first visit to our stores. According to the Integrated Insight Survey, over three-quarters of our target market expects to maintain or increase their level of food spending even after the COVID-19 pandemic subsides, and we believe based on the foregoing that we are well positioned to compete for a significant portion of this food spending.
Dedicated store team members making our guest experiences enjoyable
Our team members are passionate about quality food and love to highlight unique items within our stores, promoting the treasure hunt discovery experience that we provide. We utilize an extensive training program to encourage personalized service to our guests. Approximately 50% of our team members are full-time with a high level of retention and an established, clear path to promotion. None of our team members are subject to collective bargaining agreements. In response to the COVID-19 pandemic, we quickly set a high standard for safety and sanitation within our stores. Due to our store team members unrelenting focus, 96% of surveyed guests gave us positive ratings for cleanliness.
Our leadership team has revamped our culture to (i) ensure our stores have the freshest available products and offer quality guest service in a clean and safe environment and (ii) be extremely nimble and entrepreneurial in trying out various initiatives to improve our guests experience. Such measures include investing in guest wait time so that no guest has to wait longer than 30 seconds to check out and increasing team member training to provide for a better guest experience. At the corporate level, we have elevated our Head of Food Safety to directly report to our CEO given our enhanced focus on guest experience and guest loyalty. In our stores, we have streamlined and simplified direct reports to our store managers so that they can better focus on assisting guests and delivering on our in-store experience. Store team members have access to a number of training resources and are encouraged to grow within the organization. We also foster an environment of transparency, where all store and corporate office team members participate in weekly town halls with the CEO and management team.
Strong financial profile
Our management team and the Apollo Funds have taken significant steps in order to address challenges we have faced and to position us for long-term and sustainable growth, and we believe our results for fiscal 2020 and our preliminary, unaudited results for fiscal 2021 to date demonstrate the benefit of these steps. These steps include changes to the management team; refocusing TFMs merchandise offering on high quality fresh food and difficult-to-find specialty items while also introducing new curated meal offerings; actions to enhance in-store operational execution; exiting unprofitable stores in non-core markets such as California and Texas; changes in pricing strategy for TFMs frequently shopped products; and implementing upgraded technology.
Our differentiated strategy of offering a fresh-focused, premium product mix, together with strategic initiatives focused on cost optimization in labor, shrink, and procurement are designed to provide an attractive margin profile compared to other more traditional food retailers. Gross margins were 34.9% in fiscal 2020, compared to 31.5% and 33.2% in fiscal 2019 and 2018, respectively. In the same three fiscal years, Adjusted EBITDA margins were 11.6%, 7.7% and 6.3%. In addition, savings from the cost initiatives can be reinvested in the business to further drive profitable growth. For further discussion of Adjusted EBITDA margin and a reconciliation of Adjusted EBITDA to net income, see Managements Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures.
At the store level, average unit sales, or AUV, were $11.9 million, $9.5 million and $9.7 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively, and 99% of our stores were profitable in fiscal 2020 (compared to 93% and 92% in fiscal 2019 and fiscal 2018, respectively). We believe we are one of the most productive food and specialty retailers on a profit per square foot basis when also taking into consideration real estate ownership.
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We incurred a significant amount of debt in connection with our 2016 going private transaction and in the years following ($934.0 million outstanding as of January 31, 2021), and we intend to use the proceeds of this offering to refinance a significant portion of this debt, which will reduce our ongoing debt service obligations.
Our improved financial performance generated strong cash flow from operations of $152.2 million in fiscal 2020. Our net capital investment required to support the business over the same period was $25.7 million or less than 17% of the cash flow from operations. The end of year cash balance in fiscal 2020 increased to $206.4 million which is up over 50% versus the end of year balance in fiscal 2019.
Our Competitive Strengths and Initiatives Are Proven by Our Results
Our average weekly sales (excluding holidays sales, which are generally well above non-holidays sales) continue to accelerate, demonstrating that our competitive differentiation and our initiatives have resonated with our guests. Even in major markets where COVID-19-related restrictions have been lifted and restaurants have been open for much longer, we are seeing limited impact to our growth even as the percentage of seated diners measured vs 2019 levels recovers.
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Our Growth Strategies
We see a significant opportunity to drive long-term growth across our business by executing on the following growth strategies:
Further invest behind key capabilities to provide a consistent guest experience and drive comparable store sales growth
We will continue to invest in our highly differentiated offering
We have seen strong momentum in our business in fiscal 2020 and fiscal 2021 to date (based on preliminary, unaudited results for fiscal 2021) and we believe we have an opportunity to showcase our enhanced, differentiated shopping experience to our existing and new guests. While our strong performance is partly attributable to the positive impact of the COVID-19 pandemic, we believe we are capturing market share in the food-at-home and food-away-from-home markets through continued leadership in our high-quality, fresh premium offerings and innovation in curated meal offerings. We believe that delayed recovery in the restaurant industry and lack of differentiation in the conventional grocery space provides an opportunity for additional market share gains. We have been focused on owning tonights meal (being top-of-mind to the consumer when it comes to planning and purchasing dinner), and continue to innovate with the introduction of new items and dining occasions to increase relevance to consumers.
We will continue our efforts to systematically upgrade the quality and freshness of our products, with a focus on the produce category. Our produce buyers work directly with growers and have developed long-term relationships to ensure we procure many of the sweetest berries, the finest fruits, and the greatest variety of vegetables. We have launched an extensive training course for the members of the produce department so they can learn how to become produce gurus, learning to offer suggestions and tell guests about the story behind the food. These initiatives have resulted in an increasing score on produce satisfaction in guest surveys (from 92.7% in fiscal 2019 to 94.5% in fiscal 2020) and in produce unit growth of 31.4% outpacing total unit growth of 21.7% during fiscal 2020. We believe the continued focus on instituting a systematic approach to improving quality and freshness will accelerate comparable store sales growth.
Our new Kitchen Square concept targets the substantial opportunity to serve our guests in ready-to-eat dining occasions. We expect to pilot this new concept in two to three stores in fiscal 2021 by redesigning the layout of the floorspace to allow for a completely new restaurant look and feel. This will become a convenient destination for dine-in, order ahead and grab and go focused guests. An inviting atmosphere filled with inspiring selections will transition throughout the day from a morning coffee and croissant, to a made to order salad for lunch, to a pizza and real Carolina BBQ for dinner. The goal is to provide additional restaurant quality choices for our guests and attract a younger demographic to our stores.
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Similarly, we are investing in our ready-to-cook curated meal offerings, with a $7 million capital investment into Market Meal Kit walk-around cases in 120 of our stores. We expect this investment to have a payback period of less than 3 years as Market Meal Kits are a key driver in building a bigger basket. These cases provide
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access to Market Meal Kits, Little Big Meal, Create Your Own kit, and Ready-to-Heat options. Our Market Meal Kits are assembled in-store, with meats and vegetables cut by hand and expertly paired with sauces and ingredient packs. We also suggest wine and dessert pairings to accompany many of our curated meal offerings.
We have reduced prices across approximately 50 known items our guests purchase frequently, such as bananas, avocados, milk and others, so that our most basic items are now priced competitively. In the last year, we have invested approximately 70 basis points of merchandise margin across a number of categories in all our stores, and we plan to continue to reinvest price back in a clinical manner to benefit our guests in select products where price matters the most. We are also pursuing center-of-the-store re-alignments which will optimize shelf space and increase sales productivity by enabling the application of computer-generated ordering. We believe this in turn will improve margin through standardization of shelf alignment and a reduction in shrink.
Improvement of in-store execution and operations will further drive sales and productivity
We are working to enhance profitability by improving our operational efficiencies. We will continue to optimize our merchandise presentation through strategic store remodeling and enhanced visual storytelling. We are installing computer-generated ordering software to improve inventory management, increase our in-stock position and build on our demand forecasting abilities. We are developing engineered labor standards to ensure the right resources are in the right place at the right time to optimize our service levels. These operational improvements will not only drive efficiencies, but will also ensure a more consistent and delightful guest experience.
Our team is constantly evaluating the right in-store presentation to deliver the best experience to our guests. To that effect, we will continue to pursue store refreshes with attractive returns, focusing on enhanced produce refrigeration, aspirational displays, walk-around cases highlighting our curated meal offerings, and new point of sale machines in all 159 of our stores. We plan to finish six store refreshes in fiscal 2021, targeting cash-on-cash returns of greater than 20%. Over the next five years we expect to have modernized more than 75 stores with varying degrees of capital to strengthen our brand, especially in areas where we are adding new stores.
Our exemplary guest service scores are a direct result of our talented and motivated in-store managers and team members. We have recently completed a realignment of our reporting and compensation structure to increase accountability and further incentivize performance. We have seen a significant increase in performance by raising the number of team members that are eligible for store-based performance bonuses. The simplified store organizational structure has increased transparency into promotion opportunities as we look to develop talent through investments in training and performance reviews. Our team members are a critical component of our growth story, providing high-touch service to support our specialty offering.
We are constantly evaluating our operations to identify areas for improvement in our cost structure while also enhancing the guest experience. At the store level, we are introducing engineered labor standards which will more efficiently allocate our highly talented team members, create labor efficiencies between departments and improve overall engagement with our guests. Maximizing the freshness of our high-quality offering while minimizing out-of-stock items is key to ensuring a consistent guest experience. We have engaged in the implementation of an automated demand forecasting system to ensure our best-selling products are available for our guests while also reducing shrink from over-ordering. Continued performance against our growth initiatives will result in additional margin benefit as we leverage our corporate and store overhead, part of which will be reinvested into the business.
Focusing our marketing to deepen engagement with our guests
We have significantly increased our marketing efforts through targeted digital campaigns, innovative print content and aspirational signage. Our brand benefits from an attractive household brand awareness, which per the Integrated Insight Survey, reached 86% in our markets. To further engage with our loyal guest base, we plan to
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use targeted marketing campaigns employing a variety of channels, including loyalty marketing, email marketing, social media marketing, geo-targeted mobile ads, and in-store marketing. We want to leverage our marketing and eCommerce platforms to help guests discover our new products and menus for tonights meal and for all their special meal occasions and events. In fiscal 2020, we increased our marketing spend by approximately 60% and we expect to continue investing in our marketing spend. In fiscal 2021, we plan to have our marketing team run campaigns to protect market share where our competitors are entering with new stores.
Capitalize on substantial whitespace opportunity with a focus on expanding store footprint through de-risked in-fill opportunities
We made a strategic decision to pause new store openings over the last three fiscal years to focus on our core business. While we believe our business is now on a sustainable growth trajectory and with tremendous momentum, we plan on returning to a disciplined store growth strategy. Our methodology for selecting new sites includes an analysis of population and spending data, existing competitors and rigorous site level standards. Our internal analysis, in concert with our real estate advisors, has resulted in a methodical, multi-stage expansion plan that focuses on stores within our core market in the Southeast. We believe we have the ability to expand beyond our core markets in the long term, by increasing the penetration of our secondary markets and expansion of our core geographies. We plan to open one new store in fiscal 2021 and, beginning in fiscal 2022, we plan to open seven to 12 new stores per year for the following four years.
Core market opportunity
Our primary focus is to expand into in-fill locations and surrounding metro areas within the core markets. Examples of our near-term focus area include Florida and the Carolinas. We believe our core near-term opportunities include approximately 75 locations and offers high visibility into low-risk expansion. Existing store AUVs above our average in combination with strong market share performance within our core Southeast geography supports the viability of our expansion. These 75 locations provide an ample pipeline for our near-term store openings and exceed the number of new store openings planned for the next five years.
Secondary opportunities
We consider secondary markets where our locations have strong brand awareness but limited penetration. We believe these regions provide opportunities to expand in metros and areas that sit right outside of our current footprint but can be serviced via our existing infrastructure. We believe our secondary market opportunity currently includes approximately 275 locations that could accommodate our preferred size of stores in markets we would consider. Beyond our core and secondary markets, we believe we have the opportunity to expand across the nation. We currently have store locations in 22 states, which leaves us substantial room for growth beyond our core geographies. We believe our greenfield opportunity currently includes an additional 300 locations that could accommodate our preferred size of stores in markets that meet our underwriting standards.
We seek to open new stores with the following economics:
| Sales per new store of $12 to $14 million per year |
| Strong store-level EBITDA margins of 12% to 14% |
| Total cost per new location of $5 to $6 million (including pre-opening costs and tenant improvement allowances) |
| Return on invested capital of at least 25% and a payback period of 3 to 4 years |
Store-level EBITDA margins are calculated as store EBITDA (which excludes corporate expenses) divided by the stores sales; return on invested capital is computed as store EBITDA divided by our initial cash investment in the store.
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Enhance guest engagement with a full-scale loyalty program and improved eCommerce capabilities
We expect to launch a loyalty program in the fall of fiscal 2021. In order to promote our loyalty program, we intend to leverage our existing database of over 1.75 million email addresses currently subscribed to our digital promotions to drive conversion and penetration early on. The program will center around experiential rewards and personalized use cases that reinforce our brand, with the goal of increasing visit frequency and basket size for all guests. Through a points accumulation system, our top guests will enjoy the benefit of targeted savings for their loyalty and continued support of The Fresh Market. Our goal would be to reinvest the EBITDA impact of the resulting sales uplift back into the program so that it is a self-sustaining initiative.
Our loyalty program is designed to replicate the signature TFM discovery and joy of shopping experience by educating, surprising, delighting and rewarding guests who join the loyalty program including: (i) special loyalty pricing and personalized offers, (ii) promotions and giveaways, (iii) curated clubs and rewards, (iv) social giving and (v) earning special personalized experiences with our distinguished roster of curators and taste makers. Extensive consumer acceptance testing of the loyalty program prototype completed in fiscal 2020 indicated that our loyalty program member guests would visit more often, spend more on each visit, purchase more items per visit and would shift more of their visits to TFM from other competitors where they shop. Importantly, these guests stated that the program enhanced their perception of the TFM brand, our value and our commitment to our guests and communities and that they are eagerly awaiting the launch of our first ever loyalty program. In addition, the loyalty program will deliver a previously unavailable, robust level of guest purchase behavior data that will inform future merchandising, marketing and operating strategies.
We are in the process of redesigning our eCommerce sales portal, a project that began in the second half of fiscal 2020. We believe this program and improvements to our curbside pickup experience with our Personal Shopper store team members handpicking products has significantly increased our eCommerce sales. We believe curbside pickup will be the driver of growth within our digital business, where we can differentiate the experience through our expertise in high-touch guest service. Our continued efforts in our omni-channel capabilities have increased penetration from an average of 5.6% in fiscal 2020 to 6.9% in the week ended January 31, 2021.
Sourcing and Distribution
We source our products from over 1,000 vendors and suppliers. Our in-house merchants source only those products that meet our high specifications for quality, and we maintain strict control over which products are sold in our stores.
Distribution is outsourced to third-party logistics providers as we do not own warehouses, distribution facilities, or transportation equipment or the inventory in our distribution network. This allows us to maintain a competitive, asset-light cost structure. We have certain direct-to-store vendors that distribute to multiple stores. In other cases, we have individual store-managed relationships with local vendors. Our distribution and logistics arrangements allow us to focus on our core competencies of providing customers with a differentiated product assortment and an exceptional shopping experience.
Since early fiscal 2017, we have relied on one third-party service provider, SuperValu, Inc., to provide key services related to inventory management, warehousing and transportation for all of our stores. During fiscal 2018, SuperValu was acquired by United Natural Foods, Inc. (UNFI), who was our second largest sourcing and distribution provider. Products sourced and distributed through the combination of SuperValu and UNFI accounted for almost two-thirds of the merchandise the Company purchased in fiscal 2019. See Risk Factors We are substantially dependent on a few key third-party vendors to provide logistical services for our stores, including services related to inventory replenishment and the storage and transportation of many of our products. Any delays or disruptions in the purchase, storage, transportation or delivery of inventory, or in our ability to procure products, may have a negative effect on our business, results of operations, and financial condition.
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Marketing and Advertising
We believe that the distinct and superior food shopping experience we offer our customers, along with our careful curation of premium products, has been a major driver of our brand identity and historical comparable store sales growth. Historically, our marketing efforts have been focused on in-store customer communications, such as promotional signage, sampling, and seasonal events. We have expanded our marketing efforts to also include more external messaging, so that our suite of communication vehicles now encompasses a wider array of media and messaging options. Our in-store signage communicates our brand/product differentiation, as well as the attributes our customers are seeking. Digitally, we communicate with our customers through social media channels, our website, digital advertising, and email communications that allow us to personalize our communications to be more relevant for each customer. We also build relationships in our communities through public relations, local marketing efforts, and charitable giving. Because we have historically relied less on traditional advertising methods to drive traffic, we see a continued opportunity to enhance our efforts into more direct marketing and customer loyalty activities.
In the case of new or remodeled stores, we employ a full suite of owned, direct, and mass media vehicles to deliver relevant content about our stores to area residents. To understand our customers preferences and satisfaction, we collect customer feedback through a dedicated customer care team, monitoring and responding to social media dialogue, and frequent customer satisfaction studies, including a receipt-based customer satisfaction survey in which we analyze a significant number of responses each year.
Intellectual Property
We believe that our intellectual property has substantially contributed to the success of our business. In particular, our trademarks, including our registered The Fresh Market and TFM trademarks, are valuable assets that reinforce our customers favorable perception of our stores. In addition to our trademarks, we believe that our trade dress, which includes the design, arrangement, color scheme, and other physical characteristics of our stores and product displays, is a large part of the neighborhood grocer atmosphere we create in our stores and enables customers to distinguish our stores and products from those of our competitors.
From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we believe, have infringed or misappropriated our intellectual property rights. Third parties have also, from time to time, opposed our trademarks and challenged our intellectual property rights. We respond to these actions on a case-by-case basis.
Regulatory
Our stores are subject to various local, state, federal, and international laws, regulations, and administrative practices affecting our business. We must comply with provisions regulating health and sanitation standards, food handling and labeling, weights and measures, non-discrimination, wages and hours, safety, data privacy, licensing for the sale of food, licensing for beer and wine or other alcoholic beverages, and many other regulations and ordinances. The manufacturing, processing, formulating, packaging, labeling, and advertising of products are subject to regulation by various federal agencies, including the Food and Drug Administration, the Federal Trade Commission, the Department of Agriculture, the Consumer Product Safety Commission and the Environmental Protection Agency, as well as various state and local agencies.
Insurance
We use a combination of insurance and self-insurance to provide for potential liability for workers compensation, automobile and general liability, product liability, directors and officers liability, employee health care benefits, and other risks, including casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.
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Team Members
As of January 31, 2021, we had approximately 10,500 team members, of which approximately 5,400 work full-time and approximately 5,100 work part-time, none of whom are subject to a collective bargaining agreement. We believe our employee relations are good.
Legal Proceedings
From time to time, we are involved in various legal proceedings in the normal course of business, including labor and employment, premises, personal injury, consumer product liability and general liability. See Note 15, Commitments and Contingencies in our Notes to the Consolidated Financial Statements, included elsewhere in this prospectus.
In addition, we are involved in pending litigation in connection with the Acquisition. In October 2016, a purported stockholder class action was filed in the Court of Chancery of the State of Delaware against the members of our board of directors at the time of the Acquisition as well as former (and now current at The Fresh Market, Inc.) board member Brett Berry alleging breach of fiduciary duties. In March 2019, the plaintiff amended its complaint to add claims against our former Chief Executive Officer and former general counsel for breach of fiduciary duty and claims against Apollo and its affiliates, among others, for aiding and abetting breach of fiduciary duty.
In January 2021, the parties agreed to engage in private mediation with the goal of resolving the litigation. On February 26, 2021, the parties submitted a notice to the Court of Chancery that they had reached a preliminary agreement to settle this matter for a gross settlement amount of $27.5 million and planned to submit definitive settlement papers shortly. We concurrently engaged in continuing negotiations with our insurers, resulting in agreements by which, in exchange for certain mutual releases, the insurers agreed to fund $12.35 million of the settlement pursuant to our directors & officers liability insurance. On March 24, 2021, the Court of Chancery approved the Stipulation of Settlement including the Proposed Scheduling Order with the final settlement hearing scheduled for July 7, 2021. Accordingly, the Company contributed the $15.1 million balance to the settlement on April 12, 2021.
COVID-19 Related Developments
In response to the COVID-19 pandemic, we took decisive action to ensure the safety of our guests and store team members. All of our stores have remained open throughout the pandemic as we provide essential services to our communities. Our focus has been on making sure that our team members and guests are protected in this challenging operating environment. In addition to our diligent existing sanitation programs, we have:
| Formed a special task force to manage through the pandemic and make decisions related to policies, communications, and operational changes that focus on safety as well as business continuity |
| Expanded our pre-existing, rigorous food safety and sanitation programs by increasing the frequency of deep cleaning in high-touch areas |
| Installed additional hand sanitation stations along with disinfectant wipe dispensers throughout the stores |
| Instituted strict guest policies around face coverings with special hours for seniors to get their essential items |
| Monitored maximum store occupancy to ensure social distancing guidelines are upheld |
| Completed rollout of curbside pickup to all 159 stores in response to increased demand for eCommerce capabilities |
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| Provided FDA approved masks for all store team members and adjusted paid leave policy to include quarantine pay for up to two weeks |
| Rewarded our hard-working store team members with additional bonuses totaling $1.3 million in April 2020 and a increase in their discount on store purchases |
| Implemented a $250,000 matching donation campaign for Feeding America in Spring 2020 in response to COVID-19 |
| Established toolkits, including sanitation and disinfection procedures, for managers to use during a confirmed or pending COVID-19 case, as well as daily Health and Wellness checks |
| Implemented protocols, including Plexiglas, signage, sanitizing carts, safety masks and equipment, to provide a safe and comfortable guest and employee environment |
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The following table sets forth the name, age and position of the executive officers of The Fresh Market Holdings, Inc. as of the date of this prospectus and the directors as of the completion of this offering. As of the date of this prospectus, The Fresh Market Holdings, Inc.s board of directors consists of Andrew Jhawar, Heather Berger and Ray Berry. Upon completion of this offering, Jason Potter, Betsy Atkins and Sue Gove, who are currently directors of our subsidiary The Fresh Market, Inc., will become members of our board as well. There are no family relationships among any of our directors or our executive officers. We plan to name one additional independent director concurrently with this offering to have a board of seven.
Name |
Age |
Position | ||
Jason Potter |
50 | President and Chief Executive Officer; Director | ||
Jim Heaney |
57 | Senior Vice President and Chief Financial Officer | ||
Brian Johnson |
52 |
Senior Vice President, Store Operations | ||
Carlos Clark |
47 | Senior Vice President, General Counsel and Corporate Secretary | ||
Chris Himebauch |
53 | Senior Vice President, Chief Human Resources Officer | ||
Kevin Miller |
63 | Senior Vice President, Chief Marketing Officer | ||
Dan Portnoy |
64 |
Senior Vice President, Chief Merchandising Officer | ||
Andrew Jhawar |
49 |
Chairman of the Board | ||
Betsy Atkins |
67 | Director | ||
Heather Berger |
44 |
Director | ||
Ray Berry |
80 | Director | ||
Sue Gove |
62 | Director |
Executive Officers
Jason Potter. Mr. Potter has served as our President and Chief Executive Officer and a member of The Fresh Market board of directors since March 2020. Mr. Potter has over 30 years of experience in the grocery industry, having spent many years of his career at Sobeys Inc., one of the largest food retailers in North America and a leader in perishables. During his 26-year tenure at Sobeys, Mr. Potter served in successively senior executive positions. Most recently, he served as Executive Vice President of Operations from November 1992 to June 2018, having previously served as President Sobeys West, Sobeys Atlantic and President of Multi-Format Operations. As Executive Vice President of Operations, Mr. Potter had full leadership and P&L responsibility for the approximately 800 Full Service and Community stores under the Sobeys, Safeway, Foodland, and Thrifty banners. He earned his B.M.S. and M.B.A. at Athabasca University and completed the Advanced Management Program at Harvard University. Mr. Potter was named to Canadas Top 40 Under 40 for Leadership. He also served as Chairman of the Board for GIFT Atlantic Canada and was a board member of the Coca-Cola Research Council.
Jim Heaney. Mr. Heaney has served as our Senior Vice President and Chief Financial Officer since September 2020. Mr. Heaney has over 30 years of experience in finance leadership roles at some of the most recognizable companies in the world, including Disney Cruise Line, Sea World Entertainment, Inc. and Carnival Cruise Line. Prior to joining The Fresh Market, Mr. Heaney served as Chief Financial Officer for Carnival Cruise Line, the worlds largest cruise operator from June 2015 to September 2020. Prior to his time at Carnival Cruise Line, Mr. Heaney spent three years as Chief Financial Officer for Sea World Entertainment, where he oversaw the companys financial organization. From 1994 to 2011, Mr. Heaney held various positions at Walt Disney, where he played a key leadership role in launching and growing Disneys cruise business. He earned his B.S. in Business Administration at Texas Tech University as well as a M.B.A. from the University of Florida.
Brian Johnson. Mr. Johnson has served as our Senior Vice President, Store Operations since July 2020. Mr. Johnson has approximately 30 years of experience in operations, moving up in retail leadership at Brookshire Grocery Company, a Tyler, Texas-based supermarket chain with more than 180 stores operating in Texas, Louisiana, and Arkansas under four banners: Brookshires, Super 1 Foods, Fresh by Brookshires, and Spring Market. He most recently served as Senior Vice President, Retail Operations of Brookshires from April 2014 until July 2020, where he led more than 8,000 employee partners in 107 retail locations with seven Vice
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President, District Manager direct reports. Mr. Johnson graduated with honors from Baylor University with a degree in Management. He also holds a Masters in Business Administration from the University of Texas at Tyler and completed the Cornell Food Executive Program in 2015.
Carlos Clark. Mr. Clark has served as our Senior Vice President, General Counsel and Corporate Secretary since December 2020. Mr. Clark has significant experience from the hospitality industry. Before joining the Company, Mr. Clark was at Wyndham Destinations, the worlds largest vacation ownership and exchange company, where he served as vice president of corporate and securities and as assistant corporate secretary. Before joining Wyndham, Clark served as associate general counsel and assistant corporate secretary at SeaWorld Entertainment, a leading theme park and entertainment company, where he helped the company navigate multiple transactions and investor relations issues, as well as handled corporate governance and reporting responsibilities. He also brings previous experience as a corporate and securities attorney for several firms in Boston, including Goodwin Procter LLP and Goulston & Storrs. Mr. Clark graduated with a Bachelor of Arts in Sociology from the College of the Holy Cross and with a J.D. from Columbus School of Law at the Catholic University of America.
Chris Himebauch. Mr. Himebauch has served as our Senior Vice President, Chief Human Resources Officer since November 2018. Before joining the Fresh Market, from September 2016 to November 2018, Mr. Himebauch served as Chief Human Resources officer at Jacksonville, Florida based Stein Mart Inc., an apparel and other retail business, and before that, he was Chief Human Resources of APR Energy PLC, an international energy and power generation business, from January 2012 to July 2016. Mr. Himebauch holds a Bachelor of Arts in Education from the University of North Carolina-Chapel Hill, as well as an MBA from the University of Southern California.
Kevin Miller. Mr. Miller has served as our Senior Vice President, Chief Marketing Officer since May 2020. Mr. Miller has significant experience leading marketing and advertising organizations for Fortune 100 companies. Most recently, Mr. Miller served from January 2016 to April 2020 as the Vice President, Chief Marketing Officer for Natural Grocers, a natural and organic retail grocery chain based in Colorado, that has a similar footprint to the Company with 157 stores in 20 states. During his tenure there, Mr. Miller led transformational change across marketing, company culture and digital innovation, and significantly grew the companys loyalty program. Mr. Miller graduated from the United States Military Academy at West Point with a Bachelor of Science in Engineering and later obtained an Executive Education - Digital Marketing Certification from Harvard Business School.
Dan Portnoy. Mr. Portnoy has served as our Senior Vice President, Chief Merchandising Officer since October 2019. Mr. Portnoy has more than 35 years of experience in food retail merchandising and marketing. Mr. Portnoy is a former Winn-Dixie and Kings Food Markets executive. He served as Chief Merchandising and Marketing Officer at Winn-Dixie Stores from 2007 to 2011 and as President and CEO of Kings Food Markets/Balduccis Markets from 1998 to 2006. Before that, Portnoy was Senior Vice President of Global Sales, Marketing and New Business Development at beverage company Cott Corp. from 1995 to 1998 and Group Vice President at brand development firm Daymon Worldwide from 1990 to 1995. Mr. Portnoy earned his Bachelor of Science in Finance & Statistics from Babson College, as well as an MBA in Marketing and Consumer Research from Baruch College.
Directors
Jason Potter. For Mr. Potters biography, please see Executive OfficersJason Potter above.
Andrew Jhawar. Mr. Jhawar has served as our Chairman and a member of our board of directors since April 2016. Mr. Jhawar is a Senior Partner and Head of the Consumer & Retail Industry team in the private equity business of Apollo Management, L.P., having joined the firm in February 2000. Prior to joining Apollo, Mr. Jhawar was an investment banker for five years with Donaldson, Lufkin & Jenrette Securities Corporation and, prior to that, Jefferies & Company, where he focused primarily on the structuring, execution and negotiation
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of high yield debt and equity financing transactions. Mr. Jhawar currently sits on and has previously sat on a number of private and public company boards. He currently also serves as Chairman of the Board of Smart & Final (from June 2019-current), an operator of 254 non-membership wholesale club locations on the west coast; The Stand, LLC (from August 2015-current), a growing fast casual Southern California restaurant company; and QDOBA Restaurant Corporation (from December 2018-current), the second largest fast casual Mexican cuisine restaurant operator with over 700 company-owned, franchised and licensed locations. He also previously served as a member of the Board of Directors of Hostess Brands, Inc. (from April 2013-June 2017), which is a leading fresh baked sweet goods company in the U.S., with iconic brands including Twinkies, Ding Dongs, HoHos and Cup Cakes; Chairman of the Board and a member of the Board of Sprouts Farmers Market (from April 2011-February 2016), a leading high-growth specialty grocery retailer of natural and organic foods; Board member at Smart Foodservice Stores (from June 2019-April 2020), an operator of 70 store locations catering primarily to business and foodservice customers; Chairman of the Board at CEC Entertainment (from December 2018-December 2020), a leading entertainment company; Board member at Smart & Final (from May 2007-December 2012); Board member at General Nutrition Centers (from December 2003-March 2007), the leading specialty retailer of nutritional supplements; and a Board member at Rent-A-Center (from October 2001-June 2005), a leading national rent-to-own retailer. Mr. Jhawar graduated with an M.B.A. from Harvard Business School and graduated, summa cum laude, with a B.S. in Economics from the Wharton School of the University of Pennsylvania. We believe Mr. Jhawars extensive knowledge and understanding of the retail industry and our company, which allows him to provide invaluable insight and advice concerning our business and financial strategies, and his exceptional background in developing and implementing strategic growth models that will enhance the development of our growth and expansion strategies, make him well qualified to serve as a member of our board of directors.
Betsy Atkins. Ms. Atkins has served as a member of The Fresh Market board of directors since January 2021 and will become a director of the Company concurrent with the offering. Ms. Atkins is a three-time CEO, serial entrepreneur, and founder of Baja Corporation. She is currently the CEO of Baja Corporation and has served in such capacity since 1991. She has co-founded enterprise software companies in multiple industries including energy, healthcare and networking. She is an expert at scaling companies through hyper growth and leading them to successful initial public offerings and acquisitions. Previously, Ms. Atkins was the CEO of NCI, a food manufacturer creating Nutraceutical and Functional Food products. Ms. Atkins was also the CEO of Clear Standards, an ESG SW Co. which developed enterprise level software for monitoring energy management and carbon emissions. Ms. Atkins currently serves on two public company boards, Wynn Resorts and SL Green Realty. She is a graduate of the University of Massachusetts, Amherst. We believe Ms. Atkins experience as a CEO and entrepreneur, as well as her service on other public company boards of directors, make her well qualified to serve as a member of our board of directors.
Heather Berger. Ms. Berger has served as a member of our board of directors since December 2020. She is currently a partner of Apollo where she oversees marketing, client relations and business development for the firms Private Equity business. Ms. Berger has over 19 years of marketing experience in the alternative asset industry. Prior to joining Apollo in 2008, Ms. Berger was a member of the Private Fund Group at Credit Suisse Securities (USA), where she was responsible for raising institutional capital for private equity funds. Previously, Ms. Berger was with Capital Z Financial Service Partners, and its affiliate, where she focused on fundraising and investor relationship management. Ms. Berger graduated cum laude from Duke University in 1999 with a B.A. in Comparative Area Studies and French. She currently serves on the Alumni Board of Directors of The Spence School in New York. We believe Ms. Bergers extensive marketing experience qualifies her to serve as a member of our board of directors.
Ray Berry. Mr. Berry has served as a member of our board of directors since 1981. As our founder, he served as Chairman of the Board from 1981 until April 2016, and served as our President and Chief Executive Officer from 1981 to 2007, and has served as Vice Chairman of the Board since April 2016. Prior to founding The Fresh Market, Mr. Berry held positions at numerous grocery and retail companies, including Vice President of Stores at The Southland Corporation (former parent of 7-Eleven, Inc.) where he was responsible for the operations of nearly 4,000 7-Eleven stores from 1963 to 1980. Mr. Berry received a B.A. in Psychology from San
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Diego State University and also completed the Stanford Executive Program at the Stanford Graduate School of Business. We believe Mr. Berrys long affiliation with the Company and extensive experience in the grocery and retail industries make him well qualified to serve as a member of our board of directors.
Sue Gove. Ms. Gove has served as a member of The Fresh Market board of directors since December 2020, and will become a director of the Company concurrent with the offering. Ms. Gove is currently President of Excelsior Advisors, LLC and served as a Senior Advisor to Alvarez & Marsal from March 2017 to March 2019. Prior to founding Excelsior Advisors in August 2014, she held numerous positions at Golfsmith International Holdings, Inc., including as President and Chief Executive Officer from 2012 to April 2014. She has held senior level positions with various national retailers and consulting firms in the retail sector and currently serves on the board of directors of each Bed Bath & Beyond Inc., IAA, Inc. and Conns, Inc. Ms. Gove obtained her B.B.A. in Accounting from the University of Texas, Austin. We believe Ms. Goves experience working with national retailers and her accounting background make her well qualified to serve as a member of our board of directors.
Controlled Company Exemption
We intend to apply to list the shares of our common stock offered in this offering on .
As the Apollo Funds will continue to control a majority of our combined voting power upon the completion of this offering, we will be considered a controlled company within the meaning of corporate governance standards. Under rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance standards, including the requirements that:
| that a majority of our board of directors consist of independent directors as defined under the rules of ; and |
| that and corporate governance and nominating committee or compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities. |
For at least some period following this offering, we intend to rely on these exemptions. Although we may voluntarily elect not to rely upon one or more of these exemptions prior to the time we cease to be a controlled company, we will not be required to do so. Accordingly, until we cease to be a controlled company, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. If we cease to be a controlled company and our shares of common stock continue to be listed on , we will be required to comply with these provisions within the applicable transition periods.
Director Independence
Our board of directors has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that directors ability to exercise independent judgment in carrying out that directors responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that neither of Ms. Gove or Ms. Atkins, comprising two of our six directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is independent as that term is defined under rules. In making these determinations, our board of directors considered the current and prior relationships that each director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including their beneficial ownership of our capital stock and relationships with certain of our significant stockholders, and the transactions involving them described in the section titled Certain Relationships and Related Party Transactions.
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We intend to apply to list our common stock on . In accordance with the transaction rules of , we will appoint one or more additional independent director(s) following the completion of this offering.
Board Composition
Our board of directors will consist of seven members upon completion of this offering. Each director is to hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. The authorized number of each class of directors may be increased or decreased by the stockholders in accordance with our bylaws. At any meeting of the board of directors, except as otherwise required by law, a majority of the total number of directors then in office will constitute a quorum for all purposes.
At each annual meeting, our stockholders elect the successors to our directors. Our executive officers and key team members serve at the discretion of our board of directors. Any director may be removed from office for cause by the affirmative vote of a majority of our stockholders. Vacancies in our board of directors will be filled by the vote of a majority of the remaining directors.
Our amended and restated certificate of incorporation will provide that the board of directors will be divided into three classes of directors, with staggered three-year terms, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of the board of directors will be elected each year. Our board of directors will be designated as follows:
| The Class I directors will be Ms. Gove and Ms. Berger and their terms will expire at the annual meeting of stockholders to be held in 2022. |
| The Class II directors will be Mr. Potter and Ms. Atkins and one additional director to be appointed, and their terms will expire at the annual meeting of stockholders to be held in 2023. |
| The Class III directors will be Mr. Jhawar and Mr. Berry, and their terms will expire at the annual meeting of stockholders to be held in 2024. |
The classification of directors has the effect of making it more difficult for stockholders to change the composition of the board of directors and may have the effect of delaying or preventing changes in control of our company. See Description of Capital StockCertain Anti-Takeover, Limited Liability and Indemnification Provisions.
Committees of our Board of Directors
Our board of directors directs the management of our business and affairs and conducts its business through meetings of the board of directors and its standing committees. Upon completion of this offering, our board of directors will have a standing audit committee, compensation committee and nominating and corporate governance committee. In addition, from time to time, special committees may be established under the direction of the board of directors when necessary to address specific issues.
Each of the audit committee, the compensation committee and the nominating and corporate governance committee will operate under a written charter that will be approved by our board of directors in connection with this offering. A copy of each of the audit committee, compensation committee and nominating and corporate governance committee charters will be available on our corporate website at www.thefreshmarket.com substantially concurrently with the closing of this offering. The information on, or that can be accessed through, our website is not incorporated by reference into this prospectus and does not form a part of this prospectus.
Audit Committee
Our audit committee will assist our board of directors in monitoring the audit of our consolidated financial statements, our independent registered public accounting firms qualifications and independence, the
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performance of our audit function and independent auditors and our compliance with legal and regulatory requirements. The audit committee will have direct responsibility for the appointment, compensation, retention (including termination) and oversight of our independent auditors, and our independent auditors report directly to the audit committee. The audit committee will also review and approve related party transactions as required by the applicable rules.
Upon completion of this offering, our audit committee will consist of Ms. Atkins, Ms. Gove and , with Ms. Gove serving as chair. At least one member of the audit committee will qualify as an audit committee financial expert as such term is defined in Item 407(d)(5) of Regulation S-K. The audit committee will include directors who are independent for purposes of Rule 10A-3 of the Securities Exchange Act of 1934 and under the listing standards of .
Compensation Committee
Following the completion of this offering, our compensation committee will be responsible for reviewing and recommending policies relating to the compensation and benefits of our directors and team members, including our Chief Executive Officer and other executive officers.
Because we will be a controlled company under the rules of , our compensation committee is not required to be comprised entirely of independent directors, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules, we will adjust the composition of the compensation committee accordingly in order to comply with such rules. The compensation committee will have the sole authority to retain and terminate any compensation consultant to assist in the evaluation of employee compensation and to approve the consultants fees and the other terms and conditions of the consultants retention. Upon completion of this offering, our compensation committee will consist Ms. Atkins, Ms. Gove and , with Ms. Atkins serving as chair.
Nominating and Corporate Governance Committee
Following the completion of this offering, our nominating and corporate governance committee will be responsible for selecting or recommending that our board of directors select candidates for election to our board of directors, developing and recommending to the board of directors corporate governance guidelines that are applicable to us and overseeing board of director and management evaluations.
Because we will be a controlled company under rules, our nominating and corporate governance committee is not required to be comprised entirely of independent directors, although if such rules change in the future or we no longer meet the definition of a controlled company under the current rules, we will adjust the composition of our nominating and corporate governance committee accordingly in order to comply with such rules. Upon completion of this offering, our nominating and corporate governance committee will consist Ms. Atkins, Ms. Gove and , with Ms. Atkins serving as chair.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is, or has ever been, an officer or employee of our company.
Code of Business Conduct and Ethics
Upon consummation of this offering, our board of directors will adopt a code of business conduct and ethics that will apply to all of our directors, officers and team members (including our principal executive officer,
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principal financial officer, principal accounting officer or controller, or persons performing similar functions), which will become effective upon the effectiveness of the registration statement of which this prospectus forms a part and is intended to comply with the relevant listing requirements for a code of conduct as well as qualify as a code of ethics as defined by the rules of the SEC. The statement will contain general guidelines for conducting our business consistent with the highest standards of business ethics. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, and our directors, on our website at www.thefreshmarket.com. Following the consummation of this offering, the code of business conduct and ethics will be available on our website. The information on our website is not incorporated by reference in this prospectus and does not form a part of this prospectus.
Board Leadership Structure and Boards Role in Risk Oversight
The board of directors has an active oversight role, as a whole and also at the committee level, in overseeing management of our risks. The board of directors regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The compensation committee of the board of directors is responsible for overseeing the management of risks relating to its employee compensation plans and arrangements and the audit committee of the board of directors oversees the management of financial risks. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is regularly informed through committee reports about such risks, as well as the actions taken by management to adequately address those risks.
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or CD&A, provides an overview of our executive compensation philosophy, objectives, and design and each element of our executive compensation program with regard to the compensation awarded, to, earned by, or paid to our named executive officers (our NEOs), during Fiscal 2020. For Fiscal 2020, our NEOs were:
Name |
Title | |
Jason Potter |
President and Chief Executive Officer(1) | |
James Heaney |
Chief Financial Officer(2) | |
Kevin Miller |
Chief Marketing Officer(3) | |
Brian Johnson |
Senior Vice President, Store Operations(4) | |
Carlos Clark |
Senior Vice President, General Counsel(5) | |
Larry Appel |
Former Chief Executive Officer(6) | |
Oded Shien |
Former Chief Financial Officer(7) |
(1) | Mr. Potter has served as our Chief Executive Officer since March 1, 2020. |
(2) | Mr. Heaney has served as our Chief Financial Officer since September 3, 2020. |
(3) | Mr. Miller joined the Company on May 12, 2020. |
(4) | Mr. Johnson joined the Company on July 20, 2020. |
(5) | Mr. Clark joined the Company on December 7, 2020. |
(6) | Mr. Appel served as our Chief Executive Officer until March 1, 2020. |
(7) | Mr. Shien served as our Chief Financial Officer until September 2, 2020. |
Fiscal 2020 Senior Executive Hires
During Fiscal 2020, we welcomed Jason Potter (whose employment with us started on March 1, 2020) as our new President and Chief Executive Officer, James Heaney (whose employment with us started on September 3, 2020) as our new Chief Financial Officer, Kevin Miller (whose employment with us started on May 12, 2020) as our Chief Marketing Officer, Brian Johnson (whose employment with us started on July 20, 2020) as our Senior Vice President, Store Operations, and Carlos Clark (whose employment with us started on December 7, 2020) as our Senior Vice President, General Counsel (collectively, the Current NEOs). We view the hiring of each of the Current NEOs as an instrumental part of our Fiscal 2020 business plan. In recruiting the Current NEOs, our board of directors were guided by the same overall executive compensation philosophy as described below and negotiated the level of their compensation and the terms of their executive compensation arrangements, which include employment agreements and severance arrangements, taking into account market compensation level determined based on the experience of members of our board of directors, internal pay equity considerations, and the circumstances of our executives hirings, including their prior roles and compensation in those roles. The employment agreements, stock option agreements, and the Companys severance plan are filed as exhibits to this registration statement.
Principal Objectives of Our Compensation Program for Named Executive Officers
Our executive team is critical to our success and to building value for our stockholders. The principal objectives of our executive compensation program are to:
| attract and retain highly talented executives to serve in leadership positions and advance our long-term growth strategy; |
| motivate such executives to succeed by providing compensation that is based on both short- and long-term performance; |
| reward our executives appropriately over time for performance that increases stockholder value; and |
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| align the interests of our officers with those of our stockholders by delivering a substantial portion of the officers compensation through incentives that drive long-term enterprise value. |
Our executive compensation program is designed to reinforce a sense of ownership in the Company. The program links rewards to overall performance.
Process for Setting Executive Compensation
Role of our Board of Directors and Management in Compensation Decisions
As described below, the primary elements of our executive compensation program are annual base salary, annual bonus awards paid under our annual incentive compensation plan (the AIP), long-term equity incentives through the granting of stock options, and retirement and termination benefits. Together, these items are intended to be complementary and serve the goals described above.
Our executive compensation program was developed and overseen by our board of directors. In making decisions regarding the type and amount of 2020 compensation, allocation of compensation between short-term and long-term compensation, between cash and non-cash compensation, or among different forms of cash and non-cash compensation, as well as severance and change in control benefits, our board of directors has relied on its own business experience and familiarity with market conditions.
Use of Compensation Consultants
In preparation for this offering, the Company engaged Mercer as its independent compensation consultant in early 2021 to provide compensation consulting services going forward. It is expected that Mercer will provide services including a review and analysis of our executive compensation levels and practices, remuneration of members of our board of directors, executive officer and non-employee director ownership guidelines, peer group compensation, and long-term incentive plan design and grant practices.
Elements of Compensation
The main components of our executive compensation during Fiscal 2020 included base salary, an annual cash incentive payable under our AIP, stock option grants, and other benefits and perquisites.
Base Salary
We pay our NEOs a base salary to provide them with a fixed, base level of compensation commensurate with the executives skill, competencies, experience, contributions, and performance, as well as general review of market compensation. Base salaries are reviewed periodically, and our board of directors makes adjustments to reflect individual and Company performance.
The chart below provides the base salary for each of our NEOs as of the end of Fiscal 2019 or their date of hire, and the end of Fiscal 2020, as applicable.
Name |
Base Salary as of 1/27/2020 or Date of Hire |
Base Salary as of 1/31/2021 |
||||||
Jason Potter(1) |
$ | 750,000 | $ | 750,000 | ||||
James Heaney(2) |
$ | 500,000 | $ | 500,000 | ||||
Kevin Miller(3) |
$ | 330,000 | $ | 370,000 | ||||
Brian Johnson(4) |
$ | 375,000 | $ | 375,000 | ||||
Carlos Clark(5) |
$ | 340,000 | $ | 340,000 | ||||
Larry Appel |
$ | 750,000 | n/a | |||||
Oded Shein |
$ | 475,000 | n/a |
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(1) | Mr. Potters date of hire was March 1, 2020. |
(2) | Mr. Heaneys date of hire was September 3, 2020. |
(3) | Mr. Millers date of hire was May 12, 2020. The Board determined to increase Mr. Millers base salary by $10,000 effective November 16, 2020 and then again by $30,000 effective January 27, 2021. The salary increases were merit-based in recognition of his contributions to the Company. |
(4) | Mr. Johnsons date of hire was July 20, 2020. |
(5) | Mr. Clarks date of hire was December 7, 2020. |
Annual Cash Incentive Program
Fiscal 2020 AIPTarget Amounts and Goal Setting
Except for Mr. Clark, each of our NEOs participated in our AIP during Fiscal 2020 and was eligible for a target annual cash bonus that is equal to a percentage of his base salary, as set forth in the applicable NEOs employment agreement. For Fiscal 2020, the target annual bonus for each of our NEOs was as follows (with such amounts pro-rated for the Current NEOs who joined after the beginning of Fiscal 2020, other than Mr. Johnson):
Name |
Target AIP Amount (% of Base Salary) |
|||
Jason Potter |
100 | % | ||
James Heaney |
75 | % | ||
Kevin Miller |
50 | % | ||
Brian Johnson |
50 | % | ||
Carlos Clark(1) |
50 | % | ||
Larry Appel |
100 | % | ||
Oded Shein |
75 | % |
(1) | Mr. Clark was not eligible for the Fiscal 2020 AIP as his date of hire (December 7, 2020) was after the cutoff date for eligibility, November 1, 2020. |
For Fiscal 2020, our board of directors established performance goals under our AIP of Adjusted EBITDA Before Bonus (Adjusted EBB) and Comparable Sales Growth, which were equally-weighted. Each of the Fiscal 2020 AIP metrics is described below.
Financial Metric |
Description | |
Adjusted EBB | Adjusted EBB is a non-GAAP financial measure used by management to assess operating performance and to measure the Companys ability to generate profitable sales and cash. To calculate EBB, we deduct all anticipated and actual corporate bonus payments from Adjusted EBITDA. EBITDA is defined as net income plus interest expense, loss on extinguishment of debt, income taxes, and depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude unusual items and other adjustments required or permitted in calculating covenant compliance under the Companys senior secured notes indenture (as described in Managements Discussion and Analysis of Financial Condition and Results of Operations). | |
Comparable Sales Growth | Comparable Sales Growth measures sales growth in all stores open in both Fiscal 2020 and Fiscal 2019. Our practice is to include sales from a store in comparable store sales beginning on the first day of the sixteenth full month following the stores opening. We believe that comparability is achieved approximately 15 months after opening. When a store that is included in comparable store sales is remodeled or relocated, we continue to consider sales from that store to be comparable store sales. Generally, a store is removed from comparable store sales in the period it is closed. There may be variations in the way that our competitors calculate comparable or same store sales. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Our board of directors selected Adjusted EBB and Comparable Sales Growth as the AIP targets for Fiscal 2020 as each measure was viewed as supportive of the Companys growth imperatives and long-term equityholder value appreciation. Additionally, the board of directors decided to use Adjusted EBB, and not EBITDA, in order to more easily establish threshold through target payout metrics.
The AIP is structured such that in order for any AIP award to be paid out, the Adjusted EBB threshold amount must be met, regardless of Comparable Sales Growth achieved for the year. The following table shows the Adjusted EBB performance goals for Fiscal 2020.
Performance Metric |
Threshold | 50% Target | 100% Target | |||||||||
EBB (50% of total AIP) |
$ | 134.6M | $ | 138.5M | $ | 148.2M |
Achievement of the Comparable Sales Growth portion of the award is determined on an all-or-nothing basis (i.e., either the goal is met, in which 100% of the bonus portion based on Comparable Sales Growth is earned, or it is not, in which case 0% of such bonus portion is earned). The following table shows the Comparable Sales Growth target for Fiscal 2020.
Performance Metric |
Target | |||
Comparable Sales Growth (50% of total AIP) |
2.0 | % |
Fiscal 2020 AIPResults and Payout
In February 2021, the board of directors certified the following performance results for Fiscal 2020.
Performance Metric |
Actual Fiscal 2020 Performance |
Percentage Achieved |
||||||
Adjusted EBB |
$ | 227.5 | 100 | % | ||||
Comparable Sales Growth |
22.3% | 100 | % |
Based on the above results, each NEO received 100% of his target AIP amount. The table below sets forth the annual cash incentive award paid to each NEO for Fiscal 2020 under the AIP. These amounts are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. As described above, payments under the 2020 AIP were pro-rated for all of the Current NEOs, based on their date of hire and actual wages paid during Fiscal 2020, other than for Mr. Johnson, whose bonus target and payout were not prorated under the terms of his employment agreement.
Name(1) |
Annual Cash Incentive Award for 2020 |
|||
Jason Potter |
$ | 692,308 | ||
James Heaney |
$ | 154,327 | ||
Kevin Miller |
$ | 121,673 | ||
Brian Johnson |
$ | 187,500 | ||
Carlos Clark(2) |
|
(1) | Messrs. Appel and Shein were not eligible for, and did not receive, AIP payments for Fiscal 2020. |
(2) | Mr. Clark was not eligible for the Fiscal 2020 AIP as his date of hire (December 7, 2020) was after the cutoff date for eligibility, November 1, 2020. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Sign-On Bonuses During Fiscal 2020
All of our Current NEOs received sign-on bonuses in connection with their hiring. These amounts are reflected in the Bonus column of the Summary Compensation Table. Bonus amounts were determined by our board of directors in their sole discretion, based upon the NEOs position.
Name |
Sign-On Bonus | |||
Jason Potter |
$ | 100,000 | ||
James Heaney |
$ | 150,000 | ||
Kevin Miller |
$ | 10,000 | ||
Brian Johnson |
$ | 50,000 | ||
Carlos Clark |
$ | 50,000 |
Long-Term Equity Incentive Compensation
Prior this this offering, NEOs were eligible to receive long-term incentive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (the Option Plan). As a privately-held company, we have used stock options as the principal component of our executive compensation program. Consistent with our compensation objectives, we believe this approach aligned our NEOs contributions with our long-term interests and allowed our NEOs to be accountable for and participate in any future appreciation in our common stock.
Awards granted under the Option Plan were made by the board of directors in its sole discretion. In granting equity awards, our board of directors generally considers, among other things, the NEOs cash compensation, the need to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value, our financial results, our total annual equity budget, an evaluation of the expected and actual performance of each NEO, his individual contributions and responsibilities, the retention hold of his existing equity awards and how that lapses over time as awards vest, and the recommendations of our CEO (except with respect to his own equity award).
Fiscal 2020 Long-Term Equity Incentive Compensation Actions
During Fiscal 2020, the board of directors granted the following stock options to the Current NEOs, in each case in connection with the respective NEOs commencement of employment with the Company.
Named Executive Officer(1) |
Stock Options (# of shares) |
Stock Options (grant date fair value) |
||||||
Jason Potter |
$ | 1,788,827 | ||||||
James Heaney |
$ | 1,000,040 | ||||||
Kevin Miller |
$ | 513,690 | ||||||
Brian Johnson |
$ | 513,690 | ||||||
Carlos Clark |
$ | 1,086,900 |
(1) | Neither Mr. Appel or Mr. Shein received stock option grants during Fiscal 2020. In connection with their termination of employment with the Company during Fiscal 2020, Messrs. Appel and Shein forfeited all of their stock options. |
Stock Option Vesting Provisions
Stock options held by our Current NEOs, other than Mr. Potter, generally vest upon the earlier of (i) a Change in Control (as defined in the Option Plan) or (ii) any Investor Sale, immediately following which the Investor Percentage falls below 50%, provided that the NEO remains employed through the date of such transaction. If, immediately following any Investor Sale, the Investor Percentage falls below 30%, then all shares underlying the stock options will vest.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
For purposes of the stock option award agreements:
| Investor Sale means of sale of shares by an Apollo Investor in connection with or following a Qualified Public Offering. |
| Investor Percentage means the percentage derived by dividing (i) the number of shares held by all Apollo Investors immediately following the applicable Investor Sale by (ii) the number of shares held by all Apollo Investors as of the date the stock option was granted (subject to adjustment). |
| Qualified Public Offering means an underwritten public offering of shares by the Company or any selling securityholders pursuant to an effective registration statement filed by the Company with the Securities and Exchange Commission (other than (i) a registration relating solely to an employee benefit plan or employee stock plan, a dividend reinvestment plan, or a merger or a consolidation, (ii) a registration incidental to an issuance of securities under Rule 144A, (iii) a registration on Form S-4 or any successor form, or (iv) a registration on Form S-8 or any successor form) under the Securities Act of 1933, as amended, pursuant to which the aggregate offering price of the shares sold in such offering by the Company and/or other selling securityholders (together with the aggregate offering prices from any prior such offerings) is at least $300 million. |
Stock options held by Mr. Potter will vest upon the earlier of a Change in Control or initial underwritten public offering of the Companys shares.
Other Benefits and Perquisites
Health and Welfare Benefits
Our NEOs are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other full-time, salaried U.S. employees. These benefits include medical, dental, and vision insurance, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, and short-term and long-term disability insurance.
We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Retirement Benefits
We maintain a Section 401(k) plan for our employees, including our NEOs. The Section 401(k) plan is intended to qualify under Section 401(k) of the Code, so that contributions to the plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made. The Company matches contributions to the 401(k) plan for all employees, including the NEOs, at a rate of 50%, up to 6% of base salary. Please refer to footnote 4 to the Summary Compensation Table for more information.
We do not provide pension arrangements for our named executive officers or other employees, nor do we provide any nonqualified defined contribution or other deferred compensation plans to any of our employees.
Perquisites
We provide limited perquisites. In Fiscal 2020, Messrs. Heaney, Johnson, Miller, and Clark received relocation benefits. Please refer to footnote 4 to the Summary Compensation Table for more information.
Employment Arrangements
We have entered into written employment offer letters with each of our NEOs. We believe that these arrangements were necessary to secure the service of these individuals in a highly competitive job market. Each
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
of these employment offer letters does not have a specific term, provides for at will employment (meaning that either we or the NEO may terminate the employment relationship at any time without cause) and generally set forth the NEOs initial base salary, AIP bonus opportunity, eligibility to participate in the Option Plan, and eligibility to participate in our standard employee benefit plans and programs.
Employment Agreement with Mr. Potter
We entered into an employment agreement with Mr. Potter in connection with his commencement of employment as our President and Chief Executive Officer. Mr. Potters employment agreement provides him with (i) an annual base salary of $750,000, which base salary will be reviewed from time to time by our board of directors, (ii) a target bonus opportunity under the AIP equal to 100% of his annual base salary, (iii) an option grant to purchase shares of Company stock, (iv) a signing bonus of $100,000, (v) expenses associated with his relocation to Greensboro, North Carolina, and (vi) an entitlement to participate in our employee benefit plans and programs generally made available to senior executives of the Company. Mr. Potters employment agreement also entitles him to certain severance benefits. Please refer to -Potential Payments upon Termination or Change in Control below.
Employment Agreement with Mr. Heaney
We entered into an employment agreement with Mr. Heaney in connection with his commencement of employment as our Chief Financial Officer. Mr. Heaneys employment agreement provides him with (i) an annual base salary of $500,000, (ii) a target bonus opportunity under the AIP equal to 75% of his annual base salary, and (iii) an entitlement to participate in the Option Plan and in our employee benefit plans and programs generally made available to Company employees.
Employment Agreement with Mr. Miller
We entered into an employment agreement with Mr. Miller in connection with his commencement of employment as our Chief Marketing Officer. Mr. Millers employment agreement provides him with (i) an annual base salary of $330,000 (which was subsequently increased to $370,000), (ii) a target bonus equal to 50% of his annual base salary under the AIP, and (iii) an entitlement to participate in the Option Plan and in our employee benefit plans and programs generally made available to Company employees.
Employment Agreement with Mr. Johnson
We entered into an employment agreement with Mr. Johnson in connection with his commencement of employment as our Senior Vice President, Store Operations. Mr. Johnsons employment agreement provides him with (i) an annual base salary of $375,000, (ii) a target bonus equal to 50% of his annual base salary under the AIP, and (iii) an entitlement to participate in the Option Plan and in our employee benefit plans and programs generally made available to Company employees.
Employment Agreement with Mr. Clark
We entered into an employment agreement with Mr. Clark in connection with his commencement of employment as our Senior Vice President, General Counsel. Mr. Clarks employment agreement provides him with (i) an annual base salary of $340,000, (ii) a target bonus equal to 50% of his annual base salary under the AIP, and (iii) an entitlement to participate in the Option Plan and in our employee benefit plans and programs generally made available to Company employees.
Severance and Change in Control Arrangements
We believe that reasonable severance and change in control benefits are appropriate in certain circumstances to attract and retain top talent. The severance and acceleration benefits that our Current NEOs will be eligible for following this offering are described in Potential Payments upon Termination or Change in Control below.
111
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Other Matters
Tax and Accounting Implications of Executive Compensation Decisions
While there are currently no formal policies in place, as a result of this offering, the Company expects to review and consider formal corporate governance policies regarding stock ownership and retention, anti-hedging, anti-pledging, and claw-backs.
As we were not publicly traded during Fiscal 2020, we have not taken the deductibility limit imposed by Section 162(m) of the Code into consideration in making compensation decisions with respect to Fiscal 2020. However, we expect that following the consummation of this offering, we may authorize compensation payments that exceed the deductibility limitation under Section 162(m) of the Code when we believe that such payments are appropriate to attract and retain executive talent. In addition, assuming Treasury Regulations that were proposed in 2019 take effect, amounts in excess of the $1 million threshold paid pursuant to our existing employment agreements and other arrangements may be nondeductible.
Risk Assessment
We believe that the structure of our executive compensation program provides a mix of cash and equity compensation that balances short- and long-term incentives. We believe that the different time horizons and metrics used in the annual and long-term elements of compensation provide incentives to build our business prudently and profitably over time, while encouraging retention of our top talent. In addition, each element of compensation has been designed and is administered in a manner intended to minimize potential risks to us. The result is a program that we believe mitigates inappropriate risk taking and aligns the interests of our executive officers with those of our stockholders. Moreover, we have determined that any risks arising from our compensation policies and practices for all of our employees are not reasonably likely to have a material adverse effect on us.
Executive Compensation Tables
Summary Compensation Table
The table below sets forth the compensation earned by the NEOs during Fiscal 2020.
Name and Principal Position |
Year | Salary (1)($) |
Bonus (2)($) |
Option Awards (3)($) |
Non-Equity Incentive Plan Compensation ($) |
All Other Compensation (4) ($) |
Total ($) |
|||||||||||||||||||||
Jason Potter |
2020 | 692,308 | 100,000 | 1,788,827 | 692,308 | | 3,273,442 | |||||||||||||||||||||
James Heaney |
2020 | 205,769 | 150,000 | 1,000,040 | 154,327 | 31,862 | 1,541,998 | |||||||||||||||||||||
Kevin Miller |
2020 | 243,346 | 10,000 | 513,690 | 121,673 | 131,532 | 1,020,241 | |||||||||||||||||||||
Brian Johnson |
2020 | 201,923 | 50,000 | 513,690 | 187,500 | 23,461 | 976,574 | |||||||||||||||||||||
Carlos Clark |
2020 | 26,154 | 50,000 | 1,086,900 | | 16,031 | 1,179,085 | |||||||||||||||||||||
Larry Appel |
2020 | 81,657 | | | 820,548 | 902,205 | ||||||||||||||||||||||
Oded Shein |
2020 | 310,859 | | 949,006 | 1,259,865 |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(1) | Amounts in this column represent prorated annual salaries for Messrs. Potter, Heaney, Miller, Johnson, and Clark following their commencement of employment during Fiscal 2020. |
(2) | Amounts in this column represent signing bonuses paid to Messrs. Potter, Heaney, Miller, Johnson, and Clark following their commencement of employment. |
(3) | Amounts in this column represent the aggregate grant date fair value of stock option awards granted during Fiscal 2020, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718). For additional information regarding the assumptions underlying this calculation please read Note to our consolidated financial statements for the fiscal year ended January 31, 2021. |
(4) | Amounts reported in the All Other Compensation column include Company contributions to NEOs 401(k) accounts, relocation benefits, severance, and outplacement service payments, each as set forth in the following table |
Name |
401(k) Match ($) |
Relocation ($) |
Severance ($) |
Outplacement Service ($) |
Total All Other Compensation ($) |
|||||||||||||||
Jason Potter |
| | | | | |||||||||||||||
James Heaney |
| $ | 31,862 | | | $ | 31,862 | |||||||||||||
Kevin Miller |
| $ | 131,532 | | | $ | 131,532 | |||||||||||||
Brian Johnson |
$ | 6,923 | $ | 16,538 | | | $ | 23,461 | ||||||||||||
Carlos Clark |
| $ | 16,031 | | | $ | 16,031 | |||||||||||||
Larry Appel |
$ | 8,048 | | $ | 812,500 | | $ | 820,548 | ||||||||||||
Oded Shein |
$ | 17,867 | | $ | 922,139 | $ | 9,000 | $ | 949,006 |
2020 Grants of Plan-Based Awards Table
The following table includes information regarding annual cash incentive awards under the AIP and stock options granted to the NEOs, in each case, during Fiscal 2020.
Name |
Grant Date | Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) |
All Other Option Awards: Number of Securities Underlying Options (#) |
Exercise or Base Price of Option Awards ($/Sh) |
Grant Date Fair Value of Stock and Option Awards($)(2) |
|||||||||||||||||||||||
Threshold ($) |
Target ($) | Threshold (#) |
||||||||||||||||||||||||||
Jason Potter |
| $ | 692,308 | |||||||||||||||||||||||||
3/2/2020 | $ | 1,788,827 | ||||||||||||||||||||||||||
James Heaney |
| $ | 154,327 | |||||||||||||||||||||||||
9/3/2020 | $ | 1,000,040 | ||||||||||||||||||||||||||
Kevin Miller |
| $ | 121,673 | |||||||||||||||||||||||||
7/7/2020 | $ | 513,690 | ||||||||||||||||||||||||||
Brian Johnson |
| $ | 187,500 | |||||||||||||||||||||||||
7/7/2020 | $ | 513,690 | ||||||||||||||||||||||||||
Carlos Clark |
| |||||||||||||||||||||||||||
12/14/2020 | $ | 1,086,900 |
(1) | Represents potential payouts under the 2020 AIP, under which there were no threshold or maximum payouts possible. For additional detail on the 2020 AIP, see -Annual Cash Incentive Compensation above. |
(2) | The amounts shown represent the grant-date fair value per share determined in accordance with ASC Topic 718, multiplied by the number of shares, assuming achievement of the vesting conditions. Note that while the grant-date fair value assuming achievement of the vesting conditions is included in the table above, the achievement of such vesting conditions was not deemed probable on the date of grant. See Note 10 to our consolidated financial statements included elsewhere in this prospectus for the assumptions used in calculating these values. |
113
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Outstanding Equity Awards at 2020 Fiscal Year-End
The following table provides information regarding outstanding equity awards held by our NEOs as of January 31, 2021, the number of shares subject to each award, and the exercise price per share. The vesting schedule applicable to each outstanding award is described in the footnotes to the table below.
Option Awards | ||||||||||||||||||||
Name |
Grant Date | Number of Securities Underlying Unexercised Options Exercisable |
Number of Securities Underlying Unexercised Options Unexercisable |
Option Exercise Price |
Option Expiration Date |
|||||||||||||||
Jason Potter |
3/2/2020 | (1) | | 3/2/2027 | ||||||||||||||||
James Heaney |
9/3/2020 | (2) | | 9/3/2027 | ||||||||||||||||
Kevin Miller |
7/7/2020 | (2) | | 7/7/2027 | ||||||||||||||||
Brian Johnson |
7/7/2020 | (2) | | 7/7/2027 | ||||||||||||||||
Carlos Clark |
12/14/2020 | (2) | | 12/14/2027 |
(1) | Stock options vest upon the earlier of a Change in Control or initial underwritten public offering of the Companys shares. For additional detail on the vesting provisions applicable to the stock options reflected in this table, see -Long-Term Equity Incentive Compensation above. |
(2) | Stock options vest upon the earlier of (i) a Change in Control (as defined in the Option Plan) or (ii) any Investor Sale, immediately following which the Investor Percentage falls below 50%, provided that the NEO remain employed through the date of such transaction. For additional detail on the vesting provisions applicable to the stock options reflected in this table, see -Long-Term Equity Incentive Compensation above. |
Options Vested
No stock options held by the NEOs vested during Fiscal 2020.
Pension Benefits
We do not have any defined benefit pension plans.
Nonqualified Deferred Compensation
We do not offer any nonqualified deferred compensation plans.
Potential Payments Upon Termination or Change in Control
In this section, we discuss the nature and estimated value of payments and benefits we would provide to our NEOs in the event of termination of employment (including in connection with a change in control). The amounts described in this section reflect amounts that would have been payable under (i) our plans, and (ii) where applicable with respect to the named executive officers, their employment agreements if their employment had terminated on January 31, 2021. The actual payments and benefits that would be provided upon a termination of employment would be based on the individual NEOs compensation and benefit levels at the time of the termination of employment and the value of accelerated vesting of equity awards.
For each type of employment termination, the NEOs would be entitled to benefits that are available generally to our full-time, salaried U.S. employees, such as distributions under our 401(k) savings plan, certain disability benefits and accrued vacation. We have not described or provided an estimate of the value of any payments or benefits under plans or arrangements that do not discriminate in scope, terms or operation in favor of an NEO and that are generally available to all salaried employees.
114
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Potential Payments under Employment AgreementsJason Potter
As discussed above, we have entered into an employment agreement with our Chief Executive Officer, Jason Potter. Mr. Potters employment agreement contains provisions for the payment of severance benefits following certain termination events. Below is a summary of the payments and benefits that Mr. Potter would receive in connection with various employment termination scenarios.
Death or Disability
Upon a termination of employment due to Mr. Potters death or disability, he would be entitled to: (i) any earned but unpaid base salary accrued through the date of termination; (ii) unreimbursed business expenses; and (iii) employee benefits, if any, to which Mr. Potter or his dependents may be entitled under the employee benefit plans or programs of the Company (collectively, Mr. Potters Accrued Rights).
Termination for Cause or by Mr. Potter without Good Reason
Upon a resignation without good reason (as defined in the employment agreement) or a termination for cause (as defined in the employment agreement), Mr. Potter would be entitled only to Mr. Potters Accrued Rights.
Termination without Cause or by Mr. Potter for Good Reason
If we terminate Mr. Potters employment without cause or if Mr. Potter resigns for good reason, Mr. Potter would be entitled to continued payment of his base salary for a period of 12 months, payable over such 12-month period, subject to Mr. Potters execution and non-revocation of a customary release of claims and his compliance with a restrictive covenant agreement. Assuming Mr. Potters employment was terminated by us not for cause or by Mr. Potter for good reason as of January 31, 2021, Mr. Potter would have been eligible to receive continued payments in the amount of $750,000.
Potential Payments under The Fresh Market, Inc. Severance Plan
Messrs. Heaney, Miller, Johnson, and Clark (the Covered NEOs) are party to The Fresh Market, Inc. Severance Plan (the Severance Plan).
Termination without Cause or by the NEO for Good Reason within Protection Period
Under the Severance Plan, if the Covered NEOs employment is terminated by the Company without cause (as defined in the Severance Plan) or by the Covered NEO for good reason (as defined in the Severance Plan) at any time during the period commencing on the date on which a change in control occurs, and ending on the second anniversary thereof (the Protection Period), the Covered NEOs are entitled to the following payments (collectively, the Change in Control Severance):
| The product of 1.5 (the Severance Multiple) and the Covered NEOs base salary, payable in equal monthly installments over 1.5 years or, at the Companys discretion, payable in a lump-sum payment, subject to applicable limitations under the Code (the Salary Severance Payment); |
| A lump sum payment equal to the product of (i) the Severance Multiple and (ii) the Covered NEOs target annual bonus under the AIP for the calendar year in which the termination occurs (the Bonus Multiple Payment); |
| A lump sum payment equal to the Covered NEOs prorated annual bonus payable under the AIP (the Pro-Rated AIP Payment); |
| The continuation of benefits for a period of 18 months (the Benefits Continuation); and |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
| The payment of any unpaid annual bonus, annual bonus, or other amounts earned or accrued through the Covered NEOs termination date (collectively, the Accrued Rights). |
For a termination of employment by us not for cause or a termination by the executive for good reason within the Protection Period, the following payments would have been made under the Severance Plan to the Covered NEOs: Mr. Heaney, $1,687,500; Mr. Miller, $1,017,500; Mr. Johnson, $1,031,250; and Mr. Clark, $935,000.
Termination without Cause or by the NEO for Good Reason Outside the Protection Period
If the Covered NEOs employment is terminated by the Company without cause or by the Covered NEO for good reason at any time other than during the Protection Period, the Covered NEOs are entitled to the following payments (collectively, the Regular Severance):
| The Salary Severance Payment; |
| The Pro-Rated AIP Payment; |
| The Benefits Continuation; and |
| The Accrued Rights. |
For a termination of employment by us not for cause or a termination by the executive for good reason outside of the Protection Period, the following payments would have been made under the Severance Plan to the Covered NEOs: Mr. Heaney, $1,125,000; Mr. Miller, $740,000; Mr. Johnson, $750,000; and Mr. Clark, $680,000.
In addition to the Regular Severance, if, within six months immediately prior to a change in control, (i) the Covered NEOs employment is terminated by the Company without cause or an action is taken with respect to the Covered NEOs that would constitute good reason and (ii) the Covered NEOs reasonably demonstrates that such termination or action (x) was at the request of a third party that indicated an intention or had taken steps reasonably calculated to effect a change in control or (y) otherwise arose in connection with or in anticipation of a change in control that has been threated or proposed, so long as such change in control actually occurs, then the Covered NEOs would be entitled to the Bonus Multiple Payment, payable in a lump-sum payment. In such case, the estimated cash severance payments would be the same as reflected above under -Termination without Cause or by the NEO for Good Reason within Protection Period.
Former NEOMr. Shein
Mr. Shein, our former Chief Financial Officer, also participated in the Severance Plan. Upon his separation from the Company, Mr. Shein was entitled to receive severance payments in the amount of $922,139 and outplacement services valued at $9,000.
Separation AgreementMr. Appel
We entered into a separation agreement with Mr. Appel dated March 2, 2020, pursuant to which Mr. Appel became entitled to a severance payment of $750,000, payable in equal installments over a 12-month period, in addition to (i) his base salary for employment through the separation date of March 2, 2020; (ii) an amount equal to $62,500, representing 30 days of his base salary in lieu of notice; (iii) a lump sum payment of any reimbursable expenses; and (iv) vested benefits under the Companys 401(k) Plan.
Estimated Equity ValuesOption Plan
For a detailed description of the Option Plans treatment of outstanding options in the event of a change in control or Investor Sale, see the section entitled Long-Term Equity Incentive Compensation of the CD&A.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The estimated value of the options held by Current NEOs that would accelerate and vest upon a change in control or Investor Sale would be as follows: Mr. Potter, $ ; Mr. Heaney, $ ; Mr. Miller, $ ; Mr. Johnson, $ ; and Mr. Clark, $ . The value of accelerated options is calculated by multiplying (i) the number of shares accelerated by (ii) any positive excess of $ , the fair market value of our common stock as of January 31, 2021, over the applicable exercise price.
All options, to the extent not vested (including in connection with a change in control), terminate upon the NEOs employment; provided, however, in the case of a termination for cause (as defined in the Option Plan), the vested portion of the option award shall terminate as well.
The Fresh Market Equity Incentive Plan
Our board of directors has adopted, and our stockholders have approved, The Fresh Market 2021 Equity Incentive Plan, referred to as the Equity Incentive Plan. The Equity Incentive Plan will become effective upon the completion of this offering and will replace our Stock Option Plan (except with respect to outstanding options under such Stock Option Plan). The Equity Incentive Plan will enable us to formulate and implement a compensation program that will attract, motivate and retain experienced, highly-qualified team members who will contribute to our financial success, and will align the interests of our team members with those of our stockholders through the ability to grant a variety of stock-based and cash-based awards. The Equity Incentive Plan will serve as the umbrella plan for our stock-based and cash-based incentive compensation programs for our directors, officers and other team members.
Summary of the Equity Incentive Plan
The following is a summary of the material features of the Equity Incentive Plan. This summary is qualified in its entirety by the full text of the Equity Incentive Plan, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part.
Type of Awards
The Equity Incentive Plan provides for the issuance of stock options (including non-statutory stock options and incentive stock options), stock appreciation rights (SARs), restricted stock, restricted stock units and other stock-based awards to team members, non-employee directors, and certain consultants and advisors of us and our subsidiaries.
Administration
The Equity Incentive Plan will be administered by the compensation committee of the Board or another committee appointed by the Board to administer the Equity Incentive Plan, and to the extent the Board does not appoint a committee, the Board will serve as the committee (the Committee). The Committee (if other than the full Board) must consist of directors who are non-employee directors as defined under Rule 16b-3 promulgated under the Exchange Act and, subject to applicable transition rules, independent directors, as determined in accordance with the independence standards established by . The Committee may delegate authority under the Equity Incentive Plan to one or more subcommittees as it deems appropriate. Subject to compliance with applicable law and stock exchange requirements, including Section 157(c) of the DGCL, the Committee may delegate all or part of its authority to the Chief Executive Officer (or if there is none then appointed, the President), as it deems appropriate, with respect to grants to team members or key advisors who are not executive officers under Section 16 of the Exchange Act.
The Committee will have full power and express discretionary authority to administer and interpret the Equity Incentive Plan, to make factual determinations, and to adopt or amend such rules, regulations, agreements, and instruments for implementing the Equity Incentive Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion.
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Shares Subject to the Equity Incentive Plan
Subject to adjustment, the Equity Incentive Plan authorizes the issuance of up to shares of Common Stock of the life of the Equity Incentive Plan.
If any options or SARs expire or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards, stock units, or other stock-based awards are forfeited, terminated, or otherwise not paid in full, the shares of Common Stock subject to such awards will again be available for purposes of the Equity Incentive Plan. If shares of Common Stock are surrendered in payment of the exercise price of an option, the number of shares of Common Stock available for issuance under the Equity Incentive Plan will be reduced only by the net number of shares actually issued by upon such exercise and not by the gross number of shares as to which such option is exercised. Upon the exercise of any SAR under the Equity Incentive Plan, the number of shares of Common Stock available for issuance will be reduced only by the net number of shares actually issued upon such exercise.
If shares of Common Stock are withheld in satisfaction of the withholding taxes incurred in connection with the issuance, vesting or exercise of any grant or the issuance of Common Stock under the Equity Incentive Plan, the number of shares of Common Stock available for issuance will be reduced by the net number of shares issued, vested, or exercised under such grant, calculated in each instance after payment of such share withholding. If any awards are paid in cash, and not in shares of Common Stock, any shares of Common Stock subject to such awards will also be available for future awards. If we repurchase shares of Common Stock on the open market with the proceeds from the exercise price received from options, the repurchased shares will not be available for issuance under the Equity Incentive Plan.
Individual Limits for Non-Employee Directors
The maximum aggregate grant date value of shares of Common Stock granted to any non-employee director in any one calendar year, taken together with any cash fees earned by such non-employee director for services rendered during the calendar year, shall not exceed $500,000 in total value; provided, however, that with respect to the year during which a non-employee director is first appointed or elected to the Board, the maximum aggregate grant date value of shares of Common Stock granted to such non-employee director, taken together with any cash fees earned by such non-employee director for services rendered during such period, shall not exceed $750,000 in total value during the initial annual period.
Adjustments
In connection with stock splits, stock dividends, recapitalizations, and certain other events affecting the Common Stock, the Committee will make adjustments as it deems appropriate in: the maximum number of shares of Common Stock reserved for issuance as grants; the number and kind of shares covered by outstanding grants; the number and kind of shares that may be issued under the Equity Incentive Plan; the price per share or market value of any outstanding grants; the exercise price of options; the base amount of SARs; and the performance goals or other terms and conditions as the Committee deems appropriate.
Eligibility and Vesting
All of our team members and non-employee directors will be eligible to receive grants under the Equity Incentive Plan. In addition, key advisors who perform certain services for us may receive grants under the Equity Incentive Plan. The Committee will (i) select the team members, non-employee directors, and key advisors to receive grants and (ii) determine the number of shares of Common Stock subject to a particular grant and the vesting and exercisability terms of awards granted under the Equity Incentive Plan. As of January 31, 2021, approximately team members and six non-employee directors would be eligible to participate in the Equity Incentive Plan.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Options
Under the Equity Incentive Plan, the Committee will determine the exercise price of the options granted and may grant options to purchase shares of Common Stock in such amounts as it determines. The Committee may grant options that are intended to qualify as incentive stock options under Section 422 of the Code, or non-qualified stock options, which are not intended to so qualify. Incentive stock options may only be granted to team members. Anyone eligible to participate in the Equity Incentive Plan may receive a grant of non-qualified stock options. The exercise price of a stock option granted under the Equity Incentive Plan cannot be less than the fair market value of a share of Common Stock on the date the option is granted. If an incentive stock option is granted to a 10% stockholder of the Common Stock, the exercise price cannot be less than 110% of the fair market value of a share of Common Stock on the date the option is granted.
The exercise price for any option is generally payable in cash. In certain circumstances as permitted by the Committee, the exercise price may be paid: by the surrender of shares of Common Stock with an aggregate fair market value, on the date the option is exercised, equal to the exercise price; by payment through a broker in accordance with procedures established by the Federal Reserve Board; by withholding shares of Common Stock subject to the exercisable option that have a fair market value on the date of exercise equal to the aggregate exercise price; or by such other method as the Committee approves.
The term of an option cannot exceed ten years from the date of grant, except that if an incentive stock option is granted to a 10% stockholder of the Common Stock, the term cannot exceed five years from the date of grant. In the event that on the last day of the term of a non-qualified stock option, the exercise is prohibited by applicable law, including a prohibition on purchases or sales of Common Stock under our insider trading policy, as in effect, or pursuant to any restrictions on transfer imposed by the Committee, the term of the non-qualified option will be extended for a period of 30 days following the end of the legal prohibition, or until the expiration of such restrictions on transfer, unless the Committee determines otherwise.
Except as provided in the grant instrument, an option may only be exercised while a participant is employed by or providing service to us. The Committee will determine in the grant instrument under what circumstances and during what time periods a participant may exercise an option after termination of employment.
Stock Awards
Under the Equity Incentive Plan, the Committee may grant stock awards. A stock award is an award of Common Stock that may be subject to restrictions as the Committee determines. The restrictions, if any, may lapse over a specified period of employment or based on the satisfaction of pre-established criteria, in installments or otherwise, as the Committee may determine, including, but not limited to, restrictions based on the achievement of performance goals. Except to the extent restricted under the grant instrument relating to the stock award, a participant will have all of the rights of a stockholder as to those shares, including the right to vote and the right to receive dividends or distributions on the shares. Dividends with respect to stock awards that vest based on performance shall vest if and to the extent that the underlying stock award vests, as determined by the Committee. All unvested stock awards are forfeited if the participants employment or service is terminated for any reason, unless the Committee determines otherwise.
Stock Units
Under the Equity Incentive Plan, the Committee may grant stock units to anyone eligible to participate in the Equity Incentive Plan. Stock units represent hypothetical shares of Common Stock. Stock units become payable on terms and conditions determined by the Committee, including specified performance goals, and will be payable in cash, shares of Common Stock, or a combination thereof, as determined by the Committee. All unvested stock units are forfeited if the participants employment or service is terminated for any reason, unless the Committee determines otherwise.
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Stock Appreciation Rights
Under the Equity Incentive Plan, the Committee may grant SARs, which may be granted separately or in tandem with any option. SARs granted in tandem with a non-qualified stock option may be granted either at the time the non-qualified stock option is granted or any time thereafter while the option remains outstanding. SARs granted in tandem with an incentive stock option may be granted only at the time the grant of the incentive stock option is made. The Committee will establish the base amount of the SAR at the time the SAR is granted, which will be equal to or greater than the fair market value of a share of Common Stock as of the date of grant.
If a SAR is granted in tandem with an option, the number of SARs that are exercisable during a specified period will not exceed the number of shares of Common Stock that the participant may purchase upon exercising the related option during such period. Upon exercising the related option, the related SARs will terminate, and upon the exercise of a SAR, the related option will terminate to the extent of an equal number of shares of Common Stock. Generally, SARs may only be exercised while the participant is employed by, or providing services to, us. When a participant exercises a SAR, the participant will receive the excess of the fair market value of the underlying Common Stock over the base amount of the SAR. The appreciation of a SAR will be paid in shares of Common Stock, cash, or both.
The term of a SAR cannot exceed ten years from the date of grant. In the event that on the last day of the term of a SAR, the exercise is prohibited by applicable law, including a prohibition on purchases or sales of Common Stock under our insider trading policy, as then in effect, or pursuant to any restrictions on transfer imposed by the Committee, the term of the SAR will be extended for a period of 30 days following the end of the legal prohibition, or until the expiration of such restrictions on transfer, unless the Committee determines otherwise.
Other Stock-Based Awards
Under the Equity Incentive Plan, the Committee may grant other types of awards that are based on, or measured by, Common Stock, and granted to anyone eligible to participate in the Equity Incentive Plan. The Committee will determine the terms and conditions of such awards. Other stock-based awards may be payable in cash, shares of Common Stock or a combination of the two, as determined by the Committee.
Dividend Equivalents
Under the Equity Incentive Plan, the Committee may grant dividend equivalents in connection with grants of stock units or other stock-based awards made under the Equity Incentive Plan. Dividend equivalents entitle the participant to receive amounts equal to ordinary dividends that are paid on the shares underlying a grant while the grant is outstanding. The Committee will determine whether dividend equivalents will be paid currently or accrued as contingent cash obligations. Dividend equivalents may be paid in cash or shares of Common Stock. The Committee will determine the terms and conditions of the dividend equivalent grants, including whether the grants are payable upon the achievement of specific performance goals. Dividend equivalents with respect to stock units or other stock-based awards that vest based on performance shall vest and be paid only if and to the extent that the underlying stock units or other stock-based awards vest and are paid as determined by the Committee.
Change of Control
If we experience a change of control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Committee determines otherwise, all outstanding grants that are not exercised or paid at the time of the change of control will be assumed, or replaced with grants (with respect to cash, securities or a combination thereof) that have comparable terms, by the surviving corporation (or a parent or subsidiary of the surviving corporation).
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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If there is a change of control and all outstanding grants are not assumed, or replaced with grants that have comparable terms, by the surviving corporation, the Committee may (but is not obligated to) make adjustments to the terms and conditions of outstanding grants, including, without limitation, taking any of the following actions (or combination thereof) without the consent of any participant:
| determine that outstanding options and SARs will accelerate and become fully exercisable and the restrictions and conditions on outstanding stock awards, stock units, and dividend equivalents immediately lapse; |
| pay participants, in an amount and form determined by the Committee, in settlement of outstanding stock units or dividend equivalents; |
| require that participants surrender their outstanding stock options and SARs in exchange for a payment by us, in cash or shares of Common Stock, equal to the difference between the exercise price and the fair market value of the underlying shares of Common Stock; provided, however, if the per share fair market value of the Common Stock does not exceed the per share stock option exercise price or SARs base amount, as applicable, we will not be required to make any payment to the participant upon surrender of the stock option or SAR and shall have the right to cancel any such option or SAR for no consideration; or |
| after giving participants an opportunity to exercise all of their outstanding stock options and SARs, terminate any unexercised stock options and SARs on the date determined by the Committee. |
In general terms, a change of control under the Equity Incentive Plan occurs if:
| a person, entity or affiliated group, with certain exceptions, acquires more than 50% of the then-outstanding voting securities; |
| we merge into another entity unless the holders of voting shares immediately prior to the merger have at least 50% of the combined voting power of the securities in the merged entity or its parent; |
| we sell or disposes of all or substantially all of our assets; or |
| we consummate a complete liquidation or dissolution. |
Deferrals
The Committee may permit or require participants to defer receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due to the participant in connection with a grant under the Equity Incentive Plan. The Committee will establish the rules and procedures applicable to any such deferrals, consistent with the requirements of Section 409A of the Code.
Withholding
All grants under the Equity Incentive Plan are subject to applicable U.S. federal (including FICA), state, and local, foreign or other tax withholding requirements. We may require participants or other persons receiving grants or exercising grants to pay an amount sufficient to satisfy such tax withholding requirements with respect to such grants, or we may deduct from other wages and compensation paid by us the amount of any withholding taxes due with respect to such grant.
The Committee may permit or require that tax withholding obligation with respect to grants paid in shares of Common Stock be paid by having shares withheld up to an amount that does not exceed the participants minimum applicable withholding tax rate for U.S. federal (including FICA), state, and local tax liabilities, or as otherwise determined by the Committee. In addition, the Committee may, in its discretion, and subject to such rules as the Committee may adopt, allow participants to elect to have such share withholding applied to all or a portion of the tax withholding obligation arising in connection with any particular grant.
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Transferability
Except as permitted by the Committee with respect to non-qualified stock options, only a participant may exercise rights under a grant during the participants lifetime. Upon death, the personal representative or other person entitled to succeed to the rights of the participant may exercise such rights. A participant cannot transfer those rights except by will or by the laws of descent and distribution or, with respect to grants other than incentive stock options, pursuant to a domestic relations order. The Committee may provide in a grant instrument that a participant may transfer non-qualified stock options for no consideration to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws.
Amendment; Termination
Our Board may amend or terminate the Equity Incentive Plan at any time, except that our stockholders must approve an amendment if such approval is required in order to comply with the Code, applicable laws or applicable stock exchange requirements. Unless terminated sooner by our Board or extended with stockholder approval, the Equity Incentive Plan will terminate on the day immediately preceding the tenth anniversary of the effective date of the Equity Incentive Plan.
Stockholder Approval
Except in connection with certain corporate transactions, including stock dividends, stock splits, a recapitalization, a change in control, a reorganization, a merger, a consolidation, and a spin-off, stockholder approval is required (i) to reduce the exercise price or base price of outstanding stock options or SARs, (ii) to cancel outstanding stock options or SARs in exchange for the same type of grant with a lower exercise price or base price, and (iii) to cancel outstanding stock options or SARs that have an exercise price or base price above the current price of a share of Common Stock, in exchange for cash or other securities, each as applicable.
Establishment of Sub-Plans
Our Board may, from time to time, establish one or more sub-plans under the Equity Incentive Plan to satisfy applicable blue sky, securities or tax laws of various jurisdictions. Our Board may establish such sub-plans by adopting supplements to the Equity Incentive Plan setting forth limitations on the Committees discretion and such additional terms and conditions not otherwise inconsistent with the Equity Incentive Plan as the Board deems necessary or desirable. All such supplements will be deemed part of the Equity Incentive Plan, but each supplement will only apply to participants within the affected jurisdiction, and we will not be required to provide copies of any supplement to such unaffected participants.
Clawback
Subject to applicable law, the Committee may provide in any grant instrument that if a participant breaches any restrictive covenant agreement between the participant and us, or otherwise engages in activities that constitute cause (as defined in the Equity Incentive Plan) either while employed by, or providing services to, us or within a specified period of time thereafter, all grants held by the participant will terminate, and we may rescind any exercise of an option or SAR and the vesting of any other grant and delivery of shares upon such exercise or vesting, as applicable on such terms as the Committee will determine, including the right to require that in the event of any rescission:
| the participant must return the shares received upon the exercise of any option or SAR or the vesting and payment of any other grants; or |
| if the participant no longer owns the shares, the participant must pay to us the amount of any gain realized or payment received as a result of any sale or other disposition of the shares (if the participant transferred |
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the shares by gift or without consideration, then the fair market value of the shares on the date of the breach of the restrictive covenant agreement or activity constituting cause), net of the price originally paid by the participant for the shares. |
The Committee may also provide for clawbacks pursuant to a clawback policy, which our Board may in the future adopt and amend from time to time. Payment by the participant will be made in such manner and on such terms and conditions as may be required by the Committee. We will be entitled to set off against the amount of any such payment any amounts that we otherwise owe to the participant.
Performance Measures
Under the Equity Incentive Plan, the grant, vesting, exercisability or payment of certain awards, or the receipt of shares of Common Stock subject to certain awards, may be made subject to the satisfaction of performance measures. The performance goals applicable to a particular award will be determined by the Committee at the time of grant. One or more of the following business criteria may be used by the Committee in establishing performance measures under the Equity Incentive Plan: cash flow; free cash flow; earnings (including gross margin, earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation, amortization and charges for stock-based compensation, earnings before interest, taxes, depreciation and amortization, adjusted earnings before interest, taxes, depreciation and amortization and net earnings); earnings per share; growth in earnings or earnings per share; book value growth; stock price; return on equity or average stockholder equity; total stockholder return or growth in total stockholder return either directly or in relation to a comparative group; return on capital; return on assets or net assets; revenue, growth in revenue or return on sales; sales; expense reduction or expense control; expense to revenue ratio; income, net income or adjusted net income; operating income, net operating income, adjusted operating income or net operating income after tax; operating profit or net operating profit; operating margin; gross profit margin; return on operating revenue or return on operating profit; regulatory filings; regulatory approvals, litigation and regulatory resolution goals; other operational, regulatory or departmental objectives; budget comparisons; growth in stockholder value relative to established indexes, or another peer group or peer group index; development and implementation of strategic plans and/or organizational restructuring goals; development and implementation of risk and crisis management programs; improvement in workforce diversity; compliance requirements and compliance relief; safety goals; productivity goals; workforce management and succession planning goals; economic value added (including typical adjustments consistently applied from generally accepted accounting principles required to determine economic value added performance measures); measures of guest satisfaction, team member satisfaction or staff development; merger and acquisitions; and other similar criteria as determined by the Committee. Performance goals may be established on an absolute or relative basis and may be established on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries or business segments. Relative performance may be measured against a group of peer companies, a financial market index or other objective and quantifiable indices.
Summary of U.S. Federal Income Tax Consequences
The following is a summary of certain U.S. federal income tax consequences of awards under the Equity Incentive Plan. It does not purport to be a complete description of all applicable rules, and those rules (including those summarized here) are subject to change.
Options
An optionee generally will not recognize taxable income upon the grant of a non-statutory option. Rather, at the time of exercise of the option, the optionee will recognize ordinary income for income tax purposes in an amount equal to the excess, if any, of the fair market value of the shares purchased over the exercise price. We generally will be entitled to a tax deduction at such time and in the same amount, if any, that the optionee recognizes as ordinary income. The optionees tax basis in any shares received upon exercise of an option will be
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the fair market value of the shares on the date of exercise, and if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the optionee) depending upon the length of time such shares were held by the optionee.
Incentive stock options are eligible for favorable U.S. federal income tax treatment if certain requirements are satisfied. An incentive stock option must have an option price that is not less than the fair market value of the stock at the time the option is granted (or if granted to a 10% shareholder, not less than 110% of fair market value on the date of grant) and must be exercisable within ten years from the date of grant. A team member granted an incentive stock option generally does not realize compensation income for U.S. federal income tax purposes upon the grant of the option. At the time of exercise of an incentive stock option, no compensation income is realized by the optionee other than tax preference income for purposes of the federal alternative minimum tax on individual income. If the shares acquired on exercise of an incentive stock option are held for at least two years after grant of the option and one year after exercise, the excess of the amount realized on the sale over the exercise price will be taxed as capital gain. If the shares acquired on exercise of an incentive stock option are disposed of within less than two years after grant or one year of exercise, the optionee will realize taxable ordinary compensation income equal to the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the option price or (ii) the excess of the amount realized on the sale over the option price. Any additional amount realized will be taxed as capital gain. Generally, we will be allowed a tax deduction at the time and in the amount of ordinary compensation realized by the optionee upon disposition of an incentive stock option, but otherwise will not be allowed a deduction with respect to incentive stock options.
Stock Awards
A participant generally will not be taxed upon the grant of stock awards subject to restrictions, but rather will recognize ordinary income in an amount equal to the fair market value of the shares at the time the shares are no longer subject to a substantial risk of forfeiture (within the meaning of the Code). We generally will be entitled to a deduction at the time when, and in the amount that, the participant recognizes ordinary income on account of the lapse of the restrictions. A participants tax basis in the shares will equal their fair market value at the time the restrictions lapse, and the participants holding period for capital gains purposes will begin at that time. Any cash dividends paid on the restricted stock before the restrictions lapse will be taxable to the participant as additional compensation (and not as dividend income). Under Section 83(b) of the Code, a participant may elect to recognize ordinary income at the time the shares of stock are awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such shares of stock are subject to restrictions and a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by such participant at the time the restrictions lapse, the participant will have a tax basis in the shares equal to their fair market value on the date of their award, and the participants holding period for capital gains purposes will begin at that time. We generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary income is recognized by such participant.
Stock Units
In general, the grant of stock units will not result in income for the participant or in a tax deduction for us. Upon the settlement of such an award in cash or shares, the participant will recognize ordinary income equal to the aggregate value of the payment received, and we generally will be entitled to a tax deduction at the same time and in the same amount.
Stock Appreciation Rights
A participant who is granted a SAR generally will not recognize ordinary income upon receipt of the SAR. Rather, at the time of exercise of such SAR, the participant will recognize ordinary income for U.S. federal income tax purposes in an amount equal to the value of any cash received and the fair market value on the date of exercise of any shares received. We generally will be entitled to a tax deduction at such time and in the same amount, if any, that the participant recognizes as ordinary income. The participants tax basis in any shares received upon exercise of a SAR will be the fair market value of the shares on the date of exercise, and if the
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shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the participant) depending upon the length of time such shares were held by the participant.
Other Awards
With respect to other stock-based awards granted under the Equity Incentive Plan, generally when the participant receives payment with respect to an award, the amount of cash and/or the fair market value of any shares or other property received will be ordinary income to the participant, and we generally will be entitled to a tax deduction at the same time and in the same amount.
New Plan Benefits
Future benefits under the Equity Incentive Plan generally will be granted at the discretion of the Committee and are therefore not currently determinable.
Director Compensation
Prior to the offering, the Company is privately held. As of January 31, 2021, the Company had three directors, Andrew Jhawar, Heather Berger and Ray Berry, and another individual served on the Companys board during fiscal 2020 through December 2020, when Ms. Berger was appointed. None of such individuals received any compensation in respect of their service as directors.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than compensation arrangements for our named executive officers and directors discussed in the section titled Executive and Director Compensation, there were no transactions to which we were a party or will be a party in which:
| the amounts involved exceeded or will exceed $120,000; and |
| any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
Policies and Procedures for Related Party Transactions
Upon the consummation of this offering, we will adopt a written Related Person Transaction Policy (the policy), which will set forth our policy with respect to the review, approval, ratification and disclosure of all related person transactions by our Audit Committee. In accordance with the policy, our Audit Committee will have overall responsibility for implementation of and compliance with the policy.
For purposes of the policy, a related person transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a participant and the amount involved exceeded, exceeds or will exceed $120,000 and in which any related person (as defined in the policy) had, has or will have a direct or indirect material interest. A related person transaction does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by our board of directors or Audit Committee.
The policy will require that notice of a proposed related person transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related person transaction, the proposed transaction will be submitted to our Audit Committee for consideration. Under the policy, our Audit Committee may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders. In the event that we become aware of a related person transaction that has not been previously reviewed, approved or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to the Audit Committee so that it may determine whether to ratify, rescind or terminate the related person transaction.
The policy will also provide that the Audit Committee review certain previously approved or ratified related person transactions that are ongoing to determine whether the related person transaction remains in our best interests and the best interests of our stockholders. Additionally, we will make periodic inquiries of directors and executive officers with respect to any potential related person transaction of which they may be a party or of which they may be aware.
Stockholders Agreement
In connection with the Acquisition, we entered into a stockholders agreement (referred to as the Stockholders Agreement) with the Apollo Funds, certain stockholders of The Fresh Market prior to the Acquisition who remained stockholders after the Acquisition and are referred to therein as the Rollover Stockholders, and the other stockholder party thereto. The Stockholders Agreement became effective on April 27, 2016.
Subject to limited exceptions discussed below, the Stockholders Agreement limits transfers of shares of our common stock by stockholders party thereto (the Transfer Restrictions), other than with the prior written consent of AP VII Pomegranate Holdings, L.P., a Delaware limited partnership (the Apollo Investor) collectively with any other affiliate of the Apollo Investor to whom shares are transferred or otherwise acquires shares (together with the Apollo Investor, the Sponsor Funds). To the extent the Sponsor Funds propose a transaction involving the transfer of shares or a transaction involving the transfer of any portion of the assets of
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the Company to any person other than the Apollo Investor or its affiliates, the Sponsor Funds have customary drag-along rights to compel the Companys remaining stockholders to participate in the sale on terms no less favorable than those obtained by the Sponsor Funds (the Drag-Along Rights). In addition, stockholders are permitted to transfer shares to certain family members or certain affiliates thereof, provided that the transferee becomes a party to the Stockholders Agreement. To the extent the Sponsor Funds sell shares, stockholders will be permitted to sell a pro rata portion of their shares on the same terms as the Sponsor Funds pursuant to customary tag-along rights (the Tag-Along Rights).
The Stockholders Agreement also provides the Sponsor Funds with the right to require us to file one or more registration statements with the SEC for the resale of their shares of common stock (the Registration Rights). However, the Sponsor Funds and substantially all of our other current stockholders will be prohibited under one or more lock-up agreements entered into with the representatives of the underwriters of this offering from selling any shares prior to 180 days after the date of this prospectus as described in Underwriting. In the event that the Apollo Funds exercise such registration rights and sell shares of common stock through an underwritten offering, the other stockholders party to the Stockholders Agreement will have the right to sell a pro rata portion of their shares in such underwritten offering, at the same price and terms as the Apollo Funds. Additionally, if we propose to register any shares with the SEC in connection with a public offering, the Sponsor Funds and TFM2, LLC, a Delaware limited liability company, George Golleher, each person that hold an ownership interest in TFM2, LLC, and certain family members of George Golleher, Ray Berry and Brett Berry (collectively, the Fresh Market Co-Investors) may include their shares in the corresponding registration statement, subject to proportional adjustment in the case that including all such shares would adversely affect the price, timing or distribution of the shares in the offering, as determined in the discretion of the underwriters for the offering.
Prior to the occurrence of a underwritten public offering under an effective registration statement in which the aggregate net offering price of shares sold by us or other selling stockholders is at least $300 million (a Qualified Public Offering), each Fresh Market Co-Investor may participate pro-rata in any subscription for shares by the Sponsor Funds or any other stockholder on the same terms, cash purchase price and conditions as applied to the Sponsor Funds or such stockholder (the Preemptive Rights).
The Stockholders Agreement also contains certain requirements with respect to the composition of our board of directors and the boards of directors of certain of our subsidiaries, including the right of the Sponsor Funds to designate two members of our board of directors and the right of TFM2, LLC to designate a member of our board of directors. Such board designation rights will terminate upon the completion of a Qualified Public Offering.
Additionally, the Stockholders Agreement provides the Fresh Market Co-Investors with the right to receive certain quarterly and annual financial information about our company prior to our company becoming subject to the reporting requirements of the Exchange Act. Following a Qualified Public Offering, TFM2, LLC shall have the right, upon reasonable request, to inspect our books and records or request reasonable information regarding our financial condition and operations.
We expect that this offering will constitute a Qualified Public Offering, as a result of which the Preemptive Rights described above will terminate. The Drag-Along Rights, Tag-Along Rights and Registration Rights will survive the completion of this offering.
Management Services Agreement
The Fresh Market is a party to a management services agreement with an affiliate of Apollo to provide certain management consulting and advisory services as well as a similar management services agreement with certain entities affiliated with Ray Berry and Brett Berry (the Rollover Stockholders). The Fresh Market pays a non-refundable quarterly management fee of $375,000 in the aggregate, to an affiliate of Apollo and the Rollover
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Stockholders, with each receiving their relative pro rata shares of such quarterly management fee based on their relative pro rata ownership of the Company. This management services agreement will terminate upon the completion of this offering.
The following table reflects fees under the management services agreements, which were incurred by The Fresh Market during the periods presented (in thousands).
For the Years Ended | ||||||||
January 26, 2020 | January 27, 2019 | |||||||
Affiliate of Apollo |
$ | 1,166 | $ | 1,166 | ||||
Rollover Stockholders |
334 | 334 | ||||||
|
|
|
|
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$ | 1,500 | $ | 1,500 | |||||
|
|
|
|
The fees under the management services agreements are included in the Selling, general and administrative expenses line item on the accompanying Consolidated Statements of Income (Loss), included elsewhere in this prospectus.
Certain Real Estate Leases
An entity affiliated with a former officer and director of The Fresh Market, who is a family member of two members of The Fresh Markets Board of Directors as of January 26, 2020, acquired shopping centers in which The Fresh Market leases a retail store location. The shopping centers were acquired in fiscal 2013 and fiscal 2019. In fiscal 2018, an affiliated entity of Apollo acquired a shopping center in which The Fresh Market currently leases a retail store location.
The lease expenses associated with related party landlords were approximately $788,000 and $485,000 for the fiscal years ended January 26, 2020 and January 27, 2019, respectively.
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The following table sets forth the beneficial ownership of our common stock by:
| each person, or group of affiliated persons, who we know to beneficially own more than 5% of our common stock; |
| each of our named executive officers; |
| each of our directors; and |
| all of our executive officers and directors as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. Percentage of shares beneficially owned prior to the offering is based on shares of our common stock outstanding as of .
Number of Shares Beneficially Owned |
Percent Ownership Before the Offering |
Percent Ownership After the Offering |
||||||||||
5% Stockholders |
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Apollo Funds(1) |
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TFM2, LLC(2) |
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Named Executive Officers and Directors |
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Jason Potter(3) |
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Jim Heaney(3) |
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Carlos Clark(3) |
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Chris Himebauch(3) |
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Brian Johnson(3) |
||||||||||||
Kevin Miller(3) |
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Dan Portnoy(3) |
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Andrew Jhawar(4) |
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Heather Berger(4) |
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Betsy Atkins(5) |
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Ray Berry(6) |
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Sue Gove(5) |
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All current directors and executive officers as a group (10 persons) |
* | Represents beneficial ownership of less than one percent of shares outstanding |
(1) | Represents shares held of record by AP VIII Pomegranate Holdings, L.P. an entity owned by the Apollo Funds and managed by affiliates of Apollo Management, L.P. (Apollo Management), an investment adviser registered with the SEC. Apollo Management GP, LLC (Management GP) is the general partner of Apollo Management. Apollo Management Holdings, L.P. (Management Holdings) is the sole member and manager of Management GP. Apollo Management Holdings GP, LLC (Management Holdings GP) is the general partner of Management Holdings. Joshua Harris, Scott Kleinman, Marc Rowan and James Zelter are the managers, as well as executive officers, of Management Holdings GP, and as such may be deemed to have voting and dispositive control of the shares of common stock held of record by the Apollo Funds. The address of the AP VIII Pomegranate Holdings, L.P. is One Manhattanville Road, Suite 201, Purchase, New York 10577. The address of each of Apollo Management, Management GP, Management Holdings and Management Holdings GP, and Messrs. Harris, Kleinman, Rowan and Zelter, is 9 West 57th Street, 43rd Floor, New York, New York 10019. |
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(2) | TFM2 LLC is controlled by Ray Berry. The address of TFM2 LLC is 1101 Norwalk Street, Greensboro, NC 27407. |
(3) | Each holders address is c/o The Fresh Market Holdings, Inc. 300 N. Greene Street, Suite 1100, Greensboro, NC 27401. |
(4) | Andrew Jhawar and Heather Berger are each affiliated with AP VIII Pomegranate Holdings, L.P. and its affiliated investment managers and advisors. Mr. Jhawar and Ms. Berger each disclaim beneficial ownership of the shares of common stock that are beneficially owned by AP VIII Pomegranate Holdings, L.P. The address of Mr. Jhawar and Ms. Berger is c/o Apollo Global Management, Inc., 9 West 57th Street, 43rd Floor, New York, New York 10019. |
(5) | The address of Ms. Atkins and Ms. Gove is c/o The Fresh Market Holdings, Inc. 300 N. Greene Street, Suite 1100, Greensboro, NC 27401. |
(6) | Includes shares held by TFM and described above in note (2). The address of Ray Berry is 1101 Norwalk Street, Greensboro, NC 27407. |
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The following is a summary of all material characteristics of our capital stock as set forth in our amended and restated certificate of incorporation and amended and restated bylaws, which will be in effect upon the consummation of this offering. The summary does not purport to be complete and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated bylaws, all of which are incorporated by reference as exhibits to the registration statement of which this prospectus is a part.
Capital Stock
Our shares of common stock are currently held by 3 holders. Our amended and restated certificate of incorporation will provide that our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and shares of preferred stock, par value $0.01 per share. After the consummation of this offering, we expect to have shares (or shares if the underwriters exercise their option to purchase additional shares in full) of common stock and zero shares of preferred stock outstanding.
Common Stock Voting Rights
The holders of our common stock are entitled to one vote per share of common stock on each matter properly submitted to the stockholders on which the holders of shares of common stock are entitled to vote, including the election of directors, and will not have cumulative voting rights.
Dividend Rights
The holders of our common stock will be entitled to receive dividends when, as, and if declared by our board of directors out of legally available funds.
All shares of our common stock will be entitled to share equally in any dividends our board of directors may declare from legally available sources, subject to the terms of any outstanding preferred stock. See Preferred Stock. Provisions of our debt agreements and other contracts, including requirements under our amended and restated certificate of incorporation described elsewhere in this prospectus, may impose restrictions on our ability to declare dividends with respect to our common stock.
Liquidation Rights
In the event of our liquidation or dissolution, whether voluntary or involuntary and subject to the rights of the holders of any preferred stock and creditors, all shares of our common stock will be entitled to share equally in the assets available for distribution to holders of common stock after payment of all of our prior obligations, including any then-outstanding preferred stock.
Other Matters
The holders of our common stock will have no preemptive, subscription, redemption or conversion rights. All of the outstanding shares of common stock are, and the shares of common stock to be sold in this offering when issued and paid for will be, fully paid and nonassessable. There will be no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of holders of common stock will be subject to the rights of the holders of shares of any series of preferred stock that may be issued in the future.
Preferred Stock
After the consummation of this offering, our amended and restated certificate of incorporation will provide that our board of directors may, by a majority vote, issue, from time to time, shares of preferred stock in one or
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more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption prices, liquidation preferences and the number of shares constituting any series or designations of such series. See Certain Anti-Takeover, Limited Liability and Indemnification Provisions. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of our company, including by making a takeover more difficult or expensive. Additionally, the issuance of preferred stock may adversely affect the holders of our common stock by restricting dividends on our common stock, diluting the voting power of our common stock or subordinating the liquidation rights of our common stock. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock. See Certain Anti-Takeover, Limited Liability and Indemnification Provisions. We have no current plan to issue any shares of preferred stock following the consummation of this offering.
Certain Anti-Takeover, Limited Liability and Indemnification Provisions
Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price for the shares held by stockholders. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage acquisitions that some stockholders may favor.
No Cumulative Voting
Our amended and restated certificate of incorporation will provide that stockholders do not have the right to cumulative votes in the election of directors.
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation will provide that, prior to the date on which Apollo and its affiliates, including the Apollo Funds, cease to beneficially own more than 50% of the outstanding shares of our common stock (the Triggering Event), any action required to be or that may be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if and only if a consent in writing, setting forth the action so taken, shall be signed by the stockholders having not less than the minimum number of votes necessary to take such action.
Classified Board of Directors
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that following this offering, our board of directors will have three classes of directors:
| Class I shall consist of directors whom shall serve an initial one-year term; |
| Class II shall consist of directors whom shall serve an initial two-year term; and |
| Class III shall consist of directors whom shall serve an initial three-year term. |
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The number of directors on our board of directors may be fixed by at least two-thirds of the members of our board of directors then in office; provided, however, that prior to the Triggering Event, the number of directors on our board of directors may not be increased or decreased without the approval of a majority of the directors that have been appointed by the Apollo Funds then in office. See ManagementBoard Composition. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our amended and restated bylaws will provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice thereof in writing. To be timely, a stockholders notice generally must be delivered to and received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding years annual meeting; provided, that, in the event that the date of such meeting is advanced more than 30 days prior to, or delayed by more than 60 days after, the anniversary of the preceding years annual meeting of our stockholders, a stockholders notice to be timely must be so delivered not earlier than the close of business on the 120th day prior to such meeting and not later than the close of business on the later of the 90th day prior to such meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made. Our amended and restated bylaws will also specify certain requirements as to the form and content of a stockholders notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders.
Special Meetings of Stockholders
Subject to the rights of the preferred stock, special meetings of our stockholders may be called only by the chairman of our board of directors or by a resolution adopted by a majority of our board of directors. Stockholders are not permitted to call a special meeting of stockholders, to require that the chairman call such a special meeting, or to require that our board of directors request the calling of a special meeting of stockholders.
Removal of Directors
Until the Triggering Event, any director may be removed from office at any time, with or without cause, by holders of a majority of the voting power of our outstanding common stock. Our certificate of incorporation will provide that, after the Triggering Event, our directors may be removed only for cause by the affirmative vote of at least 662/3% of the voting power of our outstanding common stock. This requirement of a supermajority vote to remove directors could enable a minority of our stockholders to prevent a change in the composition of our board.
Super-Majority Approval Requirements
The DGCL generally provides that the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on any matter is required to amend a corporations certificate of incorporation or bylaws, unless either a corporations certificate of incorporation or bylaws require a greater percentage. Our amended and restated certificate of incorporation and amended and restated bylaws will provide that, at any time after the Triggering Event, the affirmative vote of holders of 662/3% of our outstanding common stock will be required to amend, alter, change or repeal our amended and restated certificate of incorporation or amended and restated bylaws. Our amended and restated bylaws may also be amended or repealed by a majority vote of our board of directors. Prior to the Triggering Event, the requirement of a super-majority vote to approve amendments to our amended and restated certificate of incorporation and amended and restated bylaws could enable a minority of our stockholders to exercise veto power over any such amendments.
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Limitation of Officer and Director Liability and Indemnification Agreements
Our amended and restated certificate of incorporation will limit the liability of our directors to the fullest extent permitted by the DGCL and provides that we will provide them with customary indemnification. We expect to enter into indemnification agreements with each of our executive officers and directors that provide them, in general, with customary indemnification in connection with their service to us or on our behalf.
Forum Selection
Our amended and restated certificate of incorporation will provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of a duty (including any fiduciary duty owed by any current or former director, officer, stockholder, employee or agent of the Company or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Our amended and restated certificate of incorporation and our amended and restated bylaws further provide that any person or entity purchasing, otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and consented to the forum selection clause. It is possible that a court of law could rule that the choice of forum provisions contained in our amended and restated certificate of incorporation and bylaws are inapplicable or unenforceable if they are challenged in a proceeding or otherwise. The enforceability of similar choice of forum provisions in other companies certificates of incorporation and bylaws has been challenged in legal proceedings and it is possible that a court could find our forum selection provision to be inapplicable or unenforceable.
In the event that the Court of Chancery lacks jurisdiction over any such action or proceeding, our amended and restated certificate of incorporation and our amended and restated bylaws provide that the sole and exclusive forum for such action or proceeding will be another state or federal court located within the State of Delaware. The exclusive forum provisions will not apply to suits brought to enforce any liability or duty created by the Securities Act and the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the rules and regulations promulgated thereunder.
Delaware Anti-Takeover Law
We have elected to be exempt from the restrictions imposed under Section 203 of the DGCL. However, our amended and restated certificate of incorporation will contain similar provisions providing that we may not engage in certain business combinations with any interested stockholder for a three-year period following the time that such stockholder becomes an interested stockholder unless:
| prior to such time, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
| upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced (excluding certain shares); or |
| on or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a
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person who, together with that persons affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock.
Under some circumstances, this provision will make it more difficult for a person who is an interested stockholder to effect various business combinations with us for a three-year period.
Our amended and restated certificate of incorporation will provide that Apollo and its various affiliates, successors and transferees, including the Apollo Funds, will not be deemed to be interested stockholders regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to this provision.
Corporate Opportunity
The DGCL permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by the DGCL, the doctrine of corporate opportunity will not apply to Apollo, any of our non-employee directors who are employees, affiliates or consultants of Apollo or its affiliates (other than us or our subsidiaries) or any of their respective affiliates in a manner that would prohibit them from investing in competing businesses or doing business with our customers. See Risk FactorsRisks Related to this Offering and Ownership of Our Common StockOur amended and restated certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be .
Securities Exchange
We intend to apply to list the shares of common stock on under the symbol TFM.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect the market price of our common stock prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of a substantial number of shares of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity-related capital at a time and price we deem appropriate. Although we have applied to list our common stock on , we cannot assure you that there will be an active public market for our common stock.
Upon completion of this offering, we will have outstanding an aggregate of shares of common stock, assuming the issuance of shares of common stock offered by us in this offering. Of these shares, all of the shares of common stock to be sold in this offering (or shares assuming the underwriters exercise the option to purchase additional shares in full) will be freely tradable without restriction unless the shares are held by any of our affiliates as such term is defined in Rule 144 under the Securities Act, and without further registration under the Securities Act. All remaining shares of common stock will be deemed restricted securities as such term is defined in Rule 144 of the Securities Act. The restricted securities were, or will be, issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below.
As a result of the lock-up agreements described below and the provisions of Rule 144 and Rule 701 under the Securities Act, the shares of our common stock (excluding the shares to be sold in this offering) that will be available for sale in the public market are as follows:
| no shares will be eligible for sale on the date of this prospectus or prior to 180 days after the date of this prospectus; and |
| shares will be eligible for sale upon the expiration of the lock-up agreements beginning days after the date of this prospectus and when permitted under Rule 144 or Rule 701. |
Lock-up Agreements
We, the Apollo Funds, substantially all our other existing stockholders and all of our directors and executive officers have agreed not to sell any common stock or securities convertible into or exercisable or exchangeable for shares of common stock for a period of 180 days from the date of this prospectus, subject to certain exceptions. Credit Suisse Securities (USA) LLC, in its sole discretion, may at any time release all or any portion of the shares from the restrictions in such agreements.
Upon the expiration of the 180-day lock-up period, substantially all of the shares subject to such lock-up restrictions will become eligible for sale, subject to the limitations discussed above. For a further description of these lock-up agreements applicable to our shares, please see Underwriting.
Rule 144
In general, under Rule 144 under the Securities Act as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the six months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to compliance with the public information
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requirements. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without complying with any of the requirements of Rule 144.
A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares of common stock that does not exceed the greater of one percent of the then outstanding shares of our common stock or the average weekly trading volume of our common stock reported by the during the four calendar weeks preceding the filing of notice on Form 144 of the sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.
Rule 701
In general, under Rule 701 under the Securities Act, any of our team members, directors, officers, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirement of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144. The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus.
Stock Issued Under Employee Plans
We intend to file a registration statement on Form S-8 under the Securities Act to register stock issuable under the Equity Incentive Plan. This registration statement on Form S-8 is expected to be filed following the effective date of the registration statement of which this prospectus is a part and will be effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market following the effective date, unless such shares are subject to vesting restrictions with us, Rule 144 restrictions applicable to our affiliates or the lock-up restrictions described above.
Registration Rights
Subject to the lock-up agreements described in this section and the section entitled Underwriting, the Apollo Funds will be entitled to certain customary demand and piggy-back rights with respect to the registration of their shares of our common stock under the Securities Act after the completion of this offering. After such registration, these shares of our common stock will become freely tradable without restriction under the Securities Act subject to the Rule 144 limitations applicable to affiliates, and a large number of shares may be sold into the public market. For a description of these registration rights, see Certain Relationships and Related Party TransactionsStockholders Agreement.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of material U.S. federal income tax considerations applicable to Non-U.S. Holders (as defined below) with respect to the purchase, ownership and disposition of our common stock issued pursuant to this offering. The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the Code), U.S. judicial decisions, administrative pronouncements and existing and proposed Treasury regulations, all as in effect as of the date hereof. All of the preceding authorities are subject to change at any time, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested, and will not request, a ruling from the U.S. Internal Revenue Service (the IRS) with respect to any of the U.S. federal income tax consequences described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions we have reached and describe herein.
This discussion only addresses beneficial owners of our common stock that hold such common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to a Non-U.S. Holder in light of such Non-U.S. Holders particular circumstances or that may be applicable to Non-U.S. Holders subject to special treatment under U.S. federal income tax law (including, for example, financial institutions, regulated investment companies, real estate investment trusts, brokers, dealers in securities, traders in securities that elect mark-to-market treatment, insurance companies, tax-exempt entities, Non-U.S. Holders who acquire our common stock pursuant to the exercise of employee stock options or otherwise as compensation for their services, Non-U.S. Holders liable for the alternative minimum tax, controlled foreign corporations, passive foreign investment companies, corporations that accumulate earnings to avoid U.S. federal income tax, expatriates, former citizens or former long-term residents of the United States, qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds, and Non-U.S. Holders that hold our common stock as part of a hedge, straddle, constructive sale or conversion transaction). In addition, this discussion does not address U.S. federal tax laws other than those pertaining to the U.S. federal income tax (such as U.S. federal estate or gift tax or the Medicare contribution tax on certain net investment income), nor does it address any aspects of U.S. state, local or non-U.S. taxes. Non-U.S. Holders are urged to consult with their own tax advisors regarding the possible application of these taxes.
For the purposes of this discussion, the term Non-U.S. Holder means a beneficial owner of our common stock that is an individual, corporation, estate or trust, other than:
| an individual who is a citizen or resident of the United States, as determined for U.S. federal income tax purposes; |
| a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or |
| a trust if: (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust; or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust. |
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of our common stock, the tax treatment of a person treated as a partner generally will depend on the status of the partner and the activities of the partnership. Persons that, for U.S. federal income tax purposes, are treated as partners in a partnership holding shares of our common stock are urged to consult their own tax advisors.
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Prospective purchasers are urged to consult their tax advisors as to the particular consequences to them under U.S. federal, state and local, and applicable foreign tax laws of the acquisition, ownership and disposition of our common stock.
Distributions
Although we do not anticipate that we will make any distributions on our common stock in the foreseeable future, distributions of cash or property that we pay in respect of our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Subject to the discussions below under U.S. Trade or Business Income, Information Reporting and Backup Withholding and FATCA, you generally will be subject to U.S. federal withholding tax at a 30% rate, or at a reduced rate prescribed by an applicable income tax treaty, on any dividends received in respect of our common stock. If the amount of the distribution exceeds our current and accumulated earnings and profits, such excess first will be treated as a return of capital to the extent of your tax basis in our common stock, and thereafter will be treated as capital gain (as described under Sale, Exchange or Other Taxable Disposition of Common Stock). However, except to the extent that we elect (or the paying agent or other intermediary through which you hold your common stock elects) otherwise, we (or the intermediary) must generally withhold on the entire distribution, in which case you would be entitled to a refund from the IRS for the withholding tax on the portion of the distribution that exceeded our current and accumulated earnings and profits.
In order to obtain a reduced rate of U.S. federal withholding tax under an applicable income tax treaty, you will be required to provide a properly executed IRS Form W-8BEN or Form W-8BEN-E (or, in each case, a successor form) certifying your entitlement to benefits under the treaty. If you are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS. You are urged to consult your own tax advisor regarding your possible entitlement to benefits under an income tax treaty.
Sale or Other Taxable Disposition of Common Stock
Subject to the discussions below under U.S. Trade or Business Income, Information Reporting and Backup Withholding and FATCA, you generally will not be subject to U.S. federal income or withholding tax in respect of any gain on a sale or other taxable disposition of our common stock unless:
| the gain is U.S. trade or business income, in which case, such gain will be taxed as described in U.S. Trade or Business Income below; |
| you are an individual who is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, in which case you will be subject to U.S. federal income tax at a rate of 30% (or a reduced rate under an applicable income tax treaty) on the gain realized, which may be offset by U.S. source capital losses, provided you have timely filed U.S. federal income tax returns with respect to such losses; or |
| we are or have been a United States real property holding corporation (a USRPHC) under Section 897 of the Code at any time during the shorter of the five-year period ending on the date of the disposition and your holding period for the common stock, in which case, subject to the exception set forth in the next paragraph, such gain will be subject to U.S. federal income tax in the same manner as U.S. trade or business income discussed below. |
In general, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. We believe we currently are not, and do not anticipate becoming, a USRPHC for U.S. federal income tax purposes. However, because the determination of whether we
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are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our worldwide real property interests and other assets used in a trade or business at all times during the applicable period described in the third bullet point, there can be no assurance that we will not become a USRPHC in the future. Even if we were, or were to become a USRPHC, gain generally will not be subject to tax as U.S. trade or business income if your holdings (direct and indirect, actual and constructive) at all times during the applicable period described in the third bullet point above constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market, within the meaning of the Code and applicable Treasury Regulations, during such period.
Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
U.S. Trade or Business Income
For purposes of this discussion, dividend income and gain on the sale, exchange or other taxable disposition of our common stock will be considered to be U.S. trade or business income if such income or gain is (i) effectively connected with your conduct of a trade or business within the United States and (ii) if you are eligible for the benefits of an income tax treaty with the United States and such treaty requires, attributable to a permanent establishment (or, if you are an individual, a fixed base) that you maintain in the United States. Generally, except as described under Sale or Other Taxable Disposition of Common Stock with respect to USRPHC, U.S. trade or business income is not subject to U.S. federal withholding tax (provided that you comply with applicable certification and disclosure requirements, including providing a properly executed IRS Form W-8ECI (or successor form)); instead, you are subject to U.S. federal income tax on a net basis at regular U.S. federal income tax rates (generally in the same manner as a U.S. person) on your U.S. trade or business income. If you are a corporation, any U.S. trade or business income that you receive may also be subject to a branch profits tax at a 30% rate, or at a lower rate prescribed by an applicable income tax treaty.
Information Reporting and Backup Withholding
We must annually report to the IRS and to each Non-U.S. Holder any distribution on our common stock, regardless of whether such distributions constitute dividends or whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which a Non-U.S. Holder resides or is established. Under certain circumstances, the Code imposes a backup withholding obligation on certain reportable payments. Dividends paid to you will generally be exempt from backup withholding if you provide a properly executed IRS Form W-8BEN, Form W-8BEN-E or W-8ECI (or, in each case, a successor form) or otherwise establish an exemption and the applicable withholding agent does not have actual knowledge or reason to know that you are a U.S. person or that the conditions of such other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of our common stock to or through the U.S. office of any broker (U.S. or non-U.S.) will be subject to information reporting and possible backup withholding unless you certify as to your non-U.S. status under penalties of perjury or otherwise establish an exemption and the applicable withholding agent does not have actual knowledge or reason to know that you are a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The payment of proceeds from the disposition of our common stock to or through a non-U.S. office of a non-U.S. broker will not be subject to information reporting or backup withholding unless the non-U.S. broker has certain types of relationships with the United States (a U.S. related financial intermediary). In the case of the payment of proceeds from the disposition of our common stock to or through a non-U.S. office of a broker that is either a U.S. person or a U.S. related financial intermediary, the Treasury regulations require information reporting (but not backup withholding) on the payment unless the broker has documentary evidence in its files that the owner is not a U.S. person and the broker has no knowledge to the contrary. You are urged to consult your tax advisor on the application of information reporting and backup withholding in light of your particular circumstances.
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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to you will be refunded or credited against your U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.
FATCA
Pursuant to Section 1471 through 1474 of the Code, commonly referred to as the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions (which include most foreign hedge funds, private equity funds, mutual funds, securitization vehicles and any other investment vehicles) and certain other foreign entities that do not otherwise qualify for an exemption must comply with information reporting rules with respect to their U.S. account holders and investors or be subject to a withholding tax on U.S. source payments made to them (whether received as a beneficial owner or as an intermediary for another party).
More specifically, a foreign financial institution or other foreign entity that does not comply with the FATCA reporting requirements or otherwise qualify for an exemption will generally be subject to a 30% withholding tax with respect to any withholdable payments. For this purpose, withholdable payments generally include U.S.-source payments otherwise subject to nonresident withholding tax (e.g., U.S.-source dividends) and also include the entire gross proceeds from the sale of any equity instruments of U.S. issuers (such as our common stock). The FATCA withholding tax will apply even if the payment would otherwise not be subject to U.S. nonresident withholding tax (e.g., because it is capital gain). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
FATCA currently applies to dividends made in respect of our common stock. While, beginning on January 1, 2019, withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. Non-U.S. Holders are urged to consult with their own tax advisors regarding the effect, if any, of the FATCA provisions to them based on their particular circumstances.
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Under the terms and subject to the conditions contained in an underwriting agreement dated , 2021, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC is acting as representative, the following respective numbers of shares of common stock:
Underwriter |
Number of Shares |
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Credit Suisse Securities (USA) LLC |
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|
|
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Total |
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|
|
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
We have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to additional shares from us at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $ per share. After the initial public offering the representative may change the public offering price and concession.
The following table summarizes the compensation and estimated expenses we will pay:
Per Share | Total | |||||||||||||||
Without Option |
With Option |
Without Option |
With Option |
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Underwriting Discounts and Commissions paid . . . . . . . . . . . |
$ | $ | $ | $ | ||||||||||||
Expenses payable . . . . . . . . . . . |
$ | $ | $ | $ |
We estimate that our out of pocket expenses for this offering excluding the underwriting discounts and commissions will be approximately $ . We have also agreed to reimburse the underwriters for certain of their expenses in an amount up to $ .
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus.
Our officers and directors and substantially all of our existing stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a
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transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC for a period of 180 days after the date of this prospectus, subject to certain exceptions.
We have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.
We intend to apply to list the shares of common stock on , under the symbol TFM.
Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined by negotiations among us and the representatives and will not necessarily reflect the market price of the common stock following this offering. The principal factors that were considered in determining the initial public offering price included:
| the information presented in this prospectus and otherwise available to the underwriters; |
| the history of, and prospects for, the industry in which we will compete; |
| the ability of our management; |
| the prospects for our future earnings; |
| the present state of our development, results of operations and our current financial condition; |
| the general condition of the securities markets at the time of this offering; and |
| the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies. |
We cannot assure you that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to this offering or that an active trading market for the common stock will develop and continue after this offering.
In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids.
| Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
| Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market. |
| Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by |
the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that |
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there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
| Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing transaction or a syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on and, if commenced, may be discontinued at any time.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representative may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. These investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic (each a Member State), no securities have been offered or will be offered to the public in that Member State prior to the publication of a prospectus in relation to the securities which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of securities may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
(a) to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or
(c) in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
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provided that no such offer of securities shall require the Issuer or any Manager to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an offer to the public in relation to any securities in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase or subscribe for any securities, and the expression Prospectus Regulation means Regulation (EU) 2017/1129.
Notice to Prospective Investors in the United Kingdom
Each of the underwriters severally represents, warrants and agrees as follows:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21 of the FSMA does not apply to us; and
(b) it has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.
Notice to Prospective Investors in Canada
The securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, Japanese Person shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
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Notice to Prospective Investors in Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in Hong Kong
The securities may not be offered or sold in Hong Kong by means of any document other than (i) to professional investors as defined in the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made under that Ordinance, or (ii) in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap.32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the depositary securities may be issued or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to depositary securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than:
(i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA,
(ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or
(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
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(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities pursuant to an offer made under Section 275 of the SFA except:
(a) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(b) where no consideration is or will be given for the transfer;
(c) where the transfer is by operation of law;
(d) as specified in Section 276(7) of the SFA; or
(e) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Notice to Prospective Investors in Australia
This prospectus is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and Investments Commission. It does not purport to contain all information that an investor or their professional advisers would expect to find in a prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth)) for the purposes of Part 6D.2 of the Corporations Act 2001 (Cth) or in a product disclosure statement for the purposes of Part 7.9 of the Corporations Act 2001 (Cth), in either case, in relation to the securities. The securities are not being offered in Australia to retail clients as defined in sections 761G and 761GA of the Corporations Act 2001 (Cth). This offering is being made in Australia solely to wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Cth) and, as such, no prospectus, product disclosure statement or other disclosure document in relation to the securities has been, or will be, prepared.
This prospectus does not constitute an offer in Australia other than to persons who do not require disclosure under Part 6D.2 of the Corporations Act 2001 (Cth) and who are wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Cth). By submitting an application for the securities, you represent and warrant to us that you are a person who does not require disclosure under Part 6D.2 and who is a wholesale client for the purposes of section 761G of the Corporations Act 2001 (Cth). If any recipient of this prospectus is not a wholesale client, no offer of, or invitation to apply for, the securities shall be deemed to be made to such recipient and no applications for such securities will be accepted from such recipient. Any offer to a recipient in Australia, and any agreement arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for the securities you undertake to us that, for a period of twelve months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a person who does not require disclosure under Part 6D.2 and who is a wholesale client.
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The validity of the shares offered hereby will be passed upon for us by Morgan, Lewis & Bockius LLP, New York, New York. Latham & Watkins LLP, New York, New York has acted as counsel for the underwriters.
The consolidated financial statements of The Fresh Market Holdings, Inc. at January 31, 2021 and January 26, 2020, and for each of the fiscal years ended January 31, 2021, January 26, 2020 and January 27, 2019, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock being sold in this offering. This prospectus constitutes a part of that registration statement. This prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules to the registration statement, because some parts have been omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our common stock being sold in this offering, you should refer to the registration statement and the exhibits and schedules filed as part of the registration statement. Statements contained in this prospectus regarding the contents of any agreement, contract or other document referred to are not necessarily complete; reference is made in each instance to the copy of the contract or document filed as an exhibit to the registration statement. Each statement is qualified by reference to the exhibit.
The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The SECs website address is www.sec.gov.
Upon the effectiveness of the registration statement, we will be required to file annual, quarterly and current reports, proxy statements and other information with the SEC pursuant to the Exchange Act. We intend to make these filings available on our website, www.thefreshmarket.com, once this offering is completed, where you may access such filings free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on, or that can be accessed through, our website is not incorporated by reference in this prospectus and does not form a part of this prospectus. The inclusion of our website address in this prospectus is an inactive textual reference only. You may read and copy any reports, statements or other information on file at the public reference rooms. You can also request copies of these documents, for a copying fee, by writing to the SEC, or you can review these documents on the SECs website, as described above. In addition, we will provide paper copies of our filings free of charge upon request.
148
THE FRESH MARKET HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-2 | ||||
Consolidated Balance Sheets as of January 31, 2021 and January 26, 2020 |
F-4 | |||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-9 |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of The Fresh Market Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Fresh Market Holdings, Inc. (the Company) as of January 31, 2021 and January 26, 2020, the related consolidated statements of operations, stockholders equity and cash flows for the years ended January 31, 2021, January 26, 2020 and January 27, 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2021 and January 26, 2020, and the results of its operations and its cash flows for the years ended January 31, 2021, January 26, 2020 and January 27, 2019 in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. 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.
F-2
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 the critical audit matter does not alter in any way our opinion on the consolidated 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.
Goodwill and Tradename Impairment Analyses | ||
Description of the Matter | At January 31, 2021, the Companys goodwill and indefinite-lived tradename intangible asset balances were $570.3 million and $260.0 million, respectively. As discussed in Notes 2, 4, and 5, goodwill and the indefinite-lived tradename intangible asset are tested for impairment at least annually.
Auditing managements annual impairment tests was complex and highly judgmental due to the significant estimation required in determining the fair value of the Companys reporting unit for goodwill and the fair value of the tradename. Specifically, the fair value estimates for goodwill were sensitive to significant assumptions including the estimation of expected cash flows, discount rates, and terminal value rates. The fair value estimate for the tradename was sensitive to significant assumptions including the revenue growth rates, royalty rate and the discount rate. The fair value estimates of goodwill and the tradename are affected by expectations about future company performance as well as market or economic conditions. | |
How We Addressed the Matter in Our Audit | To test the estimated fair value of the Companys reporting unit and tradename intangible asset, we performed audit procedures that included, among others, evaluating the Companys valuation methodologies used, evaluating the prospective financial information utilized in the valuations, and involving our valuation specialists to assist in testing certain significant assumptions described above, such as discount rates, terminal value rates, and royalty rate. We compared the significant assumptions used by management to current industry and economic trends and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit and the tradename intangible asset that would result from changes in the assumptions. |
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2009.
Charlotte, North Carolina
April 23, 2021
F-3
The Fresh Market Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
January 31, 2021 |
January 26, 2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 206,380 | $ | 136,560 | ||||
Accounts receivable, net |
20,172 | 8,281 | ||||||
Inventories |
61,286 | 64,017 | ||||||
Prepaid expenses and other current assets |
11,876 | 3,294 | ||||||
Income tax receivable |
61 | 413 | ||||||
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|
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Total current assets |
299,775 | 212,565 | ||||||
Operating lease assets, net |
192,545 | 199,625 | ||||||
Property and equipment, net |
143,971 | 163,688 | ||||||
Intangible asset |
260,000 | 260,000 | ||||||
Goodwill |
570,318 | 570,318 | ||||||
Restricted cash |
23,420 | 25,480 | ||||||
Other noncurrent assets |
5,372 | 6,111 | ||||||
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Total assets |
$ | 1,495,401 | $ | 1,437,787 | ||||
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Liabilities and stockholders equity |
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Current liabilities: |
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Accounts payable |
$ | 68,789 | $ | 46,486 | ||||
Accrued liabilities |
121,221 | 65,556 | ||||||
Current portion of operating lease liabilities |
28,956 | 27,616 | ||||||
Current portion of long-term debt |
1,350 | 1,250 | ||||||
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Total current liabilities |
220,316 | 140,908 | ||||||
Long-term debt |
919,869 | 900,767 | ||||||
Operating lease liabilities |
159,210 | 163,174 | ||||||
Deferred income taxes |
36,569 | 33,230 | ||||||
Other noncurrent liabilities |
24,948 | 19,495 | ||||||
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Total noncurrent liabilities |
1,140,596 | 1,116,666 | ||||||
Commitments and contingencies (Note 15) |
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Stockholders equity: |
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Common stock - $0.01 par value: 100,000,000 shares authorized, 67,500,000 issued and outstanding as of January 31, 2021 and January 26, 2020 |
675 | 675 | ||||||
Additional paid-in capital |
604,125 | 676,763 | ||||||
Accumulated deficit |
(470,311 | ) | (497,225 | ) | ||||
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Total stockholders equity |
134,489 | 180,213 | ||||||
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Total liabilities and stockholders equity |
$ | 1,495,401 | $ | 1,437,787 | ||||
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See accompanying notes to consolidated financial statements.
F-4
The Fresh Market Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
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(53 weeks) | (52 weeks) | (52 weeks) | ||||||||||
Sales |
$ | 1,887,452 | $ | 1,522,555 | $ | 1,595,448 | ||||||
Cost of goods sold |
1,229,161 | 1,042,282 | 1,065,956 | |||||||||
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Gross profit |
658,291 | 480,273 | 529,492 | |||||||||
Selling, general and administrative expenses |
466,952 | 387,842 | 440,070 | |||||||||
Transaction and related costs |
16,460 | 1,414 | (223 | ) | ||||||||
Impairments and store closure costs |
3,533 | 5,387 | 27,262 | |||||||||
Depreciation |
44,363 | 49,902 | 59,563 | |||||||||
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|
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Income from operations |
126,983 | 35,728 | 2,820 | |||||||||
Interest expense |
96,625 | 98,252 | 97,642 | |||||||||
(Gain) loss on extinguishment of debt |
(132 | ) | | 3,202 | ||||||||
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Income (loss) before income taxes |
30,490 | (62,524 | ) | (98,024 | ) | |||||||
Tax provision (benefit) |
3,576 | 2,893 | (19,427 | ) | ||||||||
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Net income (loss) |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
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Net income (loss) per share: |
||||||||||||
Basic and Diluted |
$ | 0.40 | $ | (0.97 | ) | $ | (1.16 | ) | ||||
Weighted average shares outstanding: |
||||||||||||
Basic and Diluted |
67,500,000 | 67,500,000 | 67,500,000 |
See accompanying notes to consolidated financial statements.
F-5
The Fresh Market Holdings, Inc.
Consolidated Statements of Stockholders Equity
(In thousands, except share amounts)
Common Stock, $0.01 par value |
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Common Shares Outstanding |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders Equity |
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As of January 28, 2018 |
67,500,000 | $ | 675 | $ | 677,879 | $ | (356,209 | ) | $ | 322,345 | ||||||||||
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Share-based compensation |
| | 387 | | 387 | |||||||||||||||
Net loss |
| | | (78,597 | ) | (78,597 | ) | |||||||||||||
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As of January 27, 2019 |
67,500,000 | $ | 675 | $ | 678,266 | $ | (434,806 | ) | $ | 244,135 | ||||||||||
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Impact of adoption of ASC 842, Leases, net of tax |
| | | 2,998 | 2,998 | |||||||||||||||
Share-based compensation |
| | (1,503 | ) | | (1,503 | ) | |||||||||||||
Net loss |
| | | (65,417 | ) | (65,417 | ) | |||||||||||||
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As of January 26, 2020 |
67,500,000 | $ | 675 | $ | 676,763 | $ | (497,225 | ) | $ | 180,213 | ||||||||||
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Share-based compensation |
| | 406 | | 406 | |||||||||||||||
Dividends issued |
| | (73,044 | ) | | (73,044 | ) | |||||||||||||
Net income |
| | | 26,914 | 26,914 | |||||||||||||||
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As of January 31, 2021 |
67,500,000 | $ | 675 | $ | 604,125 | $ | (470,311 | ) | $ | 134,489 | ||||||||||
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See accompanying notes to consolidated financial statements.
F-6
The Fresh Market Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
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(53 weeks) | (52 weeks) | (52 weeks) | ||||||||||
Operating activities |
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Net income (loss) |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
44,363 | 49,917 | 60,029 | |||||||||
Non-cash operating lease cost |
39,965 | 46,402 | | |||||||||
Non-cash interest expense |
5,271 | 5,243 | 4,707 | |||||||||
Loss on disposals of property and equipment |
565 | 808 | 3,545 | |||||||||
Impairments of long-lived assets |
| 6,009 | 3,094 | |||||||||
Share-based compensation |
406 | (1,503 | ) | 387 | ||||||||
(Gain) loss on extinguishment of debt |
(132 | ) | | 3,202 | ||||||||
Deferred income taxes |
3,339 | 2,749 | (19,129 | ) | ||||||||
Change in assets and liabilities: |
||||||||||||
Accounts receivable |
(11,875 | ) | (1,624 | ) | 1,764 | |||||||
Inventories |
2,731 | (1,236 | ) | 2,093 | ||||||||
Prepaid expenses and other assets |
(7,145 | ) | (248 | ) | 4,757 | |||||||
Income tax benefit |
352 | 135 | (377 | ) | ||||||||
Accounts payable |
22,303 | (2,884 | ) | 5,076 | ||||||||
Closed store reserves |
(2,225 | ) | (4,876 | ) | 6,269 | |||||||
Accrued interest expense |
990 | (420 | ) | 905 | ||||||||
Operating lease liabilities |
(35,509 | ) | (32,659 | ) | | |||||||
Accrued other liabilities |
61,878 | (11,884 | ) | 2,584 | ||||||||
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Net cash provided by (used in) operating activities |
152,191 | (11,488 | ) | 309 | ||||||||
Investing activities |
||||||||||||
Purchases of property and equipment |
(25,792 | ) | (13,494 | ) | (17,367 | ) | ||||||
Proceeds from sales of property and equipment |
129 | 1,401 | 1,875 | |||||||||
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Net cash used in investing activities |
(25,663 | ) | (12,093 | ) | (15,492 | ) | ||||||
Financing activities |
||||||||||||
Proceeds from issuance of New Superpriority Secured Notes |
$ | 133,650 | $ | | $ | | ||||||
Proceeds from issuance of Superpriority Secured Notes |
| | 122,500 | |||||||||
Payments made on Superpriority Secured Notes |
(123,125 | ) | (1,250 | ) | (625 | ) | ||||||
Payments made on New Superpriority Secured Notes |
(1,011 | ) | | | ||||||||
Payments made for the redemption premium on Superpriority Secured Notes |
(4,925 | ) | | | ||||||||
Payments made for debt issuance costs |
(1,338 | ) | | (1,480 | ) | |||||||
Payments made for Senior Secured Notes |
(54,638 | ) | | | ||||||||
Payments made on financing lease obligations |
| | (910 | ) | ||||||||
Dividends paid in cash |
(7,381 | ) | | | ||||||||
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Net cash (used in) provided by financing activities |
(58,768 | ) | (1,250 | ) | 119,485 |
F-7
The Fresh Market Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
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Net increase (decrease) in cash, cash equivalents, and restricted cash |
67,760 | (24,831 | ) | 104,302 | ||||||||
Cash, cash equivalents, and restricted cash at beginning of period |
162,040 | 186,871 | 82,569 | |||||||||
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Cash, cash equivalents, and restricted at end of period |
$ | 229,800 | $ | 162,040 | $ | 186,871 | ||||||
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for interest |
$ | 95,239 | $ | 93,417 | $ | 91,988 | ||||||
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Cash (refunded) paid during the period for taxes |
$ | (115 | ) | $ | 8 | $ | 392 | |||||
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Non-cash investing and financing activities: |
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Property and equipment acquired through financing lease obligations |
$ | | $ | | $ | 2,175 | ||||||
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One-time dividend of Senior Secured Notes held at the Company-level |
$ | 65,663 | $ | | $ | | ||||||
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See accompanying notes to consolidated financial statements.
F-8
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share data)
1. Description of Business
Description of Business
The Fresh Market Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively the Company), is a specialty food retailer, which through its wholly-owned subsidiary, The Fresh Market, Inc., a Delaware corporation, operated 159 stores in 22 states as of January 31, 2021. References to The Fresh Market Intermediate Holdings or Intermediate Holdings refer to The Fresh Market Intermediate Holdings, Inc., a Delaware corporation, and a wholly owned subsidiary of the Company. References to The Fresh Market and TFM refer to The Fresh Market, Inc., a Delaware corporation, a wholly owned subsidiary of Intermediate Holdings and an indirect wholly owned subsidiary of the Company. The Company is controlled by certain investment funds (the Apollo Funds) managed by affiliates of Apollo Global Management, Inc. (together with its subsidiaries, Apollo).
Merger and Related Transaction
On March 11, 2016, Pomegranate Holdings, Inc., a Delaware corporation (Holdings), and a wholly owned subsidiary of the Company (then called Pomegranate Parent Holdings, Inc), and Pomegranate Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Holdings (Merger Sub), entered into an agreement and plan of merger (the Merger Agreement) with The Fresh Market, Inc. Pursuant to the Merger Agreement, on March 25, 2016, Merger Sub commenced a tender offer to purchase all of the issued and outstanding shares of The Fresh Market, Inc.s common stock (the Tender Offer). Following the completion of the Tender Offer, on April 27, 2016, Merger Sub merged with and into The Fresh Market, Inc. (the Merger), with The Fresh Market, Inc. surviving the Merger and becoming a wholly owned subsidiary of Holdings, which remained a wholly owned subsidiary of the Company. As a result of the Merger, the shares of The Fresh Market, Inc.s common stock ceased to be traded on the NASDAQ Global Select Market. The Company refers to the Tender Offer and the Merger together as the Acquisition.
On March 5, 2021, the Company changed its legal name from Pomegranate Parent Holdings, Inc. to The Fresh Market Holdings, Inc. and Intermediate Holdings changed its legal name from Pomegranate Holdings, Inc. to The Fresh Market Intermediate Holdings, Inc.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP).
Definition of Fiscal Year
The Company reports its results of operations on a 52- or 53-week fiscal year ending on the last Sunday in January. The year ended January 31, 2021 was a 53-week fiscal year; the years ended January 26, 2020 and January 27, 2019 were 52-week fiscal years.
Principles of Consolidation
The Companys wholly-owned subsidiaries are consolidated, and all intercompany accounts and transactions are eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-9
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Reportable Segments
The Company has determined that it has one reportable segment. The Companys revenues are generated from the sale of items at its specialty food stores. The Companys primary focus is on perishable categories, which include meat, seafood, produce, deli, bakery, floral, sushi, dairy, and prepared foods. Non-perishable categories consist of traditional grocery, frozen, bulk, coffee, candy, and beer and wine.
The following table presents disaggregated revenue for perishable and non-perishable items for the periods presented:
Year Ended | ||||||||||||||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||||||||||||||
Perishable |
$ | 1,334,626 | 70.7 | % | $ | 1,087,110 | 71.4 | % | $ | 1,138,227 | 71.3 | % | ||||||||||||
Non-perishable |
552,826 | 29.3 | % | 435,445 | 28.6 | % | 457,221 | 28.7 | % | |||||||||||||||
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Sales |
$ | 1,887,452 | 100.0 | % | $ | 1,522,555 | 100.0 | % | $ | 1,595,448 | 100.0 | % | ||||||||||||
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Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash on deposit with banks, and credit and debit card sales transactions which settle within a few business days of the reporting date.
Restricted Cash
Amounts included in restricted cash are pledged to collateralize the Companys letters of credit for general liability and workers compensation insurance. The Company has included this amount in noncurrent assets within the Restricted cash line item on the Consolidated Balance Sheet because the Company intends to renew the letters of credit to meet the related collateral obligation.
Accounts Receivable, Net
Accounts receivable consist primarily of receivables from vendors for certain promotional programs, from insurance companies for claim amounts above the deductible and amounts related to the Companys directors and officers liability insurance for the shareholder litigation settlement, and other miscellaneous receivables, presented net of an allowance for estimated uncollectible amounts of $519 and $669 at January 31, 2021 and January 26, 2020, respectively.
Inventories
The Companys inventories are stated at the lower of cost or net realizable value. The cost is valued using the first-in, first-out (FIFO) basis. The FIFO value of inventories includes cost of goods and freight, net of vendor rebates and discounts.
The Company performs physical counts of all store inventories at least once per quarter. The Company records a shrink estimate for the period between the last physical count and the balance sheet date, where applicable.
F-10
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Property and Equipment, Net
Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the following estimated useful lives:
Buildings |
30 years | |||
Leasehold and land improvements |
10 - 15 years | |||
Store fixtures and equipment |
3 - 10 years | |||
Office furniture, fixtures and equipment |
5 - 10 years | |||
Automobiles |
5 years | |||
Software |
3 years |
Depreciation of leasehold and land improvements is recognized over the shorter of the estimated useful life of the asset or the term of the lease. The term of the lease includes renewal options for additional periods if the exercise of the renewal is considered to be reasonably assured.
When property and equipment is sold or retired, the cost and accumulated depreciation are removed from the accounts, and the resulting gain or loss is recognized in the Selling, general and administrative expenses line item on the accompanying Consolidated Statements of Operations. Expenditures for maintenance and repairs are charged to expense as incurred.
Interest costs incurred on borrowed funds during the period of construction of capital assets are capitalized as a component of the cost of those assets. No interest was capitalized during the years ended January 31, 2021 and January 26, 2020.
Prior to the adoption of ASC 842, Leases, the Company recorded depreciation associated with financing lease assets over the lesser of the assets lease term or economic life of the property and is included in the Depreciation line item on the accompanying Consolidated Statements of Operations for the year ended January 27, 2019.
Impairment of Long-Lived Assets
The Company assesses its long-lived assets, principally leasehold and land improvements, store fixtures and equipment, as well as lease assets for possible impairment whenever events or changes in circumstances, such as declining or negative operating cash flows or an unplanned change in the manner in which the Company intends to utilize its long-lived assets, indicate the carrying value of an asset or asset group may not be recoverable. When assessing whether impairment exists, the Company aggregates long-lived assets at the individual store level, which the Company considers to be the lowest level for which independent identifiable cash flows are available. Impairment evaluations for individual stores take into consideration a stores historical and projected operating cash flows, the period of time the store has been open and the operating performance in the related market. Recoverability is evaluated by comparing the carrying amount of the asset group to the future undiscounted cash flows expected to be generated by the asset group. If the carrying value of the asset group is greater than the future undiscounted cash flows, an impairment exists and must be measured, and a loss is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value is estimated based on discounted future cash flows and/or market values of the long-lived assets. As part of its analysis, the Company may use third-party fair value reports, which provide independent estimates of the fair values of certain long-lived assets.
F-11
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Goodwill and Tradename Intangible Asset
The excess of the purchase price over fair value of net identifiable assets and liabilities of an acquired business (goodwill), and the indefinite-lived tradename intangible asset are not amortized, but rather tested for impairment at least annually. The Company assesses the recoverability of the carrying amount of its goodwill and indefinite-lived tradename intangible asset annually as of the first day of the fourth quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
When assessing the recoverability of goodwill and indefinite-lived tradename intangible asset, the Company may first assess qualitative factors. If an initial qualitative assessment indicates that it is more likely than not that the carrying amount exceeds the fair value, a quantitative analysis may be required. The Company may also elect to skip the qualitative assessment and proceed directly to the quantitative analysis.
Recoverability of the carrying value of goodwill is measured at the reporting unit level. The reporting unit level is The Fresh Market, Inc. as the Chief Operating Decision Maker does not evaluate financial results at the geography level and the Company operates under one name. In performing a quantitative analysis, the Company uses a combination of the expected present value of future cash flows (income approach) and comparable public companies (market approach) to determine the implied fair value of the reporting unit, which is similar to how goodwill is estimated in a business combination. These approaches use primarily unobservable inputs, including discount rates, sales growth rates, and gross margin rates, which are considered Level 3 fair value input measurements. See the description of the fair value hierarchy in Note 5, Fair Value Measurements for further details. The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, tax rates, cash flow projections, and terminal value rates. Discount rates, growth rates, terminal value rates, and cash flow projections are the assumptions most sensitive and susceptible to change as they require significant management judgment, including expected operating performance as well as overall trends in the grocery and supermarket industry. If the carrying amount of the Companys reporting unit exceeds the fair value of the reporting unit, an impairment loss is recorded to write down the carrying amount of goodwill equal to the excess carrying amount of the reporting unit compared to its fair value.
In performing a quantitative analysis, the Company tests its indefinite-lived tradename intangible asset for impairment utilizing the relief from royalty method to determine the estimated fair value for the intangible asset, which is classified as a Level 3 fair value measurement. The relief from royalty method estimates the Companys theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rate, growth rates, tax rates, sales projections, and terminal value rates. The discount rates, royalty rate, growth rates, terminal value rates, and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated for the weighted average cost of capital considering any differences in company-specific risk factors. See Note 5, Fair Value Measurements for further details.
Revenue Recognition
The Companys performance obligations are satisfied upon the transfer of goods to the customer, which occurs at the point of sale, and revenue is recognized, net of coupons and discounts. Sales taxes are not included in revenue.
F-12
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Gift Cards
A wholly-owned subsidiary of the Company sells Company gift cards to customers. There are no administrative fees on unused gift cards, and the gift cards do not have an expiration date. Gift card sales are recorded as a liability to unearned gift card revenue when sold and are recognized as revenue when either the gift card is redeemed or the likelihood of the gift card being redeemed is remote (gift card breakage). The Companys gift card breakage rate is based upon historical redemption patterns, and it recognizes breakage revenue utilizing the redemption recognition method.
Cost of Goods Sold
Cost of goods sold consists of the cost of inventory sold during the period, including the direct costs of purchased merchandise, inventory shrinkage, distribution and supply chain costs, packaging, store supplies, and store occupancy costs. Store occupancy costs include rent, common area maintenance, real estate taxes, personal property taxes, insurance, licenses, utilities, and other non-cash amortization charges. Rebates and discounts from vendors are recorded as the related purchases are made and are recognized as a reduction to cost of goods sold as the related inventory is sold. Cost of goods sold does not contain depreciation expense because the Company outsources all aspects of its supply chain, including warehousing and distribution, and relies upon independent third-party service providers for product shipments to its stores.
Since early fiscal 2017, the Company has relied on one third-party service provider, SuperValu, Inc., to provide key services related to inventory management, warehousing and transportation for all of its stores. During fiscal 2018, SuperValu was acquired by United Natural Foods, Inc. (UNFI), who was the Companys second largest sourcing and distribution provider. The combination of the Companys two largest vendors increases its dependence on one third-party vendor and may affect its costs and service levels, and any unresolved difficulties associated with integration of the two businesses may result in service disruption. Products sourced and distributed through the combination of SuperValu and UNFI accounted for approximately two-thirds of the merchandise the Company purchased in fiscal 2020.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include retail store and corporate compensation (both cash and share-based), buying costs, pre-opening expenses, marketing and advertising, and other store and corporate administrative costs. Pre-opening expenses are costs associated with new store openings or grand re-openings, including costs associated with rent, store labor, travel, recruiting, relocating and training personnel, advertising, and other miscellaneous costs, while grand re-opening expenses are primarily related to advertising. Pre-opening costs and costs incurred for producing and communicating advertising are expensed when incurred. Advertising costs totaled $16,175, $9,907, and $13,362 for the years ended January 31, 2021, January 26, 2020, and January 27, 2019, respectively.
Leases
The Company leases all of its retail store locations, its administrative offices, and certain equipment. The Company determines if a contractual arrangement is a lease on the contracts inception date. If the contractual arrangement is a lease, the Company establishes a lease asset and liability on the lease commencement date. Lease liabilities represent the present value of minimum lease payments not yet paid and considers the timing of any rent holidays where the Company has control of the property prior to the opening of the store and scheduled
F-13
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
rent escalations within the lease agreement. Operating lease assets represent the right to use an underlying asset and are based on the operating lease liabilities adjusted for prepayments, lease incentives, and impairments, if any. The Company records the lease asset to the Operating lease assets, net line item and corresponding lease liability to the Accrued liabilities line item for the current portion and to the Operating lease liabilities line item for the noncurrent portion on its Consolidated Balance Sheets.
As most of the Companys lease agreements do not have an implicit rate, the Company uses an estimated incremental borrowing rate based on an analysis of third-party information available at the lease commencement date of a similar term as the lease in determining the estimated present value of the lease payments.
Most of the leases include one or more options to renew, with renewal terms that can extend the lease. The exercise of lease renewal options is at the Companys sole discretion and is not included in the Companys measurement of its lease asset and corresponding lease liability until it is reasonably certain that the Company will exercise the options within the lease.
Operating lease expense represents fixed lease payments for operating leases recognized on a straight-line basis over the applicable lease term. With the exception of equipment leases, the Company accounts for the lease and non-lease components as a single lease component for all classes of leases. The Company separates the lease and non-lease components for equipment leases.
There are no finance lease assets as of January 31, 2021 and January 26, 2020.
Most of the Companys real estate lease agreements include variable payments related to pass-through costs for common area maintenance, taxes, and insurance. A small number of the Companys real estate lease agreements have fixed payments for common area and insurance charges. The estimated present value of the fixed payments and scheduled escalations within the lease agreement are recorded as a lease asset to the Operating lease assets, net line item and corresponding lease liability to the Accrued liabilities line item for the current portion and to the Operating lease liabilities line item for the noncurrent portion on its Consolidated Balance Sheets.
Additionally, certain of the Companys leases include a payment of contingent rent expense based on a percentage of sales above stipulated minimums. These variable payments are not included in the measurement of the lease asset or the corresponding lease liability and are expensed as incurred. For lease agreements with contingent rents, the Company begins accruing an estimate for contingent rent expense when it is determined that it is probable the specified levels of sales in excess of the stipulated minimums will be reached during the year.
Leases with a term of 12 months or less (short-term leases) are not recorded on the balance sheet. The Company does not currently have any material short-term leases. Additionally, the Companys lease agreements do not contain any residual value guarantees or material restrictive covenants.
The Company subleases certain real estate to third parties, which have all been classified as operating leases. The Company recognizes sublease income on a straight-line basis.
Store Closure Costs
Store closure costs include related ongoing occupancy costs, employee severance costs, write-down and loss on disposal of assets, and other costs.
F-14
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Prior to the adoption of ASC842, Leases, store closure costs also included lease obligation costs related to closed stores, which represented the present value of the remaining noncancelable lease payments required under operating leases for the closed stores, less an estimate of subtenant income.
Transaction and related costs
Ongoing costs associated with legal fees in connection with litigation related to the Acquisition of The Fresh Market, Inc. as well as any settlements are recorded in the Transaction and related costs line item in the Companys Consolidated Statements of Operations. See Note 15, Commitments and Contingencies for further details.
Share-based Compensation
The Company expenses the fair value of share-based compensation awards granted to its employees and independent directors on a straight-line basis over the period that services are required to be provided in exchange for the award, which typically is the period over which the award vests. For awards based on performance conditions, the Company will recognize the expense when the vesting criteria related to a change of control and, in certain cases, initial public offering occur as the Company cannot determine when it is probable that the vesting criteria will be achieved.
The Company measures share-based compensation expense related to its stock options at the time of grant. Because the Companys stock is not publicly traded, it is not possible to base the expected volatility assumption on the historical volatility of the Companys stock. The volatility assumption is based on the historical volatility of a group of the Companys publicly traded peers. The Company elects to account for forfeitures as they occur rather than estimate expected forfeitures. Share-based compensation expense is recorded in Selling, general and administrative expenses in the Companys Consolidated Statements of Operations.
Income Taxes
The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in income in the period that includes the enactment date.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In this process, certain relevant criteria are evaluated including: the taxable income in prior carryback years that can be used to absorb net operating losses and credit carrybacks, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, prudent and feasible tax planning strategies, and future expected taxable income. The Company establishes a valuation allowance for deferred tax assets when it is estimated to be more likely than not that the deferred tax assets will not be realized.
F-15
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
The Company applies the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (ASC 740-10), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Pursuant to this guidance, the tax benefits would be recognized in the consolidated financial statements from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Company has no uncertain tax positions. Additionally, ASC 740-10 provides guidance on other items related to uncertainty in income taxes, including derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Recent Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequently issued related ASUs in 2018 and 2019 (collectively, ASC 842, Leases) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the standard as of January 28, 2019, the first day of fiscal 2019, using the modified retrospective approach. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits companies not to reassess prior conclusions on lease identification, lease classification, and initial direct costs. The Company did not elect the hindsight practical expedient.
The adoption of ASC 842, Leases, resulted in the recognition of lease assets and corresponding lease liabilities for the present value of lease payments expected over the remaining lease term. Included in the measurement of the lease assets at the adoption of ASC 842, Leases, are transition balances for intangible assets and liabilities associated with favorable and unfavorable lease agreements recorded in purchase accounting under ASC 805, closed store reserves, deferred rent, and tenant improvement allowances as of January 28, 2019. The amortization periods for these transition adjustments are based on the related leased assets single unit of account, and determined using the remaining lease term, including any renewal options that the Company was reasonably certain to exercise, for the related leased asset. The single unit of account resulted in an increase in amortization expense of $11.2 million in fiscal 2020 and $19.8 million in fiscal 2019 primarily driven by amortizing the former favorable lease assets over a shorter period. The Company expects incremental non-cash expense of $8.3 million in fiscal 2021, $5.2 million in fiscal 2022, and $3.2 million in fiscal 2023 related to the shorter amortization period for former favorable lease assets included in the right to use lease asset assuming there is no subsequent re-evaluation of the lease terms for lease modifications that may occur in the future.
Additionally, in accordance with the transition guidance, the Company evaluated locations where the Company was considered the accounting owner and determined the locations met the criteria to be classified as operating leases. As a result, upon adoption of ASC 842, Leases, the Company derecognized the assets and related financing obligations recorded for these leases as accounting owner locations and began to account for the leases as operating leases under ASC 842, Leases, including recognizing rent expense for these locations. Prior to adoption, the Company recorded depreciation expense associated with the building asset and interest expense for the financing lease obligation.
F-16
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
The table below presents the impact of adopting ASC 842, Leases, to the beginning balances for fiscal 2019, including an adjustment, net of tax, to beginning retained earnings of $3.0 million for fiscal 2019.
January 28, 2019 |
Adoption impact of ASC 842, Leases |
Adjusted balance as of January 28, 2019 |
||||||||||
Assets: |
||||||||||||
Operating lease asset, net |
$ | | $ | 222,585 | $ | 222,585 | ||||||
Total property and equipment, net |
212,734 | (4,397 | ) | 208,337 | ||||||||
Intangible assets, net |
332,417 | (72,417 | ) | 260,000 | ||||||||
|
|
|||||||||||
Total change to assets |
$ | 145,771 | ||||||||||
|
|
|||||||||||
Current liabilities: |
||||||||||||
Accrued liabilities |
$ | 83,527 | $ | (5,948 | ) | $ | 77,579 | |||||
Current portion of long-term debt including obligations under financing lease |
2,062 | (812 | ) | 1,250 | ||||||||
Current portion of operating lease liabilities |
| 27,968 | 27,968 | |||||||||
|
|
|||||||||||
Total change to current liabilities |
$ | 21,208 | ||||||||||
|
|
|||||||||||
Noncurrent liabilities: |
||||||||||||
Operating lease liabilities |
$ | | $ | 171,707 | $ | 171,707 | ||||||
Finance lease obligations |
11,138 | (11,138 | ) | | ||||||||
Closed store reserves |
29,808 | (23,033 | ) | 6,775 | ||||||||
Deferred income taxes |
28,745 | 1,736 | 30,481 | |||||||||
Unfavorable lease interests |
9,726 | (9,726 | ) | | ||||||||
Other noncurrent liabilities |
26,058 | (7,981 | ) | 18,077 | ||||||||
|
|
|||||||||||
Total change to noncurrent liabilities |
$ | 121,565 | ||||||||||
|
|
|||||||||||
Stockholders equity: |
||||||||||||
Accumulated deficit |
$ | (434,806 | ) | $ | 2,998 | $ | (431,808 | ) | ||||
|
|
|||||||||||
Total change to stockholders equity |
$ | 2,998 | ||||||||||
|
|
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent ASUs to clarify specific topics (collectively, ASC 326). ASC 326 changes the impairment model for most financial assets and certain other instruments to leverage a new forward-looking expected loss model that replaces the current incurred loss model. The Company adopted ASC 326 effective January 27, 2020, using the modified retrospective approach. There was no impact to opening retained earnings as of January 27, 2020 or on the Companys consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in interim periods, and the recognition of deferred tax for investments. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years, and
F-17
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
interim periods within fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently in the process of evaluating the effect this guidance will have on its consolidated financial statements and related disclosures and does not expect the guidance to have a material impact.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an update that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The optional guidance is provided to ease the potential burden of accounting for reference rate reform. The guidance is effective and can be adopted no later than December 31, 2022. The Company is currently in the process of evaluating the effect this guidance will have on its consolidated financial statements and related disclosures and does not expect the guidance to have a material impact.
3. Long-Term Debt
The Companys long-term debt consisted of the following for the dates presented:
January 31, 2021 |
January 26, 2020 |
|||||||
Senior Secured Notes |
$ | 800,000 | $ | 800,000 | ||||
New Superpriority Secured Notes |
133,989 | n/a | ||||||
Superpriority Secured Notes |
n/a | 123,125 | ||||||
|
|
|
|
|||||
Total debt outstanding |
933,989 | 923,125 | ||||||
Less: |
||||||||
Unamortized discount and premium, net |
(2,396 | ) | (6,235 | ) | ||||
Unamortized debt issuance costs |
(10,374 | ) | (14,873 | ) | ||||
Current portion |
(1,350 | ) | (1,250 | ) | ||||
|
|
|
|
|||||
Total long-term debt |
$ | 919,869 | $ | 900,767 | ||||
|
|
|
|
As of January 31, 2021, the Company was in compliance with its debt covenants under the indenture governing the 9.75% First-Priority Senior Secured Notes due 2023 (the Senior Secured Notes) and the indenture governing the Super Senior Secured Notes due 2025 (the New Superpriority Secured Notes).
Original Issue Discount and Premium, Net and Debt Issuance Costs
The Company incurred original issue discounts and debt issuance costs related to the issuance of the Senior Secured Notes on April 27, 2016, the Superpriority Secured Notes on March 15, 2018, and the New Superpriority Secured Notes on March 13, 2020.
The Company transferred Senior Secured Notes held at the Company-level to its stockholders as a dividend in January 2021 as described below in One-Time Dividend Distribution of Held Senior Secured Notes. The fair value of the Senior Secured Notes was in excess of par when transferred and therefore, a premium was recognized at the date of the dividend and will be amortized over the remaining life of the bonds.
F-18
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
The original issue discounts and premiums incurred with the debt offerings and dividends and related expense consisted of the following for the periods presented:
Year Ended | ||||||||||||||||
Original Issue Discount (Premium) |
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
|||||||||||||
Senior Secured Notes |
$ | 8,000 | $ | 1,087 | $ | 1,112 | $ | 1,002 | ||||||||
Senior Secured Notes - Dividend |
(1,836 | ) | (26 | ) | n/a | n/a | ||||||||||
New Superpriority Secured Notes |
1,350 | 201 | n/a | n/a | ||||||||||||
Superpriority Secured Notes |
2,500 | 37 | 473 | 367 | ||||||||||||
|
|
|
|
|
|
|||||||||||
$ | 1,299 | $ | 1,585 | $ | 1,369 | |||||||||||
|
|
|
|
|
|
The Company incurred debt issuance costs related to the issuance of the Senior Secured Notes on April 27, 2016, the Revolving Credit Facility on April 27, 2016, the Superpriority Secured Notes on March 15, 2018, and the New Superpriority Secured Notes on March 13, 2020. The debt issuance costs incurred and related expense consisted of the following for the periods presented:
Year Ended | ||||||||||||||||
Debt Issuance Costs |
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
|||||||||||||
Senior Secured Notes |
$ | 24,171 | $ | 3,749 | $ | 3,359 | $ | 3,028 | ||||||||
New Superpriority Secured Notes |
1,338 | 199 | n/a | n/a | ||||||||||||
Superpriority Secured Notes |
1,580 | 24 | 299 | 232 | ||||||||||||
Revolving Credit Facility |
5,056 | n/a | n/a | 3,280 | ||||||||||||
|
|
|
|
|
|
|||||||||||
$ | 3,972 | $ | 3,658 | $ | 6,540 | |||||||||||
|
|
|
|
|
|
The original issue discount and premium, net and debt issuance costs are recorded as a contra liability on its Consolidated Balance Sheets and are presented as a reduction to Long-term debt. The original issue discount and premium, net and debt issuance costs are amortized using the effective interest method over the life of the related debt to Interest expense on the Companys Consolidated Statements of Operations.
The Company purchased Senior Secured Notes during July 2020 in open market transactions, which was considered an effective retirement of the bonds, and the remaining unamortized original issue discount of $316 and debt issuance costs of $956 were written off as described below in Purchase and Effective Retirement of Senior Secured Notes.
The Superpriority Secured Notes were redeemed and terminated on March 13, 2020. The remaining unamortized original issue discount of $1,622 and debt issuance costs of $1,025 were written off as described below in Redemption and Termination of Superpriority Secured Notes.
The Company wrote off the remaining unamortized debt issuance costs of $3,202 in connection with the termination of the Revolving Credit Facility on March 15, 2018 in connection with the issuance of the Superpriority Secured Notes. The write-off of debt issuance costs is recorded to (Gain) loss on extinguishment of debt on the Companys Consolidated Statements of Operations.
F-19
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
Senior Secured Notes
On April 27, 2016, the Pomegranate Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Holdings (Merger Sub) successfully completed the offering of $800,000 aggregate principal amount of 9.75% First-Priority Senior Secured Notes due 2023. The Senior Secured Notes were offered and sold to qualified institutional buyers within the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and to persons outside of the United States in compliance with Regulation S under the Securities Act. The Senior Secured Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities laws.
The Senior Secured Notes were issued pursuant to an indenture, dated April 27, 2016, among Merger Sub and Wilmington Trust, National Association, as trustee (as supplemented, the Senior Secured Notes Indenture). On April 27, 2016, the Company and the initial subsidiary guarantors under the Senior Secured Notes Indenture (the Subsidiary Guarantors) entered into a supplemental indenture pursuant to which The Fresh Market, Inc. assumed the obligations of Merger Sub under the Senior Secured Notes and the Senior Secured Notes Indenture, and the Subsidiary Guarantors guaranteed The Fresh Market, Inc.s obligations under the Senior Secured Notes and the Senior Secured Notes Indenture. The Senior Secured Notes and the related guarantees are secured by first-priority security interests in, subject to certain exceptions set forth in the Senior Secured Notes Indenture and the security documents, substantially all of the existing and future assets of The Fresh Market, Inc. and the Subsidiary Guarantors, which assets also secure the Superpriority Secured Notes described below.
The Senior Secured Notes will mature on May 1, 2023. Interest on the Senior Secured Notes accrues at 9.75% per annum and is paid semi-annually, in arrears, on May 1 and November 1 of each year.
The Company may redeem the Senior Secured Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the Senior Secured Notes Indenture.
The Senior Secured Notes Indenture contains covenants that limit The Fresh Market, Inc.s (and most of its Subsidiaries) ability to, among other things: (i) incur additional indebtedness or issue certain preferred shares; (ii) make dividend payments on or make other distributions in respect of its capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting its restricted subsidiaries; (vi) create liens on assets; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and (viii) enter into certain transactions with its affiliates. These covenants are subject to a number of important limitations and exceptions. Additionally, upon the occurrence of specified change of control events, The Fresh Market, Inc. must offer to repurchase the Senior Secured Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The Senior Secured Notes Indenture also provides for customary events of default.
Issuance of Super Senior Secured Notes Due 2025
On March 13, 2020, the Companys subsidiary, The Fresh Market, Inc., completed the issuance and sale of $135 million aggregate principal amount of Super Senior Secured Notes due 2025 at a purchase price equal to 99.00% of the principal amount thereof in a private placement transaction. The New Superpriority Secured Notes were issued pursuant to an Indenture by and between The Fresh Market, Inc., Holdings, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee (the New Superpriority Secured Notes Indenture).
F-20
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
The New Superpriority Secured Notes and the related guarantees are secured by first priority liens with respect to the collateral that rank pari passu with the liens on the collateral securing the Senior Secured Notes (although the holders of the New Superpriority Secured Notes will be entitled to receive payments ahead of the Senior Secured Notes under a payment waterfall set forth in the existing intercreditor agreement and the Senior Secured Notes are not secured by a pledge of the equity interests of The Fresh Market, Inc. held by Holdings), as described below.
Proceeds from the New Superpriority Secured Notes were used to finance the redemption in full of the existing Superpriority Secured Notes and for general corporate purposes. In connection with the redemption in full of the Superpriority Secured Notes, the Superpriority Secured Notes Indenture was terminated.
Maturity, Interest Rates and Fees
The New Superpriority Secured Notes will mature on March 13, 2025, subject to a springing maturity to March 1, 2023 if the aggregate principal amount of the Senior Secured Notes outstanding on such date equals or exceeds $120 million.
Interest on the New Superpriority Secured Notes accrues at a rate equal to (i) a LIBOR rate determined by reference to the costs of funds for Dollar deposits for a 3 month interest period, adjusted for certain additional costs and subject to a 1.25% LIBOR rate floor plus (ii) an applicable margin of 9.50% per annum. The applicable margin is subject to one stepdown and one stepup, depending on the annualized EBITDA of The Fresh Market, Inc. as set forth in the New Superpriority Secured Notes Indenture. Interest on the New Superpriority Secured Notes is payable on the last day of March, June, September and December of each year.
Amortization and Mandatory Redemptions
The New Superpriority Secured Notes Indenture requires scheduled quarterly amortization payments on the New Superpriority Secured Notes in an annual amount equal to 1.0% of the original principal amount of the New Superpriority Secured Notes outstanding on each issue date, with the balance to be paid at maturity.
In addition, the New Superpriority Secured Notes Indenture requires the Company to make an offer to holders to redeem outstanding New Superpriority Secured Notes, subject to certain exceptions, at the prices set forth in the New Superpriority Secured Notes Indenture with:
| 50% of The Fresh Market, Inc.s annual excess cash flow, as defined under the New Superpriority Secured Notes Indenture; |
| 100% of the net cash proceeds of certain non-ordinary course asset sales, casualty events and other extraordinary receipts, in each case subject to certain exceptions; and |
| 100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Superpriority Secured Notes Indenture. |
Voluntary Redemption
The Company may redeem the New Superpriority Secured Notes, in whole or in part, at any time on or after March 13, 2022 (but prior to March 13, 2023) at a price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The Company may redeem the
F-21
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
New Superpriority Secured Notes, in whole or in part, at any time on or after March 13, 2023 (but prior to March 13, 2024) at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The Company may redeem the New Superpriority Secured Notes, in whole or in part, at any time on or after March 13, 2024 at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In addition, prior to March 13, 2022, the Company may redeem the New Superpriority Secured Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the New Superpriority Secured Notes redeemed, plus a make-whole premium and accrued and unpaid interest, if any, to, but not including, the date of redemption.
Collateral and Guarantors
All obligations under the New Superpriority Secured Notes and the Indenture are fully and unconditionally guaranteed by Holdings and each of The Fresh Market, Inc.s existing and future direct and indirect material subsidiaries, subject to certain exceptions. The New Superpriority Secured Notes and the related guarantees are secured by a pledge of The Fresh Market, Inc.s capital stock directly held by Holdings and substantially all of The Fresh Market, Inc.s assets and those of each subsidiary guarantor, including a pledge of the capital stock of all entities directly held by The Fresh Market, Inc. or the subsidiary guarantors, in each case subject to certain exceptions. Such security interests consist of first-priority liens with respect to the collateral that rank pari passu with the liens on the collateral securing the Senior Secured Notes (although the holders of the New Superpriority Secured Notes will be entitled to receive payments ahead of the Senior Secured Notes under a payment waterfall set forth in the existing intercreditor agreement as described in the following paragraph and the Senior Secured Notes are not secured by a pledge of the equity interests of The Fresh Market, Inc. held by Holdings).
Under the terms of the security documents and intercreditor agreement, subject to certain exceptions set forth therein, if there is an event of default existing under the New Superpriority Secured Notes Indenture, any amounts received by the collateral agent or any other secured party in respect of the New Superpriority Secured Notes, the Senior Secured Notes or any other indebtedness subject to the intercreditor agreement (whether or not proceeds of collateral) will be applied to repay the noteholders under the New Superpriority Secured Notes Indenture prior to any payment to the holders of the Senior Secured Notes until the obligations under the New Superpriority Secured Indenture and the New Superpriority Secured Notes, including in respect of interest, fees and expenses (including interest, fees, expenses, indemnity claims and other monetary obligations accrued during the pendency of an insolvency proceeding, whether or not constituting an allowed claim in such proceeding), have been paid in full.
Restrictive Covenants and Other Matters
The New Superpriority Secured Notes Indenture requires that The Fresh Market, Inc. maintains a daily minimum balance of cash and cash equivalents in aggregate of $7.5 million.
The New Superpriority Secured Notes Indenture contains certain affirmative covenants. The negative covenants in the Indenture include, among other things, limitations (none of which are absolute) on the ability of The Fresh Market, Inc. and its subsidiaries to:
| incur additional debt; |
| create liens on certain assets; |
| make certain loans or investments (including acquisitions); |
| pay dividends on or make distributions in respect of its capital stock or make other restricted payments; |
F-22
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
| consolidate, merge, sell or otherwise dispose of its assets; |
| enter into certain transactions with its affiliates; |
| enter into certain sale-leaseback transactions; |
| change its lines of business; |
| restrict dividends from its subsidiaries or restrict liens; |
| change its fiscal year; and |
| prepay certain debt or modify the terms of certain debt or organizational agreements. |
In addition, the New Superpriority Secured Notes Indenture contains limitations on the ability of Holdings to, among other things, conduct business other than activities related to its legal existence, the ownership of the equity interests of The Fresh Market, Inc. and its subsidiaries, the performance of its obligations under the New Superpriority Secured Notes Indenture and the receipt and making of certain distributions.
The New Superpriority Secured Notes Indenture contains certain customary events of default, including relating to a change of control. If an event of default occurs, the noteholders under the New Superpriority Secured Notes Indenture will be entitled to take various actions, including the acceleration of amounts due under the New Superpriority Secured Notes and the New Superpriority Secured Notes Indenture and all actions permitted to be taken by a secured creditor in respect of the collateral securing the New Superpriority Secured Notes and the New Superpriority Secured Notes Indenture.
Restricted Net Assets
Both the Senior Secured Notes and New Superpriority Secured Notes contain covenants limiting the ability of Holdings and The Fresh Market, Inc. to pay dividends, distribute capital stock, and make payments to the Company. Both Holdings and The Fresh Market, Inc. currently have no net assets as of January 31, 2021, predominantly due to an accumulated deficit in retained earnings; therefore, Holdings and The Fresh Market, Inc. and its subsidiaries have no restricted net assets within the meaning of Rule 4-08(e)(3) or Rule 12-04 of Regulation S-X.
Redemption and Termination of Superpriority Secured Notes
On March 13, 2020 in connection with the issuance of the New Superpriority Secured Notes, the Company redeemed all of the outstanding Superpriority Secured Notes at a redemption price of $1,064.88 per $1,000 of outstanding principal amount of Superpriority Secured Notes, which redemption price represented the make-whole premium on the Superpriority Secured Notes on the date of redemption plus accrued and unpaid interest, and terminated all commitments under the indenture governing the Superpriority Secured Notes. The noteholders of the Superpriority Secured Notes did not participate in the private placement transaction for the New Superpriority Secured Notes.
The Company incurred a loss on the extinguishment of debt of $7,572 for the termination of the Superpriority Secured Notes in connection with the issuance of the New Superpriority Secured Notes on March 13, 2020. The loss on extinguishment of debt included the write off for the remaining unamortized original issue discount of $1,622 and debt issuance costs of $1,025. Additionally, the Company paid a make whole premium of $4,925 to redeem the Superpriority Secured Notes. The charges associated with the redemption of the Superpriority Secured Notes are recorded to Loss on extinguishment of debt on the Companys Consolidated Statements of Operations.
F-23
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
3. Long-Term Debt (continued)
Purchase and Effective Retirement of Senior Secured Notes
During July 2020, the Company purchased Senior Secured Notes with a par value of $62,506 in open market transactions. The total cash paid was $54,638, which included $53,530 for the bonds and $1,108 for accrued, but unpaid interest at the time of purchase.
The purchased Senior Secured Notes had a carrying value of $61,234 for the Company due to $316 in unamortized original issue discount and $956 in unamortized debt issuance costs. The purchase of Senior Secured Notes by the Company was considered an effective retirement of the debt since the purchased debt was issued by a wholly owned subsidiary of the Company. As a result, the Company recognized a pre-tax gain on the extinguishment of debt of $7,704 associated with the effective retirement of the debt, which is the difference between the cash purchase price of the debt and the carrying value on the purchase date.
One-Time Dividend Distribution of Held Senior Secured Notes
In January 2021, the Company declared and recorded a one-time dividend of assets held at the Company-level for approximately $73,044 to stockholders that was comprised cash of $7,381, the $62,506 par value of the Senior Secured Notes purchased in July 2020, which had a fair value of $64,342 and accrued interest payable of $1,321 as of the dividend date.
The Senior Secured Notes fair value of $64,342 as of the dividend date was based on indicative quotes on the dividend date, which is a Level 2 fair value measurement. The Company accounted for the distribution of the Senior Secured Notes similar to a new bond offering and recorded the $62,506 par value and related $1,836 premium to the Long-term debt line item and recorded the associated accrued interest as of the dividend date of $1,321 to the Accrued liabilities line item on the Companys Consolidated Balance Sheets.
Termination of Revolving Credit Facility
The Fresh Market, Inc. was acquired via a tender offer and merged into Merger Sub on April 27, 2016 (Acquisition). In connection with the Acquisition, The Fresh Market, Inc. assumed obligations under a Revolving Credit Facility (the Revolving Credit Facility), in an aggregate principal amount of up to $100,000, with a maturity of five years, which included both a $40,000 letter of credit sub-facility and a $15,000 swingline loan sub-facility.
On March 15, 2018, the Company terminated the Revolving Credit Facility. On the termination date, there was no principal or interest outstanding under the Revolving Credit Facility. The Company recorded $3,202 of unamortized debt issuance costs for the Revolving Credit Facility to the Loss on extinguishment of debt line item on the Companys Consolidated Statements of Operations.
4. Intangibles
Intangibles assets, net
The following table presents the Companys indefinite-lived tradename intangible asset at January 31, 2021 and January 26, 2020.
January 31, 2021 | January 26, 2020 | |||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Impairment Losses |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Impairment Losses |
Net Carrying Amount |
|||||||||||||||||||
Tradename |
$ | 260,000 | $ | | $ | 260,000 | $ | 260,000 | $ | | $ | 260,000 |
F-24
The Fresh Market Holdings, Inc.
Notes to Consolidated Financial Statements - (continued)
4. Intangibles (continued)
Goodwill
The following table presents the Companys goodwill at January 31, 2021 and January 26, 2020.
January 31, 2021 | January 26, 2020 | |||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Impairment Losses |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Impairment Losses |
Net Carrying Amount |
|||||||||||||||||||
Goodwill |
$ | 728,702 | $ | (158,384 | ) | $ | 570,318 | $ | 728,702 | $ | (158,384 | ) | $ | 570,318 |
5. Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurement, requires fair value measurements to be classified and disclosed in one of the following pricing categories:
| Level 1 - Quoted prices in active markets for identical assets or liabilities as of the reporting date. |
| Level 2 - Observable inputs other than quoted prices in active markets for identical assets or liabilities. |
| Level 3 - Unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions. |
The Companys financial instruments consist primarily of cash and cash equivalents, trade payables, and debt. For cash and cash equivalents and trade payables, the carrying amounts of these financial instruments as of January 31, 2021 and January 26, 2020 were considered representative of their fair values due to their short terms to maturity. The fair values of the Companys debt is estimated based on indicative quotes, where available. If indicative quotes were not available, the fair value was based on market yields and the underlying terms of the debt. The carrying value of the Companys Senior Secured Notes, New Superpriority Secured Notes, and Superpriority Secured Notes are net of original issue discounts, premiums, and debt issuance costs.
The following table presents the carrying value, fair value, and valuation input levels of the Companys financial liabilities measured at fair value on a recurring basis as of the dates presented.
January 31, 2021 | January 26, 2020 |
|
||||||||||||||||||
Carrying Value |
Fair Value | Carrying Value |
Fair Value | Valuation Inputs |
||||||||||||||||
Senior Secured Notes |
$ | 789,518 | $ | 828,000 | $ | 781,600 | $ | 416,000 | Level 2 | |||||||||||
New Superpriority Secured Notes |
131,701 | 146,517 | n/a | n/a | Level 2 | |||||||||||||||
Superpriority Secured Notes |
n/a | n/a | 120,417 | 128,211 | Level 2 |
F-25
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
5. Fair Value Measurements (continued)
The following table shows the carrying value of the Companys long-lived assets that have been adjusted to fair value on a non-recurring basis and the impact on the Companys results of operations for the years ended January 26, 2020, and January 27, 2019. There were no adjustments to fair value for the year ended January 31, 2021.
|
Fair Value Measurement |
|
||||||||||||||||||
For the Year Ended |
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
Impairment |
|||||||||||||||
(in thousands) | ||||||||||||||||||||
January 26, 2020 |
||||||||||||||||||||
Property and equipment |
$ | 6,266 | $ | | $ | 589 | $ | | $ | 5,677 | ||||||||||
Right of Use Asset |
706 | | | 374 | 332 | |||||||||||||||
January 27, 2019 |
||||||||||||||||||||
Property and equipment |
$ | 5,029 | $ | | $ | 1,935 | $ | | $ | 3,094 |
Property and equipment
During the year ended January 26, 2020, the Company recorded impairment charges of $5,677 to write-down the carrying value of certain fixed assets to their estimated fair value. This impairment was primarily related to certain store locations and a store closed in September 2019. The amount of the impairment was based on actual sale prices for similar equipment obtained from third-party dealers of such equipment. Quoted prices in active markets for similar equipment are considered a Level 2 input in the fair value measurement hierarchy.
During the year ended January 27, 2019, the Company recorded $3,094 as an impairment to reduce the carrying value of certain fixed assets to their estimated proceeds. This impairment was primarily related to store closure and exit activities in July 2018. The amount of the impairment was based on actual sale prices for similar equipment obtained from third-party dealers of such equipment. Quoted prices in active markets for similar equipment are considered a Level 2 input in the fair value measurement hierarchy.
These charges were measured at various times during fiscal 2019 and 2018. The impairments are included in the Impairments and store closure costs line item on the accompanying Consolidated Statements of Operations.
Right of Use Asset
During the year ended January 26, 2020, the Company recorded impairment charges of $332 to write-down the carrying value of certain right of use assets to their estimated fair value. These right of use assets are included in Operating lease assets, net line item of the accompanying Consolidated Balance Sheets with the corresponding charge recorded to the Impairments and store closure costs line item on the Consolidated Statements of Operations. Assumptions used to estimate the fair value were based on the current economic environment, real estate market rents, and other inputs, which are considered a Level 3 fair value measurement.
Goodwill
The Company performed impairment tests for goodwill on the first day of the fourth quarter of fiscal 2020, 2019, and 2018. The Company determined the fair value of its reporting unit exceeded its carrying value by approximately 42% in its fiscal 2020 analysis. No impairment charges have been recorded during the past three fiscal years.
F-26
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
5. Fair Value Measurements (continued)
Recoverability of the carrying value of goodwill is measured at the reporting unit level. In performing a quantitative analysis, the Company uses a combination of the expected present value of future cash flows (income approach) and comparable public companies (market approach) to determine the implied fair value of the reporting unit, which is similar to how goodwill is estimated in a business combination. These approaches use primarily unobservable inputs, including discount rates, sales growth rates, and gross margin rates, which are considered Level 3 fair value measurements. The analysis took into account expected operating performance as well as overall trends in the grocery and supermarket industry.
Tradename
The Company performed impairment tests for its indefinite-lived tradename intangible asset on the first day of the fourth quarter of fiscal 2020, 2019, and 2018. The Company determined the fair value of the tradename asset exceeded its carrying value by approximately 50% in its fiscal 2020 analysis. No impairment charges have been recorded during the past three fiscal years.
The Company used the relief from royalty method to estimate the fair value of the tradename. This method uses primarily unobservable inputs, including discount rates, royalty rate, growth rates, tax rates, sales projections, and terminal growth rates, which are considered Level 3 fair value measurements.
Lease Obligations
During the year ended January 27, 2019, the Company recorded $20,995 of lease obligations for closed stores and locations where stores were not opened as a nonrecurring fair value measurement. These lease obligation costs are included in the Accrued liabilities and Closed store reserves line items of the accompanying Consolidated Balance Sheets with the corresponding charge recorded to the Impairments and store closure costs line item on the Consolidated Statements of Operations. The lease obligations were estimated based on the present value of the minimum lease payments less an estimate of sublease income, which is a Level 2 fair value measurement.
6. Impairments and Store Closure Costs
The Company closed one store in September 2019 and one store in November 2019 and 15 stores in July 2018. The decision was made to close these stores after careful consideration of expected future cash flows and the long-term strategic importance of each individual store in order to optimize the overall portfolio.
Impairments
Impairments recorded for long-lived assets were as follows for the periods presented:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Property and equipment impairments |
$ | | $ | 5,677 | $ | 3,094 | ||||||
Right of use asset impairments |
| 332 | | |||||||||
|
|
|
|
|
|
|||||||
Total impairments |
$ | | $ | 6,009 | $ | 3,094 | ||||||
|
|
|
|
|
|
Refer to Note 5, Fair Value Measurements, for a discussion of the methods and inputs used to estimate the fair value of those asset groups.
F-27
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
6. Impairments and Store Closure Costs (continued)
Store Closure Costs
The number of stores closed and related store closure costs were as follows for the periods presented:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Lease liability and closed store reserve adjustments |
$ | (1,630 | ) | $ | (5,935 | ) | $ | 13,864 | ||||
Lease liability and related ongoing costs |
3,739 | 4,805 | 2,571 | |||||||||
Loss on sale of fixed assets, net of write-down and loss on other disposals |
198 | 196 | 3,462 | |||||||||
Employee and severance costs |
| 214 | 1,981 | |||||||||
Other costs |
1,226 | 98 | 2,290 | |||||||||
|
|
|
|
|
|
|||||||
Total store closure costs |
$ | 3,533 | $ | (622 | ) | $ | 24,168 | |||||
|
|
|
|
|
|
|||||||
Stores Closed (in units) |
0 | 2 | 15 |
Store closure costs include related ongoing costs, employee severance costs, write-down and loss on disposal of assets, and other costs. Prior to the adoption of ASC842, Leases, store closure costs also included lease obligation costs related to closed stores, which represented the present value of the remaining noncancelable lease payments required under operating leases for the closed stores, less an estimate of subtenant income. When leases are terminated, lease liabilities and closed store reserves are adjusted to actual expense, which may result in a reversal of prior accrued expense. During the years ended January 31, 2021 and January 26, 2020, negotiated lease terminations resulted in a net benefit for store closure costs, as shown in the Lease liability and closed store reserve adjustments line item in the table above.
Closed Store Reserves
Activity for the closed store reserve during the years ended January 31, 2021 and January 26, 2020 was as follows:
January 31, 2021 |
January 26, 2020 |
|||||||
Beginning balance |
$ | 4,107 | $ | 37,460 | ||||
ASC 842 adoption |
| (28,477 | ) | |||||
Additions and adjustments |
(1,190 | ) | (2,564 | ) | ||||
Payments |
(1,035 | ) | (2,312 | ) | ||||
|
|
|
|
|||||
Ending balance |
$ | 1,882 | $ | 4,107 | ||||
|
|
|
|
With the adoption of ASC 842, Leases, the Company utilized transition guidance where lease assets established under ASC 842, Leases, were offset by existing closed store reserves. The Company reduced the carrying value for lease assets associated with closed store locations by $28,477 during the year ended January 26, 2020.
F-28
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
6. Impairments and Store Closure Costs (continued)
Lease Assignments
As of January 31, 2021, the Company has assigned or sublet, to various third parties, three leases on properties where it no longer operates stores. The assignees are responsible for making the payments required by the leases and are liable for any payments that the Company makes on their behalf. The Company remains secondarily liable in the event of default by the assignees, with the lease terms expiring on or before January 31, 2028 plus additional option terms if an assignee exercises renewal options. The maximum potential liability for future rental payments related to the primary lease term that the Company could be required to make under these leases at January 31, 2021 was $4,502. The Company could also be obligated to pay property taxes and other lease related costs in the event of default by the assignee. The potential liability under these leases will decrease over time as lease payments are made, and the assigned leases expire. The Company believes it is remote that it will be ultimately responsible for the obligations under these leases and, as a result, no obligation was recorded at January 31, 2021.
7. Leases
The Company leases all of its retail store locations, its administrative offices, and certain equipment, under noncancelable operating lease agreements that expire from 2021 to 2035. The store location leases generally have an initial term ranging from 10 to 15 years and contain renewal options ranging from 15 to 30 years with increased rental rates during the option periods.
ASC 842, Leases, Disclosures
Lease costs includes both the fixed and variable expense recorded for leases. The components of lease cost were as follows for the periods presented:
Year Ended | ||||||||||
Classification | January 31, 2021 |
January 26, 2020 |
||||||||
Operating lease cost: |
||||||||||
Cost of goods sold |
$ | 65,476 | $ | 74,526 | ||||||
Selling, general and administrative |
1,292 | 1,749 | ||||||||
Variable lease cost: |
||||||||||
Cost of goods sold |
18,192 | 17,095 | ||||||||
Selling, general and administrative |
137 | 118 | ||||||||
Sublease income |
Cost of goods sold | (568 | ) | (670 | ) | |||||
|
|
|
|
|||||||
Total net lease cost |
$ | 84,529 | $ | 92,818 | ||||||
|
|
|
|
In addition to the presented lease cost, lease costs for closed stores of $3,517 and $4,730 were recorded in the Impairments and store closure costs line item on the Consolidated Statements of Operations during the years ended January 31, 2021 and January 26, 2020, respectively.
The Company incurs variable lease-related expenses such as real estate taxes, insurance and maintenance that are generally based on the Companys pro-rata share of the total square footage of the property being leased. The Companys store lease expenses are recorded in the Cost of goods sold line item on the accompanying Consolidated Statements of Operations. Lease expenses related to the Companys corporate offices and lease expenses incurred prior to store openings are recorded in the Selling, general and administrative expenses line item on the Consolidated Statements of Operations.
F-29
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
7. Leases (continued)
From time to time, the Company enters into leases at locations with excess square footage that is demised and sublet to third parties. The operating lease cost for sublet locations is reduced by sublease rental income, which is recorded to the Cost of good sold line item on the Consolidated Statements of Operations. The sublease arrangements do not contain renewal options beyond the associated head lease. The Company estimates future sublease rental income to be as follows:
Sublease rental income |
||||
2021 |
$ | 428 | ||
2022 |
357 | |||
2023 |
165 | |||
2024 |
93 | |||
2025 |
93 | |||
Thereafter |
78 | |||
|
|
|||
Total |
$ | 1,214 | ||
|
|
After adopting ASC 842, Leases, on January 28, 2019, all of the Companys leases with fixed lease costs are operating leases; therefore, there are no finance leases assets or liabilities recorded on the Companys Consolidated Balance Sheets. The Companys supplemental balance sheet information related to leases was as follows as of the date presented:
Classification | January 31, 2021 |
January 26, 2020 |
||||||||
Assets |
||||||||||
Operating |
Operating lease assets, net | $ | 192,545 | $ | 199,625 | |||||
Liabilities |
||||||||||
Current |
||||||||||
Operating |
Current portion of operating lease liabilities | $ | 28,956 | 27,616 | ||||||
Noncurrent |
||||||||||
Operating |
Operating lease liabilities | 159,210 | 163,174 | |||||||
|
|
|
|
|||||||
Total lease liabilities |
$ | 188,166 | $ | 190,790 | ||||||
|
|
|
|
Weighted average remaining lease term (years) | January 31, 2021 |
January 26, 2020 |
||||||
Operating lease |
6.4 | 6.6 | ||||||
Weighted average discount rate |
||||||||
Operating lease |
17.4 | % | 18.7 | % |
The adoption of ASC 842, Leases, on January 28, 2019 resulted in adjustments to the lease assets being recorded in accordance with transition guidance. Included in the measurement of the lease assets at the adoption of ASC 842, Leases, are transition balances for intangible assets and liabilities associated with favorable and unfavorable lease agreements recorded in purchase accounting under ASC 805, closed store reserves, deferred rent, and tenant improvement allowances as of January 28, 2019. The amortization periods for these transition adjustments are based on the related leased assets single unit of account, and determined using the remaining lease term, including any renewal options that the Company was reasonably certain to exercise, for the related
F-30
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
7. Leases (continued)
leased asset. The single unit of account resulted in an increase in amortization expense of $11.2 million and $19.8 million for the years ended January 31, 2021 and January 26, 2020, respectively, primarily driven by amortizing the former favorable lease assets over a shorter period. The Company expects incremental non-cash expense of $8.3 million in fiscal 2021, $5.2 million in fiscal 2022, and $3.2 million in fiscal 2023 related to the shorter amortization period for former favorable lease assets included in the right to use lease asset assuming there is no subsequent re-evaluation of the lease terms for lease modifications that may occur in the future.
Supplemental cash flow and other information related to leases was as follows for the period presented:
Year Ended | ||||||||
Cash paid for amounts included in measurement of lease liabilities: |
January 31, 2021 |
January 26, 2020 |
||||||
Operating cash flows for operating leases |
$ | 59,521 | $ | 61,414 | ||||
Lease assets obtained in exchange for lease liabilities: |
||||||||
Operating leases |
$ | 32,885 | $ | 23,774 |
Maturities of lease liabilities are as follows:
Operating Leases | ||||
2021 |
$ | 57,154 | ||
2022 |
53,380 | |||
2023 |
47,977 | |||
2024 |
39,769 | |||
2025 |
32,187 | |||
Thereafter |
81,406 | |||
|
|
|||
Total |
311,873 | |||
Less: Imputed Interest |
(123,707 | ) | ||
|
|
|||
Total lease liabilities |
188,166 | |||
Less: Current portion |
(28,956 | ) | ||
|
|
|||
Long-term lease liabilities |
$ | 159,210 | ||
|
|
ASC 840 disclosures related to periods prior to adoption of ASC 842, Leases
Total rent expense, net of subtenant lease income, for the year ended January 27, 2019 was as follows:
Year Ended | ||||
January 27, 2019 |
||||
Minimum rentals |
$ | 55,787 | ||
Contingent rentals |
90 | |||
|
|
|||
$ | 55,877 | |||
|
|
F-31
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
8. Employee Benefits
Accrued Compensated Absences
The Company provides its employees with paid annual leave that may be used for any purpose. Paid annual leave is earned and accrued throughout the year at a rate based on eligible employees years of service, less an estimate for forfeitures. Unused balances do not carryforward to future years, except where required by law, and are forfeited at fiscal year end.
The Companys liability related to paid annual leave was $220 and $592 at January 31, 2021 and January 26, 2020, respectively.
Employee Savings and Profit Sharing Plan
The Company sponsors an employee savings and profit sharing plan which is a defined contribution retirement plan subject to Section 401(k) of the Internal Revenue Code. The plan is voluntary. The plan is available to all eligible employees hired before July 1, 2019 after 60 days of service. For employees hired after July 1, 2019, the plan is available to all full-time employees after 60 days of service and part-time employees after 1,000 hours worked in their first year of service or in any calendar year thereafter. The Company may, in its discretion, provide a matching contribution up to defined maximums. The expense recorded for the Companys match to the 401(k) plan was $1,442, $1,037, and $1,428 for the years ended January 31, 2021, January 26, 2020, and January 27, 2019, respectively.
9. Income Taxes
The income tax provision consisted of the following for the presented periods:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Current: |
||||||||||||
Federal |
$ | 25 | $ | 62 | $ | (312 | ) | |||||
State |
212 | 82 | 14 | |||||||||
|
|
|
|
|
|
|||||||
Total current |
237 | 144 | (298 | ) | ||||||||
|
|
|
|
|
|
|||||||
Deferred: |
||||||||||||
Federal |
3,122 | 4,277 | (20,001 | ) | ||||||||
State |
217 | (1,528 | ) | 872 | ||||||||
|
|
|
|
|
|
|||||||
Total deferred |
3,339 | 2,749 | (19,129 | ) | ||||||||
|
|
|
|
|
|
|||||||
Total income tax provision |
$ | 3,576 | $ | 2,893 | $ | (19,427 | ) | |||||
|
|
|
|
|
|
A reconciliation of the statutory federal income tax rate and the Companys effective tax rate is as follows:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Statutory federal rate |
21.00 | % | 21.00 | % | 21.00 | % | ||||||
State income taxes |
1.39 | % | 2.36 | % | 4.17 | % | ||||||
Valuation Allowance |
(9.91 | )% | (28.75 | )% | (5.60 | )% | ||||||
Other |
(0.75 | )% | 0.76 | % | 0.29 | % | ||||||
|
|
|
|
|
|
|||||||
Effective tax rate |
11.73 | % | (4.63 | )% | 19.86 | % | ||||||
|
|
|
|
|
|
F-32
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
9. Income Taxes (continued)
The Companys effective tax rate was 11.73% for the year ended January 31, 2021. The primary driver of the variance of the Companys effective rate from the statutory rate of 21.0% was a decrease in the valuation allowance attributable to the Company utilizing net operating loss carryforwards, for which a valuation allowance was previously established.
The Companys effective tax rate was a negative 4.63% for the year ended January 26, 2020. The primary driver of the variance of the Companys effective rate from the statutory rate of 21.0% was adjustments made to the valuation allowance associated with certain deferred tax assets.
The Companys effective tax rate was a 19.82% for the year ended January 27, 2019. The primary driver of the variance of the Companys effective rate from the statutory rate of 21.0% was adjustments made to the valuation allowance associated with certain deferred tax assets.
The components of the Companys deferred tax assets and liabilities are as follows:
January 31, 2021 |
January 26, 2020 |
|||||||
Deferred Tax Assets: |
||||||||
Accrued compensation |
$ | 2,785 | $ | 119 | ||||
Accrued expenses |
14,125 | 7,463 | ||||||
Deferred and share-based compensation |
769 | 670 | ||||||
Net operating loss and credit carryforwards |
14,026 | 29,352 | ||||||
Interest expense limitation |
30,939 | 34,730 | ||||||
State depreciation |
1,126 | 648 | ||||||
Operating lease liabilities |
47,820 | 48,673 | ||||||
Other |
401 | 507 | ||||||
|
|
|
|
|||||
Total gross deferred tax assets |
111,991 | 122,162 | ||||||
Valuation allowance on deferred tax assets |
(29,439 | ) | (32,463 | ) | ||||
|
|
|
|
|||||
Total net deferred tax assets |
82,552 | 89,699 | ||||||
|
|
|
|
|||||
Deferred Tax Liabilities: |
||||||||
Depreciation |
(951 | ) | (2,159 | ) | ||||
Inventories |
(2,752 | ) | (3,294 | ) | ||||
Operating lease assets, net |
(48,932 | ) | (50,887 | ) | ||||
Tradename |
(66,075 | ) | (66,051 | ) | ||||
Prepaid expenses |
(411 | ) | (538 | ) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
(119,121 | ) | (122,929 | ) | ||||
|
|
|
|
|||||
Net deferred tax liability |
$ | (36,569 | ) | $ | (33,230 | ) | ||
|
|
|
|
At January 31, 2021, for federal income tax purposes, the Company had net operating loss carryforwards of $32,969, which expire in 2037, and a Work Opportunity Tax Credit carryforward of $3,522, which expires between 2036 and 2040. For state income tax purposes, the Company had net operating loss carryforwards of $112,615 expiring between 2022 and 2041.
The Company assesses its deferred tax assets and related likelihood of realization, considering both positive and negative evidence, and determined it is more likely than not that a portion of the Companys deferred tax
F-33
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
9. Income Taxes (continued)
assets will not be realized. As of January 31, 2021, the Company had recorded a $29,439 valuation allowance to offset its deferred tax assets for carryforward credits and other deferred tax assets that are expected to expire unutilized. The valuation allowance is recorded in the Deferred income taxes line item on the Consolidated Balance Sheets. The related benefit of $3,024 associated with changes in the valuation allowance is recorded to the Tax provision (benefit) line item on the Consolidated Statements of Operations.
As of January 31, 2021 and January 26, 2020, the Company had no accrued interest or penalties related to uncertain tax positions. There were no unrecognized tax benefits that would affect the Companys effective tax rate if recognized. The Company does not expect its unrecognized tax benefits to change significantly in the next 12 months. The Companys policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income taxes.
The Company files income tax returns in the U.S. Federal jurisdiction and in various state jurisdictions. The statute of limitation remains open for U.S. and certain state income tax examinations for tax years 2017 through 2020.
CARES Act
On March 27, 2020, the CARES Act was signed into law by President Trump. The CARES Act is an approximately $2 trillion emergency stimulus package to provide direct economic support to businesses and individuals affected by the coronavirus pandemic. The CARES Act includes several significant business tax provisions that are available to the Company, that, among other things, allows deferment of employer side social security payments, increases the allowable business interest deduction under Section 163(j) from 30% to 50%, limits the carryforward of certain federal net operating losses, and corrects the tax depreciation methods for qualified improvement property. Associated with the enactment of the CARES Act, the Company identified discrete adjustments, mainly related to increasing the valuation allowance on the deferred tax asset for its federal net operating loss carryforward. Additionally, the Company has deferred $12,717 in employer side social security payments as of January 31, 2021. The Company will pay half of the deferred social security payments by the applicable due date of December 31, 2021 and the remaining balance by December 31, 2022. The tax liability associated with the deferral of employer side social security payments is recorded to Accrued liabilities for the half due on December 31, 2021 and Other liabilities for the other half due on December 31, 2022 on the Consolidated Balance Sheets.
10. Share-based Compensation
Stock Option Plan
The Board of Directors adopted the Pomegranate Parent Holdings, Inc. Stock Option Plan, whereby Parent may grant equity incentive stock options to directors or employees of the Company. The Company granted options to purchase shares of its common stock to certain employees of the Company.
Options granted before fiscal 2018 are subject to certain service and performance vesting criteria and are split evenly between three tranches, which have different vesting requirements. The options in the first tranche are service based and vest in equal installments on each of the first five anniversaries of the grant date. The second and third tranches of options are based on performance conditions and vest if the conditions are met. The Monte Carlo simulation model was used to estimate the fair value of all three tranches.
F-34
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
10. Share-based Compensation (continued)
Options granted after February 2018 vest and become exercisable upon a change of control. In addition, certain grants also vest and become exercisable upon an initial public offering. The Black-Scholes model was used to estimate the fair value of the options granted in fiscal 2018 and 2019.
Because of the nature of the vesting criteria for options granted after February 2018, the Company cannot determine when it is probable that the vesting criteria will be achieved. As a result, share-based compensation expense associated with the new grants will not be recognized until the vesting criteria are met, such as a change in control or initial public offering.
All options are subject to accelerated vesting in the event of a change in control and expire on the seventh anniversary of the grant date. There are 6,537 options outstanding, net of forfeitures, as of January 31, 2021.
The following table summarizes the share-based compensation expense related to the Stock Option plan for the periods presented (in thousands, except per share amounts):
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Share-based compensation (benefit) expense |
$ | 406 | $ | (1,503 | ) | $ | 387 | |||||
Weighted average grant date value |
$ | 1.38 | $ | 2.01 | $ | 1.82 |
The benefit related to share-based compensation for the year ended January 26, 2020 was due to forfeitures. Share-based compensation expense is included in the Selling, general and administrative expenses line item on the accompanying Consolidated Statements of Operations.
The following table summarizes option activity under the Stock Option Plan for the year ended January 31, 2021 (in thousands, except per share amounts and contractual lives in years):
Stock Options |
Weighted Average Grant Date Fair Value |
Weighted Average Exercise Price |
Weighted Average Remaining Term |
|||||||||||||
Outstanding awards, January 26, 2020 |
4,812 | $ | 2.26 | $ | 4.95 | |||||||||||
Granted |
4,559 | 1.38 | 2.69 | |||||||||||||
Forfeited |
(2,833 | ) | 1.86 | 4.67 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Outstanding awards, January 31, 2021 |
6,537 | $ | 1.83 | $ | 3.64 | 5.9 | ||||||||||
|
|
|
|
|
|
|||||||||||
Expected to vest, January 31, 2021(1) |
501 | $ | 4.42 | $ | 8.06 | 2.4 | ||||||||||
Exercisable stock options, January 31, 2021 |
174 | $ | 5.11 | $ | 10.00 | 2.4 |
(1) | Expected to vest excludes 5,862 options where the vesting criteria related to a change of control or initial public offering is not probable of being achieved. |
As of January 31, 2021, the Company had $9,304 of total unrecognized share-based compensation expense related to unvested options. Of which, $254 is expected to be amortized over the remaining weighted-average vesting period of 0.4 years. The remaining $9,050 will be recognized when the vesting criteria is met upon a change of control, or for certain awards upon an initial public offering. As of January 31, 2021, no stock options have been exercised.
F-35
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
10. Share-based Compensation (continued)
The fair value of the stock option grants and modifications during fiscal 2020 and 2019 have been estimated using the Black-Scholes option pricing model with the following weighted average assumptions.
2020 | 2019 | |||||||
Risk-free interest rate |
0.55 | % | 1.78 | % | ||||
Expected life, in years |
4 | 5 | ||||||
Expected volatility |
76.37 | % | 73.92 | % | ||||
Dividend yield |
| % | | % | ||||
Weighted average exercise price |
$ | 2.69 | $ | 3.30 |
The risk-free interest rate is based on the U.S. Treasury constant maturities on the date of the grant for the time period equal to the expected term of the options granted. Expected volatility was calculated on the basis of the average volatilities of similar entities and considered characteristics such as industry, stage of life cycle, size, financial leverage and comparable programs and participant pools. The Company determined the use of historical volatility for similar entities represents a more accurate calculation of option fair value. Expected life is calculated in a like manner and is based upon the industry, stage of life cycle, size, financial leverage and comparable programs and participant pools. The assumptions used to calculate the fair value of options granted are evaluated and revised for new awards, as necessary, to reflect market conditions and experience.
11. Insurance Reserves
The Company has insurance policies for general liability, medical, and workers compensation benefits that contain significant deductibles. The cost of these insurance claims is accrued based on actual claims reported plus loss development factors. These estimates are based on historical information along with certain assumptions about future events and are subject to change as additional information becomes available. The Company had accrued liabilities related to these claims of $29,841 at January 31, 2021 and $28,843 at January 26, 2020. Insurance reserves are recorded to the Accrued liabilities and Other liabilities line items on the accompanying Consolidated Balance Sheets.
12. Supplementary Balance Sheet Information
The following table provides a reconciliation of cash, cash equivalents, and restricted cash as presented in the Consolidated Balance Sheets for the fiscal periods presented to cash, cash equivalents, and restricted cash as presented in the Consolidated Statements of Cash Flows for the years ended January 31, 2021 and January 26, 2020:
January 31, 2021 |
January 26, 2020 |
|||||||
Cash and cash equivalents |
$ | 206,380 | $ | 136,560 | ||||
Restricted cash |
23,420 | 25,480 | ||||||
|
|
|
|
|||||
Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows |
$ | 229,800 | $ | 162,040 | ||||
|
|
|
|
F-36
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
12. Supplementary Balance Sheet Information (continued)
The following reflects supplementary balance sheet information for the Companys property and equipment, net at January 31, 2021 and January 26, 2020:
January 31, 2021 |
January 26, 2020 |
|||||||
Buildings |
$ | 13,439 | $ | 13,439 | ||||
Store fixtures and equipment |
246,677 | 231,719 | ||||||
Leasehold and land improvements |
136,120 | 133,616 | ||||||
Office furniture, fixtures and equipment |
13,480 | 11,472 | ||||||
Automobiles |
122 | 206 | ||||||
Construction in progress |
3,681 | 1,252 | ||||||
|
|
|
|
|||||
Total property and equipment |
413,519 | 391,704 | ||||||
Accumulated depreciation |
(269,548 | ) | (228,016 | ) | ||||
|
|
|
|
|||||
Total property and equipment, net |
$ | 143,971 | $ | 163,688 | ||||
|
|
|
|
The following reflects supplementary balance sheet information for the Companys accrued liabilities at January 31, 2021 and January 26, 2020:
January 31, 2021 |
January 26, 2020 |
|||||||
Accrued compensation and benefits |
$ | 40,936 | $ | 17,916 | ||||
Accrued occupancy costs |
9,766 | 8,139 | ||||||
Accrued closed store costs |
528 | 1,180 | ||||||
Accrued interest |
21,019 | 19,816 | ||||||
Litigation settlement accrual |
27,500 | | ||||||
Other accrued liabilities |
21,472 | 18,505 | ||||||
|
|
|
|
|||||
Total accrued liabilities |
$ | 121,221 | $ | 65,556 | ||||
|
|
|
|
13. Earnings Per Share
The computation of basic earnings per share is based on the number of weighted-average common shares outstanding during the period. The computation of diluted earnings per share considers the dilutive effect of common stock equivalents consisting of incremental common shares deemed outstanding from the assumed exercise of stock options. In the computation of diluted net income per share for fiscal 2020, 675 stock options were excluded because their effect of inclusion would have been anti-dilutive and 5,862 stock options were excluded because the vesting criteria related to a change of control or initial public offering is not probable of being achieved. In the computation of diluted net loss per share for fiscal 2019 and fiscal 2018, all of the Companys stock options were excluded because their effect on inclusion would have been anti-dilutive, since the Company recognized net losses during those years.
F-37
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
13. Earnings Per Share (continued)
A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations follows (in thousands, except per share amounts):
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Net income (loss) available to common stockholders (numerator for basic and diluted earnings per share) |
$ | 26,914 | $ | (65,417 | ) | $ | (78,597 | ) | ||||
|
|
|
|
|
|
|||||||
Weighted average common shares outstanding (denominator for basic earnings per share) |
67,500 | 67,500 | 67,500 | |||||||||
Potential common shares outstanding: |
||||||||||||
Incremental shares from share-based awards |
| | | |||||||||
|
|
|
|
|
|
|||||||
Weighted average common shares outstanding and potential additional common shares outstanding (denominator for diluted earnings per share) |
67,500 | 67,500 | 67,500 | |||||||||
|
|
|
|
|
|
|||||||
Net income (loss) per share: |
||||||||||||
Basic and diluted |
$ | 0.40 | $ | (0.97 | ) | $ | (1.16 | ) | ||||
|
|
|
|
14. Related-Party Transactions
Management Services Agreements
The Company is controlled by Apollo and is a party to a management services agreement with an affiliate of Apollo to provide certain management consulting and advisory services as well as a similar management services agreement with certain entities affiliated with Ray Berry and Brett Berry (collectively, the Rollover Stockholders). The Company pays a non-refundable quarterly management fee of $375 in the aggregate, to an affiliate of Apollo and the Rollover Stockholders, with each receiving their relative pro rata shares of such quarterly management fee based on their relative pro rata ownership of Parent. The Companys obligation to pay such fees and expenses will terminate upon the completion of its initial public offering.
The following table reflects fees under the management service agreements, which were incurred by the Company during the periods presented:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Affiliate of Apollo |
$ | 1,166 | $ | 1,166 | $ | 1,166 | ||||||
Rollover Stockholders |
334 | 334 | 334 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,500 | $ | 1,500 | $ | 1,500 | |||||||
|
|
|
|
|
|
The fees under the management service agreements are included in the Selling, general and administrative expenses line item on the accompanying Consolidated Statements of Operations.
F-38
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements - (continued)
14. Related-Party Transactions (continued)
Real Estate Leases
An entity affiliated with a former officer and director of the Company, who is a family member of two members of the Companys Board of Directors as of January 31, 2021, acquired shopping centers in which the Company leases a retail store location. The shopping centers were acquired in fiscal 2013 and fiscal 2019. In fiscal 2018, an affiliated entity of Apollo acquired a shopping center in which the Company currently leases a retail store location.
The following table reflects the lease expenses associated with related party landlords for the periods presented:
Year Ended | ||||||||||||
January 31, 2021 |
January 26, 2020 |
January 27, 2019 |
||||||||||
Real Estate Leases |
$ | 890 | $ | 788 | $ | 485 |
15. Commitments and Contingencies
Litigation
From time to time, the Company is involved in various legal proceedings in the normal course of business, including labor and employment, premises, personal injury, consumer product liability and general liability claims, and claims related to commercial and leasing matters. The Company reviews the status of its legal proceedings and performs an assessment of potential loss contingencies using a number of factors, including those listed in FASB ASC No. 450-20, Contingencies - Loss Contingencies, regarding the probability of a loss and whether a loss is reasonably estimable. In the opinion of management, the resolution of currently pending matters, other than those described or referred to in the following paragraph, will not have a material adverse effect on the Companys financial condition or results of operations. However, because of the nature and inherent uncertainties of litigation, the Company cannot predict with certainty the ultimate resolution of these actions and, should the outcome be unfavorable, the Companys business, financial position, results of operations or cash flows could be materially and adversely affected.
On October 6, 2016, Elizabeth Morrison filed a purported stockholder class action in the Court of Chancery of the State of Delaware (the Court of Chancery) against the members of the board of directors of The Fresh Market, Inc. at the time of the April 27, 2016 acquisition of The Fresh Market, Inc. by Holdings (the Acquisition) as well as former (and now current at The Fresh Market, Inc.) board member Brett Berry. The case is captioned Elizabeth Morrison v. Ray Berry, et. al., Civil Action No. 12808. Morrison alleges that the members of The Fresh Market, Inc.s board of directors, aided and abetted by defendant Brett Berry, breached their fiduciary duties of loyalty and due care owed to the plaintiff and the public stockholders of The Fresh Market, Inc., including by allegedly failing to obtain a fair price and failing to engage in a fair process in connection with the Acquisition. The complaint seeks, among other things, rescissory and compensatory damages in an unspecified amount, plus interest and attorneys fees. The Court granted Morrisons Motion for Class Certification, and, subsequently, granted the defendants Motions to Dismiss and dismissed the action.
On July 9, 2018, the Delaware Supreme Court reversed the dismissal of the action and remanded the case to the Court of Chancery for additional proceedings. On March 7, 2019, Morrison filed an amended complaint adding claims against The Fresh Market, Inc.s former CEO (as an officer) and former general counsel for breach of fiduciary duty and against Apollo and affiliates, J.P. Morgan Securities LLC and affiliates, and Cravath,
F-39
The Fresh Market Holdings, Inc.
Notes to the Consolidated Financial Statements (continued)
15. Commitments and Contingencies (continued)
Swaine & Moore LLP for aiding and abetting breach of fiduciary duty. On May 29, 2019, Morrison filed a second amended complaint. All defendants subsequently filed separate motions to dismiss which were heard by the Court on September 23, 2019. By June 1, 2020, the Court of Chancery issued rulings on all the defendants motions granting the motions to dismiss filed by The Fresh Market, Inc.s independent board of directors, Brett Berry, Cravath, and Apollo and affiliates, but it denied the motions to dismiss filed by the former CEO, the former general counsel, Ray Berry, and J.P. Morgan Securities LLC and affiliates.
In January 2021, the parties agreed to engage in private mediation with the goal of resolving the litigation. On February 26, 2021, the parties submitted a notice to the Court of Chancery that they had reached a preliminary agreement to settle this matter for a gross settlement amount of $27.5 million and planned to submit definitive settlement papers shortly. The Company concurrently engaged in continuing negotiations with its insurers, resulting in agreements by which, in exchange for certain mutual releases, the insurers agreed to fund $12.4 million of the settlement pursuant to our directors & officers liability insurance. On March 11, 2021, the parties filed with the Court of Chancery an executed Stipulation of Settlement, which, once approved by the Court of Chancery, will establish the timeline and as well as the parties respective obligations in connection with securing the Court of Chancerys final approval of the settlement. On March 24, 2021, the Court of Chancery approved the Stipulation of Settlement including the Proposed Scheduling Order with the final settlement hearing scheduled for July 7, 2021. Accordingly, the Company contributed the $15.1 million balance to the settlement on April 12, 2021.
The Company recorded a liability for the gross settlement amount of $27.5 million during the year ended January 31, 2021. Additionally, since the insurers agreed to fund a portion of the settlement, the Company recorded a receivable in the amount $12.4 million during the year ended January 31, 2021. The liability is recorded to the Accrued liabilities line item, and the insurance receivable is recorded to the Accounts receivable, net line item on the Consolidated Balance Sheets.
16. Subsequent Events
The Company has evaluated subsequent events from January 31, 2021 through April 23, 2021, the date these consolidated financial statements were issued, and concluded that there were no subsequent events that require recognition or disclosure other than the settlement of the litigation disclosed in Note 15, Commitments and Contingencies.
F-40
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Shares
The Fresh Market Holdings, Inc.
Common Stock
PRELIMINARY PROSPECTUS
Credit Suisse
, 2021
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is a table of the registration fee for the Securities and Exchange Commission and estimates of all other expenses to be paid by the registrant in connection with the issuance and distribution of the securities described in the registration statement. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, Inc. (FINRA) filing fee and the exchange listing fee.
SEC registration fee |
$ | * | ||
Stock exchange listing fee |
$ | * | ||
Financial Industry Regulatory Authority filing fee |
$ | * | ||
Printing expenses |
$ | * | ||
Legal fees and expenses |
$ | * | ||
Accounting fees and expenses |
$ | * | ||
Blue Sky fees and expenses |
$ | * | ||
Transfer agent and registrar fees |
$ | * | ||
Miscellaneous |
$ | * | ||
|
|
|||
Total |
$ | * |
* | To be provided by amendment. |
Item 14. Indemnification of Directors and Officers.
Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the Registrant, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The DGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Registrants bylaws provide for indemnification by the Registrant of its directors, officers and employees to the fullest extent permitted by the DGCL.
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Registrants certificate of incorporation provides for such limitation of liability.
The Registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (b) to the
II-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Registrant with respect to payments which may be made by the Registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.
In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act against certain liabilities.
We expect to enter into customary indemnification agreements with our executive officers and directors that provide them, in general, with customary indemnification in connection with their service to us or on our behalf.
Item 15. Recent Sales of Unregistered Securities
Set forth below is information regarding securities sold or granted by us since March 1, 2018 that were not registered under the Securities Act. Also included is the consideration, if any, received by us for such securities and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed for such sales and grants.
From March 1, 2018 through the date of this registration statement, we granted to our employees, officers and directors options to purchase an aggregate of shares of our common stock at per share exercise prices ranging from $ to $ under our stock option plan. None of these options have been exercised for issuances of shares of our common stock as of the date of this registration statement.
The issuances of the securities in the transactions described above were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act and/or Rule 506, Rule 701 or Regulation S promulgated thereunder. The securities were issued directly by us and did not involve a public offering or general solicitation. The recipients of such securities represented their intentions to acquire the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof.
None of the transactions set forth in Item 15 involved any underwriters, underwriting discounts or commissions or any public offering. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising. Unless otherwise stated, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. Individuals who purchased securities as described above represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibit Index
See the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this registration statement on Form S-1, which Exhibit Index is incorporated herein by reference.
(b) Financial statement schedules
All schedules are omitted because the required information is either not present, not present in material amounts or presented within the consolidated financial statements included in the prospectus and are incorporated herein by reference.
II-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Item 17. Undertakings.
The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT INDEX
Exhibit Number |
Exhibit Description | |||
1.1 | * | Form of Underwriting Agreement. | ||
3.1 | * | Certificate of Incorporation of The Fresh Market Holdings, Inc. | ||
3.2 | * | Amendment to Certificate of Incorporation of The Fresh Market Holdings, Inc. | ||
3.2 | * | Bylaws of The Fresh Market Holdings, Inc. | ||
3.3 | * | Form of Amended and Restated Certificate of Incorporation of The Fresh Market Holdings, Inc. | ||
3.4 | * | Form of Amended and Restated Bylaws of The Fresh Market Holdings, Inc. | ||
4.1 | Stockholders Agreement, dated April 27, 2016 | |||
4.2 | * | Specimen Stock Certificate evidencing the shares of common stock | ||
5.1 | * | Opinion of Morgan, Lewis & Bockius LLP as to the validity of the securities being offered. | ||
10.1 | Management Consulting Agreement, dated April 27, 2016, by and among The Fresh Market, Inc., Pomegranate Holdings, Inc. and TFM2, LLC. | |||
10.2 | Management Consulting Agreement, dated April 27, 2016, by and among The Fresh Market, Inc., Pomegranate Holdings, Inc. and Apollo Management Holdings, L.P. | |||
10.3 | Indenture (for 9.75% First-Priority Senior Secured Notes due 2023), dated as of April 27, 2016, by and among The Fresh Market, Inc. (as successor to Pomegranate Merger Sub, Inc.), the Subsidiary Guarantors party thereto from time to time, and Wilmington Trust, National Association. | |||
10.4 | Indenture (for Super Senior Secured Notes due 2025), dated as of March 13, 2020, by and among The Fresh Market, Inc., the Guarantors party thereto from time to time and Wilmington Trust, National Association. | |||
10.5 | * | Form of Indemnification Agreement | ||
10.6+ | Pomegranate Parent Holdings, Inc. Stock Option Plan | |||
10.7 | *+ | The Fresh Market Holdings, Inc. Equity Incentive Plan | ||
10.8+ | The Fresh Market, Inc. Severance Plan | |||
10.9+ | Employment Agreement, dated January 22, 2020, by and between The Fresh Market, Inc. and Jason Potter | |||
10.10+ | Employment Agreement, dated August _, 2020, by and between The Fresh Market, Inc. and James Heaney | |||
10.11+ | Employment Agreement, dated July 27, 2020, by and between The Fresh Market, Inc. and Brian Johnson | |||
10.12+ | Employment Agreement, dated November 29, 2019, by and between The Fresh Market, Inc. and Chris Himebauch | |||
10.13+ | Employment Agreement, dated May 12, 2020, by and between The Fresh Market, Inc. and Kevin Miller | |||
10.14+ | Employment Agreement, dated December 7, 2020, by and between The Fresh Market, Inc. and Carlos Clark | |||
10.15+ | Option Agreement, dated January 22, 2020, by and between Pomegranate Parent Holdings, Inc. and Jason Potter | |||
10.16+ | Option Agreement, dated September 4, 2020, by and between Pomegranate Parent Holdings, Inc. and James Heaney | |||
10.17+ | Option Agreement, dated July 27, 2020, by and between Pomegranate Parent Holdings, Inc. and Brian Johnson |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit Number |
Exhibit Description | |||
10.18+ | Option Agreement, dated February 28, 2019, by and between Pomegranate Parent Holdings, Inc. and Chris Himebauch | |||
10.19+ | Option Agreement, dated July 15, 2020, by and between Pomegranate Parent Holdings, Inc. and Kevin Miller | |||
10.20+ | Option Agreement, dated December 21, 2020, by and between Pomegranate Parent Holdings, Inc. and Carlos Clark | |||
10.21+ | Option Agreement, dated November 12 2019, by and between Pomegranate Parent Holdings, Inc. and Dan Portnoy | |||
10.22 | * | Product Supply and Storage Agreement, dated August 12, 2016, by and between United Natural Foods, Inc. and The Fresh Market, Inc. | ||
10.23 | * | Addendum to the Product Supply and Storage Agreement, dated November 8, 2018, by and between the Fresh Market, Inc. and United Natural Foods Inc. | ||
21.1 | * | Subsidiaries of The Fresh Market Holdings, Inc. | ||
23.1 | * | Consent of Ernst & Young LLP, independent registered public accounting firm | ||
23.2 | * | Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1) | ||
24.1 | * | Power of Attorney (included in signature page) | ||
99.1 | * | Consent of Jason Potter | ||
99.2 | * | Consent of Betsy Atkins | ||
99.3 | * | Consent of Sue Gove |
* | To be filed by amendment. |
| Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Rule 406 under the Securities Act. |
+ | Indicates a management contract or compensatory plan or arrangement |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in , on the day of , 2021.
The Fresh Market Holdings, Inc. | ||
By: |
||
Name: | Jim Heaney | |
Title: | Chief Financial Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Jim Heaney and Carlos Clark, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact or any of their substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date |
||||
Jason Potter |
President and Chief Executive Officer (Principal Executive Officer) |
, 2021 | ||||
Jim Heaney |
Chief Financial Officer (Principal Financial Officer) |
, 2021 | ||||
Jeff Short |
Vice President and Chief Accounting Officer (Principal Accounting Officer) |
, 2021 | ||||
Andrew Jhawar |
Chairman of the Board | , 2021 | ||||
Heather Berger |
Director | , 2021 | ||||
Ray Berry |
Director | , 2021 |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 4.1
EXECUTION VERSION
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT, dated as of April 27, 2016 (this Agreement), is entered into by and among POMEGRANATE PARENT HOLDINGS, INC., a Delaware corporation (the Company), and the STOCKHOLDERS that are parties hereto (each, a Stockholder and, collectively, the Stockholders).
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of March 11, 2016 (the Merger Agreement), among The Fresh Market, Inc. (The Fresh Market), Pomegranate Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (Parent), and Pomegranate Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (Merger Sub), Merger Sub will be merged with and into The Fresh Market with The Fresh Market surviving such merger as an indirect wholly owned subsidiary of the Company.
WHEREAS, reference is made to that certain (a) Rollover, Contribution and Exchange Agreement, dated as of March 12, 2016 (as amended by the Rollover Letter Agreement, the Rollover Agreement), by and among Parent and certain stockholders of The Fresh Market (collectively, the Rollover Stockholders), and (b) that certain letter agreement dated as of April 22, 2016 (the Rollover Letter Agreement), by and among the Rollover Stockholders, Company and TFM2, LLC, a Delaware limited liability company (TFM2).
WHEREAS, the Rollover Agreement has been assigned from Parent to the Company pursuant to that certain Assignment and Assumption Agreement dated as of April 22, 2016, by and between the Company and Parent.
WHEREAS, prior to the consummation of the transactions contemplated by the Merger Agreement (the Merger Closing) and pursuant to that certain Contribution Agreement dated as of April 25, 2016 (the Contribution Agreement) by and between TFM2, LLC, and the Rollover Stockholders, the Rollover Stockholders contributed their shares of the common stock of The Fresh Market (the TFM Contributed Shares) to TFM2 in exchange for units of TFM2 (the Berry Contribution).
WHEREAS, prior to the Merger Closing and immediately following the Berry Contribution, TFM2 contributed the TFM Contributed Shares to the Company in exchange for the issuance by the Company of 13,094,533 shares of Common Stock (Berry Shares) pursuant to the terms of the Rollover Agreement and the Rollover Letter Agreement (the TFM Contribution).
WHEREAS, prior to the Merger Closing and concurrently with the TFMs Contribution, the Apollo Investor subscribed for and purchased from the Company 45,731,516 shares of Common Stock for an aggregate cash purchase price of $457,316,157 pursuant to the terms of that certain Subscription Agreement dated as of the date hereof, by and between the Apollo Investor and the Company (the Apollo Subscription Agreement).
WHEREAS, in connection with the consummation of the transactions contemplated by the Merger Agreement, the Rollover Agreement and the Apollo Subscription Agreement, the Stockholders each own or, upon the Closing (as defined in the Merger Agreement), will own an equity interest in the Company and may, from time to time thereafter, acquire additional equity interests in the Company.
WHEREAS, each Stockholder deems it to be in the best interest of the Company and the Stockholders to enter into this Agreement to set forth their agreements with respect to certain matters concerning the Company.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
NOW, THEREFORE, in consideration of the premises and of the mutual consents and obligations hereinafter set forth, intending to be legally bound, the parties hereto hereby agree as follows:
Section 1. | Definitions. |
As used in this Agreement:
Agreement has the meaning set forth in the preamble.
Affiliate means a Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For the avoidance of doubt, the term Affiliate (i) as applied to the Sponsor Funds, shall not at any time include any of the Fresh Market Co-Investors or any portfolio companies of Apollo Management VIII, L.P. (including the Company and its subsidiaries) or any of its affiliated funds; (ii) as applied to the Berry Investor, shall include the Berry Investor Members and any affiliate of the Berry Investor Members; and (iii) as applied to Golleher, shall include Gollehers spouse and each of Gollehers lineal ancestors and descendants (including by adoption and stepchildren). As used in this definition, the term control, including the correlative terms controlling, controlled by and under common control with, means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.
Apollo Group means Apollo Investor and its Affiliates.
Apollo Investor means AP VIII Pomegranate Holdings, L.P., a Delaware limited partnership.
Apollo Subscription Agreement has the meaning set forth in the recitals.
Berry Contribution has the meaning set forth in the recitals.
Berry Investor means TFM2, LLC, a Delaware limited liability company and any of its Co- Investor Permitted Transferees.
Berry Investor Member means each Person that holds an Ownership Interest in the Berry Investor.
Berry Shares has the meaning set forth in the recitals.
Berry Investor Termination Event means the date the Berry Investor owns, directly or indirectly, less than an aggregate of 6,547,266 shares of Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock).
Co-Investor Permitted Transferee means: (i) with respect to Golleher, Gollehers spouse, siblings, ancestors and descendants (including stepfamilies), in each case whether natural or adopted, and any trust, partnership, limited liability company or similar vehicle established and maintained solely for the benefit of (or the sole members or partners of which are) Golleher, Gollehers spouse and/or Gollehers siblings, ancestors and/or descendants; and (ii) with respect to any Berry Investor Member, (A) any other Berry Investor Member, (B) any spouse, siblings, ancestors and descendants (including stepfamilies), in each case whether natural or adopted, of Ray Berry and Brett Berry (collectively, the Berry Owners) and any trust, partnership, limited liability company or similar vehicle established and maintained solely for the benefit of (or the sole members or partners of which are) either Berry Owner, either Berry Owners spouse and/or either Berry Owners siblings, ancestors and/or descendants, and (C) any tax-exempt religious, private foundation, charitable organization or other organization qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Common Stock means the common stock of the Company, par value $.01 per share.
Company has the meaning ascribed to such term in the introductory paragraph hereof.
Company Board means the Board of Directors of the Company and any duly authorized committee thereof. All determinations by the Board required pursuant to the terms of this Agreement shall be made in the good faith sole discretion of the Board.
Company By-Laws has the meaning set forth in Section 7(a).
Company Charter has the meaning set forth in Section 7(a).
Company Director has the meaning set forth in Section 7(a).
Contribution Agreement has the meaning set forth in the recitals.
Demand Notice has the meaning set forth in Section 9(a)(ii).
Drag Along Notice has the meaning set forth in Section 3(a).
Drag Along Right has the meaning set forth in Section 3(a).
Drag Along Stockholder has the meaning set forth in Section 3(a).
Election Notice has the meaning set forth in Section 4(b).
Equity Securities means, with regard to any Person, as applicable, (i) any capital stock, voting, partnership, membership, joint venture or other ownership or equity interests, or other share capital of such Person, (ii) any debt or equity securities of such Person, directly or indirectly, convertible into or exchangeable for any capital stock, partnership, membership, joint venture or other ownership or equity interests, or other share capital (whether voting or non-voting, whether preferred, common or otherwise) of such Person or containing any profit participation features with respect to such Person, (iii) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, partnership, membership, joint venture or other ownership or equity interests, other share capital of such Person or securities containing any profit participation features with respect to such Person or directly or indirectly to subscribe for or to purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, partnership, membership, joint venture or other ownership interests, other share capital of such Person or securities containing any profit participation features with respect to such Person, or (iv) any share, unit or membership interest appreciation rights, phantom share rights, contingent interest or other similar rights relating to such Person.
Fresh Market Co-Investors means, collectively, the Berry Investor and Golleher.
GAAP means United States generally accepted accounting principles.
Golleher means, George G. Golleher, an individual.
Merger Agreement has the meaning set forth in the recitals.
Merger Closing has the meaning set forth in the recitals.
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Merger Sub has the meaning set forth in the recitals.
Ownership Interest means any and all shares, interests, participations, or other equivalents (however designated) of capital stock of a corporation and any and all ownership interests in a Person (other than a corporation), including membership interests, partnership interests, joint venture interests, and beneficial interests, and any and all warrants, options, convertible or exchangeable securities, or rights to purchase or otherwise acquire any of the foregoing.
Parent has the meaning set forth in the recitals.
Parent Board has the meaning set forth in Section 7(b).
Person shall be construed broadly and shall include, without limitation, an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
Preemptive Event has the meaning set forth in Section 5.
Proportionate Percentage means a number (expressed as a percentage) equal to a fraction, the numerator of which is the total number of shares of Common Stock proposed to be Transferred by the Sponsor Funds and the denominator of which is the total number of shares of Common Stock owned by the Sponsor Funds.
Prospective Purchaser has the meaning set forth in Section 3(a).
Public Sale means any sale of Common Stock to the public, occurring simultaneously with or after an initial public offering of Common Stock, (i) pursuant to a registration statement under the Securities Act, or (ii) pursuant to Rule 144 under the Securities Act provided such sale is made in compliance with the manner of sale requirements of Rule 144(f) whether or not compliance therewith is required by Rule 144.
Qualified Public Offering means an underwritten public offering of Common Stock by the Company or any selling securityholders pursuant to an effective registration statement filed by the Company with the Securities and Exchange Commission (other than (i) a registration relating solely to an employee benefit plan or employee stock plan, a dividend reinvestment plan, or a merger or a consolidation, (ii) a registration incidental to an issuance of securities under Rule 144A, (iii) a registration on Form S-4 or any successor form, or (iv) a registration on Form S-8 or any successor form) under the Securities Act, pursuant to which the aggregate net offering price of the Common Stock by the Company and/or other selling securityholders (after underwriting discounts, commissions and fees) sold in such offering is at least $300 million.
Registrable Securities shall mean shares of Common Stock and any security issued or distributed in respect thereof; provided, that any Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in accordance with the plan of distribution set forth in such registration statement, (ii) such Registrable Securities have been disposed of in reliance upon Rule 144 (or any similar provision then in force) under the Securities Act or (iii) such Registrable Securities shall have been otherwise transferred and new certificates for them not bearing a legend restricting further transfer under the Securities Act shall have been delivered by the Company; and provided, further, that any securities that have ceased to be Registrable Securities shall not thereafter become Registrable Securities and any security that is issued or distributed in respect of securities that have ceased to be Registrable Securities is not a Registrable Security.
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Registration Request has the meaning set forth in Section 9(a)(i).
Rollover Agreement has the meaning set forth in the recitals.
Rollover Letter Agreement has the meaning set forth in the recitals.
Rollover Stockholders has the meaning set forth in the recitals.
Securities Act means the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.
Stockholder has the meaning set forth in the preamble.
Sponsor Funds means the Apollo Investor collectively with any member of the Apollo Group to whom shares of Common Stock are transferred or that otherwise acquires Common Stock (for the avoidance of doubt, excluding the Fresh Market Co-Investors).
Subsidiary Board has the meaning set forth in Section 7(b).
Subsidiary Director has the meaning set forth in Section 7(b).
Tag Along Certificates has the meaning set forth in Section 4(b).
Tag Along Notice has the meaning set forth in Section 4(a).
Tag Along Option Period has the meaning set forth in Section 4(b).
Tag Along Right has the meaning set forth in Section 4(a).
Tag Along Sale has the meaning set forth in Section 4(a).
Tag Along Stockholder has the meaning set forth in Section 4(b).
TFM Board has the meaning set forth in Section 7(b).
TFM Contributed Shares has the meaning set forth in the recitals.
TFM Contribution has the meaning set forth in the recitals.
The Fresh Market has the meaning set forth in the recitals.
Transfer means a sale, assignment, encumbrance, gift, pledge, hypothecation, distribution or other disposition of Common Stock or any interest therein.
Transferring Stockholder has the meaning set forth in Section 4(a).
Underwritten Offering means a sale of shares of Common Stock to an underwriter for reoffering to the public.
Unfulfilled Amounts has the meaning set forth in Section 4(c).
5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 2. | Transfers. |
(a) General Restrictions on Transfers. Without the prior written consent of the Sponsor Funds (which consent may be withheld in the sole discretion of the Sponsor Funds), no Stockholder (other than the Sponsor Funds) shall, directly or indirectly, Transfer any shares of Common Stock (other than pursuant to Section 2(d), Section 3, Section 4 or Section 9). The preceding sentence shall apply with respect to all shares of Common Stock held at any time by any Fresh Market Co-Investor. Each Sponsor Fund may Transfer its shares of Common Stock subject to Section 4. Any Transfer or attempted Transfer in breach of this Agreement shall be void ab initio and of no effect. In connection with any attempted Transfer in breach of this Agreement, the Company may hold and refuse to transfer any Common Stock or any certificate therefor, in addition to and without prejudice to any and all other rights or remedies which may be available to it or the Stockholders.
(b) Securities and Antitrust Law Compliance. Notwithstanding anything in this Agreement to the contrary, no Stockholder shall, directly or indirectly, Transfer any shares of Common Stock owned by such Stockholder, or any interest therein, unless such transfer or disposition is made upon compliance with the provisions of the Securities Act and any applicable antitrust, competition or similar laws. Prior to any proposed Transfer of any shares of Common Stock by a Stockholder (other than the Sponsor Funds) that is permitted by this Agreement, unless there is in effect a registration statement under the Securities Act covering the proposed Transfer, the Stockholder intending to Transfer such Common Stock (the Transferor Stockholder) shall give written notice to the Company of such Transferor Stockholders intention to effect such Transfer; provided, however, that promptly following a Transfer of any shares of Common Stock by a Sponsor Fund, the transferring Sponsor Fund shall provide written notice to each Fresh Market Co-Investor setting forth the number of shares Transferred and the name of the transferee. Each such notice shall describe the manner and circumstances of the proposed Transfer in sufficient detail, and shall be accompanied, unless the Board otherwise approves, by either (i) a written opinion of legal counsel, who shall be reasonably satisfactory to the Company, addressed to the Company, and reasonably satisfactory in form and substance to the Companys legal counsel, to the effect that the proposed Transfer may be effected without registration under the Securities Act, or (ii) a no action letter from the staff of the Securities and Exchange Commission to the effect that the Transfer of such Common Stock without registration will not result in a recommendation by the staff that action be taken with respect thereto. Notwithstanding the foregoing, any proposed Transfer (other than Transfers pursuant to Rule 144 under the Securities Act or Transfers pursuant to a transaction subject to an effective registration statement) shall be null and void unless the proposed transferee becomes a party to this Agreement (in the same capacity as the transferor) by executing a joinder agreement in form and substance reasonably acceptable to the Company Board.
(c) Legends. Each certificate representing any shares of Common Stock that is held by a party hereto shall be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR APPLICABLE STATE SECURITIES LAWS, AND MAY BE OFFERED, PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT AND SUCH LAWS, OR IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM REGISTRATION; PROVIDED THAT THE ISSUER MAY REQUIRE THE TRANSFEROR TO DELIVER AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER REGARDING THE AVAILABILITY OF SUCH AN EXEMPTION.
6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT, DATED AS OF APRIL 27, 2016, AS IT MAY BE AMENDED FROM TIME TO TIME (THE AGREEMENT), WHICH CONTAINS PROVISIONS REGARDING (I) CERTAIN RESTRICTIONS ON THE SALE, ASSIGNMENT, ENCUMBRANCE, GIFT, PLEDGE, HYPOTHECATION, DISTRIBUTION OR OTHER DISTRIBUTION (EACH, A TRANSFER) OF SUCH SECURITIES, (II) CERTAIN TAG ALONG RIGHTS AND DRAG ALONG RIGHTS APPLICABLE TO SUCH SECURITIES AND (III) CERTAIN OTHER MATTERS. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE OR ANY INTEREST THEREIN IN VIOLATION OF THE AGREEMENT IS NULL AND VOID.
The Company will instruct any transfer agent not to register the Transfer of any shares of Common Stock until the conditions specified in the foregoing legends and this Agreement are satisfied. Upon the request of any Stockholder, the Company shall remove the Securities Act portion of the legend set forth above from the certificate or certificates for such shares to the extent such shares are eligible (as determined by the Company Board) to be sold pursuant to an effective registration statement under the Securities Act.
(d) Permitted Transfers. Subject to compliance with the applicable provisions of the Securities Act and Section 2(b), the following Transfers may be made by Stockholders without the prior written consent of the Sponsor Funds in accordance with Section 2(a) subject to the transferee executing a joinder agreement and thereby becoming a party hereto (in the same capacity as the transferor): (i) Transfers by any Stockholder to the Company or to the Apollo Group; and (ii) Transfers by a Fresh Market Co-Investor to a Co-Investor Permitted Transferee.
(e) Indirect Transfers. Without limiting the generality of Section 2(a), the Berry Investor agrees that (i) no Berry Investor Member shall be permitted to sell, assign, encumber, gift, pledge, hypothecate, distribute or otherwise dispose of any Ownership Interest in the Berry Investor to any Person other than a Co-Investor Permitted Transferee without the prior written consent of the Sponsor Funds (which consent may be without in the sole discretion of the Sponsor Funds) and (ii) it will take any and all actions reasonably requested by the Sponsor Funds to prevent breaches of this Section 2 by the Berry Investor Members.
Section 3. | Drag Along Rights. |
(a) If the Sponsor Funds propose a transaction involving the Transfer of Common Stock or a transaction involving the Transfer of any portion of the assets of the Company (whether through a stock sale, a merger, a recapitalization, a consolidation transaction, a transaction involving the transfer of the assets of the Company or otherwise) to any Person other than a member of the Apollo Group (a Prospective Purchaser), then the Sponsor Funds shall have the right (the Drag Along Right) to compel the remaining Stockholders (the Drag Along Stockholders) to sell their shares of Common Stock to the Prospective Purchaser for a consideration per share and on terms and conditions no less favorable to the Drag Along Stockholders than those the Sponsor Funds obtain for their Common Stock (and in the case of a transfer of such shares or a transfer of assets of the Company, or other transaction requiring the vote of the Drag Along Stockholders, this Drag Along Right requires the Drag Along
7
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Stockholders to vote their shares in favor of the transaction and to tender their shares for the transaction consideration); provided, however, that the Drag Along Stockholders shall not be required to (i) make any representations and warranties to the Prospective Purchaser other than those representations and warranties made by the Sponsor Funds, (ii) be subject to any additional covenants and indemnification obligations than those to which the Sponsor Funds are subject to, or (iii) pay indemnity to the Prospective Purchaser (other than in cases of fraud) in excess of the aggregate consideration received by such Drag Along Stockholder in the transaction (which indemnity obligations shall be several, and not joint and several, among the Stockholders and shall be on a pro rata basis based on the relative consideration (whether in cash or otherwise) received or to be received by each such Stockholder, other than obligations that relate specifically to a particular Stockholder such as indemnification with respect to representations and warranties given by a Stockholder regarding such Stockholders title to and ownership of such Stockholders shares of Common Stock). In addition, the obligations of each Drag Along Stockholder pursuant to this Section 3 are subject to the satisfaction of the condition that each Drag Along Stockholder will receive the same form and amount of consideration with respect to each share of Common Stock as each other Stockholder receives with respect to such Stockholders shares of Common Stock; provided, however, that any Drag Along Stockholder who does not deliver representations and warranties satisfactory to the Company that it is an accredited investor within the meaning of Rule 501 under the Securities Act (unless another exemption from registration under the Securities Act is available), may be excluded from receiving any securities in connection with such Transfer and such Drag Along Stockholder shall receive, in lieu thereof, an amount in cash equal to the fair value (as determined by the Company Board) of the securities which such Drag Along Stockholder would otherwise receive in connection with such Transfer. The number of shares subject to the Drag Along Right shall be, as to each Drag Along Stockholder, a number of shares of Common Stock that represents the Proportionate Percentage of all shares of Common Stock owned by such Drag Along Stockholder. The Sponsor Funds shall exercise the Drag Along Right by giving written notice (the Drag Along Notice), not less than 20 days prior to consummation of the transfer to the Prospective Purchaser, to the Company and the Drag Along Stockholders stating: (A) that they propose to effect such a transaction; (B) the name of the Prospective Purchaser; (C) the proposed purchase price per share of Common Stock or for such assets; (D) the Proportionate Percentage; (E) that all the Drag Along Stockholders shall be obligated to sell their shares upon terms and conditions no less favorable to the Drag Along Stockholders than those the Sponsor Funds are able to obtain for their shares, including entering into agreements with other persons on terms substantially identical to or more favorable to the Drag Along Stockholders than those applicable to the Sponsor Funds and obtaining any required consents; and (F) in the case of a transfer, whether through a stock sale, a merger, a recapitalization, a consolidation transaction, a transaction involving the transfer of the assets of the Company or otherwise, of such shares or of such assets in a transaction requiring the vote of or tenders by the Drag Along Stockholders, that all the Drag Along Stockholders shall be obligated to vote in favor of such transaction and, if applicable, tender their shares for the transaction consideration. Each Drag Along Stockholder affirms that its agreement to vote for the approval of the transaction with respect to the transfer of shares or assets to the Prospective Purchaser under this Section 3 is given as a condition of this Agreement and as such is coupled with an interest and is irrevocable. This voting agreement shall remain in full force and effect throughout the time that this Section 3 is in effect. It is understood that this voting agreement relates solely to the transaction with a Prospective Purchaser as described in this Section 3 and does not constitute the agreement to vote or consent as to any other matters.
(b) Not later than 20 days following the date of receipt of the Drag Along Notice, each of the Drag Along Stockholders shall, if required by the Drag Along Notice, deliver to the Sponsor Funds certificates representing the shares held by such Drag Along Stockholder to be transferred, accompanied by duly executed stock powers. If any Drag Along Stockholder fails to deliver such certificates to the Sponsor Funds, the Company shall cause the books and records of
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Pursuant to 17 C.F.R. Section 200.83
the Company to show that the shares represented by such certificates of such Drag Along Stockholder are bound by the provisions of this Section 3 and are transferable only to the Prospective Purchaser or an Affiliate of such Prospective Purchaser upon surrender for transfer by the holder thereof.
(c) Each Stockholder shall, at or following the consummation of a Transfer pursuant to this Section 3, bear its pro rata share (based upon the amount of consideration received or proposed to be received in such Transfer with respect to such Stockholders shares of Common Stock) of the costs of any such Transfer to the extent such costs are incurred for the benefit of all such Stockholders and are not otherwise paid by the Company or the acquiring party. Costs incurred by the Stockholders on their own behalf will not be considered costs of such Transfer.
Section 4. | Tag Along Rights. |
(a) If one or more Sponsor Funds (collectively, the Transferring Stockholder) proposes a Transfer of Common Stock to a Prospective Purchaser or to Prospective Purchasers representing, together with any prior such Transfers by the Sponsor Funds, 25% or more of the then issued and outstanding Common Stock (other than pursuant to Section 9 of this Agreement) (a Tag Along Sale), and the Drag Along Right, if any, has not been exercised with respect to such Tag Along Sale, then, prior to proceeding with such Tag Along Sale, the Transferring Stockholder shall promptly deliver to each remaining Stockholder and the Company a written notice (the Tag Along Notice) stating that the Transferring Stockholder desires to enter into the Tag Along Sale and setting forth in reasonable detail the identity of the Prospective Purchaser, the purchase price per share of Common Stock the number of shares desired to be sold by the Transferring Stockholder and the total number of shares of Common Stock then owned by the Transferring Stockholder and any other material terms and conditions of the Tag Along Sale. Each of the remaining Stockholders shall have the right (the Tag Along Right) to participate in any such sale of shares of Common Stock by the Transferring Stockholder in accordance with the procedures set forth in Section 4(b) below; provided, that such participation shall be on terms and conditions no less favorable to such remaining Stockholders than those on which the Transferring Stockholder proposes to transfer its shares.
(b) Within 20 days after receipt of the Tag Along Notice (the Tag Along Option Period), the remaining Stockholders may elect to exercise their Tag Along Right and participate in the Tag Along Sale. Any remaining Stockholder electing to participate in the Tag Along Sale (a Tag Along Stockholder) shall give written notice thereof (the Election Notice) to the Transferring Stockholder and the Company within the Tag-Along Option Period. The Election Notice shall specify the number of shares that such Tag-Along Stockholder desires to sell to the Prospective Purchaser, which amount may be up to (or less than) the number of shares of Common Stock that represents the Proportionate Percentage of all shares of Common Stock owned by such Tag Along Stockholder; provided if, at the end of the Tag-Along Option Period, any remaining Stockholders do not exercise their Tag-Along Right in full (or at all), then the Transferring Stockholder shall be entitled to Transfer such number of additional shares equal to the number of such unexercised shares, without the need to provide an additional Tag Along Notice, within 120 days of the expiration of the Tag Along Option Period, at a price no greater than and on other terms and conditions no more favorable to the Transferring Stockholders as those provided for thin the Tag Along Notice. Each Tag Along Stockholder shall deliver to the Transferring Stockholder, at the same time as, and enclosed with its Election Notice, certificates representing such Tag Along Stockholders shares that are specified in the Election Notice to be transferred, accompanied by duly executed stock powers (the Tag Along Certificates). The failure of any remaining Stockholder to submit an Election Notice or deliver its Tag Along Certificates within the Tag Along Option Period shall constitute an election by such remaining Stockholder not to participate in such Tag Along Sale; provided, however, that such Tag Along
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Sale is consummated within 120 days of the expiration of the Tag Along Option Period, at a price no greater than and on other terms and conditions no more favorable to the Transferring Stockholders as those provided for in the Tag Along Notice. By delivering an Election Notice and its Tag Along Certificates to the Transferring Stockholder within the Tag Along Option Period, a Tag Along Stockholder shall have the right and obligation to sell to the Prospective Purchaser that number of shares specified in the Election Notice; provided, however, that, to the extent the Prospective Purchaser is unwilling or unable to purchase all of the shares proposed to be sold by the Transferring Stockholder and the Tag Along Stockholders, the number of shares to be sold by the Transferring Stockholder shall be ratably reduced so that each Tag-Along Stockholder may sell its proportionate share of Common Stock calculated as provided above, and the number of shares to be sold by the Transferring Stockholder and each of the Tag-Along Stockholders equals the number of shares that the Prospective Purchaser is willing or able to purchase. Any such securities not sold by the Transferring Stockholder during such 120 day period shall again be subject to the provisions of this Section 4 upon subsequent Transfer.
Section 5. Preemptive Rights. Subject to this Section 5, none of the Stockholders shall have any preemptive rights with respect to issuances of Equity Securities by the Company or any of its subsidiaries. Notwithstanding the foregoing, at any time prior to a Qualified Public Offering, each Fresh Market Co-Investor shall have the right to participate, in whole or in part, on a pro rata basis (measured with reference to the percentage of the outstanding Common Stock owned by such Fresh Market Co-Investors relative to the percentage of the outstanding Common Stock owned by the Sponsor Funds and the other Fresh Market Co-Investors), in any subscription for Equity Securities by the Apollo Group and/or any other Stockholder (other than in connection with any equity based compensation plans or arrangements), on the same terms, cash purchase price and subject to the same conditions as applied to the Apollo Group and/or any other Stockholder (a Preemptive Event). The offer to the Fresh Market Co-Investors to participate in any such equity issuance shall be made either prior to or as soon as reasonably practicable after the relevant issuance to achieve the same effect. The Company shall give prompt notice to each Fresh Market Co-Investor of any Preemptive Event, including the terms of such subscription, which the Fresh Market Co-Investors shall have 30 days to accept or reject (in whole or in part), provided that in the event any such Fresh Market Co-Investor does not reply in such 30-day period, such offer shall be deemed rejected by such Fresh Market Co-Investor. If and to the extent a Fresh Market Co-Investor rejects (in whole or in part) its respective right for subscription in a Preemptive Event, it shall forfeit such opportunity, which opportunity shall revert to the Sponsor Funds, who may elect to purchase such securities within 120 days after the expiration of the 30 day period described above at the proposed purchase price and on the terms of sale set forth in the notice provided to the Fresh Market Co-Investors pursuant to this Section 5. Any Equity Securities not sold within such 120 day period that are again offered for sale by the Company or any of its subsidiaries after such 120 day period must be reoffered to the Fresh Market Co-Investors pursuant to this Section 5.
Section 6. Dividends and Distributions. In the event that any dividend is paid on any shares of Common Stock or any other distribution is made in respect of shares of Common Stock, shares of Common Stock owned by the Fresh Market Co-Investors shall be treated in the same manner (on a pro rata basis) as shares of Common Stock owned by the Sponsor Funds.
Section 7. | The Board (and Committees of the Board) of the Company, Parent and The Fresh Market. |
(a) Company Board. As of the Closing, the Company Board and any committees thereof shall consist of three members (each member, a Company Director) which shall consist of (A) one Company Director to be designated by the Berry Investor which shall initially be Ray Berry; and (B) two Company Directors to be designated by the Sponsor Funds. Company Directors shall serve for the time periods set forth in the Companys Certificate of Incorporation (the Company Charter) or By-Laws (Company By-Laws). The Company Board shall have the
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Pursuant to 17 C.F.R. Section 200.83
sole right to manage the business and affairs of the Company and shall have all powers and rights necessary, appropriate or advisable to carry out the purposes and business of the Company and is authorized to execute and document on behalf of the Company in call cases consistent with this Agreement, the Company Charter and Company By-Laws. The Company By-Laws shall provide, among other things, that at least 24 hours advance notice of any meetings of the Company Board shall be given to all members of the Company Board. The Company Board shall have sole discretion regarding the appointment, quantity, titles, duties, power and removal of officers and agents of the Company. Without limiting any Stockholders rights pursuant to this Section 7(a), the Company Board may increase or decrease its size in accordance with the provisions of the Company Charter and Company By-Laws; provided that, except as otherwise provided in this Agreement (including Section 7(a)), no such change to the size of the Company Board shall eliminate the right of the Berry Investor to designate one Company Director to the Company Board without the written consent of the Berry Investor.
(b) Subsidiary Boards and Committees Thereof. As of the Closing, the Company shall cause (i) the Board of Directors of Parent and each committee of the Board of Directors of Parent (collectively, the Parent Board) and (ii) the Board of Directors of The Fresh Market and each committee of the Board of Directors of The Fresh Market (collectively, the TFM Board and, together with the Parent Board, each a Subsidiary Board) to consist of five members (each member of such Subsidiary Board, a Subsidiary Director) which shall consist of: (A) one Subsidiary Director on each Subsidiary Board to be designated by the Berry Investor, which shall initially be Ray Berry; and (B) four Subsidiary Directors on each Subsidiary Board to be designated by the Sponsor Funds. Subsidiary Directors shall serve for the time periods set forth in the Parents and The Fresh Markets organizational documents and such documents shall provide, among other things, that at least 24 hours advance notice of any meetings of the Subsidiary Board shall be given to all members of the Subsidiary Board. Without limiting any Stockholders rights pursuant to this Section 7(b), each Subsidiary Board may increase or decrease its size in accordance with the provisions of its certificate of incorporation and by-laws; provided that, except as otherwise provided in this Agreement (including Section 7(b)), no such change to the size of any Subsidiary Board shall eliminate the right of the Berry Investor to designate one Subsidiary Director to such Subsidiary Board without the consent of the Berry Investor.
(c) Designation; Removal and Replacement of Directors. The Sponsor Funds shall have the right to continue to designate Company Directors and Subsidiary Directors as provided in Sections 7(a) and (b) for so long as the Sponsor Funds own any shares of Common Stock. The Berry Investor shall have the right to continue to designate one Company Director and one Subsidiary Director on each Subsidiary Board as provided in Section 7(b) until the date of the Berry Investor Termination Event. Any Stockholder may remove and replace any of its Company Director designees or Subsidiary Director designees for any reason and at any time and shall have the right to designate a replacement Company Director or Subsidiary Director; provided that in the event the Berry Investors right to designate a Company Director and a Subsidiary Director on each Subsidiary Board is terminated in accordance with Section 7(f), the Sponsor Funds shall have the right to remove and replace the Berry Investors designee and shall have the right to designate a replacement Subsidiary Director on each Subsidiary Board. No delay by a Stockholder in designating its Company Director designee or Subsidiary Director designee shall impair such Stockholders right to subsequently designate its Company Director designee or Subsidiary Director designee.
(d) Implementation; Facilitation. Each of the parties to this Agreement agrees that it shall (and shall cause its Affiliates to) cooperate in facilitating any action described in or required by this Agreement, including by voting all of the shares of Common Stock under its control in support of such action. Without limiting the generality of the foregoing, each of the parties to this
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Agreement agrees that it shall (and shall cause its Affiliates to) vote its shares of Common Stock and any shares of Common Stock it holds proxies or powers of attorney with respect to or execute consents, as the case may be, and take all other necessary action (including nominating such designees and calling an annual or special meeting of stockholders) in order to ensure that the composition of the Company Board and each Subsidiary Board is as set forth in this Section 7 and otherwise to give effect to the provisions of this Section 7. Each party shall vote its shares of Common Stock and any shares of Common Stock it holds proxies or powers of attorney with respect to, and shall take all other actions necessary, to ensure that the Company Charter and Company By-Laws facilitate and do not at any time conflict with any provision of this Agreement. The Company agrees that it will (and will cause its officers and its subsidiaries to) take all such action as shall be necessary (including by voting all shares of capital stock or other equity interests that it holds in each of its subsidiaries, either in a meeting or in an action by written consent) to ensure that the articles of incorporation and by-laws or other applicable governing documents of each of its subsidiaries are consistent with, and do not conflict with, any provision of this Agreement and that the boards of directors, general partners, managing members or other applicable governing body or persons for each such subsidiary shall act in accordance with the provisions of this Agreement and that each subsidiary board of directors or other applicable governing body is as set forth in Section 7. Each of the parties to this Agreement acknowledges and agrees that the director designated by the Berry Investor may share any information and documents obtained in his capacity as director with TFM2, subject to compliance with Section 11(a) by TFM2.
(e) Compensation and Reimbursement. Directors who are not employees of the Company may receive such reasonable compensation for serving in such capacity as may be approved by the Company Board or the Subsidiary Board, as the case may be. The Company shall pay, or shall cause one of its Subsidiaries to pay, the reasonable and documented out-of-pocket costs and expenses incurred by each Director in the course of his or her service as such, including in connection with attending regular and special meetings of the Company Board or the Subsidiary Board, as the case may be, and/or any of their respective committees
(f) Termination. The rights and obligations under this Section 7 shall terminate: (i) following a Qualified Public Offering; (ii) solely with respect to the Sponsor Funds, at such time as the Sponsor Funds cease to own any shares of Common Stock; and (iii) solely with respect to the Berry Investor, on the date of the Berry Investor Termination Event.
(g) Conflicts. Notwithstanding the rights of the Berry Investor to designate one Company Director to each committee of the Company Board and one Subsidiary Director to each committee of each Subsidiary Board pursuant to this Section 7, the Berry Investor acknowledges and agrees that such rights shall not apply in the event an actual or potential conflict of interest arises in connection with having such designee on the applicable committee.
Section 8. | Financial Statements; Information Rights. |
(a) Prior to such time as the Company, Parent or The Fresh Market is a reporting company under the Securities Exchange Act of 1934, as amended, the Company shall provide to each of the Fresh-Market Co-Investors: (i) as soon as available after the end of each fiscal quarter but in no event later than forty-five (45) days after the end of such fiscal quarter, unaudited consolidated quarterly balance sheets of the Company and its subsidiaries and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries for such quarter and for the portion of the fiscal year ending with such quarter, in each case prepared in accordance with GAAP; and (ii) as soon as available after the end of each fiscal year but in no event later than ninety (90) days after the end of such fiscal year audited consolidated annual balance sheets of the Company and its subsidiaries for such fiscal year and audited consolidated
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statements of income and cash flows of the Company and its subsidiaries for such fiscal year, in each case prepared in accordance with GAAP and accompanied by an opinion thereon of the independent certified public accountants of the Company.
(b) Following the consummation of a Qualified Public Offering, the Berry Investor shall have the right, upon reasonable request, to inspect the books and records of the Company and its subsidiaries and the facilities of the Company and its subsidiaries, and to request and receive reasonable information regarding the Companys and its subsidiaries financial condition and operations.
Section 9. | Registration Rights. |
(a) | Demand Registration Rights. |
(i) Subject to the provisions of this Section 9(a), at any time and from time to time after the date hereof, the Sponsor Funds may make one or more written requests (Registration Request) to the Company for registration under and in accordance with the provisions of the Securities Act of all or part of their shares of Common Stock.
(ii) All Registration Requests made pursuant to this Section 9(a) will specify the aggregate amount of shares of Common Stock to be registered and will also specify the intended methods of disposition thereof (a Demand Notice). Subject to Section 9(a)(iii), promptly upon receipt of any such Demand Notice, the Company will use its reasonable best efforts to effect such registration under the Securities Act (including, without limitation, filing post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with the applicable regulations promulgated under the Securities Act) of the shares of Common Stock which the Company has been so requested to register within 180 days of such request (or within 120 days of such request in the case of a Registration Request after a Qualified Public Offering (subject to any lock-up restrictions)).
(iii) If the Company receives a Registration Request and the Company furnishes to the Sponsor Funds a copy of a resolution of the Board certified by the secretary of the Company stating that in the good faith judgment of the Board it would be materially adverse to the Company for a registration statement to be filed on or before the date such filing would otherwise be required hereunder, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after the date such filing would otherwise be required hereunder. The Company shall not be permitted to take such action more than once in any 360-day period. If the Company shall so postpone the filing of a registration statement, the Sponsor Funds may withdraw its Registration Request by so advising the Company in writing within thirty (30) days after receipt of the notice of postponement. In addition, if the Company receives a Registration Request and the Company is then in the process of preparing to engage in a Public Sale, the Company shall inform the Sponsor Funds of the Companys intent to engage in a Public Sale and may require the Sponsor Funds to withdraw such Registration Request for a period of up to 120 days so that the Company may complete its Public Sale. In the event that the Company ceases to pursue such Public Sale, it shall promptly inform the Sponsor Funds and the Sponsor Funds shall be permitted to submit a new Registration Request. The foregoing shall be without prejudice to any rights of the Sponsor Funds pursuant to Section 9(b).
(iv) Registrations under this Section 9(a) shall be on such appropriate registration form of the Securities and Exchange Commission (A) as shall be selected by
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the Company and as shall be reasonably acceptable to the Sponsor Funds and (B) as shall permit the disposition of such Common Stock in accordance with the intended method or methods of disposition specified in the Demand Notice. If, in connection with any registration under this Section 9(a) which is proposed by the Company to be on Form S-3 or any successor form, the managing underwriter, if any, shall advise the Company in writing that in its opinion the use of another permitted form is of material importance to the success of the offering, then such registration shall be on such other permitted form.
(v) The Company shall use its best efforts to keep any Registration Statement filed in response to a Registration Request effective for as long as is necessary for the Sponsor Funds to dispose of the covered securities.
(vi) In the case of an Underwritten Offering, the Sponsor Funds shall select the underwriters, provided such selection is reasonably acceptable to the Company.
(b) | Piggy-Back Registration Rights. |
(i) Participation. Subject to Section 9(b)(ii), if the Company proposes to register (other than a registration on Form S-4 or S-8 or any successor form to such forms or any registration of securities as it relates to an offering and sale to management of the Company pursuant to any employee stock plan or other employee benefit plan arrangement) any shares of Common Stock in connection with the public offering of such securities (including for this purpose a registration effected by the Company for stockholders other than the Sponsor Funds), then the Company shall give prompt notice (the Piggy-Back Notice) to the Sponsor Funds and each of the Fresh Market Co- Investors and each of the Sponsor Funds and Fresh Market Co-Investors shall be entitled to include in such registration statement the Registrable Securities held by it. The Piggy-Back Notice shall offer the Sponsor Funds and Fresh Market Co-Investors the right, subject to Section 9(b)(ii) (the Piggy-Back Registration Right), to register such number of shares of Registrable Securities as the each such Sponsor Funds and Fresh Market Co- Investor may request and shall set forth (i) the anticipated filing date of such registration statement and (ii) the number of shares of Common Stock that is proposed to be included in such registration statement. Subject to Section 9(b)(ii), the Company shall include in such registration statement such shares of Registrable Securities for which it has received written requests to register such shares within twenty (20) days after the Piggy-Back Notice has been given. Notwithstanding the foregoing, the Piggyback Registration Right of the Berry Investor set forth in this Section 9(b)(i) shall terminate on the date of the Berry Investor Termination Event.
(ii) Underwriters Cutback. Notwithstanding the foregoing, if a registration pursuant to this Section 9(b) involves an Underwritten Offering and the managing underwriter or underwriters of such proposed Underwritten Offering advises the Company that the total or kind of securities intend to include in such offering would be reasonably likely to adversely affect the price, timing or distribution of the securities offered in such offering, then the number of securities proposed to be included in such registration shall be allocated among the Company, the Sponsor Funds and the Fresh Market Co-Investors proportionately, such that the number of securities that each such
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Person shall be entitled to sell in the Underwritten Offering shall be included in the following order:
(1) In the event of an exercise of any demand rights by the Sponsor Funds:
first, the Registrable Securities held by the Sponsor Funds exercising a demand right pursuant to Section 9(a) and the Registrable Securities held by the Persons requesting their Registrable Securities to be included in such registration pursuant to the terms of this Section 9(b) or pursuant to any other agreement in which the Company has granted piggyback registration rights, pro rata based upon the number of Registrable Securities owned by each such Person at the time of such registration; and
second, the securities to be issued and sold by the Company in such registration.
(2) In all other cases:
first, the securities to be issued and sold by the Company in such registration; and
second, the Registrable Securities held by the Persons requesting their Registrable Securities be included in such registration pursuant to the terms of this Section 9(b) or pursuant to any other agreement in which the Company has granted piggyback registration rights, pro rata based upon the number of Registrable Securities owned by each such Person at the time of such registration.
(iii) Lock-up. If the Company at any time shall register shares of Common Stock under the Securities Act for sale to the public, no Stockholder shall sell publicly, make any short sale of, grant any option for the purchase of, or otherwise dispose publicly of, any capital stock of the Company without the prior written consent of the Company, for the period of time in which the Sponsor Funds has similarly agreed not to sell publicly, make any short sale of, grant any option for the purchase of, or otherwise dispose publicly of, any capital stock of the Company. In addition, if requested by the managing underwriter(s), in connection with the initial Qualified Public Offering, all Stockholders shall enter into a customary lock-up agreement with the managing underwriter(s) for such period as may be required by the managing underwriter(s), subject to customary exceptions in the Companys discretion. For avoidance of doubt, the foregoing shall not apply to shares of capital stock of the Company that are purchased in the public markets or are purchased under a registration statement.
(iv) Company Control. The Company may decline to file a registration statement after giving the Piggy-Back Notice, or withdraw a registration statement after filing and after such Piggy-Back Notice, but prior to the effectiveness of the registration statement, provided that the Company shall promptly notify each Stockholder in writing of any such action and provided further that the Company shall bear all reasonable expenses incurred by such Stockholder or otherwise in connection with such withdrawn registration statement. Except as provided in Section 9(a)(vi), notwithstanding any other provision herein, the Company shall have sole discretion to select any and all underwriters that may participate in any Underwritten Offering.
(v) Participation in Underwritten Offerings. No Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell such Persons securities on the basis provided in any underwriting arrangements approved by the Persons entitled to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lock-ups and
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other documents required for such underwriting arrangements. Nothing in this Section 9 (b)(v) shall be construed to create any additional rights regarding the piggy-back registration of Registrable Securities in any Person otherwise than as set forth herein.
(vi) Expenses. The Company will pay all registration fees and other reasonable expenses in connection with each registration of Registrable Securities requested pursuant to this Section 9(b); provided, that each Stockholder shall pay all applicable underwriting fees, discounts and similar charges (pro rata based on the securities sold) and that all Stockholders as a group shall be entitled to a single counsel (at the Companys expense) to be selected by the Sponsor Funds.
(vii) Indemnification.
(1) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each selling Stockholder, its officers, directors, employees and representatives and each Person who controls (within the meaning of the Securities Act) such selling Stockholder against any losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, except insofar as the same may be caused by or contained in any information furnished in writing to the Company by such selling Stockholder for use therein; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such preliminary prospectus if (A) such selling Stockholder failed to deliver or cause to be delivered a copy of the prospectus to the Person asserting such loss, claim, damage, liability or expense after the Company has furnished such selling Stockholder with a sufficient number of copies of the same and (B) the prospectus completely corrected in a timely manner such untrue statement or omission; and provided, further, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in the prospectus, if such untrue statement or alleged untrue statement, omission or alleged omission is completely corrected in an amendment or supplement to the prospectus and the selling Stockholder thereafter fails to deliver such prospectus as so amended or supplemented prior to or concurrently with the sale of the securities to the Person asserting such loss, claim, damage, liability or expense after the Company had furnished such selling Stockholder with a sufficient number of copies of the same. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the selling Stockholder, if requested.
(2) Indemnification by Selling Stockholders. Each selling Stockholder, agrees to severally and not jointly, indemnify and hold harmless, to the full extent permitted by law, the Company, its directors, officers, employees and representatives and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages or liabilities
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Pursuant to 17 C.F.R. Section 200.83
and expenses caused by any untrue statement of a material fact contained in any registration statement or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such selling Stockholder to the Company for inclusion in such registration statement, prospectus or preliminary prospectus and has not been corrected in a subsequent writing prior to or concurrently with the sale of the securities to the Person asserting such loss, claim, damage, liability or expense. In no event shall the maximum aggregate liability of any selling Stockholder hereunder be greater in amount than the dollar amount of the proceeds received by such selling Stockholder upon the sale of the securities giving rise to such indemnification obligation (net of any selling expenses paid by such selling Stockholder). The Company and the selling Stockholders shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons for inclusion in any prospectus or registration statement.
(3) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt (but in any event within 30 days after such Person has actual knowledge of the facts constituting the basis for indemnification) written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that the indemnifying party is actually prejudiced by reason of such delay or failure; provided, further, however, that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed in writing to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person or (c) in the reasonable judgment of any such Person, based upon advice of counsel, a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld), provided that an indemnified party shall not be required to consent to any settlement involving the imposition of equitable remedies or involving the imposition of any material obligations on such indemnified party other than financial obligations for which such indemnified party will be indemnified hereunder. No indemnifying party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. Whenever the
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indemnified party or the indemnifying party receives a firm offer to settle a claim for which indemnification is sought hereunder, it shall promptly notify the other of such offer. If the indemnifying party refuses to accept such offer within 20 business days after receipt of such offer (or of notice thereof), such claim shall continue to be contested and, if such claim is within the scope of the indemnifying partys indemnity contained herein, the indemnified party shall be indemnified pursuant to the terms hereof. If the indemnifying party notifies the indemnified party in writing that the indemnifying party desires to accept such offer, but the indemnified party refuses to accept such offer within 20 business days after receipt of such notice, the indemnified party may continue to contest such claim and, in such event, the total maximum liability of the indemnifying party to indemnify or otherwise reimburse the indemnified party hereunder with respect to such claim shall be limited to and shall not exceed the amount of such offer, plus reasonable out-of-pocket costs and expenses (including reasonable attorneys fees and disbursements) to the date of notice that the indemnifying party desires to accept such offer, provided that this sentence shall not apply to any settlement of any claim involving the imposition of equitable remedies or to any settlement imposing any material obligations on such indemnified party other than financial obligations for which such indemnified party will be indemnified hereunder. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim in any one jurisdiction, unless in the written opinion of counsel to the indemnified party, reasonably satisfactory to the indemnifying party, use of one counsel would be expected to give rise to a conflict of interest between such indemnified party and any other of such indemnified parties with respect to such claim, in which even the indemnifying party shall be obligated to pay the fees and expenses of each additional counsel.
(4) Other Indemnification. Indemnification similar to that specified in this Section 9(b)(vii) (with appropriate modifications) shall be given by the Company and each selling Stockholder with respect to any required registration or other qualification of securities under Federal or state law or regulation of governmental authority other than the Securities Act.
(5) Contribution. If for any reason the indemnification provided for in the preceding clauses 9(b)(vii)(1) and 9(b)(vii)(2) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by the preceding clauses 9(b)(vii)(1) and 9(b)(vii)(2), then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations, provided that no selling Stockholder shall be required to contribute in an amount greater than the dollar amount of the proceeds received by such selling Stockholder with respect to the sale of any securities under this Section 9(b) (net of any selling expenses paid by such Stockholder). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
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Section 10. Affiliate Transactions. Until the date of the Berry Investor Termination Event, the prior written consent of the Berry Investor will be required prior to the entry into (i) any transaction between the Company, Parent, The Fresh Market and/or any of their respective subsidiaries, on the one hand, and any Sponsor Fund and/or any of their Affiliates and/or any portfolio companies of Apollo Management VIII, L.P., on the other hand, and (ii) any agreement or arrangement with any Sponsor Fund and/or any of their Affiliates for the payment of fees or reimbursement of expenses (other than (A) that certain Management Consulting Agreement, dated as of the date hereof, by and among The Fresh Market, Parent and Apollo Management Holdings, L.P. and (B) this Agreement), in each case, unless the terms of such transaction, agreement or arrangement, as the case may be, are no less favorable to the Company and/or its subsidiaries than would be obtained in a comparable arms-length transaction with an unrelated third-party.
Section 11. | Restrictive Covenants. |
(a) Confidentiality. Each Fresh Market Co-Investor agrees that such Fresh Market Co-Investor shall not, and shall cause its Affiliates to not, disclose and to treat and hold as confidential all information, observations and data concerning the business of the Company and its subsidiaries and including any confidential or proprietary information of any third person in the Companys possession (collectively, the Confidential Information) and, except as otherwise expressly permitted by this Agreement, refrain from using any of the Confidential Information for the benefit of any Person other than the Company and its Affiliates. In the event that any Fresh Market Co-Investor or any of such Fresh Market Co-Investors Affiliates is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Fresh Market Co-Investor shall notify the Company promptly of the request or requirement so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Section 11(a). If, in the absence of a protective order or the receipt of a waiver hereunder, in the event a Fresh Market Co-Investor is compelled to disclose any Confidential Information to any tribunal, such Fresh Market Co-Investor may disclose the Confidential Information to the tribunal; provided that such Fresh Market Co-Investor shall use its commercially reasonable efforts to obtain, at the request and expense of the Company, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as the Company shall designate. Notwithstanding the foregoing, for purposes of this Agreement, Confidential Information shall not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by any Fresh Market Co-Investor or its Affiliates in violation of this Agreement, (ii) was available to such Fresh Market Co-Investor or its Affiliates on a non-confidential basis prior to disclosure by the Company, (iii) becomes available to such Fresh Market Co-Investor or its Affiliates on a non-confidential basis from a source other than the Company, provided that, to such Fresh Market Co-Investors knowledge after reasonable inquiry, such source is not acting in violation of a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to such Fresh Market Co-Investor or its Affiliates by a contractual, legal or fiduciary obligation, or (iv) is independently developed by such Fresh Market Co-Investor or its Affiliates without use of or reference to the Confidential Information.
(b) Non-Solicitation. Each Stockholder other than the Sponsor Funds covenants and agrees that during the Restricted Period, such Stockholder shall not and shall cause its Affiliates not to, directly or indirectly, (i) induce or attempt to induce any officer or manager of the Company or any of its Affiliates to leave the employ of the Company or any of its Affiliates or (ii) actually hire any officer or manager that is or was employed by the Company or any of its Affiliates at any time during the 6 months prior to the date such hiring is contemplated; provided, however, that the foregoing shall not prohibit the solicitation of any person by general
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advertisements (in any media) or non-directed search inquiries (including through professional search firms or otherwise) for employment not specifically directed towards employees of the Company or its Affiliates.
(c) Non-Disparagement. Each Stockholder covenants and agrees that such Stockholder shall not and shall cause its Affiliates not to, directly or indirectly, make any disparaging statements or communications about the Company, any other Stockholder or any of their respective direct or indirect Affiliates, stockholders, directors, members, managers, officers, employees, independent contractors and representatives, provided that no Stockholder shall be prevented from providing true testimony to the extent required by any legal proceeding or investigation by a competent governmental authority.
(d) Enforcement. If, at the time of enforcement of any of the provisions of this Section 11, a court determines that the restrictions stated herein are unreasonable under the circumstances then existing, then the parties hereto agree that the maximum period, scope or geographical area reasonable under the circumstances shall be substituted for the stated period, scope or area. The parties further agree that such court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope or geographical area permitted by law, but in no event a period longer than the Restricted Period.
(e) Remedies. Each Stockholder acknowledges and agrees that money damages may not be an adequate remedy for any breach or threatened breach of the provisions of this Section 11 applicable to such Stockholder and that, in such event, the Stockholders, the Company and/or their respective successors or assigns shall, in addition to any other rights and remedies existing in their favor, be entitled to seek specific performance, injunctive and/or other relief from any court of competent jurisdiction in order to enforce or prevent any violations of the provisions of this Section 11; provided that such Stockholder is found to have been in violation of the provisions of this Section 11.
Section 12. Directors and Officers Liability Insurance; Indemnification Agreements. The Company shall purchase and maintain a directors and officers insurance policy with an aggregate limit equal to not less than $30 million, and the members of the Parent Board and any Subsidiary Board appointed or designated by the Stockholders shall each be named as covered insureds thereunder. The Company shall maintain such policy contemplated hereby in effect from the date hereof until six years from the last date upon which any member of the Parent Board and any Subsidiary Board nominated by any of the Stockholders held office on such board. In addition, the Company, Parent, and The Fresh Market shall enter into indemnification agreements with each member of the Parent Board and each Subsidiary Board in the form of Exhibit A (collectively, the Indemnification Agreements). In the event the Company, Parent, or The Fresh Market or any of its successors or assigns (a) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (b) transfers all or substantially all of the properties and assets to any person, then, and in each such case, proper provision shall be made so that such successors and assigns shall assume the obligations set forth in this Section 12.
Section 13. Notices. In the event a notice or other document is required to be sent hereunder to the Company or to any Stockholder, such notice or other document shall be deemed given: (a) on the date delivered personally, (b) on the date delivered by a private courier, or (c) on the date sent by email to the email address upon email confirmation, (d) on the date noted on the return receipt as the delivery or attempted delivery date if mailed, by certified or registered mail, return receipt requested, postage prepaid. Any such notice or other documents shall be addressed as set forth on Annex I hereto. Any party may effect a change of address for purposes of this Agreement by giving notice of such change to each of the other parties in the manner provided herein. Until such notice of change of address is properly given, the addresses set forth on Annex I hereto shall be effective for all purposes.
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Section 14. Amendment. This Agreement may be amended, modified or supplemented from time to time by an instrument in writing signed by the Company and Apollo Investor; provided, however, that until the date of the Berry Investor Termination Event, any amendment, modification or supplement of any provision of this Agreement (including, without limitation, Sections 4, 5, 7, 9(b), 10, this Section 14 and any applicable defined terms in such Sections) that will have a material, adverse and disproportionate effect on the Berry Investor (as compared to the other Stockholders) shall require the prior written consent of the Berry Investor.
Section 15. | Miscellaneous Provisions. |
(a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTIONS CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(b) Whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural. Section headings are used for convenience only and shall in no way affect the construction of this Agreement.
(c) This Agreement shall be binding upon the Company, each of the parties hereto, and their respective permitted successors and assigns. The Company shall require any Person who acquires any shares of Common Stock (whether from another Stockholder or from the Company) after the date of this Agreement (the Acquired Securities) to become a party to this Agreement and to succeed to all of the rights and obligations of a Stockholder under this Agreement by obtaining an executed joinder to this Agreement from such Person in the form and substance approved by the Company Board. Upon the execution and delivery of the joinder by such Person, such Person shall be a Stockholder under this Agreement with respect to the Acquired Securities. Each Additional Stockholder shall be added by the Company to Annex I attached hereto, and the Company shall amend and restate such Annex I from time to time to reflect the addition of such Additional Stockholders; provided that such amendment shall not be subject to Section 14 of this Agreement.
(d) Any provision of this Agreement may be waived from time to time by an instrument in writing signed by each party from whom such waiver is sought. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. The specified rights of the Berry Investor may not be waived without the consent of the Berry Investor.
(e) Unless earlier terminated by the mutual agreement of all the parties hereto, this Agreement shall terminate automatically upon the dissolution of the Company (unless the Company continues to exist after such dissolution as a limited liability company or in another form, whether incorporated in Delaware or another jurisdiction).
(f) Any Stockholder who disposes of all of his, her or its Common Stock in conformity with the terms of this Agreement shall cease to be a party to this Agreement and shall have no further rights hereunder other than rights to indemnification under Section 9(b)(vii), if applicable.
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(g) Each party to this Agreement acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that each other party to this Agreement shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach and further agrees to waive (to the extent legally permissible) any legal conditions required to be met for the obtaining of any such injunctive or other equitable relief (including posting any bond in order to obtain equitable relief).
(h) This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.
(i) Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, illegal or otherwise unenforceable provisions shall be null and void as to such jurisdiction. It is the intent of the parties, however, that any invalid, illegal or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, illegal or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law.
(j) Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and other documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby.
(k) The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall exclusively and properly lie in the Delaware State Chancery Court located in Wilmington, Delaware, or (in the event that such court denies jurisdiction) any federal or state court located in the State of Delaware. By execution and delivery of this Agreement each party hereto irrevocably submit to the jurisdiction of such courts for himself and in respect of his property with respect to such action. The parties hereto irrevocably agree that venue for such action would be proper in such court, and hereby waive any objection that such court is an improper or inconvenient forum for the resolution of such action. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court.
(l) No course of dealing between the Company, or its subsidiaries, and the Stockholders (or any of them) or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
(m) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED
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BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHT OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS ENTERED INTO IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN.
(n) Except as otherwise expressly provided herein, this Agreement sets forth the entire agreement of the parties hereto as to the subject matter hereof and supersedes all previous agreements (including, without limitation, the Rollover Agreement) among all or some of the parties hereto, whether written, oral or otherwise, as to such subject matter. Unless otherwise provided herein, any consent required by the Company may be withheld by the Company in its sole discretion.
(o) Except as otherwise expressly provided herein, no Person not a party to this Agreement, as a third party beneficiary or otherwise, shall be entitled to enforce any rights or remedies under this Agreement; provided that parties entitled to indemnification pursuant to Section 9(b)(vii) hereof shall have the right to enforce such sections in their own names.
(p) If, and as often as, there are any changes in the Common Stock by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions of this Agreement, as may be required, so that the rights, privileges, duties and obligations hereunder shall continue with respect to the Common Stock as so changed.
(q) Without limiting anything in the Company Charter or the Company By-Laws, no Company Director shall be personally liable to the Company or any Stockholder as a result of any acts or omissions taken under this Agreement in good faith.
(r) In the event additional shares of Common Stock are issued by the Company to a Stockholder at any time during the term of this Agreement, either directly or upon the exercise or exchange of securities of the Company exercisable for or exchangeable into shares of Common Stock, such additional shares of Common Stock, as a condition to their issuance, shall become subject to the terms and provisions of this Agreement.
(s) Notwithstanding anything to the contrary contained herein, the Sponsor Funds may assign their rights or obligations, in whole or in part, under this Agreement to any member of the Apollo Group. In the event that any additional members of the Apollo Group becomes an becomes an owner of Common Stock, such member shall automatically become party to this Agreement and this Agreement shall be amended and restated to provide that such Person or a designee of such Person shall have the same rights and obligations of the Sponsor Funds hereunder.
* * * * *
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This Stockholders Agreement is executed by the Company and by the other parties hereto to be effective as of the date first above written.
POMEGRANATE PARENT HOLDINGS, INC. | ||||||
By:
|
| |||||
Name: | Andrew S. Jhawar | |||||
Title: | President | |||||
AP VIII POMEGRANATE HOLDINGS, L.P. | ||||||
By: | AP VIII Pomegranate GP, LLC, | |||||
its General Partner | ||||||
By:
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| |||||
Name: | Andrew S. Jhawar | |||||
Title: | President |
[Signature Page to Stockholders Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TFM2, LLC | ||
By:
|
| |
Name: Leslie Anderson | ||
Title: Manager |
[Signature Page to Stockholders Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
|
George G. Golleher |
[Signature Page to Stockholders Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ANNEX I
ADDRESSES FOR NOTICE
1. | If to the Company: |
Pomegranate Parent Holdings, Inc. | ||
c/o Apollo Management VIII, L.P. | ||
9 West 57th Street | ||
43rd Floor | ||
New York, NY 10019 | ||
Attention: |
Laurie Medley | |
Email: |
lmedley@apollolp.com |
with an additional copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius, LLP | ||
101 Park Avenue | ||
New York, New York 10178 | ||
Attention: |
Robert G. Robison | |
Email: |
robert.robison@morganlewis.com |
2. | If to any Sponsor Fund: |
Apollo Management VIII, L.P. | ||
9 West 57th Street 43rd Floor | ||
New York, NY 10019 | ||
Attention: |
Laurie Medley | |
Email: |
lmedley@apollolp.com |
with an additional copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius, LLP
101 Park Avenue
New York, New York 10178 | ||
Attention: |
Robert G. Robison | |
Email: |
robert.robison@morganlewis.com |
Annex I-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
3. | If to Berry Investor: |
TFM 2, LLC
c/o Leslie L Anderson
Leslie Anderson, CPA, P.C.
1101 Norwalk Street
Greensboro, NC 27407-2022
Email: Anderson@leslieandersonpc.com
Ray Berry
4540 Gordon Drive
Naples, FL 34102
Email: rdbtfm@gmail.com
Brett Berry
740 Juniper Avenue
Boulder, CO 80304-1722
Email: bmberry@gmail.com
with additional copies (which shall not constitute notice) to:
DLA Piper LLP (US)
One Atlantic Center
1201 West Peachtree Street, Suite 2800
Atlanta, Georgia 30309-3450
Attention: Joseph Silver, Esq.
Email: joseph.silver@dlapiper.com
4. | If to Golleher: |
George G. Golleher
50 Greenhorn Road
Hailey, ID. 83333
Annex I-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT A
Form of Director Indemnification Agreement
[See attached.]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
DIRECTOR INDEMNIFICATION AGREEMENT
THIS DIRECTOR INDEMNIFICATION AGREEMENT (the Agreement) is effective as of [●], 2016 by and among [The Fresh Market, Inc., a Delaware corporation] (the Company), and [●] (the Indemnitee).
WHEREAS, the Indemnitee has been elected as a director of the Company as of the date of this Agreement;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify persons serving as directors of the Company to the fullest extent permitted by applicable law so that they will serve or continue to serve as directors of the Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve and/or continue to serve on the Board of Directors of the Company (the Board), on the condition that he be so indemnified;
NOW THEREFORE, in consideration of the promises and the covenants contained herein, the Company and the Indemnitee do hereby covenant and agree as follows:
Section 1. Services by the Indemnitee. The Indemnitee agrees to serve or continue to serve at the request of the Company as a director of the Company. Notwithstanding the foregoing, the Indemnitee may at any time and for any reason resign from any such position.
Section 2. Indemnification General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, the Indemnitee as provided in this Agreement and to the fullest extent permitted by the General Corporation Law of the State of Delaware and Delaware law as in effect at any time. The rights of the Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by or in the Right of the Company. The Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he was, is, or is threatened to be made, a party to any threatened, pending or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, the Company shall indemnify the Indemnitee against Expenses, judgments, fines (including any excise taxes assessed on the Indemnitee with respect to an employee benefit plan) and amounts paid in settlement actually and reasonably incurred by him in connection with such Proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, if he also had no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company. The Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he was, is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, the Company shall indemnify the Indemnitee against Expenses actually and reasonably incurred by him in connection with the defense or settlement of such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Notwithstanding the foregoing, no
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indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnitee shall have been adjudged to be liable to the Company or if applicable law prohibits such indemnification unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware of such other court shall deem proper.
Section 5. | Indemnification for Expenses of a Party Who is Wholly or Partly Successful. |
(a) To the extent that the Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If the Indemnitee is not wholly successful in defense of any Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by him in connection with each such claim, issue or matter as to which the Indemnitee is successful, on the merits or otherwise. For purposes of this Section 5(a), the term successful, on the merits or otherwise, shall include, but shall not be limited to, (i) the termination of any claim, issue or matter in a Proceeding by withdrawal or dismissal, with or without prejudice, (ii) termination of any claim, issue or matter in a Proceeding by any other means without any express finding of liability or guilt against the Indemnitee, with or without prejudice, or (iii) the expiration of 120 days after the making of a claim or threat of a Proceeding without the institution of the same and without any promise or payment made to induce a settlement. The provisions of this Section 5(a) are subject to Section 5(b) below.
(b) In no event shall the Indemnitee be entitled to indemnification under Section 5(a) above with respect to a claim, issue or matter to the extent (i) applicable law prohibits such indemnification or (ii) an admission is made by the Indemnitee in writing to the Company or in such Proceeding or a final, nonappealable determination is made in such Proceeding that the standard of conduct required for indemnification under this Agreement has not been met with respect to such claim, issue or matter.
Section 6. Indemnification for Expenses as a Witness. Notwithstanding any provisions herein to the contrary, to the extent that the Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding, the Company shall indemnify the Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith.
Section 7. Advancement of Expenses. The Company shall advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding within 20 days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after the final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by or on behalf of the Indemnitee. The Indemnitee hereby expressly undertakes to repay such amounts advanced, if, but only if, and then only to the extent that, it shall ultimately be determined by a final, non-appealable adjudication or arbitration decision that the Indemnitee is not entitled to be indemnified against such Expenses. The Indemnitee further undertakes to return any such advance which remains unspent at the final, non-appealable conclusion of the Proceeding to which the advance related. All amounts advanced to the Indemnitee by the Company pursuant to this Section 7 and repaid shall be repaid without interest. The Company shall make all advances pursuant to this Section 7 without regard to the financial ability of the Indemnitee to make repayment, without bond or other security and without regard to the prospect of
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whether the Indemnitee may ultimately be found to be entitled to indemnification under the provision of this Agreement. Any required reimbursement of Expenses by the Indemnitee shall be made by the Indemnitee to the Company within 20 days following the entry of the final, non-appealable adjudication or arbitration decision pursuant to which it is determined that the Indemnitee is not entitle to be indemnified against such Expenses.
Section 8. | Procedure for Determination of Entitlement to Indemnification. |
(a) To obtain indemnification under this Agreement, following final disposition of the applicable Proceeding, the Indemnitee shall submit to the Company in care of the Secretary of the Company a written request therefor, along with such documentation and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that the Indemnitee has requested indemnification.
(b) Upon written request by the Indemnitee for indemnification pursuant to the first sentence of Section 8(a) hereof, a determination, if required by applicable law, with respect to the Indemnitees entitlement thereto shall be made in the specific case; (i) by a majority voted of the Disinterested Directors (as hereinafter defined), even though less than a quorum; or (ii) by a committee of Disinterested Directors designated by a majority vote of Disinterested Directors, even though less than a quorum; or (iii) if there are no Disinterested Directors, or if the Disinterested Directors so direct, by Independent Counsel (as hereinafter defined), as selected pursuant to Section 8(c), in a written opinion to the Board, a copy of which hall be delivered to the Indemnitee; or (iv) by the stockholders of the Company. If it is so determined that the Indemnitee is entitled to indemnification, the Company shall make payment to the Indemnitee within 10 days after such determination. The Indemnitee shall cooperate with the Person or Persons making such determination with respect to the Indemnitees entitlement to indemnification, including providing to such Person or Persons upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. Notwithstanding the foregoing, if a Change of Control has occurred, the Indemnitee may require a determination with respect to the Indemnitees entitlement to indemnification to be made by Independent Counsel, as selected pursuant to Section 8(c), in a written opinion to the Board.
(c) In the event the determination of entitlement to the indemnification is to be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be selected as provide in this Section 8(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board (including a vote of a majority of the Disinterested Directors if obtainable), and the Company shall give written notice to the Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and approved by the Company (which approval shall not be unreasonably withheld, conditioned or delayed). If (i) an Independent Counsel is to make the determination of entitlement pursuant to Section 8(b) hereof, and (ii) within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected, either the Company or the Indemnitee may petition the Court of Chancery of the State of Delaware for the appointment as Independent Counsel of a Person selected by such a court or by such other Person as such court shall designate. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(c), regardless of the manner in which such
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Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding pursuant to Section 10(a)(iv) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
Section 9. | Presumptions and Effect of Certain Proceedings; Construction of Certain Phrases. |
(a) In making a determination with respect to whether the Indemnitee is entitled to indemnification hereunder, the Person or Persons making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement if the Indemnitee has submitted a request for indemnification in accordance with Section 8(a) of this Agreement, and anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion to overcome that presumption.
(b) Subject to the terms of Section 16 hereof, the termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that the Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that the Indemnitee had reasonable cause to believe that his conduct was unlawful.
(c) For purposes of any determination of the Indemnitees entitlement to indemnification under this Agreement or otherwise, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the interests of the Company, and, with respect to a criminal Proceeding, to have also had no reasonable cause to believe his conduct was unlawful, if it is determined by the Board or by the Independent Counsel, as applicable, that the Indemnitees actions were based on good faith reliance on the records or books of account of the Company or Another Enterprise or on information supplied to the Indemnitee by the officers of the Company or Another Enterprise in the course of their duties, or on the advice of legal counsel for the Company or Another Enterprise or on information or records given or reports made to the Company or Another Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or Another Enterprise.
Section 10. | Remedies of the Indemnitee. |
(a) In the event that (i) a determination is made pursuant to Section 8 of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6 of this Agreement, (iii) the determination of entitlement of indemnification is to be made by the Disinterested Directors, a committee of Disinterested Directors or the stockholders of the Company pursuant to Section 8(b) of this Agreement and such determination shall not have been made and delivered to the Indemnitee in writing within 20 days after receipt by the Company of the request for indemnification, (iv) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) of this Agreement and such determination shall not have been made in a written opinion to the Board and a copy delivered to the Indemnitee within 20 days after receipt by the Company of the request for indemnification, (v) payment of indemnification is not made pursuant to Section 6 of this Agreement within 30 days after receipt by the Company of a written request therefor or (vi) payment of indemnification is not made
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within 10 days after a determination has been made that the Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 8 or Section 9 of this Agreement, the Indemnitee shall be entitled to an adjudication in the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. The Indemnitee shall commence such Proceeding seeking an adjudication within 180 days following the date on which the Indemnitee first has the right to commence such Proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a Proceeding brought by the Indemnitee to enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination is made pursuant to Section 8 of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial on the merits, and the Indemnitee shall not be prejudiced by reason of that adverse determination.
(c) Any judicial adjudication determined under this Section 10 shall be final and binding on the parties.
Section 11. Defense of Certain Proceedings. The Company shall be entitled to participate in the defense of any Proceeding or to assume the defense thereof, with counsel approved by the Indemnitee, which approval shall not be unreasonably withheld, conditioned or delayed, upon the delivery to the Indemnitee of written notice of its election to do so; provided, however, that in the event that (i) the use of counsel chosen by the Company to represent the Indemnitee would present such counsel with an actual or potential conflict, (ii) the named parties in any such Proceeding (including any impleaded parties) include both the Company and the Indemnitee and Indemnitee shall conclude that there may be one or more legal defenses available to him or her that are different from or in addition to those available to the Company, or (iii) any such representation by the Company would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee will be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Proceeding) at the Companys expense.
Section 12. Exception to Right of Indemnification or Advancement of Expenses. (a) Notwithstanding any other provision of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding, or any claim, issue or matter therein, brought or made by the Indemnitee against:
(i) The Company, except for (x) any claim or Proceeding in respect of this Agreement and/or the Indemnitees rights hereunder, (y) any claim or Proceeding to establish or enforce a right to indemnification under (A) any statute or law, (B) any other agreement with the Company or (C) the Companys Certificate of Incorporation or Bylaws as now or hereinafter in effect and (z) any counter-claim or cross-claim brought or made by him against the Company in any Proceeding brought by or in the right of the Company against him; or
(ii) Any other Person, except for Proceedings or claims approved by the Board.
(b) In the event that a claim for indemnification against liabilities arising under the Securities Act of 1933, as amended (the Securities Act) (other than the payment by the Company of Expenses incurred or paid by the Indemnitee in the successful defense of any Proceeding) is asserted by the Indemnitee in connection with securities being registered under the
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Securities Act, the Company shall, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and the parties hereto shall be governed by the final adjudication of such issue.
Section 13. | Contribution. |
(a) If, with respect to any Proceeding, the indemnification provided for in this Agreement is held by a court of competent jurisdiction to be unavailable to the Indemnitee for any reason other than that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to a criminal Proceeding, that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Company shall contribute to the amount of Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with such Proceeding or any claim, issue or matter therein in such proportion as is appropriate to reflect the relative benefits received by the Indemnitee and the relative fault of the Indemnitee versus the other defendants or participants in connection with the action or inaction which resulted in such Expenses, judgments, penalties, fines and amounts paid in settlement, as well as any other relevant equitable considerations.
(b) The Company and the Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 13 were determined by pro rata or per capita allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 13(a) above.
(c) No Person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not found guilty of such fraudulent misrepresentation.
Section 14. Director Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors liability insurance, the Indemnitee will be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director of the Company.
Section 15. Security. The Company may, but shall not be required to, provide security to the Indemnitee for the Companys obligations hereunder through an irrevocable bank letter of credit, funded trust or other similar collateral.
Section 16. Settlement of Claims. The Company shall not be required to obtain the consent of the Indemnitee to the settlement of any Proceeding which the Company has undertaken to defend if such settlement solely involves the payment of money, the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by an Indemnitee in settlement of any Proceeding unless the Company has consented to such settlement, which consent shall not be unreasonably withheld.
Section 17. Duration of Agreement. This Agreement shall be unaffected by the termination of the Corporate Status of the Indemnitee and shall continue for so long as the Indemnitee may have any liability or potential liability by virtue of his Corporate Status, including, without limitation, the final termination of all pending Proceedings in respect of which the Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any Proceeding commenced by the
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Indemnitee pursuant to Section 10 of this Agreement relating thereto, whether or not he is acting or serving in such capacity at the time any liability or Expense is incurred for which indemnification can be provided under this Agreement.
Section 18. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise.
Section 19. Limitation of Liability. Notwithstanding any other provision of this Agreement, neither party shall have any liability to the other for, and neither party shall be entitled to recover from the other, any consequential, special, punitive, multiple or exemplary damages as a result of a breach of this Agreement.
Section 20. Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights; provided, however, that no right of advancement or recovery that the Indemnitee may have from any other Person, and no right to coverage from any insurer providing insurance coverage under any policy purchased or maintained by any other Person or under any personal umbrella liability insurance policy or any policy purchased or maintained by the Indemnitee, shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company under applicable law, the Companys Certificate of Incorporation, the Companys Bylaws, any other agreement, a vote of stockbrokers, a resolution of directors or otherwise.
Section 21. | Definitions. For purposes of this Agreement: |
(a) Another Enterprise means any corporation (other than the Company), partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which the Indemnitee is serving at the request of the Company as a director, officer, employee, partner, member, agent or in a similar capacity.
(b) Change of Control shall mean the occurrence of any one or more of the following:
(i) Business Combination. Consummation of (x) a reorganization, merger, consolidation, share exchange or other business combination involving the Company or any of its subsidiaries or the disposition of all or substantially all the assets of the Company, whether in one or a series of related transactions, or (y) the acquisition of assets or stock of another entity by the Company (either, a Business Combination), excluding, however, any Business Combination pursuant to which individuals who were the beneficial owners (as such term is defined in Rule 13d-3 under the Exchange Act), respectively, of the then outstanding shares of common stock of the Company (the Outstanding Stock) and the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company (the Outstanding Company Voting Securities) immediately prior to such Business Combination beneficially own, upon consummation of such Business Combination, directly or indirectly, more than 50% of the then outstanding shares of common stock (or similar securities or interests in the case of an entity other than a corporation) and more than 50% of the combined voting power of the then outstanding securities (or interests) entitled to vote generally in the election of directors (or in the selection of any other similar
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governing body in the case of an entity other than a corporation) of the Surviving Corporation (as defined below) in substantially the same proportions as their ownership of the Outstanding Stock and Outstanding Company Voting Securities, immediately prior to the consummation of such Business Combination (that is, excluding any outstanding voting securities of the Surviving Corporation that such beneficial owners hold immediately following the consummation of the Business Combination as a result of their ownership prior to such consummation of voting securities of any company or other entity involved in or forming part of such Business Combination other than the Company); or
(ii) Liquidation. Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company (or, if no such approval is required, the consummation of such a liquidation or dissolution).
(c) Corporate Status describes the status of an individual who is or was director of the Company, or is or was serving at the request of the Company as a director, officer, employee, partner, member, agent or in a similar capacity of Another Enterprise.
(d) Disinterested Director means a director of the Company who is not and was not a party to the Proceeding for which indemnification is sought by the Indemnitee.
(e) Exchange Act means the Securities Exchange Act of 1934, as amended.
(f) Expenses shall include all reasonable attorneys fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding.
(g) Independent Counsel means a law firm or a member of a law firm that is experienced in matters of corporation law and such law firm neither presently is, nor in the past five years has been, retained to represent: (i) the Company or the Indemnitee in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term Independent Counsel shall not include any Person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company of the Indemnitee in an action to determine the Indemnitees rights under this Agreement.
(h) Person means a natural person, firm, partnership, joint venture, association, corporation, company, limited liability company, trust, business trust, estate or other entity.
(i) Proceeding includes any action, suit or proceeding, whether civil, criminal, administrative or investigative.
(j) References to the Company shall include, in addition to any resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, partner, member or agent of another
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corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provision of this Agreement with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
Section 22. Non-Exclusivity. The Indemnitees rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Companys Certificate of Incorporation, the Companys Bylaws, any other agreement, a vote of stockholders, a resolution of directors or otherwise. The Company shall, in connection with any threatened, pending or completed Proceeding to which the Indemnitee was, is, or is threatened to be made, a party, by reason of his Corporate Status be the indemnitor of first resort and any obligation of any other Person, and any obligation of any insurer providing insurance coverage under any policy purchased or maintained by any other Person, or under any personal umbrella liability insurance policy or any policy purchased or maintained by the Indemnitee, to provide advancement or indemnification for the same Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement) incurred by the Indemnitee shall be secondary. In no event shall the Company have any indemnification obligation to the Indemnitee in connection with the Indemnitees service to any Person other than the Company or Another Enterprise.
Section 23. Remedies Not Exclusive. No right or remedy herein conferred upon the Indemnitee is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative of and in addition to the rights and remedies given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy of the Indemnitee hereunder or otherwise shall not be deemed an election of remedies on the part of the Indemnitee and shall not prevent the concurrent assertion or employment of any other right or remedy by the Indemnitee.
Section 24. Changes in Law. In the event that a change in applicable law after the date of this Agreement, whether by statute, rule or judicial decision, expands or otherwise increases the right or ability of a Delaware corporation to indemnify (or to otherwise pay or advance Expenses as to any Proceeding for the benefit of) a member of its board of directors, the Indemnitee shall, by this Agreement, enjoy the greater benefits so afforded by such change. In the event that a change in applicable law after the date of this Agreement, whether by statute, rule or judicial decision, narrows or otherwise reduces the right or ability of a Delaware corporation to indemnify (or to otherwise pay or advance Expenses as to any Proceeding for the benefit of) a member of its board of directors, such change shall have no effect on this Agreement or any of the Indemnitees rights hereunder, except and only to the extent required by law.
Section 25. Interpretation of Agreement. No provision of this Agreement will be interpreted in favor of, or against, either of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof or thereof.
Section 26. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions will be deemed reformed to the extent necessary to conform to applicable law and to give maximum effect to the intent of the parties
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hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision or provisions held invalid, illegal or unenforceable.
Section 27. | Governing Law; Jurisdiction and Venue. |
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(b) Each of the parties (a) consents to submit itself to the personal jurisdiction of the courts of the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the courts of the State of Delaware or any Federal court sitting in the State of Delaware.
Section 28. Notice by the Indemnitee. The Indemnitee agrees to promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder; provided, however, that the failure of the Indemnitee to timely provide such notice shall not affect the Indemnitees right to be indemnified or to receive advancement of Expenses under this Agreement except if, and then only to the extent that, the Company is actually prejudiced by such failure.
Section 29. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and received for by the party to whom said notice or other communication shall have been directed, (b) mailed by U.S. certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, or (c) sent via facsimile or electronic mail transmission (with electronic or telephonic confirmation of receipt):
(i) If to the Company:
c/o Apollo Management VIII, L.P.
9 West 57th Street, 43rd Floor
New York, NY 10019
Attention: |
Laurie Medley, Esq. | |||
Facsimile: |
(646) 607-0528 | |||
Email: lmedley@apollolp.com |
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: |
Robert G. Robison, Esq. | |||
Facsimile: (212) 309-6001 | ||||
Email: robert.robison@morganlewis.com |
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(ii) If to the Indemnitee, to the address of the Indemnitee set forth on the signature page hereof; or to such other address as may have been furnished by any party to the other(s), in accordance with this Section 29.
Section 30. Modification and Waiver. No supplement, modification or amendment of this Agreement or any provision hereof shall limit or restrict in any way any right of the Indemnitee under this Agreement with respect to any action taken or omitted by the Indemnitee in his Corporate Status prior to such supplement, modification or amendment. No supplement, modification or amendment of this Agreement or any provision hereof shall be binding unless executed in writing by both of the Company and the Indemnitee. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 31. Entire Agreement. This Agreement embodies the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior negotiations, commitments, agreements, representations and understandings, whether written or oral, relating to such subject matter and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto.
Section 32. Headings. The headings of the Sections or paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 33. Gender. Use of the masculine pronoun in this Agreement shall be deemed to include usage of the feminine pronoun where appropriate.
Section 34. Identical Counterparts. This Agreement may be executed in one or more counterparts (whether by original, photocopy or facsimile signature), each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement. Only one such counterpart executed by the party against whom enforcement is sought must be produced to evidence the existence of this Agreement.
Section 35. Successors and Assigns. (a) This Agreement shall be binding upon all successors and assigns of the Company (including any transferee of all or substantially all of its assets and any successor by merger or operation of law) and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee.
(b) This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Section 35(a). Without limiting the generality or effect of the foregoing, the Indemnitees right to receive payments hereunder will not be assignable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by Indemnitees will or by the laws of descent and distribution, and, in the event of any attempted assignment or transfer contrary to this Section 35(b) the Company will have no liability to pay any amount so attempted to be assigned or transferred.
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[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.
[THE FRESH MARKET, INC.] | ||
By: | ||
Name: | ||
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[Signature Page Director Indemnification Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.1
EXECUTION VERSION
MANAGEMENT CONSULTING AGREEMENT
MANAGEMENT CONSULTING AGREEMENT, dated as of April 27, 2016 (this Agreement), by and among THE FRESH MARKET, INC., a Delaware corporation (the Company), POMEGRANATE HOLDINGS, INC., a Delaware corporation (Holdings), and TFM2, LLC, a Delaware limited liability company (TFM2).
RECITALS
WHEREAS, TFM2 has expertise in the areas of finance, strategy, investment, acquisitions and other matters relating to Holdings, its direct and indirect divisions and subsidiaries and, where applicable, controlled affiliates, including the Company (collectively, the Company Group) and their businesses;
WHEREAS, each of Holdings and the Company desires to avail itself of TFM2s expertise and consequently has requested that TFM2 make such expertise available from time to time in rendering certain management consulting and advisory services related to the business and affairs of the Company Group and the review and analysis of certain financial and other transactions; and
WHEREAS, each of TFM2, Holdings and the Company agrees that it is in its best interest to enter into this Agreement whereby, for the consideration specified herein, TFM2 shall provide the services identified herein as an independent contractor to the Company Group on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Retention of TFM2.
Holdings and the Company retain TFM2 to provide the services hereunder, and TFM2 accepts such retention, upon the terms and subject to the conditions set forth in this Agreement.
Section 2. Term.
(a) This Agreement shall commence on, and shall be effective from, the date hereof and, subject to the terms of Section 2(b) below, shall terminate simultaneously with the Apollo Management Consulting Agreement (as defined below) (the Term) or such earlier date as TFM2, Holdings and the Company may mutually agree in writing. The date on which the Term expires or on which TFM2, Holdings and the Company mutually agree in writing to terminate this Agreement shall be deemed the Termination Date. The obligations of the Company Group pursuant to Sections 2(b), 4 (solely to the extent of any Consulting Fee or portion thereof incurred, but not paid, prior to the termination of this Agreement), and 5 and the provisions of Section 6 through Section 14 shall survive the termination of this Agreement.
(b) TFM2s obligation to provide the services hereunder and the Companys obligations under Section 4 shall continue through and until the earlier of: (i) the Termination Date; and (ii) any merger, acquisition, disposition, recapitalization, divestiture, sale of assets, joint venture, issuance of securities (whether equity, equity-linked, debt or otherwise), financing or any similar transaction, in a single transaction or series of related transactions, the result of which is that New Holders (as defined below) become the beneficial owner, directly or indirectly, of more than 90% of the equity and/or voting securities, or all or substantially all of the assets, of
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Company and/or the Company Group. For the purposes of this Section 2(b), New Holders means one or more Persons that are not Initial Holders; and Initial Holders means (A) holders of equity interests of Pomegranate Parent Holdings, Inc. (Parent Holdings) as of the date hereof, (B) any Persons who acquire equity interests of Parent Holdings during the six (6) month period following the date hereof, (C) any directors, officers, employees and/or other members of management of Parent Holdings and/or its subsidiaries who acquire or receive equity interests of Parent Holdings at any time in their capacities as such and/or (D) any Affiliates of any of the foregoing (A) or (B).
Section 3. Management Consulting Services.
(a) TFM2 shall advise the Company Group and members of senior management of the Company Group concerning such management matters that relate to proposed financial transactions, acquisitions and other senior management matters related to the business, administration and policies of the members of the Company Group. Holdings or the Company shall provide all such background materials and information necessary for TFM2 to complete such services, and TFM2 shall devote such time to any such request as TFM2 shall deem necessary. Such consulting services shall be rendered in person or by telephone or other communication as determined by TFM2, and TFM2 may elect to have all or a portion of such services provided by or through its agents, employees or independent contractors. TFM2 shall have no obligation to any member of the Company Group as to the manner and time of rendering the services hereunder, and no member of the Company Group shall have any right to dictate or direct the details of the services rendered hereunder, or otherwise review the services rendered hereunder.
(b) Holdings and the Company shall promptly provide any materials or information that TFM2 may request in connection with the provision of services by TFM2 pursuant to the terms and conditions of this Agreement or to comply with Securities and Exchange Commission or other legal requirements (any such materials or information so furnished, the Information). Each of Holdings and the Company recognizes and confirms that TFM2 (i) shall use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same, (ii) does not assume any responsibility or liability whatsoever for the accuracy or completeness of the Information and such other information and (iii) is entitled to rely upon the Information without independent verification.
(c) TFM2 shall perform all services to be provided hereunder as an independent contractor to the Company Group and not as an employee, agent, partner of, member of a joint venture with, equity holder or representative of any member of the Company Group. TFM2 shall have no authority to act for or to bind any member of the Company Group while acting in its capacity as an advisor to the Company Group under this Agreement without Holdings or the Companys prior written consent.
(d) This Agreement shall in no way prohibit TFM2, its Affiliates, or any of its or its Affiliates current or former limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives from engaging in other activities or performing services for its or their own account or for the account of others, including for any Person that may be in direct or indirect competition with any business of any member of the Company Group, and the Company, on behalf of each member of the Company Group, disclaims to the fullest extent any prohibition thereof.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(e) TFM2 shall not have, by reason of this Agreement, a fiduciary relationship in respect of the Company Group, and nothing in this Agreement is intended to or shall be so construed as to impose upon TFM2, its Affiliates or any of their respective limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives, any obligation, except as expressly set forth in this Agreement.
(f) Any advice or opinions provided by TFM2 may not be disclosed or referred to publicly or to any third party (other than Holdings, the Companys or any of their respective affiliates legal, tax, financial or other advisors, each of which first agrees to keep such advice or opinions confidential), except in accordance with TFM2s prior written consent.
Section 4. Compensation.
(a) As consideration for TFM2s agreement to render the services set forth in Section 3(a) of this Agreement, subject to waiver or deferral as described in Section 4(e), and as compensation for any such services rendered by TFM2, the Company agrees to pay, or cause to be paid, to TFM2 a nonrefundable quarterly fee (the Consulting Fee) in an amount equal to (i) the Apollo Management Consulting Fee (as defined below) multiplied by (ii) the TFM2 Pro Rata Share, payable in full and in advance for each fiscal quarter on the first business day of such fiscal quarter (with each fiscal year beginning on January 1); provided, that on the date of the closing of the transactions (the Closing and the date on which the Closing occurs, the Closing Date) contemplated by that certain Agreement and Plan of Merger, dated as of March 11, 2016, by and between Holdings, Pomegranate Merger Sub, Inc. and the Company (as amended, restated, supplemented or otherwise modified from time to time, the Merger Agreement), the Company shall pay, or cause to be paid, to TFM2 a prorated portion of the Consulting Fee equal to (A) the Apollo Management Consulting Fee, multiplied by (B) the TFM2 Pro Rata Share, multiplied by (C) a fraction (expressed as a percentage) the numerator of which is the number of calendar days remaining after the Closing Date in the fiscal quarter in which the Closing occurs and the denominator of which is the number of calendar days in such fiscal quarter. The Consulting Fee will be payable to TFM2 by wire transfer in immediately available funds to the bank account designated by TFM2. For purposes herein, the phrase TFM2 Pro Rata Share means, as of the date of calculation, a fraction, the numerator of which is the total number of shares in Parent Holdings that are held by TFM2 and its Co-Investor Permitted Transferees (as defined in the Stockholders Agreement of Parent Holdings, dated as of the date hereof, by the among the stockholders party thereto) (the TFM2 Group) and the denominator of which is the sum of (x) the total number of shares in Parent Holdings held by the TFM2 Group and (y) the total number of shares in Parent Holdings held by the Sponsor Funds (as defined in the Stockholders Agreement of Parent Holdings, dated as of the date hereof, by the among the stockholders party thereto). For purposes herein, the phrase Apollo Management Consulting Fee means the amount set forth in Section 4(a), clause (i), of the Apollo Management Consulting Agreement, as the same may be increased (or decreased) from time to time.
(b) The parties acknowledge and agree that an objective of the Company Group is to maximize value for its equity holders which may include consummating (or participating in the consummation of) one or more underwritten public offerings of any class of equity or debt securities of the Company or any other member of the Company Group or a direct or indirect parent company thereof (each such offering, an Underwritten Offering). The services provided to the Company Group by TFM2 pursuant to this Agreement will help to facilitate the consummation of an Underwritten Offering, should any member of the Company Group decide to pursue such a transaction.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Reference is made to that certain First Lien Credit Agreement, dated as of the date hereof, by and among Holdings, Pomegranate Merger Sub, Inc. (Merger Sub), the Lenders party thereto, and Barclays Bank PLC, as Administrative Agent and that certain Indenture, dated as of the date hereof, by and among Merger Sub, the Subsidiary Guarantors party thereto and Wilmington Trust, National Association, as trustee (each as amended, restated, supplemented or otherwise modified from time to time, the Debt Documents). Any portion of the fees payable to TFM2 under this Agreement (including the Consulting Fee) which the Company is prohibited from paying to TFM2 under the Debt Documents shall be deferred and shall be payable at the earliest time permitted under the Debt Documents or upon the payment in full of all obligations under the Credit Agreements; provided, that such fees shall only be deferred if (and only for so long as) such fees under the Apollo Management Consulting Agreement are being deferred under the Debt Documents. The Company shall notify TFM2 if the Company or its subsidiaries shall be unable to pay any fees pursuant to the Debt Documents on each date on which the Company would otherwise make a payment of fees under this Agreement to TFM2.
(d) All amounts payable to TFM2 hereunder shall be paid in cash and in U.S. dollars by wire transfer in immediately available funds to the bank account designated by TFM2.
(e) TFM2 may, at its sole discretion, waive or defer, in full or in part, payment of the Consulting Fee by providing written notice to such effect to the Company; provided that, in the event Apollo Management Holdings, L.P. (Apollo) elects to waive or defer, in full or in part, any payment of the Consulting Fee (as defined in the Apollo Management Consulting Agreement) payable pursuant to the Management Consulting Agreement, dated as of the date hereof, by and among the Company, Holdings and Apollo (the Apollo Management Consulting Agreement) in accordance with Section 4(f) of the Apollo Management Consulting Agreement, TFM2 shall automatically be deemed to have waived or deferred, in full or in part, the applicable payment of the Consulting Fee on the same terms, and subject to the same conditions, as the election by Apollo. The Company shall not claim a deduction on any tax return (i) for any such fee waived by TFM2 and (ii) for any such fee deferred by TFM2 until actually paid to TFM2, if at all.
Section 5. Indemnification; Limitation on Damages
(a) The Company shall indemnify and hold harmless TFM2, its Affiliates, and all of its and its Affiliates limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equityholders, affiliates and advisors (each such Person being an Indemnified Party) on demand from and against any and all losses, claims, demands, actions, causes of action, judgments, obligations, contracts, agreements, debts, costs, expenses, disbursements, damages and liabilities, whether known or unknown, contingent or otherwise, at common law, civil law and in equity, including in connection with seeking indemnification and, whether joint or several (the Liabilities), related to, arising out of or in connection with the services contemplated by this Agreement or the engagement of TFM2 pursuant to, and the performance by TFM2 (or any other Person permitted hereunder) of the services contemplated by, this Agreement, whether or not pending or threatened, whether or not an Indemnified Party is a party, whether or not resulting in any liability and whether or not such action, claim, demand, suit, investigation or proceeding is initiated or brought by any member of the Company Group; provided, that no Indemnified Party shall be entitled to any indemnification pursuant to this Agreement with respect to any investment losses or other Liabilities that may be incurred by such party solely in its capacity as an investor (directly or indirectly) in the Company Group. The Company shall on demand reimburse any Indemnified Party for all costs, fees,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
disbursements and expenses (including attorneys fees and expenses and fees and expenses of any investigator or consultant) as they are incurred in connection with investigating, preparing, pursuing, defending or assisting in the defense of any action, claim, demand, suit, investigation or proceeding for which the Indemnified Party would be entitled to indemnification under the terms of the previous sentence, or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. The Company shall not be liable under the foregoing indemnification provisions with respect to any Liability of an Indemnified Party to the extent that such is determined by a court of competent jurisdiction, in a final judgment from which no further appeal may be taken, to have resulted primarily from the fraud or willful misconduct of such Indemnified Party. The fees, expenses, costs and disbursements of an Indemnified Party (including attorneys fees and fees and expenses of any investigator or consultant) shall be paid by the Company as they are incurred only upon receipt, in each case, of an undertaking by or on behalf of the Indemnified Party to repay such amounts if it is finally judicially determined that the Liabilities in question resulted primarily from the fraud or willful misconduct of such Indemnified Party.
(b) The Company Groups sole and exclusive remedy against TFM2 and any other Indemnified Party for breach of this Agreement or otherwise arising from, in connection with or related to the performance of the services to be rendered hereunder, shall be to offset any fees otherwise payable to TFM2 by the amount of any Liabilities arising out of or relating to this Agreement or the services to be rendered hereunder, it being understood that any recovery shall be limited to recovery of actual damages, and no special, consequential, indirect, or punitive damages shall be allowed. No Indemnified Person shall be liable to the Company Group (i) for any breach hereunder by another Indemnified Person or (ii) for any breach by it, unless such breach constitutes fraud or willful misconduct as determined in a final judgment of a court of competent jurisdiction from which no appeal can be made.
Section 6. Notices.
All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed sufficient if personally delivered, sent by nationally-recognized overnight courier, or email (in each case if no system error or other notice on non-delivery is generated), or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:
if to TFM2, to:
TFM2, LLC
c/o Leslie L Anderson
Leslie Anderson, CPA, P.C.
1101 Norwalk Street
Greensboro, NC 27407-2022
Email: Anderson@leslieandersonpc.com
with a copy to (which shall not constitute notice):
DLA Piper LLP (US)
One Atlantic Center
1201 West Peachtree Street, Suite 2800
Atlanta, Georgia 30309-3450
Attention: Joseph Silver, Esq.
Email: Joeseph.silver@dlapiper.com
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
if to the Company or Holdings, to it at:
c/o Apollo Management VIII, L.P.
9 West 57th Street, 43rd Floor
New York, NY 10019
Attention: Laurie Medley, Esq.
Email: lmedley@apollolp.com
with a copy to (which shall not constitute notice):
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Robert G. Robison, Esq.
R. Alec Dawson, Esq.
James Z. Fang, Esq.
Email: robert.robison@morganlewis.com
alec.dawson@morganlewis.com
james.fang@morganlewis.com
or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of facsimile or email, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted.
Section 7. Benefits of Agreement.
This Agreement shall bind and inure to the benefit of TFM2, Holdings, the Company, the Indemnified Parties and any successors to or assigns of TFM2, Holdings, the Company and the Indemnified Parties; provided, this Agreement may not be assigned by any party hereto without the prior written consent of the other party, which consent will not be unreasonably withheld in the case of any assignment by TFM2. Upon TFM2s request, the Company shall cause the other members of the Company Group to become parties hereto directly in order to avail themselves of the services hereunder.
Section 8. Governing Law.
This Agreement shall be governed by, and construed, enforced and interpreted in accordance with, the laws of the State of New York, without giving effect to any law that would cause the laws of any jurisdiction other than the State of New York to be applied. Each of the parties hereto hereby (a) submits to the exclusive jurisdiction of any state court sitting in New York City or any federal court sitting in the Southern District of New York for the purpose of any action arising out of or relating to this letter agreement brought by any party hereto, (b) agrees that all claims in respect of such action or proceeding shall be heard and determined only in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (d) agrees not to bring any action or proceeding arising out of or relating to this letter agreement or any of the transactions contemplated by this letter agreement in any other court and (e) irrevocably waives, in any such action, any claim of improper venue or any claim that such courts are an inconvenient forum.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 9. Headings.
Section headings are used for convenience only and shall in no way affect the construction of this Agreement.
Section 10. Entire Agreement; Amendments.
This Agreement contains the entire understanding of the parties hereto with respect to its subject matter and supersedes and cancels any and all prior or contemporaneous agreements or understandings, and neither it nor any part of it may in any way be altered, amended, extended, waived, discharged, modified or terminated except by a written agreement signed by each of the parties hereto.
Section 11. Counterparts.
This Agreement may be executed in counterparts, including via facsimile transmission or PDF copies sent by e-mail, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute one and the same document.
Section 12. Waivers.
Any party to this Agreement may, by written notice to the other party, waive any provision of this Agreement. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
Section 13. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.
Section 14. Definitions.
For purposes of this Agreement, the term Affiliate, with respect to TFM2, shall include, without limitation, the members of TFM2 and each person controlling, controlled by or under common control with any of the foregoing persons. Furthermore, for purposes of this Agreement, the term Person shall mean an individual, partnership, limited liability partnership, corporation, limited liability company, association, joint stock company, trust, estate, joint venture, unincorporated organization or governmental authority (or any department, agency or political subdivision thereof). The words include, includes and including mean include, includes and including without limitation. Each and every decision, election, instruction or direction to be made or given by, or any act to be performed (or omitted) by, TFM2 hereunder shall be made, given, taken or omitted by TFM2 in its sole and non-reviewable discretion.
[Signature Pages Follow.]
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
THE FRESH MARKET, INC. | ||||
By:
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Name: Jeffrey Ackerman | ||||
Title: CFO |
[Signature Page to Berry Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
POMEGRANATE HOLDINGS, INC. | ||||
By:
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Name: Andrew S. Jhawar | ||||
Title: President |
[Signature Page to Berry Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TFM2, LLC | ||||
By:
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Name: | Leslie Anderson | |||
Title: | Manager |
[Signature Page to Berry Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.2
STRICTLY CONFIDENTIAL
EXECUTION VERSION
MANAGEMENT CONSULTING AGREEMENT
MANAGEMENT CONSULTING AGREEMENT, dated as of April 27, 2016 (this Agreement), by and among THE FRESH MARKET, INC., a Delaware corporation (the Company), POMEGRANATE HOLDINGS, INC., a Delaware corporation (Holdings) and APOLLO MANAGEMENT HOLDINGS, L.P., a Delaware limited partnership (Apollo).
RECITALS
WHEREAS, Apollo has expertise in the areas of finance, strategy, investment, acquisitions and other matters relating to Holdings, its direct and indirect divisions and subsidiaries and, where applicable, controlled affiliates, including the Company (collectively, the Company Group) and their businesses;
WHEREAS, each of Holdings and the Company desires to avail itself of Apollos expertise and consequently has requested that Apollo make such expertise available from time to time in rendering certain management consulting and advisory services related to the business and affairs of the Company Group and the review and analysis of certain financial and other transactions; and
WHEREAS, each of Apollo, Holdings and the Company agrees that it is in its best interest to enter into this Agreement whereby, for the consideration specified herein, Apollo shall provide the services identified herein as an independent contractor to the Company Group on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Retention of Apollo.
Holdings and the Company retain Apollo to provide the services hereunder, and Apollo accepts such retention, upon the terms and subject to the conditions set forth in this Agreement.
Section 2. Term.
(a) This Agreement shall commence on, and shall be effective from, the date hereof and, subject to the terms of Section 2(b) below, shall terminate on the eight-year anniversary of the date hereof (the Term) or such earlier date as Apollo, Holdings and the Company may mutually agree in writing. The date on which the Term expires or on which Apollo, Holdings and the Company mutually agree in writing to terminate this Agreement shall be deemed the Termination Date. The obligations of the Company Group pursuant to Sections 2(b), 4 (solely to the extent of any Consulting Fee, expense reimbursement or portion thereof incurred, but not paid, prior to the termination of this Agreement) and 5 and the provisions of Section 6 through Section 14 shall survive the termination of this Agreement.
(b) Apollos obligation to provide the services hereunder and the Companys obligations under Section 4 shall continue through and until the earlier of: (i) the Termination Date; and (ii) any merger, acquisition, disposition, recapitalization, divestiture, sale of assets, joint venture, issuance of securities (whether equity, equity-linked, debt or otherwise), financing or any similar transaction, in a single transaction or series of related transactions, the result of which is that New Holders (as defined below) become the beneficial owner, directly or indirectly, of more than 90% of the equity and/or voting securities, or all or substantially all of the assets, of
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Company and/or the Company Group. For the purposes of this Section 2(b), New Holders means one or more Persons that are not Initial Holders; and Initial Holders means (A) holders of equity interests of Pomegranate Parent Holdings, Inc. (Parent Holdings) as of the date hereof, (B) any Persons who acquire equity interests of Parent Holdings during the six (6) month period following the date hereof, (C) any directors, officers, employees and/or other members of management of Parent Holdings and/or its subsidiaries who acquire or receive equity interests of Parent Holdings at any time in their capacities as such and/or (D) any Affiliates of any of the foregoing (A) or (B).
Section 3. Management Consulting Services.
(a) Apollo shall advise the Company Group concerning such management matters that relate to proposed financial transactions, acquisitions and other senior management matters related to the business, administration and policies of the members of the Company Group. Holdings or the Company shall provide all such background materials and information necessary for Apollo to complete such services, and Apollo shall devote such time to any such request as Apollo shall deem necessary. Such consulting services shall be rendered in person or by telephone or other communication as determined by Apollo, and Apollo may elect to have all or a portion of such services provided by or through its agents, employees or independent contractors. Apollo shall have no obligation to any member of the Company Group as to the manner and time of rendering the services hereunder, and no member of the Company Group shall have any right to dictate or direct the details of the services rendered hereunder, or otherwise review the services rendered hereunder.
(b) Holdings and the Company shall promptly provide any materials or information that Apollo may request in connection with the provision of services by Apollo pursuant to the terms and conditions of this Agreement or to comply with Securities and Exchange Commission or other legal requirements (any such materials or information so furnished, the Information). Each of Holdings and the Company recognizes and confirms that Apollo (i) shall use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same, (ii) does not assume any responsibility or liability whatsoever for the accuracy or completeness of the Information and such other information and (iii) is entitled to rely upon the Information without independent verification.
(c) Apollo shall perform all services to be provided hereunder as an independent contractor to the Company Group and not as an employee, agent, partner of, member of a joint venture with, equity holder or representative of any member of the Company Group. Apollo shall have no authority to act for or to bind any member of the Company Group while acting in its capacity as an advisor to the Company Group under this Agreement without Holdings or the Companys prior written consent.
(d) This Agreement shall in no way prohibit Apollo, its Affiliates, or any of its or its Affiliates current or former limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives from engaging in other activities or performing services for its or their own account or for the account of others, including for any Person that may be in direct or indirect competition with any business of any member of the Company Group, and the Company, on behalf of each member of the Company Group, disclaims to the fullest extent any prohibition thereof.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(e) Apollo shall not have, by reason of this Agreement, a fiduciary relationship in respect of the Company Group, and nothing in this Agreement is intended to or shall be so construed as to impose upon Apollo, its Affiliates or any of their respective limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives, any obligation, except as expressly set forth in this Agreement.
(f) Any advice or opinions provided by Apollo may not be disclosed or referred to publicly or to any third party (other than Holdings, the Companys or any of their respective affiliates legal, tax, financial or other advisors, each of which first agrees to keep such advice or opinions confidential), except in accordance with Apollos prior written consent.
Section 4. Compensation.
(a) As consideration for Apollos agreement to render the services set forth in Section 3(a) of this Agreement, subject to waiver or deferral as described in Section 4(g), and as compensation for any such services rendered by Apollo, the Company agrees to pay, or cause to be paid, to Apollo a nonrefundable quarterly fee (the Consulting Fee) in an amount equal to (i) $375,000 multiplied by (ii) the Apollo Pro Rata Share, payable in full and in advance for each fiscal quarter on the first business day of such fiscal quarter (with each fiscal year beginning on January 1); provided, that on the date of the closing of the transactions (the Closing and the date on which the Closing occurs, the Closing Date) contemplated by that certain Agreement and Plan of Merger, dated as of March 11, 2016, by and between Holdings, Pomegranate Merger Sub, Inc. and the Company (as amended, restated, supplemented or otherwise modified from time to time, the Merger Agreement), the Company shall pay, or cause to be paid, to Apollo a prorated portion of the Consulting Fee equal to (A) $375,000, multiplied by (B) the Apollo Pro Rata Share, multiplied by (C) a fraction (expressed as a percentage) the numerator of which is the number of calendar days remaining after the Closing Date in the fiscal quarter in which the Closing occurs and the denominator of which is the number of calendar days in such fiscal quarter. The Consulting Fee will be payable to Apollo by wire transfer in immediately available funds to the bank account designated by Apollo. For purposes herein, the Apollo Pro Rata Share means, as of the date of calculation, a fraction, the numerator of which is the total number of shares in Parent Holdings that are held by Apollo and its Affiliates (the Apollo Group) and the denominator of which is the sum of (x) the total number of shares in Parent Holdings held by the Apollo Group and (y) the total number of shares in Parent Holdings held by TFM2, LLC and its Co-Investor Permitted Transferees (as defined in the Stockholders Agreement of Parent Holdings, dated as of the date hereof, by the among the stockholders party thereto).
(b) The parties acknowledge and agree that an objective of the Company Group is to maximize value for its equity holders which may include consummating (or participating in the consummation of) one or more underwritten public offerings of any class of equity or debt securities of the Company or any other member of the Company Group or a direct or indirect parent company thereof (each such offering, an Underwritten Offering). The services provided to the Company Group by Apollo pursuant to this Agreement will help to facilitate the consummation of an Underwritten Offering, should any member of the Company Group decide to pursue such a transaction.
(c) Upon presentation by Apollo to the Company of such documentation as may be reasonably requested by the Company, the Company shall reimburse, or cause to be reimbursed, Apollo for all out-of-pocket expenses, including legal fees and expenses, and other disbursements incurred by Apollo, its Affiliates, or any of its or its Affiliates limited partners, general partners,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives in the performance of Apollos obligations hereunder, whether incurred before, on or prior to the date hereof, including out-of-pocket expenses incurred in connection with the Merger Agreement and the other agreements and documents contemplated by the Merger Agreement, and the financing in connection with the transactions contemplated by the Merger Agreement, and each of the documents referred to therein, contemplated thereby or executed in connection therewith, but without duplication, in each case, of any expenses of the that the Company has reimbursed, or is under the obligation to reimburse, pursuant to Section 4(b) of the Transaction Fee Agreement dated as of April 27, 2016, 2016. The parties acknowledge that such amounts shall be in addition to the fees payable to Apollo pursuant to Section 4(a) of this Agreement. Notwithstanding the foregoing, Apollo may instruct the Company to pay, or cause one or more of its subsidiaries to pay, directly to any third party any amount that would otherwise be required to be paid to Apollo pursuant to the first sentence of this Section 4(c) of this Agreement.
(d) Nothing in this Agreement shall have the effect of prohibiting Apollo, its Affiliates or any of its or its Affiliates limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equity holders, affiliates, advisors or representatives from receiving from Holdings, the Company or any other member of the Company Group, any other fees, including any fee payable upon the consummation of the transactions contemplated by the Merger Agreement pursuant to that certain Transaction Fee Agreement, dated as of the date hereof, by and among Holdings, the Company and Apollo Global Securities, LLC (the Transaction Fee Agreement) or this Agreement.
(e) Reference is made to that certain First Lien Credit Agreement, dated as of the date hereof, by and among Holdings, Pomegranate Merger Sub, Inc. (Merger Sub), the Lenders party thereto, and Barclays Bank PLC, as Administrative Agent and that certain Indenture, dated as of the date hereof, by and among Merger Sub, the Subsidiary Guarantors party thereto and Wilmington Trust, National Association, as trustee (each as amended, restated, supplemented or otherwise modified from time to time, the Debt Documents). Any portion of the fees payable to Apollo under this Agreement (including the Consulting Fee) which the Company is prohibited from paying to Apollo under the Debt Documents shall be deferred and shall be payable at the earliest time permitted under the Debt Documents or upon the payment in full of all obligations under the Credit Agreements. The Company shall notify Apollo if the Company or its subsidiaries shall be unable to pay any fees pursuant to the Debt Documents on each date on which the Company would otherwise make a payment of fees under this Agreement to Apollo.
(f) All amounts payable to Apollo hereunder shall be paid in cash and in U.S. dollars by wire transfer in immediately available funds to the bank account designated by Apollo.
(g) Apollo may, at its sole discretion, waive or defer, in full or in part, payment of the Consulting Fee by providing written notice to such effect to the Company. The Company shall not claim a deduction on any tax return (i) for any such fee waived by Apollo and (ii) for any such fee deferred by Apollo until actually paid to Apollo, if at all.
Section 5. Indemnification; Limitation on Damages
(a) The Company shall indemnify and hold harmless Apollo, its Affiliates, and all of its and its Affiliates limited partners, general partners, directors, members, officers, managers, employees, agents, independent contractors, equityholders, affiliates and advisors (each such Person being an Indemnified Party) on demand from and against any and all losses, claims,
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demands, actions, causes of action, judgments, obligations, contracts, agreements, debts, costs, expenses, disbursements, damages and liabilities, whether known or unknown, contingent or otherwise, at common law, civil law and in equity, including in connection with seeking indemnification and, whether joint or several (the Liabilities), related to, arising out of or in connection with the services contemplated by this Agreement or the engagement of Apollo pursuant to, and the performance by Apollo (or any other Person permitted hereunder) of the services contemplated by, this Agreement, whether or not pending or threatened, whether or not an Indemnified Party is a party, whether or not resulting in any liability and whether or not such action, claim, demand, suit, investigation or proceeding is initiated or brought by any member of the Company Group; provided, that no Indemnified Party shall be entitled to any indemnification pursuant to this Agreement with respect to any investment losses or other Liabilities that may be incurred by such party solely in its capacity as an investor (directly or indirectly) in the Company Group. The Company shall on demand reimburse any Indemnified Party for all costs, fees, disbursements and expenses (including attorneys fees and expenses and fees and expenses of any investigator or consultant, but without duplication with Section 4(c)) as they are incurred in connection with investigating, preparing, pursuing, defending or assisting in the defense of any action, claim, demand, suit, investigation or proceeding for which the Indemnified Party would be entitled to indemnification under the terms of the previous sentence, or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. The Company shall not be liable under the foregoing indemnification provisions with respect to any Liability of an Indemnified Party to the extent that such is determined by a court of competent jurisdiction, in a final judgment from which no further appeal may be taken, to have resulted primarily from the fraud or willful misconduct of such Indemnified Party. The fees, expenses, costs and disbursements of an Indemnified Party (including attorneys fees and fees and expenses of any investigator or consultant) shall be paid by the Company as they are incurred only upon receipt, in each case, of an undertaking by or on behalf of the Indemnified Party to repay such amounts if it is finally judicially determined that the Liabilities in question resulted primarily from the fraud or willful misconduct of such Indemnified Party.
(b) The Company Groups sole and exclusive remedy against Apollo and any other Indemnified Party for breach of this Agreement or otherwise arising from, in connection with or related to the performance of the services to be rendered hereunder, shall be to offset any fees otherwise payable to Apollo by the amount of any Liabilities arising out of or relating to this Agreement or the services to be rendered hereunder, it being understood that any recovery shall be limited to recovery of actual damages, and no special, consequential, indirect, or punitive damages shall be allowed. No Indemnified Person shall be liable to the Company Group (i) for any breach hereunder by another Indemnified Person or (ii) for any breach by it, unless such breach constitutes fraud or willful misconduct as determined in a final judgment of a court of competent jurisdiction from which no appeal can be made.
Section 6. Notices.
All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed sufficient if personally delivered, sent by nationally-recognized overnight courier, by facsimile or email (in each case if no system error or other notice on non-delivery is generated), or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:
if to Apollo, to:
Apollo Management Holdings, L.P.
9 West 57th Street, 43rd Floor
New York, NY 10019
Attention: Laurie Medley, Esq.
Facsimile: (646) 607-0528
Email: lmedley@apollolp.com
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Pursuant to 17 C.F.R. Section 200.83
with a copy to (which shall not constitute notice):
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Robert G. Robison, Esq.
R. Alec Dawson, Esq.
James Z. Fang, Esq.
Facsimile: (212) 309-6001
Email: robert.robison@morganlewis.com
alec.dawson@morganlewis.com
james.fang@morganlewis.com
if to the Company or Holdings, to it at:
c/o Apollo Management VIII, L.P.
9 West 57th Street, 43rd Floor
New York, NY 10019
Attention: Laurie Medley, Esq.
Facsimile: (646) 607-0528
Email: lmedley@apollolp.com
with a copy to (which shall not constitute notice):
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Robert G. Robison, Esq.
R. Alec Dawson, Esq.
James Z. Fang, Esq.
Facsimile: (212) 309-6001
Email: robert.robison@morganlewis.com
alec.dawson@morganlewis.com
james.fang@morganlewis.com
or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of nationally-recognized overnight courier, on the next business day after the date when sent, (c) in the case of facsimile or email, when received, and (d) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted.
Section 7. Benefits of Agreement.
This Agreement shall bind and inure to the benefit of Apollo, Holdings, the Company, the Indemnified Parties and any successors to or assigns of Apollo, Holdings, the Company and the
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Indemnified Parties; provided, this Agreement may not be assigned by either party hereto without the prior written consent of the other party, which consent will not be unreasonably withheld in the case of any assignment by Apollo and; provided, further, that no consent of any party shall be required for any assignment by Apollo to an Affiliate of Apollo. Upon Apollos request, the Company shall cause the other members of the Company Group to become parties hereto directly in order to avail themselves of the services hereunder.
Section 8. Governing | Law. |
This Agreement shall be governed by, and construed, enforced and interpreted in accordance with, the laws of the State of New York, without giving effect to any law that would cause the laws of any jurisdiction other than the State of New York to be applied. Each of the parties hereto hereby (a) submits to the exclusive jurisdiction of any state court sitting in New York City or any federal court sitting in the Southern District of New York for the purpose of any action arising out of or relating to this letter agreement brought by any party hereto, (b) agrees that all claims in respect of such action or proceeding shall be heard and determined only in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (d) agrees not to bring any action or proceeding arising out of or relating to this letter agreement or any of the transactions contemplated by this letter agreement in any other court and (e) irrevocably waives, in any such action, any claim of improper venue or any claim that such courts are an inconvenient forum.
Section 9. Headings.
Section headings are used for convenience only and shall in no way affect the construction of this Agreement.
Section 10. Entire Agreement; Amendments.
This Agreement (together with, where applicable, the Transaction Fee Agreement) contains the entire understanding of the parties hereto with respect to its subject matter and supersedes and cancels any and all prior or contemporaneous agreements or understandings, and neither it nor any part of it may in any way be altered, amended, extended, waived, discharged, modified or terminated except by a written agreement signed by each of the parties hereto.
Section 11. Counterparts.
This Agreement may be executed in counterparts, including via facsimile transmission or PDF copies sent by e-mail, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute one and the same document.
Section 12. Waivers.
Any party to this Agreement may, by written notice to the other party, waive any provision of this Agreement. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
Section 13. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.
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Section 14. Definitions.
For purposes of this Agreement, the term Affiliate, with respect to Apollo, shall include, without limitation, Apollo Investment Fund VIII, L.P., Apollo Overseas Partners VIII, L.P., Apollo Overseas Partners (Delaware) VIII, L.P., Apollo Overseas Partners (Delaware 892) VIII, L.P., Apollo Advisors VIII, L.P. and each of their respective affiliates (collectively, the Funds), the general partner of each of the Funds and each person controlling, controlled by or under common control with any of the foregoing persons. Furthermore, for purposes of this Agreement, the term Person shall mean an individual, partnership, limited liability partnership, corporation, limited liability company, association, joint stock company, trust, estate, joint venture, unincorporated organization or governmental authority (or any department, agency or political subdivision thereof). The words include, includes and including mean include, includes and including without limitation. Each and every decision, election, instruction or direction to be made or given by, or any act to be performed (or omitted) by, Apollo hereunder shall be made, given, taken or omitted by Apollo in its sole and non-reviewable discretion.
[Signature Pages Follow.]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
THE FRESH MARKET, INC. | ||||
By:
|
| |||
Name: Jeffrey Ackerman | ||||
Title: CFO |
[Signature Page to Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
POMEGRANATE HOLDINGS, INC. | ||||
By:
|
| |||
Name: Andrew S. Jhawar | ||||
Title: President |
[Signature Page to Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
APOLLO MANAGEMENT HOLDINGS, L.P. | ||||
By: | Apollo Management Holdings GP, LLC, | |||
its general partner | ||||
By:
|
| |||
Name: Laurie D. Medley | ||||
Title: Vice President |
[Signature Page to Management Consulting Agreement]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.3
EXECUTION VERSION
POMEGRANATE MERGER SUB, INC.
(to be merged with and into THE FRESH MARKET, INC.)
as Issuer
and the Subsidiary Guarantors party hereto from time to time
9.75% First-Priority Senior Secured Notes due 2023
INDENTURE
Dated as of April 27, 2016
and
Wilmington Trust, National Association
as Trustee
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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TABLE OF CONTENTS
Page | ||||||
ARTICLE I |
| |||||
DEFINITIONS AND INCORPORATION BY REFERENCE |
| |||||
SECTION 1.01 | Definitions | 1 | ||||
SECTION 1.02 | Other Definitions | 50 | ||||
SECTION 1.03 | Rules of Construction | 51 | ||||
SECTION 1.04 | No Incorporation by Reference of Trust Indenture Act | 52 | ||||
ARTICLE II |
| |||||
THE NOTES |
| |||||
SECTION 2.01 | Amount of Notes | 52 | ||||
SECTION 2.02 | Form and Dating | 53 | ||||
SECTION 2.03 | Execution and Authentication | 53 | ||||
SECTION 2.04 | Registrar and Paying Agent | 54 | ||||
SECTION 2.05 | Paying Agent to Hold Money in Trust | 54 | ||||
SECTION 2.06 | Holder Lists | 55 | ||||
SECTION 2.07 | Transfer and Exchange | 55 | ||||
SECTION 2.08 | Replacement Notes | 56 | ||||
SECTION 2.09 | Outstanding Notes | 56 | ||||
SECTION 2.10 | Cancellation | 57 | ||||
SECTION 2.11 | Defaulted Interest | 57 | ||||
SECTION 2.12 | CUSIP Numbers, ISINs, Etc. | 57 | ||||
SECTION 2.13 | Calculation of Principal Amount of Notes | 57 | ||||
ARTICLE III |
| |||||
REDEMPTION |
| |||||
SECTION 3.01 | Redemption | 58 | ||||
SECTION 3.02 | Applicability of Article | 58 | ||||
SECTION 3.03 | Notices to Trustee | 58 | ||||
SECTION 3.04 | Selection of Notes to Be Redeemed | 58 | ||||
SECTION 3.05 | Notice of Optional Redemption | 59 | ||||
SECTION 3.06 | Effect of Notice of Redemption | 60 | ||||
SECTION 3.07 | Deposit of Redemption Price | 60 | ||||
SECTION 3.08 | Notes Redeemed in Part | 60 | ||||
ARTICLE IV |
| |||||
COVENANTS |
| |||||
SECTION 4.01 | Payment of Notes | 61 | ||||
SECTION 4.02 | Reports and Other Information | 61 | ||||
SECTION 4.03 | Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock | 63 | ||||
SECTION 4.04 | Limitation on Restricted Payments | 71 |
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SECTION 4.05 | Dividend and Other Payment Restrictions Affecting Subsidiaries | 79 | ||||
SECTION 4.06 | Asset Sales | 81 | ||||
SECTION 4.07 | Transactions with Affiliates | 84 | ||||
SECTION 4.08 | Change of Control | 88 | ||||
SECTION 4.09 | Compliance Certificate | 90 | ||||
SECTION 4.10 | Further Instruments and Acts | 90 | ||||
SECTION 4.11 | Future Subsidiary Guarantors | 90 | ||||
SECTION 4.12 | Liens | 90 | ||||
SECTION 4.13 | After-Acquired Property | 91 | ||||
SECTION 4.14 | Maintenance of Office or Agency | 92 | ||||
SECTION 4.15 | Covenant Suspension | 92 | ||||
ARTICLE V |
| |||||
SUCCESSOR COMPANY |
| |||||
SECTION 5.01 | When Issuer and Subsidiary Guarantors May Merge or Transfer Assets | 93 | ||||
ARTICLE VI |
| |||||
DEFAULTS AND REMEDIES |
| |||||
SECTION 6.01 | Events of Default | 96 | ||||
SECTION 6.02 | Acceleration | 98 | ||||
SECTION 6.03 | Other Remedies | 98 | ||||
SECTION 6.04 | Waiver of Past Defaults | 99 | ||||
SECTION 6.05 | Control by Majority | 99 | ||||
SECTION 6.06 | Limitation on Suits | 99 | ||||
SECTION 6.07 | Contractual Rights of the Holders to Receive Payment | 100 | ||||
SECTION 6.08 | Collection Suit by Trustee | 100 | ||||
SECTION 6.09 | Trustee May File Proofs of Claim | 100 | ||||
SECTION 6.10 | Priorities | 100 | ||||
SECTION 6.11 | Undertaking for Costs | 101 | ||||
SECTION 6.12 | Waiver of Stay or Extension Laws | 101 | ||||
ARTICLE VII |
| |||||
TRUSTEE |
| |||||
SECTION 7.01 | Duties of Trustee | 101 | ||||
SECTION 7.02 | Rights of Trustee | 103 | ||||
SECTION 7.03 | Individual Rights of Trustee | 104 | ||||
SECTION 7.04 | Trustees Disclaimer | 104 | ||||
SECTION 7.05 | Notice of Defaults | 105 | ||||
SECTION 7.06 | [Reserved] | 105 | ||||
SECTION 7.07 | Compensation and Indemnity | 105 | ||||
SECTION 7.08 | Replacement of Trustee | 106 |
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Page | ||||||
SECTION 7.09 |
Successor Trustee by Merger |
107 | ||||
SECTION 7.10 |
Eligibility; Disqualification |
107 | ||||
SECTION 7.11 |
Preferential Collection of Claims Against the Issuer |
108 | ||||
SECTION 7.12 |
Limitation on Duty of Trustee in Respect of Collateral; Indemnification |
108 | ||||
ARTICLE VIII |
| |||||
DISCHARGE OF INDENTURE; DEFEASANCE |
| |||||
SECTION 8.01 |
Discharge of Liability on Notes; Defeasance |
109 | ||||
SECTION 8.02 |
Conditions to Defeasance |
110 | ||||
SECTION 8.03 |
Application of Trust Money |
111 | ||||
SECTION 8.04 |
Repayment to Issuer |
112 | ||||
SECTION 8.05 |
Indemnity for U.S. Government Obligations |
112 | ||||
SECTION 8.06 |
Reinstatement |
112 | ||||
ARTICLE IX |
| |||||
AMENDMENTS AND WAIVERS |
| |||||
SECTION 9.01 |
Without Consent of the Holders |
112 | ||||
SECTION 9.02 |
With Consent of the Holders |
114 | ||||
SECTION 9.03 |
Revocation and Effect of Consents and Waivers |
115 | ||||
SECTION 9.04 |
Notation on or Exchange of Notes |
115 | ||||
SECTION 9.05 |
Trustee to Sign Amendments |
115 | ||||
SECTION 9.06 |
Additional Voting Terms; Calculation of Principal Amount |
116 | ||||
ARTICLE X |
| |||||
RANKING OF NOTE LIENS |
| |||||
SECTION 10.01 |
Relative Rights |
116 | ||||
ARTICLE XI |
| |||||
COLLATERAL |
| |||||
SECTION 11.01 |
Security Documents |
117 | ||||
SECTION 11.02 |
First-Priority Collateral Agent |
118 | ||||
SECTION 11.03 |
Authorization of Actions to Be Taken |
119 | ||||
SECTION 11.04 |
Release of Liens |
120 | ||||
SECTION 11.05 |
Powers Exercisable by Receiver or Trustee |
122 | ||||
SECTION 11.06 |
Release Upon Termination of the Issuers Obligations |
123 | ||||
SECTION 11.07 |
Designations |
123 |
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ARTICLE XII |
| |||||
GUARANTEE |
| |||||
SECTION 12.01 |
Subsidiary Guarantee | 123 | ||||
SECTION 12.02 |
Limitation on Liability | 126 | ||||
SECTION 12.03 |
[Intentionally Omitted] | 126 | ||||
SECTION 12.04 |
Successors and Assigns | 126 | ||||
SECTION 12.05 |
No Waiver | 127 | ||||
SECTION 12.06 |
Modification | 127 | ||||
SECTION 12.07 |
Execution of Supplemental Indenture for Future Subsidiary Guarantors | 127 | ||||
SECTION 12.08 |
Non-Impairment | 127 | ||||
ARTICLE XIII |
| |||||
MISCELLANEOUS |
| |||||
SECTION 13.01 |
[Reserved] | 128 | ||||
SECTION 13.02 |
Notices | 128 | ||||
SECTION 13.03 |
[Reserved] | 129 | ||||
SECTION 13.04 |
Certificate and Opinion as to Conditions Precedent | 129 | ||||
SECTION 13.05 |
Statements Required in Certificate or Opinion | 129 | ||||
SECTION 13.06 |
When Notes Disregarded | 130 | ||||
SECTION 13.07 |
Rules by Trustee, Paying Agent and Registrar | 130 | ||||
SECTION 13.08 |
Legal Holidays | 130 | ||||
SECTION 13.09 |
GOVERNING LAW | 130 | ||||
SECTION 13.10 |
No Recourse Against Others | 130 | ||||
SECTION 13.11 |
Successors | 130 | ||||
SECTION 13.12 |
Multiple Originals | 131 | ||||
SECTION 13.13 |
Table of Contents; Headings | 131 | ||||
SECTION 13.14 |
Indenture Controls | 131 | ||||
SECTION 13.15 |
Severability | 131 | ||||
SECTION 13.16 |
Intercreditor Agreement | 131 | ||||
SECTION 13.17 |
Waiver of Jury Trial | 131 |
Appendix A | | Provisions Relating to Initial Notes and Additional Notes |
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EXHIBIT INDEX
Exhibit A | | Form of Initial Note | ||
Exhibit B | | Form of Transferee Letter of Representation | ||
Exhibit C | | Form of Supplemental Indenture (Future Guarantors) | ||
Exhibit D | | Form of Supplemental Indenture (Issuer Merger) |
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Pursuant to 17 C.F.R. Section 200.83
INDENTURE, dated as of April 27, 2016, among POMEGRANATE MERGER SUB, INC., a Delaware corporation (Merger Sub), the Subsidiary Guarantors party hereto from time to time (as defined below) and Wilmington Trust, National Association, as trustee (the Trustee).
On the Issue Date (as defined below), and immediately after the issuance of the Initial Notes (as defined below), Merger Sub will merge with and into THE FRESH MARKET, Inc., a Delaware corporation (together with its successors and assigns, The Fresh Market), with The Fresh Market as the surviving corporation (the Issuer Merger), and The Fresh Market will assume all obligations of Merger Sub under this Indenture and the Notes. In this Indenture, references to the Issuer mean, prior to the Issuer Merger, Merger Sub, and from and after the Issuer Merger, The Fresh Market.
Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the holders of (i) $800,000,000 aggregate principal amount of the Issuers 9.75% First-Priority Senior Secured Notes due 2023 issued on the date hereof (the Initial Notes) and (ii) Additional Notes issued from time to time (together with the Initial Notes, the Notes):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
Acquired Indebtedness means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is merged, consolidated or amalgamated with or into or became a Restricted Subsidiary of such specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
Acquired Indebtedness will be deemed to have been Incurred, with respect to clause (1) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary and, with respect to clause (2) of the preceding sentence, on the date of consummation of such acquisition of such assets.
Acquisition Documents means the Agreement and Plan of Merger among Pomegranate Holdings Inc., a Delaware corporation, Pomegranate Merger Sub Inc., a Delaware corporation, and The Fresh Market, and any other agreements or instruments contemplated thereby, in each case, as amended, restated, supplemented or otherwise modified from time to time.
Additional First-Priority Secured Party means the holders of any Other First-Priority Obligations that are Incurred after the Issue Date.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Additional Notes means the Notes issued under the terms of this Indenture subsequent to the Issue Date.
Additional Refinancing Amount means, in connection with the Incurrence of any Refinancing Indebtedness, the aggregate principal amount of additional Indebtedness, Disqualified Stock or Preferred Stock Incurred to pay accrued and unpaid interest, premiums (including tender premiums), expenses, defeasance costs and fees in respect thereof.
Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
After-Acquired Property means any property or assets (other than Excluded Property) of the Issuer or any Subsidiary Guarantor that secures any First-Priority Obligations (including any Secured Bank Indebtedness) that is not already subject to the Lien under the Security Documents.
Applicable Premium means, with respect to any Note on any applicable redemption date, as determined by the Issuer, the greater of:
(1) 1% of the then outstanding principal amount of the Note; and
(2) the excess of:
(a) the present value at such redemption date of (i) the redemption price of the Note, at May 1, 2019 (such redemption price being set forth in Paragraph 5 of the Note) plus (ii) all required interest payments due on the Note through May 1, 2019 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over
(b) the then outstanding principal amount of the Note.
Asset Sale means:
(1) the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of Sale/Leaseback Transactions) outside the ordinary course of business of the Issuer or any Restricted Subsidiary (each referred to in this definition as a disposition); or
(2) the issuance or sale of Equity Interests (other than directors qualifying shares and shares issued to foreign nationals or other third parties to the extent required by applicable law) of any Restricted Subsidiary (other than to the Issuer or another Restricted Subsidiary) (whether in a single transaction or a series of related transactions), in each case other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities or obsolete, damaged or worn out property or equipment in the ordinary course of business;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to Section 5.01 or any disposition that constitutes a Change of Control;
(c) any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 4.04;
(d) any disposition of assets of the Issuer or any Restricted Subsidiary or issuance or sale of Equity Interests of the Issuer or any Restricted Subsidiary, which assets or Equity Interests so disposed or issued have an aggregate Fair Market Value (as determined in good faith by the Issuer) of less than $30 million;
(e) any disposition of property or assets, or the issuance of securities, by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary;
(f) any exchange of assets (including a combination of assets and Cash Equivalents) for assets related to a Similar Business of comparable or greater market value or usefulness to the business of the Issuer and the Restricted Subsidiaries as a whole, as determined in good faith by the Issuer;
(g) foreclosure or any similar action with respect to any property or other asset of the Issuer or any of the Restricted Subsidiaries;
(h) any disposition of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(i) the lease, assignment or sublease of any real or personal property in the ordinary course of business;
(j) any sale of inventory or other assets in the ordinary course of business;
(k) any grant in the ordinary course of business of any license of patents, trademarks, know-how or any other intellectual property;
(l) any swap of assets, or lease, assignment or sublease of any real or personal property, in exchange for services (including in connection with any outsourcing arrangements) of comparable or greater value or usefulness to the business of the Issuer and the Restricted Subsidiaries as a whole, as determined in good faith by the Issuer;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(m) any disposition (including by capital contribution) of Securitization Assets, including pursuant to Permitted Securitization Financings;
(n) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Issue Date, including any Sale/Leaseback Transaction or asset securitization permitted by this Indenture;
(o) dispositions in connection with Permitted Liens;
(p) any disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a Person (other than the Issuer or a Restricted Subsidiary) from whom such Restricted Subsidiary was acquired or from whom such Restricted Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition;
(q) the sale of any property in a Sale/Leaseback Transaction within twelve months of the acquisition of such property;
(r) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;
(s) any surrender, expiration or waiver of contract rights or the settlement, release, recovery on or surrender of contract, tort or other claims of any kind;
(t) any disposition made pursuant to the Acquisition Documents (as in effect on the Issue Date) or in connection with the Transactions; and
(u) to the extent constituting an Asset Sale, any termination, settlement or extinguishment of Hedging Obligations.
Authorized Representative means (i) in the case of the Notes, the Trustee, (ii) in the case of the Credit Agreement, the administrative agent under the Credit Agreement, and (iii) in the case of any Series of Other First-Priority Obligation that becomes subject to the First Lien Intercreditor Agreement, the authorized representative (and any successor thereto) named for such Series in the applicable joinder agreement.
Bank Indebtedness means any and all amounts payable under or in respect of (a) the Credit Agreement and the other Credit Agreement Documents, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), restructured, repaid, refunded, refinanced or otherwise modified from time to time (including after termination of the Credit Agreement), including any agreement or indenture extending the maturity thereof, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement or agreements or indenture or indentures or any successor or replacement agreement or agreements or indenture or indentures or increasing the amount loaned or issued thereunder or altering the maturity thereof, including principal, premium (if any), interest (including interest accruing on or after the filing of any
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
petition in bankruptcy or for reorganization relating to the Issuer whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof (except to the extent any such refinancing, replacement or restructuring is designated by the Issuer to not be included in the definition of Bank Indebtedness) and (b) whether or not the Indebtedness referred to in clause (a) remains outstanding, if designated by the Issuer to be included in this definition, one or more (A) debt facilities or commercial paper facilities, providing for revolving credit loans, term loans, reserve-based loans, securitization or receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) or letters of credit, (B) debt securities, indentures or other forms of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers acceptances), or (C) instruments or agreements evidencing any other Indebtedness, in each case, with the same or different borrowers or issuers and, in each case, as amended, supplemented, modified, extended, restructured, renewed, refinanced, restated, replaced or refunded in whole or in part from time to time.
Bankruptcy Code means Title 11 of the United States Code.
Board of Directors means, as to any Person, the board of directors or managers, as applicable, of such Person or any direct or indirect parent of such Person (or, if such Person is a partnership, the board of directors or other governing body of the general partner of such Person) or any duly authorized committee thereof.
Business Day means a day other than a Saturday, Sunday or other day on which banking institutions are authorized or required by law to close in New York City or the place of payment.
Capital Stock means:
(1) in the case of a corporation, corporate stock or shares;
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP; provided that obligations of the Issuer or its Restricted Subsidiaries, or of a special purpose or other entity not consolidated with the Issuer and its Restricted Subsidiaries, either existing on the Issue Date or created thereafter that (a) initially
5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
were not included on the consolidated balance sheet of the Issuer as capital lease obligations and were subsequently recharacterized as capital lease obligations or, in the case of such a special purpose or other entity becoming consolidated with the Issuer and its Restricted Subsidiaries were required to be characterized as capital lease obligations upon such consolidation, in either case, due to a change in accounting treatment or otherwise, or (b) did not exist on the Issue Date and were required to be characterized as capital lease obligations but would not have been required to be treated as capital lease obligations on the Issue Date had they existed at that time, shall for all purposes not be treated as Capitalized Lease Obligations or Indebtedness.
Capitalized Software Expenditures shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person and its Restricted Subsidiaries during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such Person and such Restricted Subsidiaries.
Cash Equivalents means:
(1) U.S. dollars, pounds sterling, euros, the national currency of any member state in the European Union or such local currencies held by an entity from time to time in the ordinary course of business;
(2) securities issued or directly and fully guaranteed or insured by the U.S. government or any country that is a member of the European Union or any agency or instrumentality thereof in each case maturing not more than two years from the date of acquisition;
(3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers acceptances, in each case with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $250 million and whose long-term debt is rated A or the equivalent thereof by Moodys or S&P (or reasonably equivalent ratings of another internationally recognized ratings agency);
(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;
(5) commercial paper issued by a corporation (other than an Affiliate of the Issuer) rated at least A-1 or the equivalent thereof by Moodys or S&P (or reasonably equivalent ratings of another internationally recognized ratings agency) and in each case maturing within one year after the date of acquisition;
(6) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moodys or S&P (or reasonably equivalent ratings of another internationally recognized ratings agency) in each case with maturities not exceeding two years from the date of acquisition;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(7) Indebtedness issued by Persons (other than the Sponsors or any of their Affiliates) with a rating of A or higher from S&P or A-2 or higher from Moodys (or reasonably equivalent ratings of another internationally recognized ratings agency) in each case with maturities not exceeding two years from the date of acquisition;
(8) investment funds investing at least 95% of their assets in securities of the types described in clauses (1) through (7) above;
(9) instruments equivalent to those referred to in clauses (1) through (8) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States of America to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction; and
(10) credit card receivables to the extent included in cash and cash equivalents on the consolidated balance sheet of such Person.
cash management services means cash management services for collections, treasury management services (including controlled disbursement, overdraft, automated clearing house fund transfer services, return items and interstate depository network services), any demand deposit, payroll, trust or operating account relationships, commercial credit cards, merchant card, purchase or debit cards, non-card e-payables services, and other cash management services, including electronic funds transfer services, lockbox services, stop payment services and wire transfer services.
CFC means a controlled foreign corporation within the meaning of Section 957 of the Code.
Change of Control means the occurrence of either of the following:
(1) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all the assets of the Issuer and its Subsidiaries, taken as a whole, to a Person other than any of the Permitted Holders; or
(2) the Issuer becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or in a related series of transactions, by way of merger, consolidation, amalgamation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50% of the total voting power of the Voting Stock of the Issuer.
Code means the Internal Revenue Code of 1986, as amended.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Co-Investors means (a) the Sponsors, (b) Ray Berry, Brett Berry and George Golleher and any Related Party of any of the foregoing persons and (c) the respective Affiliates of the investors described in clause (b) other than portfolio companies thereof.
Collateral means all property subject or purported to be subject, from time to time, to a Lien under any Security Documents.
Collateral Agreement means the Collateral Agreement (First Lien) among the Issuer, each Subsidiary Guarantor and the First-Priority Collateral Agent, entered into on the Issue Date, as may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms and in accordance with this Indenture.
Common Collateral means, at any time, Collateral in which the holders of two or more Series of First-Priority Obligations (or their respective Authorized Representatives) hold a valid and perfected security interest at such time. If more than two Series of First-Priority Obligations are outstanding at any time and the holders of less than all Series of First-Priority Obligations hold a valid and perfected security interest in any Collateral at such time, then such Collateral shall constitute Common Collateral for those Series of First-Priority Obligations that hold a valid security interest in such Collateral at such time and shall not constitute Common Collateral for any Series which does not have a valid and perfected security interest in such Collateral at such time.
Consolidated Depreciation and Amortization Expense means, with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of intangible assets, deferred financing fees, Capitalized Software Expenditures and store development costs and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits, of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
Consolidated Interest Expense means, with respect to any Person for any period, the sum, without duplication, of:
(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including the interest component of Capitalized Lease Obligations and net payments and receipts (if any) pursuant to interest rate Hedging Obligations and excluding amortization of deferred financing fees and original issue discount, debt issuance costs, commissions, fees and expenses, expensing of any bridge, commitment or other financing fees and non-cash interest expense attributable to movement in mark to market valuation of Hedging Obligations or other derivatives (in each case permitted hereunder) under GAAP); plus
(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; plus
8
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(3) commissions, discounts, yield and other fees and charges Incurred in connection with any Permitted Securitization Financing which are payable to Persons other than the Issuer and the Restricted Subsidiaries; minus
(4) interest income for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Consolidated Net Income means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis; provided, however, that:
(1) any net after-tax extraordinary, nonrecurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses or charges, any severance expenses, relocation expenses, restructuring expenses, curtailments or modifications to pension and post-retirement employee benefit plans, excess pension charges, any expenses related to any New Project or any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternate uses and fees, expenses or charges relating to facilities or stores closing costs, store rebranding costs, acquisition integration costs, facilities or stores opening costs, project start-up costs, business optimization costs, recruiting costs, signing, retention or completion bonuses, expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or Incurrence, issuance, repayment, refinancing, amendment or modification of Indebtedness (in each case, whether or not successful), and any fees, expenses, charges or change in control payments related to the Transactions (including any costs relating to auditing prior periods, any transition-related expenses, and transaction expenses incurred before, on or after the Issue Date), in each case, shall be excluded;
(2) effects of purchase accounting adjustments (including the effects of such adjustments pushed down to such Person and such Subsidiaries and including, without limitation, the effects of adjustments to (A) deferred rent, (B) Capitalized Lease Obligations or other obligations or deferrals attributable to capital spending funds with suppliers or (C) any other deferrals of income) in amounts required or permitted by GAAP, resulting from the application of purchase accounting or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded;
(3) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period;
(4) any net after-tax income or loss from disposed, abandoned, transferred, closed or discontinued operations or fixed assets and any net after-tax gains or losses on disposal of disposed, abandoned, transferred, closed or discontinued operations or fixed assets shall be excluded;
9
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(5) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by management of the Issuer) shall be excluded;
(6) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness, Hedging Obligations or other derivative instruments shall be excluded;
(7) (a) the Net Income for such period of any Person that is not a Subsidiary of such Person, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period and (b) the Net Income for such period shall include any dividend, distribution or other payment in cash (or to the extent converted into cash) received by the referent Person or a Subsidiary thereof (other than an Unrestricted Subsidiary of such referent Person) from any Person in excess of, but without duplication of, the amounts included in subclause (a);
(8) solely for the purpose of determining the amount available for Restricted Payments under clause (1) of the definition of Cumulative Credit, the Net Income for such period of any Restricted Subsidiary (other than any Subsidiary Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restrictions with respect to the payment of dividends or similar distributions have been legally waived; provided that the Consolidated Net Income of such Person shall be increased by the amount of dividends or other distributions or other payments actually paid in cash (or converted into cash) by any such Restricted Subsidiary to such Person, to the extent not already included therein;
(9) an amount equal to the amount of Tax Distributions actually made to any parent or equity holder of such Person in respect of such period in accordance with Section 4.04(b)(xii) shall be included as though such amounts had been paid as income taxes directly by such Person for such period;
(10) any impairment charges or asset write-offs, in each case pursuant to GAAP, and the amortization of intangibles and other fair value adjustments arising pursuant to GAAP shall be excluded;
10
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(11) any non-cash expense realized or resulting from stock option plans, employee benefit plans or post-employment benefit plans, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or other rights shall be excluded;
(12) any (a) non-cash compensation charges, (b) costs and expenses after the Issue Date related to employment of terminated employees, or (c) costs or expenses realized in connection with or resulting from stock appreciation or similar rights, stock options or other rights existing on the Issue Date of officers, directors and employees, in each case of such Person or any Restricted Subsidiary, shall be excluded;
(13) accruals and reserves that are established or adjusted within 12 months after the Issue Date and that are so required to be established or adjusted in accordance with GAAP or as a result of adoption or modification of accounting policies shall be excluded;
(14) (a)(i) the non-cash portion of straight-line rent expense shall be excluded, (ii) the cash portion of straight-line rent expense which exceeds the amount expensed in respect of such rent expense shall be included, (iii) the non-cash amortization of tenant allowances shall be excluded, (iv) cash received from landlords for tenant allowances shall be included and (v) to the extent not already included in Net Income, the cash portion of sublease rentals received shall be included (for the avoidance of doubt, the net effect of the adjustments in this clause (14)(a) as well as any related adjustments pursuant to clause (2) above shall be to compute rent expense and rental income on a cash basis for purposes of determining Consolidated Net Income) and (b) non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretations shall be excluded;
(15) any currency translation gains and losses related to currency remeasurements of Indebtedness, and any net loss or gain resulting from hedging transactions for currency exchange risk, shall be excluded;
(16) (a) to the extent covered by insurance and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (i) not denied by the applicable carrier in writing within 180 days and (ii) in fact reimbursed within 365 days of the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within 365 days), expenses with respect to liability or casualty events or business interruption shall be excluded and (b) amounts estimated in good faith to be received from insurance in respect of lost revenues or earnings in respect of liability or casualty events or business interruption shall be included (with a deduction for amounts actually received up to such estimated amount to the extent included in Net Income in a future period);
11
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(17) Capitalized Software Expenditures and store development costs shall be excluded;
(18) non-cash charges for deferred tax asset valuation allowances shall be excluded;
(19) [reserved];
(20) any other costs, expenses or charges resulting from store closures or sales, including income (or losses) from such store closures or sales, shall be excluded;
(21) any deductions attributable to minority interests shall be excluded; and
(22) any gain, loss, income, expense or charge resulting from the application of any LIFO shall be excluded.
Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries or Restricted Subsidiaries to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04 pursuant to clauses (4) and (5) of the definition of Cumulative Credit.
Consolidated Non-Cash Charges means, with respect to any Person for any period, the non-cash expenses (other than Consolidated Depreciation and Amortization Expense) of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person for such period on a consolidated basis and otherwise determined in accordance with GAAP, provided that if any such non-cash expenses represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA in such future period to the extent paid, but excluding from this proviso, for the avoidance of doubt, amortization of a prepaid cash item that was paid in a prior period.
Consolidated Taxes means, with respect to any Person for any period, the provision for taxes based on income, profits or capital, including, without limitation, state, franchise, property and similar taxes, foreign withholding taxes (including penalties and interest related to such taxes or arising from tax examinations) and any Tax Distributions taken into account in calculating Consolidated Net Income.
Consolidated Total Indebtedness means, as of any date of determination, an amount equal to the sum (without duplication) of (1) the aggregate principal amount of all outstanding Indebtedness of the Issuer and the Restricted Subsidiaries (excluding any undrawn letters of credit) consisting of Capitalized Lease Obligations (other than Capitalized Lease Obligations relating to store leases) and Indebtedness for borrowed money, plus (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and the Restricted Subsidiaries and all Preferred Stock of Restricted Subsidiaries, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences, in each case determined on a consolidated basis in accordance with GAAP.
12
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Contingent Obligations means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (primary obligations) of any other Person (the primary obligor) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent:
(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,
(2) to advance or supply funds:
(a) for the purchase or payment of any such primary obligation; or
(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or
(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.
Corporate Trust Office means the designated office of the Trustee in the United States of America at which at any time its corporate trust business shall be administered, or such other address as the Trustee may designate from time to time by notice to the holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the holders and the Issuer).
Credit Agreement means (i) the first lien credit agreement entered into on the Issue Date among the Issuer, the guarantors named therein, the financial institutions named therein and Barclays Bank PLC, as administrative agent, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), restructured, repaid, refunded, refinanced or otherwise modified from time to time, including any agreement or indenture extending the maturity thereof, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement or agreements or indenture or indentures or any successor or replacement agreement or agreements or indenture or indentures or increasing the amount loaned or issued thereunder or altering the maturity thereof (except to the extent any such refinancing, replacement or restructuring is designated by the Issuer to not be included in the definition of Credit Agreement) and (ii) whether or not the credit agreement referred to in clause (i) remains outstanding, if designated by the Issuer to be included in the definition of Credit Agreement, one or more (A) debt facilities or commercial paper facilities, providing for revolving credit loans, term loans, securitization or receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables) or letters of credit, (B) debt securities, indentures or other forms of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers acceptances), or (C) instruments or agreements evidencing any other Indebtedness, in each case, with the same or different borrowers or issuers and, in each case, as amended, supplemented, modified, extended, restructured, renewed, refinanced, restated, replaced or refunded in whole or in part from time to time.
13
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Credit Agreement Documents means the collective reference to any Credit Agreement, any notes issued pursuant thereto and the guarantees thereof, and the collateral documents relating thereto, as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified, in whole or in part, from time to time.
Cumulative Credit means the sum of (without duplication):
(1) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from February 1, 2016 to the end of the Issuers most recently ended fiscal quarter for which financial statements have been delivered to the Trustee at the time of such Restricted Payment (or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit), plus
(2) 100% of the aggregate net proceeds, including cash and the Fair Market Value (as determined in good faith by the Issuer) of property other than cash, received by the Issuer after the Issue Date (other than net proceeds to the extent such net proceeds have been used to incur Indebtedness, Disqualified Stock, or Preferred Stock pursuant to Section 4.03(b)(xiii)) from the issue or sale of Equity Interests of the Issuer or any direct or indirect parent entity of the Issuer (excluding Refunding Capital Stock (as defined below), Designated Preferred Stock, Excluded Contributions, and Disqualified Stock), including Equity Interests issued upon exercise of warrants or options (other than an issuance or sale to the Issuer or a Restricted Subsidiary), plus
(3) 100% of the aggregate amount of contributions to the capital of the Issuer received in cash and the Fair Market Value (as determined in good faith by the Issuer) of property other than cash after the Issue Date (other than Excluded Contributions, Refunding Capital Stock, Designated Preferred Stock, and Disqualified Stock and other than contributions to the extent such contributions have been used to Incur Indebtedness, Disqualified Stock, or Preferred Stock pursuant to Section 4.03(b)(xiii)), plus
(4) 100% of the principal amount of any Indebtedness, or the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock of the Issuer or any Restricted Subsidiary issued after the Issue Date (other than Indebtedness or Disqualified Stock issued to a Restricted Subsidiary) which has been converted into or exchanged for Equity Interests in the Issuer (other than Disqualified Stock) or any direct or indirect parent of the Issuer (provided, in the case of any such parent, such Indebtedness or Disqualified Stock is retired or extinguished), plus
(5) 100% of the aggregate amount received by the Issuer or any Restricted Subsidiary in cash and the Fair Market Value (as determined in good faith by the Issuer) of property other than cash received by the Issuer or any Restricted Subsidiary from:
(A) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer and the Restricted Subsidiaries and from repurchases and redemptions of such Restricted
14
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Investments from the Issuer and the Restricted Subsidiaries by any Person (other than the Issuer or any Restricted Subsidiary) and from repayments of loans or advances, and releases of guarantees, which constituted Restricted Investments (other than in each case to the extent that the Restricted Investment was made pursuant to Section 4.04(b)(vii)),
(B) the sale (other than to the Issuer or a Restricted Subsidiary) of the Capital Stock of an Unrestricted Subsidiary, or
(C) a distribution or dividend from an Unrestricted Subsidiary, plus
(6) in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary, the Fair Market Value (as determined in good faith by the Issuer) of the Investment of the Issuer or the Restricted Subsidiaries in such Unrestricted Subsidiary (which, if the Fair Market Value of such Investment shall exceed $25 million, shall be determined by the Board of Directors of the Issuer) at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) (other than in each case to the extent that the designation of such Subsidiary as an Unrestricted Subsidiary was made pursuant to Section 4.04(b)(vii) or constituted a Permitted Investment).
Default means any event which is, or after notice or passage of time or both would be, an Event of Default.
Designated Non-cash Consideration means the Fair Market Value (as determined in good faith by the Issuer) of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers Certificate, setting forth such valuation, less the amount of Cash Equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration.
Designated Preferred Stock means Preferred Stock of the Issuer or any direct or indirect parent of the Issuer (other than Disqualified Stock), that is issued for cash (other than to the Issuer or any of its Subsidiaries or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers Certificate, on the issuance date thereof.
Discharge of Credit Agreement Obligations means the date on which the Obligations under the Credit Agreement are indefeasibly paid in full in cash (or, in the case of letters of credit and other contingent indemnification obligations (other than contingent obligations as to which no claim has been made or notice given), cash collateralized in a manner consistent with the documents giving rise to such obligation); provided that the Discharge of Credit Agreement Obligations shall not be deemed to have occurred in connection with a refinancing of the Obligations under the Credit Agreement or an incurrence of future Obligations under any Credit Agreement with additional First-Priority Obligations secured by the Common
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Collateral under an agreement relating to Other First-Priority Obligations which has been designated in writing by the Issuer to the First-Priority Collateral Agent and each other Authorized Representative as the Credit Agreement for purposes of the First Lien Intercreditor Agreement and which are permitted to be incurred as obligations having priority under the Priority Waterfall under the terms of the Notes and the Other First-Priority Obligations.
Discharge of First-Priority Obligations means, except to the extent otherwise provided in the First Lien Intercreditor Agreement with respect to the reinstatement or continuation of any First-Priority Obligation under certain circumstances, payment in full in cash (except for contingent indemnities and cost and reimbursement obligations to the extent no claim has been made) of all First-Priority Obligations and, with respect to any letters of credit or letter of credit guaranties outstanding under a document evidencing a First-Priority Obligation, delivery of cash collateral or backstop letters of credit in respect thereof in a manner consistent with such document, in each case after or concurrently with the termination of all commitments to extend credit thereunder, and the termination of all commitments of the First-Priority Secured Parties under such document evidencing such Obligation; provided that the Discharge of First-Priority Obligations shall not be deemed to have occurred if such payments are made with the proceeds of other First-Priority Obligations that constitute an exchange or replacement for or a refinancing of such Obligations or First-Priority Obligations. In the event the First-Priority Obligations are modified and the Obligations are paid over time or otherwise modified, in each case pursuant to Section 1129 of the Bankruptcy Code, the First-Priority Obligations shall be deemed to be discharged when the final payment is made, in cash, in respect of such indebtedness and any obligations pursuant to such modified indebtedness shall have been satisfied.
Disqualified Stock means, with respect to any Person, any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is redeemable or exchangeable), or upon the happening of any event:
(1) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other than as a result of a change of control or asset sale),
(2) is convertible or exchangeable for Indebtedness or Disqualified Stock of such Person or any of its Restricted Subsidiaries, or
(3) is redeemable at the option of the holder thereof, in whole or in part (other than solely as a result of a change of control or asset sale),
in each case prior to 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided, further, however, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by such Person in order to satisfy applicable statutory or regulatory obligations or as a result of such employees termination, death or disability; provided, further,
16
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
that any class of Capital Stock of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Capital Stock that is not Disqualified Stock shall not be deemed to be Disqualified Stock.
Domestic Subsidiary means a Restricted Subsidiary that is not a Foreign Subsidiary.
EBITDA means, with respect to any Person for any period, the Consolidated Net Income of such Person and its Restricted Subsidiaries for such period plus, without duplication, to the extent the same was deducted in calculating Consolidated Net Income:
(1) Consolidated Taxes; plus
(2) Fixed Charges and costs of surety bonds in connection with financing activities; plus
(3) Consolidated Depreciation and Amortization Expense; plus
(4) Consolidated Non-Cash Charges; plus
(5) any expenses or charges (other than Consolidated Depreciation and Amortization Expense) related to any issuance of Equity Interests, Investment, acquisition, New Project, disposition, recapitalization or the incurrence, modification or repayment of Indebtedness permitted to be incurred by this Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the Transactions, the Notes or any Bank Indebtedness, (ii) any amendment or other modification of the Notes or other Indebtedness and (iii) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Permitted Securitization Financing; plus
(6) business optimization expenses and other restructuring charges, reserves or expenses (which, for the avoidance of doubt, shall include, without limitation, the effect of inventory optimization programs, facility or store closures, facility or store consolidations, retention, severance, systems establishment costs, contract termination costs, future lease commitments and excess pension charges) and Pre-Opening Expenses; plus
(7) the amount of loss or discount in connection with a Permitted Securitization Financing; plus
(8) any costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or a Subsidiary Guarantor or net cash proceeds of an issuance of Equity Interests of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation of the Cumulative Credit; plus
17
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(9) [reserved]; plus
(10) the amount of any loss attributable to a New Project, until the date that is 12 months after the date of completing the construction, acquisition, assembling or creation of such New Project, as the case may be; provided that (a) such losses are reasonably identifiable and factually supportable and certified by a responsible financial or accounting officer of the Issuer and (b) losses attributable to such New Project after 12 months from the date of completing such construction, acquisition, assembling or creation, as the case may be, shall not be included in this clause (10); plus
(11) the amount of any management, monitoring, consulting, transaction, advisory and similar fees and related expenses paid to the Sponsors (or any accruals relating to such fees and related expenses) during such period to the extent otherwise permitted by Section 4.07, including, if applicable, the amount of termination fee paid pursuant to Section 4.07(b)(xx); plus
(12) with respect to any joint venture that is not a Subsidiary and solely to the extent relating to any net income referred to in clause (7) of the definition of Consolidated Net Income, an amount equal to the proportion of those items described in clauses (1) and (2) above relating to such joint venture corresponding to the Issuers and the Restricted Subsidiaries proportionate share of such joint ventures Consolidated Net Income (determined as if such joint venture were a Subsidiary); plus
(13) one-time costs associated with commencing Public Company Compliance; plus
(14) all adjustments of the nature used in connection with the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum to the extent such adjustments, without duplication, continue to be applicable to such period; and
less, without duplication, to the extent the same increased Consolidated Net Income,
(15) non-cash items increasing Consolidated Net Income for such period (excluding the recognition of deferred revenue or any items which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that reduced EBITDA in any prior period and any items for which cash was received in a prior period).
Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Equity Offering means any public or private sale after the Issue Date of common Capital Stock or Preferred Stock of the Issuer or any direct or indirect parent of the Issuer, as applicable (other than Disqualified Stock), other than:
(1) public offerings with respect to the Issuers or such direct or indirect parents common stock registered on Form S-4 or Form S-8;
(2) issuances to any Subsidiary of the Issuer; and
(3) any such public or private sale that constitutes an Excluded Contribution.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Excluded Contributions means the Cash Equivalents or other assets (valued at their Fair Market Value as determined in good faith by senior management or the Board of Directors of the Issuer) received by the Issuer after the Issue Date from:
(1) contributions to its common equity capital, and
(2) the sale (other than to a Subsidiary of the Issuer or to any Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,
in each case designated as Excluded Contributions pursuant to an Officers Certificate.
Excluded Property means the property and other assets of the Issuer and the
Subsidiary Guarantors that is excluded from the grant of security interest in favor of the First-Priority Collateral Agent, on behalf of the First-Priority Secured Parties, pursuant to the terms of this Indenture and the Security Documents.
Excluded Subsidiary means (a) each Unrestricted Subsidiary, (b) each Domestic Subsidiary that is not a Wholly Owned Subsidiary (for so long as such Subsidiary remains a non-Wholly Owned Subsidiary), (c) each Domestic Subsidiary that is prohibited from guaranteeing the Notes by any requirement of law or that would require consent, approval, license or authorization of a governmental authority to guarantee the Notes (unless such consent, approval, license or authorization has been received), (d) each Domestic Subsidiary that is prohibited by any applicable contractual requirement from guaranteeing the Notes on the Issue Date or at the time such Subsidiary becomes a Subsidiary (to the extent not incurred in connection with becoming a Subsidiary and in each case for so long as such restriction or any replacement or renewal thereof is in effect), (e) any Foreign Subsidiary, (f) any Domestic Subsidiary (i) that owns no material assets (directly or through its Subsidiaries) other than equity interests of one or more Foreign Subsidiaries that are CFCs or (ii) that is a direct or indirect Subsidiary of a Foreign Subsidiary, (g) any Special Purpose Securitization Subsidiary, (h) any Subsidiary (other than a Significant Subsidiary) that (i) did not, as of the last day of the fiscal quarter of the Issuer most recently ended, have assets with a value in excess of 5% of the Total Assets or revenues representing in excess of 5% of total revenues of the Issuer and the Restricted Subsidiaries on a
19
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
consolidated basis as of such date and (ii) taken together with all other such Subsidiaries being excluded pursuant to this clause (h), as of the last day of the fiscal quarter of the Issuer most recently ended, did not have assets with a value in excess of 10% of the Total Assets or revenues representing in excess of 10% of total revenues of the Issuer and the Restricted Subsidiaries on a consolidated basis as of such date and (i) any Subsidiary for which providing a Subsidiary Guarantee or granting Liens to secure Indebtedness could reasonably be expected to result in material adverse tax consequences as determined in good faith by the Issuer.
Fair Market Value means, with respect to any asset or property, the price which could be negotiated in an arms-length transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.
First Lien Intercreditor Agreement means (i) the first lien/first lien intercreditor agreement among Wilmington Trust, National Association, as First-Priority Collateral Agent, Barclays Bank PLC, as an Authorized Representative, the Trustee, as an Authorized Representative, and the other parties from time to time party thereto, entered into on the Issue Date, as it may be amended, restated, supplemented or otherwise modified from time to time in accordance with this Indenture or (ii) any replacement or other intercreditor agreement that contains terms not materially less favorable to holders of the Notes than the intercreditor agreement referred to in clause (i).
First-Priority Collateral Agent means Wilmington Trust, National Association, in its capacity as collateral agent for the First-Priority Secured Parties, together with its successors and permitted assigns (or if such Person is no longer the First-Priority Collateral Agent, such agent or trustee as is designated as First-Priority Collateral Agent under the First-Priority Obligations Documents).
First-Priority Obligations means (i) all Secured Bank Indebtedness, (ii) all Notes Obligations, (iii) Other First-Priority Obligations and (iv) if such Hedging Obligations or obligations in respect of cash management services have been secured in the collateral that secures the First-Priority Obligations, all other obligations of the Issuer or any of its Restricted Subsidiaries in respect of Hedging Obligations or obligations in respect of cash management services in each case owing to a Person that is a holder of Secured Bank Indebtedness or an Affiliate of such holder on the Issue Date or at the time of entry into such Hedging Obligations or obligations in respect of cash management services.
First-Priority Obligations Documents means the Credit Agreement Documents, the Notes Documents and any other documents or instrument evidencing or governing any other First-Priority Obligations.
First-Priority Secured Parties means the Persons holding any First-Priority Obligations, including the First-Priority Collateral Agent.
Fixed Charge Coverage Ratio means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any of its Restricted Subsidiaries Incurs, repays,
20
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
repurchases or redeems any Indebtedness (other than in the case of any Permitted Securitization Financing, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during the applicable period) or issues, repurchases or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made (the Fixed Charge Calculation Date), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such Incurrence, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, and any operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations that the Issuer or any Restricted Subsidiary has determined to make and/or made during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Calculation Date (each, for purposes of this definition, a pro forma event) shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, amalgamations, consolidations, discontinued operations and other operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations (and the change of any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation, amalgamation, discontinued operation, operational change, business realignment project or initiative, New Project, restructuring or reorganization, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger, amalgamation, consolidation, operational change, business realignment project or initiative, New Project, restructuring or reorganization had occurred at the beginning of the applicable four-quarter period. If since the beginning of such period any Restricted Subsidiary is designated an Unrestricted Subsidiary or any Unrestricted Subsidiary is designated a Restricted Subsidiary, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such designation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer. Any such pro forma calculation may include adjustments appropriate, in the reasonable good faith determination of the Issuer as set forth in an Officers Certificate, to reflect (1) operating expense reductions and other operating improvements or synergies reasonably expected to result from the applicable event, which adjustments pursuant to this clause (1) (other than in connection with the Transactions as specified in the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma
21
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Consolidated Financial Data under Summary in the Offering Memorandum) shall not exceed 20% of EBITDA for the applicable four fiscal quarter period (calculated prior to giving effect to such capped adjustments (but, for the avoidance of doubt, after giving effect to other uncapped pro forma adjustments)), and such adjustments shall only be included to the extent that actions resulting in such operating expense reductions and other operating improvements or synergies are taken or commenced or expected to be taken or commenced (in the good faith determination of the Issuer) within 12 months after the date any such calculation is performed, and (2) all adjustments of the nature used in connection with the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum to the extent such adjustments, without duplication, continue to be applicable to such four-quarter period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
For purposes of making the computation referred to above, in giving effect to each New Project which commences operations and records not less than one full fiscal quarters operations during such period, the operating results of such New Project shall be annualized on a straight line basis during such period, taking into account any seasonality adjustments determined by the Issuer in good faith.
For purposes of this definition, any amount in a currency other than U.S. dollars will be converted to U.S. dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination in a manner consistent with that used in calculating EBITDA for the applicable period.
Fixed Charges means, with respect to any Person for any period, the sum, without duplication, of: (1) Consolidated Interest Expense (excluding amortization or write-off of deferred financing costs) of such Person for such period, and (2) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock or Disqualified Stock of such Person and its Restricted Subsidiaries.
Foreign Subsidiary means a Restricted Subsidiary not organized or existing under the laws of the United States of America or any state thereof or the District of Columbia.
22
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
GAAP means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. For the purposes of this Indenture, the term consolidated with respect to any Person shall mean such Person consolidated with its Restricted Subsidiaries, and shall not include any Unrestricted Subsidiary, but the interest of such Person in an Unrestricted Subsidiary will be accounted for as an Investment.
guarantee means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations. The amount of any guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such person in good faith.
Hedging Obligations means, with respect to any Person, the obligations of such Person under:
(1) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements; and
(2) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or commodity prices.
holder or noteholder means the Person in whose name a Note is registered on the Registrars books.
Impairment means, with respect to any Series of First-Priority Obligations, any determination by a court of competent jurisdiction that (x) any of the First-Priority Obligations of such Series are unenforceable under applicable law or are subordinated to any other obligations (other than another Series of First-Priority Obligations), (y) any of the First-Priority Obligations of such Series do not have an enforceable security interest in any of the Common Collateral securing any other Series of First-Priority Obligations and/or (z) any intervening security interest exists securing any other obligations (other than another Series of First-Priority Obligations) on a basis ranking prior to the security interest of such Series of First-Priority Obligations but junior to the security interest of any other Series of First-Priority Obligations.
Incur means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such person becomes a Subsidiary (whether by merger, amalgamation, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary.
23
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Indebtedness means, with respect to any Person:
(1) the principal of any indebtedness of such Person, whether or not contingent, (a) in respect of borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers acceptances (or, without duplication, reimbursement agreements in respect thereof), (c) representing the deferred and unpaid purchase price of any property (except any such balance that constitutes (i) a trade payable or similar obligation to a trade creditor Incurred in the ordinary course of business, (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) liabilities accrued in the ordinary course of business), which purchase price is due more than twelve months after the date of placing the property in service or taking delivery and title thereto, (d) in respect of Capitalized Lease Obligations, or (e) representing any Hedging Obligations, if and to the extent that any of the foregoing indebtedness would appear as a liability on a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;
(2) to the extent not otherwise included, any obligation of such Person to be liable for, or to pay, as obligor, guarantor or otherwise, the obligations referred to in clause (1) of another Person (other than by endorsement of negotiable instruments for collection in the ordinary course of business); and
(3) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person); provided, however, that the amount of such Indebtedness will be the lesser of: (a) the Fair Market Value (as determined in good faith by the Issuer) of such asset at such date of determination, and (b) the amount of such Indebtedness of such other Person;
provided, however, that, notwithstanding the foregoing, Indebtedness shall be deemed not to include (1) Contingent Obligations incurred in the ordinary course of business and not in respect of borrowed money; (2) deferred or prepaid revenues; (3) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the respective seller; (4) Obligations under or in respect of Permitted Securitization Financing; (5) trade and other ordinary course payables, accrued expenses and intercompany liabilities arising in the ordinary course of business; (6) obligations under the Acquisition Documents; (7) obligations in respect of Third Party Funds; (8) in the case of the Issuer and its Restricted Subsidiaries (x) all intercompany Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business and (y) intercompany liabilities in connection with cash management, tax and accounting operations of the Issuer and its Restricted Subsidiaries; and (9) any obligations under Hedging Obligations; provided that such agreements are entered into for bona fide hedging purposes of the Issuer or its Restricted Subsidiaries (as determined in good faith by the board of directors or senior management of the Issuer, whether or not accounted for as a hedge in accordance with GAAP) and, in the case of any foreign exchange contract, currency swap agreement, futures contract, option contract or other similar agreement, such agreements are related to business transactions of the Issuer or its Restricted Subsidiaries entered into in the ordinary course of business and, in
24
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the case of any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement, such agreements substantially correspond in terms of notional amount, duration and interest rates, as applicable, to Indebtedness of the Issuer or its Restricted Subsidiaries Incurred without violation of this Indenture.
Notwithstanding anything in this Indenture to the contrary, Indebtedness shall not include, and shall be calculated without giving effect to, the effects of Statement of Financial Accounting Standards No. 133 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under this Indenture as a result of accounting for any embedded derivatives created by the terms of such Indebtedness; and any such amounts that would have constituted Indebtedness under this Indenture but for the application of this sentence shall not be deemed an Incurrence of Indebtedness under this Indenture.
Indenture means this Indenture as amended or supplemented from time to time.
Independent Financial Advisor means an accounting, appraisal or investment banking firm or consultant, in each case of nationally recognized standing, that is, in the good faith determination of the Issuer, qualified to perform the task for which it has been engaged.
Interest Payment Date has the meaning set forth in Exhibit A hereto.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys or BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.
Investment Grade Securities means:
(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents),
(2) securities that have a rating equal to or higher than Baa3 (or equivalent) by Moodys and BBB- (or equivalent) by S&P, but excluding any debt securities or loans or advances between and among the Issuer and its Subsidiaries,
(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment and/or distribution, and
(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition.
Investments means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees of loans), advances or capital contributions (excluding accounts receivable, trade credit and advances to
25
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business and any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of Unrestricted Subsidiary and Section 4.04:
(1) Investments shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the Fair Market Value (as determined in good faith by the Issuer) of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary equal to an amount (if positive) equal to:
(a) the Issuers Investment in such Subsidiary at the time of such redesignation less
(b) the portion (proportionate to the Issuers equity interest in such Subsidiary) of the Fair Market Value (as determined in good faith by the Issuer) of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value (as determined in good faith by the Issuer) at the time of such transfer, in each case as determined in good faith by the Board of Directors of the Issuer.
Issue Date means the date on which the Initial Notes are originally issued.
Junior Lien Obligations means the Obligations with respect to other Indebtedness permitted to be incurred under this Indenture, which is by its terms intended to be secured by the Collateral on a basis junior to the Notes; provided such Lien is permitted to be incurred under this Indenture.
Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or similar encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement or any lease in the nature thereof); provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.
Management Group means the group consisting of the directors, executive officers and other management personnel of the Issuer or any direct or indirect parent of the Issuer, as the case may be, on the Issue Date together with (1) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of the Issuer or
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
any direct or indirect parent of the Issuer, as applicable, was approved by a vote of a majority of the directors of the Issuer or any direct or indirect parent of the Issuer, as applicable, then still in office who were either directors on the Issue Date or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Issuer or any direct or indirect parent of the Issuer, as applicable, hired at a time when the directors on the Issue Date together with the directors so approved constituted a majority of the directors of the Issuer or any direct or indirect parent of the Issuer, as applicable.
Moodys means Moodys Investors Service, Inc. or any successor to the rating agency business thereof.
Net Income means, with respect to any Person, the net income (loss) of such Person and its Restricted Subsidiaries, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.
Net Proceeds means the aggregate cash proceeds received by the Issuer or any Restricted Subsidiary in respect of any Asset Sale (including, without limitation, any cash received in respect of or upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding the assumption by the acquiring person of Indebtedness relating to the disposed assets or other consideration received in any other non-cash form), net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration (including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions), and any relocation expenses Incurred as a result thereof, taxes paid or payable as a result thereof (including Tax Distributions and after taking into account any available tax credits or deductions and any tax sharing arrangements related solely to such disposition), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness required (other than pursuant to Section 4.06(b)) to be paid as a result of such transaction, and any deduction of appropriate amounts to be provided by the Issuer as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.
New Project means (x) each plant, facility, branch or store which is either a new plant, facility, branch or store or an expansion, relocation, remodeling, or substantial modernization of an existing plant, facility, branch or store owned by the Issuer or the Restricted Subsidiaries which in fact commences operations and (y) each creation (in one or a series of related transactions) of a business unit (including, without limitation, individual stores) to the extent such business unit commences operations or each expansion (in one or series of related transactions) of business into a new market.
Notes Documents means this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents and the First Lien Intercreditor Agreement.
27
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Notes Obligations means Obligations in respect of the Notes, this Indenture, the Subsidiary Guarantees and the Security Documents.
Obligations means any principal, interest, penalties, fees, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and bankers acceptances), damages and other liabilities payable under the documentation governing any Indebtedness (including interest, fees, expenses, indemnity claims and other monetary obligations accrued during the pendency of an insolvency proceeding, whether or not constituting an allowed claim in such proceeding); provided that Obligations with respect to the Notes shall not include fees or indemnifications in favor of third parties other than the Trustee.
Offering Memorandum means the offering memorandum, dated April 22, 2016, relating to the issuance of the Initial Notes.
Officer means the chairman of the Board of Directors, chief executive officer, chief financial officer, president, any executive vice president, senior vice president or vice president, the treasurer or the secretary of the Issuer.
Officers Certificate means a certificate signed on behalf of the Issuer by an Officer of the Issuer who is the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, which meets the requirements set forth in this Indenture.
Opinion of Counsel means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer.
Other First-Priority Obligations means other Indebtedness or Obligations of the Issuer and its Restricted Subsidiaries that are equally and ratably secured by the Common Collateral pursuant to the terms of the First Lien Intercreditor Agreement (including, if applicable, with priority under the Priority Waterfall). For the avoidance of doubt, any Indebtedness which has priority under the Priority Waterfall shall be considered equally and ratably secured for purposes of this Indenture.
Pari Passu Indebtedness means: (a) with respect to the Issuer, the Notes and any Indebtedness which ranks pari passu in right of payment to the Notes; and (b) with respect to any Subsidiary Guarantor, its Subsidiary Guarantee and any Indebtedness which ranks pari passu in right of payment to such Subsidiary Guarantors Subsidiary Guarantee. For the avoidance of doubt, any Indebtedness which has priority under the Priority Waterfall shall be considered Pari Passu Indebtedness for purposes of this Indenture.
Permitted Holders means, at any time, each of (i) the Co-Investors, (ii) the Management Group, (iii) any Person that has no material assets other than the Capital Stock of the Issuer and other Permitted Holders and, directly or indirectly, holds or acquires 100% of the total voting power of the Voting Stock of the Issuer, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than any of the other Permitted Holders, holds more than 50% of the total voting power of the Voting Stock thereof and (iv) any group (within the meaning of Section 13(d)(3)
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
or Section 14(d)(2) of the Exchange Act, or any successor provision) the members of which include any of the Permitted Holders specified in clauses (i), (ii) and (iii) above and that, directly or indirectly, hold or acquire beneficial ownership of the Voting Stock of the Issuer (a Permitted Holder Group), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member (or more favorable voting rights, in the case of any Permitted Holder) and (2) no Person or other group (other than Permitted Holders specified in clauses (i), (ii) and (iii) above) beneficially owns more than 50% on a fully diluted basis of the Voting Stock held by the Permitted Holder Group. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.
Permitted Investments means:
(1) any Investment in the Issuer or any Restricted Subsidiary;
(2) any Investment in Cash Equivalents or Investment Grade Securities;
(3) any Investment by the Issuer or any Restricted Subsidiary in a Person if as a result of such Investment (a) such Person becomes a Restricted Subsidiary, or (b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary;
(4) any Investment in securities or other assets not constituting Cash Equivalents and received in connection with an Asset Sale made pursuant to Section 4.06 or any other disposition of assets not constituting an Asset Sale;
(5) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date or an Investment consisting of any extension, modification or renewal of any Investment existing on the Issue Date; provided that the amount of any such Investment may be increased (x) as required by the terms of such Investment as in existence on the Issue Date or (y) as otherwise permitted under this Indenture;
(6) loans and advances to officers, directors, employees or consultants of the Issuer or any of its Subsidiaries (i) in the ordinary course of business in an aggregate outstanding amount (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not to exceed $20 million, (ii) in respect of payroll payments and expenses in the ordinary course of business and (iii) in connection with such persons purchase of Equity Interests of the Issuer or any direct or indirect parent of the Issuer solely to the extent that the amount of such loans and advances shall be contributed to the Issuer in cash as common equity;
(7) any Investment acquired by the Issuer or any Restricted Subsidiary (a) in exchange for any other Investment or accounts receivable held by the Issuer or such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Issuer of such other Investment or accounts
29
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
receivable, or (b) as a result of a foreclosure by the Issuer or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(8) Hedging Obligations permitted under Section 4.03(b)(x);
(9) any Investment by the Issuer or any Restricted Subsidiary in a Similar Business having an aggregate Fair Market Value (as determined in good faith by the Issuer), taken together with all other Investments made pursuant to this clause (9) that are at that time outstanding, not to exceed the sum of (x) the greater of (i) $25 million and (ii) 0.15 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters plus (y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, however, that if any Investment pursuant to this clause (9) is made in any Person that is not the Issuer or a Restricted Subsidiary at the date of the making of such Investment and such Person becomes the Issuer or a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (9) for so long as such Person continues to be the Issuer or a Restricted Subsidiary;
(10) additional Investments by the Issuer or any Restricted Subsidiary having an aggregate Fair Market Value (as determined in good faith by the Issuer), taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed the sum of (x) the greater of (i) $35 million and (ii) 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters plus (y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, however, that if any Investment pursuant to this clause (10) is made in any Person that is not the Issuer or a Restricted Subsidiary at the date of the making of such Investment and such Person becomes the Issuer or a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (10) for so long as such Person continues to be the Issuer or a Restricted Subsidiary;
(11) loans and advances to officers, directors or employees for business-related travel expenses, moving expenses and other similar expenses, in each case Incurred in the ordinary course of business or consistent with past practice or to fund such persons purchase of Equity Interests of the Issuer or any direct or indirect parent of the Issuer;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(12) Investments the payment for which consists of Equity Interests of the Issuer (other than Disqualified Stock) or any direct or indirect parent of the Issuer, as applicable; provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (3) of the definition of Cumulative Credit;
(13) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 4.07(b) (except transactions described in clauses (ii), (iv), (vi), (ix)(B) and (xvi) of Section 4.07(b));
(14) [reserved];
(15) guarantees issued in accordance with Section 4.03 and Section 4.11 including, without limitation, any guarantee or other obligation issued or incurred under the Credit Agreement in connection with any letter of credit issued for the account of the Issuer or any of its Subsidiaries (including with respect to the issuance of, or payments in respect of drawings under, such letters of credit);
(16) Investments consisting of or to finance purchases and acquisitions of inventory, supplies, materials, services or equipment or purchases of contract rights or licenses or leases of intellectual property;
(17) Investments consisting of Securitization Assets or arising as a result of Permitted Securitization Financings;
(18) any Investment in an entity which is not a Restricted Subsidiary to which a Restricted Subsidiary sells Securitization Assets pursuant to a Permitted Securitization Financing;
(19) additional Investments in joint ventures not to exceed, at any one time in the aggregate outstanding under this clause (19), the sum of (x) the greater of (i) $35 million and (ii) 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters plus (y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment (with the Fair Market Value of each Investment being measured at the time such Investment is made and without giving effect to subsequent changes in value); provided, however, that the Issuer or any Restricted Subsidiary may make additional Investments in joint ventures if the Total Indebtedness Leverage Ratio for the most recently ended four fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such Investment is not greater than 3.50 to 1.00 on a pro forma basis after giving effect to such Investment as if it had occurred at the beginning of such four fiscal quarters; provided, further, however, that if any Investment
31
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
pursuant to this clause (19) is made in any Person that is not the Issuer or a Restricted Subsidiary at the date of the making of such Investment and such Person becomes the Issuer or a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (19) for so long as such Person continues to be the Issuer or a Restricted Subsidiary;
(20) Investments of a Restricted Subsidiary acquired after the Issue Date or of an entity merged into, amalgamated with, or consolidated with the Issuer or a Restricted Subsidiary in a transaction that is not prohibited by Section 5.01 after the Issue Date to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation;
(21) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers;
(22) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Issuer or its Restricted Subsidiaries;
(23) any Investment in any Subsidiary of the Issuer or any joint venture in connection with intercompany cash management arrangements or related activities arising in the ordinary course of business;
(24) guarantees of Indebtedness under customer financing lines of credit in the ordinary course of business; and
(25) Investments made pursuant to the Acquisition Documents or in connection with the Transactions.
Permitted Liens means, with respect to any Person:
(1) pledges or deposits and other Liens granted by such Person under workmens compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds, performance and return of money bonds, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(2) Liens imposed by law, such as landlords, carriers, warehousemens, mechanics, materialmens, repairmens, construction or other like Liens securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(3) Liens for taxes, assessments or other governmental charges not yet overdue by more than 30 days or that are being contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit, bankers acceptances or similar obligations issued pursuant to the request of and for the account of such Person in the ordinary course of its business;
(5) minor survey exceptions, minor encumbrances, trackage rights, special assessments, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
(6) (A) Liens on assets of a Subsidiary that is not a Subsidiary Guarantor securing Indebtedness of a Subsidiary that is not a Subsidiary Guarantor permitted to be Incurred pursuant to Section 4.03;
(B) Liens securing Obligations in respect of (x) Indebtedness Incurred pursuant to Section 4.03(b)(i) (provided that only Liens securing Indebtedness Incurred pursuant to Section 4.03(b)(i)(x) may have priority under the Priority Waterfall or a similar priority waterfall not materially less favorable to the holders of the Notes than the priority under the Priority Waterfall applicable to the Credit Agreement on the Issue Date, and no other Indebtedness otherwise permitted to be secured hereunder may have such status) and (y) any other Indebtedness permitted to be Incurred under this Indenture if, as of the date such Indebtedness was Incurred, and after giving pro forma effect thereto and the application of the net proceeds therefrom, the Senior Secured Leverage Ratio of the Issuer does not exceed 4.00 to 1.00;
(C) Liens securing Obligations in respect of Indebtedness permitted to be Incurred pursuant to clause (iv), (xii) (or (xiv) to the extent it guarantees any such Indebtedness), (xvi) or (xx) of Section 4.03(b) (provided that (i) in the case of clause (xx), such Lien does not extend to the property or assets of any Subsidiary of the Issuer other than a Restricted Subsidiary that is not a Subsidiary Guarantor and (ii) in the case of clause (xvi), such Liens securing Indebtedness Incurred pursuant to clause (xvi) shall only be permitted under this clause (C) if, on a pro forma basis after giving effect to the Incurrence of such Indebtedness and Liens, the Senior Secured Leverage Ratio of the Issuer would be no greater than immediately prior to such Incurrence); and
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(D) Liens securing the Notes Obligations in respect of the Initial Notes.
(7) Liens existing on the Issue Date (other than Liens in favor of the lenders under the Credit Agreement);
(8) Liens on assets, property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, that such Liens (other than Liens to secure Indebtedness Incurred pursuant to Section 4.03(b)(xvi)) are not created or Incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens (other than Liens to secure Indebtedness Incurred pursuant to Section 4.03(b)(xvi)) may not extend to any other property owned by the Issuer or any Restricted Subsidiary (other than pursuant to after-acquired property clauses in effect with respect to such Lien at the time of acquisition on property of the type that would have been subject to such Lien notwithstanding the occurrence of such acquisition);
(9) Liens on assets or property at the time the Issuer or a Restricted Subsidiary acquired the assets or property, including any acquisition by means of a merger, amalgamation or consolidation with or into the Issuer or any Restricted Subsidiary; provided, however, that such Liens (other than Liens to secure Indebtedness Incurred pursuant to Section 4.03(b)(xvi)) are not created or Incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens (other than Liens to secure Indebtedness Incurred pursuant to Section 4.03(b)(xvi)) may not extend to any other property owned by the Issuer or any Restricted Subsidiary (other than pursuant to after-acquired property clauses in effect with respect to such Lien at the time of acquisition on property of the type that would have been subject to such Lien notwithstanding the occurrence of such acquisition);
(10) Liens securing Indebtedness or other obligations of the Issuer or a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be Incurred in accordance with Section 4.03;
(11) Liens securing Hedging Obligations not incurred in violation of this Indenture; provided that with respect to Hedging Obligations relating to Indebtedness, such Lien extends only to the property securing such Indebtedness (other than Hedging Obligations constituting Secured Bank Indebtedness);
(12) Liens on inventory or other goods and proceeds of any Person securing such Persons obligations in respect of documentary letters of credit, bank guarantees or bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(13) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Issuer or any of the Restricted Subsidiaries;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(14) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases or other obligations not constituting Indebtedness;
(15) Liens in favor of the Issuer or any Subsidiary Guarantor;
(16) Liens in respect of Permitted Securitization Financings that extend only to the assets subject thereto and Liens on the Equity Interests of Special Purpose Securitization Subsidiaries;
(17) pledges and deposits and other Liens made in the ordinary course of business to secure liability to insurance carriers;
(18) Liens on the Equity Interests of Unrestricted Subsidiaries;
(19) leases or subleases, and licenses or sublicenses (including with respect to intellectual property) granted to others in the ordinary course of business;
(20) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clauses (6), (7), (8), (9), (10), (11), (15), (25) and (37) of this definition; provided, however, that (x) such new Lien shall be limited to all or part of the same property (including any after acquired property to the extent it would have been subject to the original Lien) that secured the original Lien (plus improvements on and accessions to such property, proceeds and products thereof, customary security deposits and any other assets pursuant to the after-acquired property clauses to the extent such assets secured (or would have secured) the Indebtedness being refinanced, refunded, extended, renewed or replaced), and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount (or accreted value, if applicable) or, if greater, committed amount of the applicable Indebtedness described under clauses (6), (7), (8), (9), (10), (11), (15), (25) and (37) at the time the original Lien became a Permitted Lien under this Indenture, (B) unpaid accrued interest and premiums (including tender premiums), and (C) an amount necessary to pay any underwriting discounts, defeasance costs, commissions, fees and expenses related to such refinancing, refunding, extension, renewal or replacement; provided further, however, that in the case of any Liens to secure any refinancing, refunding, extension or renewal of Indebtedness secured by a Lien referred to in clause (6)(B) or (6)(C), the principal amount of any Indebtedness Incurred for such refinancing, refunding, extension or renewal shall be deemed secured by a Lien under clause (6)(B) or (6)(C) and not this clause (20) for purposes of determining the principal amount of Indebtedness outstanding under clause (6)(B) or (6)(C); provided further however that any Lien securing any refinancing of any Indebtedness secured by a Lien referred to in clause (37) shall be a junior Lien;
(21) Liens on equipment of the Issuer or any Restricted Subsidiary granted in the ordinary course of business to the Issuers or such Restricted Subsidiarys client at which such equipment is located;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(22) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made;
(23) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into in the ordinary course of business;
(24) Liens incurred to secure cash management services or to implement cash pooling arrangements in the ordinary course of business;
(25) other Liens securing obligations the outstanding principal amount of which does not, taken together with the principal amount of all other obligations secured by Liens incurred under this clause (25) that are at that time outstanding, exceed the greater of $65 million and 0.35 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters;
(26) any encumbrance or restriction (including put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement securing obligations of such joint venture or pursuant to any joint venture or similar agreement;
(27) any amounts held by a trustee in the funds and accounts under an indenture securing any revenue bonds issued for the benefit of the Issuer or any Restricted Subsidiary, under any indenture issued in escrow pursuant to customary escrow arrangements pending the release thereof, or under any indenture pursuant to customary discharge, redemption or defeasance provisions;
(28) Liens (i) arising by virtue of any statutory or common law provisions relating to bankers Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depository or financial institution, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business or (iii) encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(29) Liens (i) in favor of credit card companies pursuant to agreements therewith and (ii) in favor of customers;
(30) Liens disclosed by the title insurance policies delivered on (with respect to all mortgages delivered on the Issue Date) or subsequent to the Issue Date and pursuant to the Credit Agreement and any replacement, extension or renewal of any such Lien; provided that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Lien prior to such replacement, extension or renewal; provided, further, that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted under this Indenture;
(31) Liens that are contractual rights of set-off relating to purchase orders and other agreements entered into with customers, suppliers or service providers of the Issuer or any Restricted Subsidiary in the ordinary course of business;
(32) in the case of real property that constitutes a leasehold interest, any Lien to which the fee simple interest (or any superior leasehold interest) is subject;
(33) Liens in respect of Third Party Funds;
(34) agreements to subordinate any interest of the Issuer or any Restricted Subsidiary in any accounts receivable or other prices arising from inventory consigned by the Issuer or any such Restricted Subsidiary pursuant to an agreement entered into in the ordinary course of business;
(35) Liens on securities that are the subject of repurchase agreements constituting Cash Equivalents under clause (4) of the definition thereof;
(36) Liens securing insurance premium financing arrangements; provided that such Liens are limited to the applicable unearned insurance premiums; and
(37) Liens on the Collateral securing Junior Lien Obligations; provided that the Notes are secured on a senior priority basis to the obligations so secured until such time as such obligations are no longer secured by a Lien.
Permitted Securitization Documents shall mean all documents and agreements evidencing, relating to or otherwise governing a Permitted Securitization Financing.
Permitted Securitization Financing shall mean one or more securitization transactions pursuant to which (i) Securitization Assets or interests therein are sold to or financed by one or more Special Purpose Securitization Subsidiaries, and (ii) such Special Purpose Securitization Subsidiaries finance their acquisition of such Securitization Assets or interests therein, or the financing thereof, by selling or borrowing against Securitization Assets and any Hedging Obligations entered into in connection with such Securitization Assets; provided, that recourse to the Issuer or any Restricted Subsidiary (other than the Special Purpose Securitization Subsidiaries) in connection with such transactions shall be limited to the extent customary (as determined by the Issuer in good faith) for similar securitization transactions in the applicable jurisdictions (including, to the extent applicable, in a manner consistent with the delivery of a true sale/absolute transfer opinion with respect to any transfer by the Issuer or any Restricted Subsidiary (other than a Special Purpose Securitization Subsidiary)).
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Person means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Preferred Stock means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up.
Pre-Opening Expenses means, with respect to any fiscal period, the amount of expenses (other than interest expense) incurred with respect to stores which are classified as pre-opening rent, pre-opening expenses or store-opening costs (or any similar or equivalent caption).
Priority Waterfall means the provisions of Section 2.01(a) of the First Lien Intercreditor Agreement.
Pro Forma EBITDA means, with respect to any Person, at any date, the EBITDA of such Person for the full four fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date, subject to the following adjustments. In the event that the Issuer or any Restricted Subsidiary Incurs, repays, repurchases or redeems any Indebtedness subsequent to the commencement of the period for which Pro Forma EBITDA is being calculated but prior to the event for which the calculation of Pro Forma EBITDA is made (the Pro Forma EBITDA Calculation Date), then Pro Forma EBITDA shall be calculated giving pro forma effect to such Incurrence, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or Preferred Stock as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, and any operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations that the Issuer or any Restricted Subsidiary has determined to make and/or made during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Pro Forma EBITDA Calculation Date (each, for purposes of this definition, a pro forma event) shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, amalgamations, consolidations, discontinued operations and other operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations (and the change of any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation, amalgamation, discontinued operation, operational change, business realignment project or initiative, New Project, restructuring or reorganization, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then Pro Forma EBITDA shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger, amalgamation, consolidation, operational change, business
38
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
realignment project or initiative, New Project, restructuring or reorganization had occurred at the beginning of the applicable four-quarter period. If since the beginning of such period any Restricted Subsidiary is designated an Unrestricted Subsidiary or any Unrestricted Subsidiary is designated a Restricted Subsidiary, then Pro Forma EBITDA shall be calculated giving pro forma effect thereto for such period as if such designation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer. Any such pro forma calculation may include adjustments appropriate, in the reasonable good faith determination of the Issuer as set forth in an Officers Certificate, to reflect (1) operating expense reductions and other operating improvements or synergies reasonably expected to result from the applicable event, which adjustments pursuant to this clause (1) (other than in connection with the Transactions as specified in the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum) shall not exceed 20% of EBITDA for the applicable four fiscal quarter period (calculated prior to giving effect to such capped adjustments (but, for the avoidance of doubt, after giving effect to other uncapped pro forma adjustments)), and such adjustments shall only be included to the extent that actions resulting in such operating expense reductions and other operating improvements or synergies are taken or commenced or expected to be taken or commenced (in the good faith determination of the Issuer) within 12 months after the date any such calculation is performed, and (2) all adjustments of the nature used in connection with the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum to the extent such adjustments, without duplication, continue to be applicable to such four-quarter period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Pro Forma EBITDA Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
For purposes of making the computation referred to above, in giving effect to each New Project which commences operations and records not less than one full fiscal quarters operations during such period, the operating results of such New Project shall be annualized on a straight line basis during such period, taking into account any seasonality adjustments determined by the Issuer in good faith.
39
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Public Company Compliance means compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, the provisions of the Securities Act and the Exchange Act, and the rules of national securities exchange listed companies (in each case, as applicable to companies with equity or debt securities held by the public), including procuring directors and officers insurance, legal and other professional fees, and listing fees.
Rating Agency means (1) each of Moodys and S&P and (2) if Moodys or S&P ceases to rate the Notes for reasons outside of the Issuers control, a nationally recognized statistical rating organization within the meaning of Rule 15cs-1(c)(2)(vi)(F) under the Exchange Act selected by the Issuer or any direct or indirect parent of the Issuer as a replacement agency for Moodys or S&P, as the case may be.
Receivables Assets shall mean accounts receivable (including any bills of exchange) and related assets and property from time to time originated, acquired or otherwise owned by the Issuer or any Subsidiary.
Related Party means, with respect to any Person, (1) any spouse, descendant or immediate family member of such Person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of such Person referred to in the immediately preceding clause (2), acting solely in such capacity.
Record Date has the meaning specified in Exhibit A hereto.
Restricted Cash means cash and Cash Equivalents held by Restricted Subsidiaries that would appear as restricted on a consolidated balance sheet of the Issuer or any of its Restricted Subsidiaries.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Subsidiary means, with respect to any Person, any Subsidiary of such Person other than an Unrestricted Subsidiary of such Person. Unless otherwise indicated in this Indenture, all references to Restricted Subsidiaries shall mean Restricted Subsidiaries of the Issuer.
Sale/Leaseback Transaction means an arrangement relating to property now owned or hereafter acquired by the Issuer or a Restricted Subsidiary whereby the Issuer or such Restricted Subsidiary transfers such property to a Person and the Issuer or such Restricted Subsidiary leases it from such Person, other than leases between the Issuer and a Restricted Subsidiary or between Restricted Subsidiaries.
S&P means Standard & Poors Ratings Group or any successor to the rating agency business thereof.
SEC means the Securities and Exchange Commission.
40
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Secured Bank Indebtedness means any Bank Indebtedness that is secured by a Permitted Lien incurred or deemed incurred pursuant to clause (6) of the definition of Permitted Liens, as designated by the Issuer to be included in this definition.
Secured Indebtedness means any Consolidated Total Indebtedness secured by a Lien.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Security Documents means the Collateral Agreement and security agreements, pledge agreements, collateral assignments and mortgages, as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified from time to time, creating the security interests in the Collateral for the benefit of the Trustee, the First-Priority Collateral Agent and the holders of the Notes as contemplated by this Indenture.
Securitization Assets means any of the following assets (or interests therein) from time to time originated, acquired or otherwise owned by the Issuer or any Restricted Subsidiary or in which the Issuer or any Restricted Subsidiary has any rights or interests, in each case, without regard to where such assets or interests are located: (1) Receivables Assets, (2) franchise fee payments and other revenues related to franchise agreements, (3) royalty and other similar payments made related to the use of trade names and other intellectual property, business support, training and other services, (4) revenues related to distribution and merchandising of the products of the Issuer and the Restricted Subsidiaries, (5) rents, real estate taxes and other non-royalty amounts due from franchisees, (6) intellectual property rights relating to the generation of any of the foregoing types of assets, (7) parcels of or interests in real property, together with all easements, hereditaments and appurtenances thereto, all improvements and appurtenant fixtures and equipment, incidental to the ownership, lease or operation thereof and (8) any other assets and property to the extent customarily included in securitization transactions of the relevant type in the applicable jurisdictions (as determined by the Issuer in good faith).
Securitization Fees means distributions or payments made directly or by means of discounts with respect to any participation interests issued or sold in connection with, and all other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Permitted Securitization Financing.
Securitization Repurchase Obligation means any obligation of a seller of Securitization Assets in a Permitted Securitization Financing to repurchase Securitization Assets arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a Securitization Asset or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.
Senior Secured Leverage Ratio means, with respect to any Person, at any date, the ratio of (i) Secured Indebtedness of such Person and its Restricted Subsidiaries constituting First-Priority Obligations as of such date of calculation (determined on a consolidated basis in accordance with GAAP) less the amount of cash and Cash Equivalents in excess of any
41
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Restricted Cash that would be stated on the balance sheet of such Person and its Restricted Subsidiaries and held by such Person and its Restricted Subsidiaries as of such date of determination to (ii) EBITDA of such Person for the four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred. In the event that the Issuer or any Restricted Subsidiary Incurs, repays, repurchases or redeems any Indebtedness subsequent to the commencement of the period for which the Senior Secured Leverage Ratio is being calculated but prior to the event for which the calculation of the Senior Secured Leverage Ratio is made (the Senior Secured Leverage Calculation Date), then the Senior Secured Leverage Ratio shall be calculated giving pro forma effect to such Incurrence, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or Preferred Stock as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, and any operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations that the Issuer or any Restricted Subsidiary has determined to make and/or made during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Senior Secured Leverage Calculation Date (each, for purposes of this definition, a pro forma event) shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, amalgamations, consolidations, discontinued operations and other operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations (and the change of any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation, amalgamation, discontinued operation, operational change, business realignment project or initiative, New Project, restructuring or reorganization, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Senior Secured Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger, amalgamation, consolidation, operational change, business realignment project or initiative, New Project, restructuring or reorganization had occurred at the beginning of the applicable four-quarter period. If since the beginning of such period any Restricted Subsidiary is designated an Unrestricted Subsidiary or any Unrestricted Subsidiary is designated a Restricted Subsidiary, then the Senior Secured Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such designation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer. Any such pro forma calculation may include adjustments appropriate, in the reasonable good faith determination of the Issuer as set forth in an Officers Certificate, to reflect (1) operating expense reductions and other operating improvements or synergies reasonably expected to result from the applicable event, which adjustments pursuant to
42
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
this clause (1) (other than in connection with the Transactions as specified in the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum) shall not exceed 20% of EBITDA for the applicable four fiscal quarter period (calculated prior to giving effect to such capped adjustments (but, for the avoidance of doubt, after giving effect to other uncapped pro forma adjustments)), and such adjustments shall only be included to the extent that actions resulting in such operating expense reductions and other operating improvements or synergies are taken or commenced or expected to be taken or commenced (in the good faith determination of the Issuer) within 12 months after the date any such calculation is performed, and (2) all adjustments of the nature used in connection with the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum to the extent such adjustments, without duplication, continue to be applicable to such four-quarter period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Senior Secured Leverage Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
For purposes of making the computation referred to above, in giving effect to each New Project which commences operations and records not less than one full fiscal quarters operations during such period, the operating results of such New Project shall be annualized on a straight line basis during such period, taking into account any seasonality adjustments determined by the Issuer in good faith.
For purposes of this definition, any amount in a currency other than U.S. dollars will be converted to U.S. dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination in a manner consistent with that used in calculating EBITDA for the applicable period.
Series means (a) with respect to the First-Priority Secured Parties, each of (i) the Secured Parties as defined in the Credit Agreement (or an equivalent provision thereof), (ii) the holders of the Notes and the Trustee (each in their capacity as such) and (iii) the Additional First-Priority Secured Parties that become subject to the First Lien Intercreditor Agreement after the Issue Date that are represented by a common Authorized Representative (in its capacity as such for such Additional First-Priority Secured Parties) and (b) with respect to any First-Priority Obligations, each of (i) the Obligations under the Credit Agreement, (ii) the Notes
43
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Obligations and (iii) the Other First-Priority Obligations incurred pursuant to any applicable agreement, which pursuant to any joinder agreement, are to be represented under the First Lien Intercreditor Agreement by a common Authorized Representative (in its capacity as such for such Other First-Priority Obligations).
Significant Subsidiary means any Restricted Subsidiary that would be a Significant Subsidiary of the Issuer within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC (or any successor provision).
Similar Business means any business, the majority of whose revenues are derived from (i) the business or activities of the Issuer and its Subsidiaries as of the Issue Date, (ii) any business that is a natural outgrowth or a reasonable extension, development or expansion of any such business or any business similar, reasonably related, incidental, complementary or ancillary to any of the foregoing or (iii) any business that in the Issuers good faith business judgment constitutes a reasonable diversification of business conducted by the Issuer and its Subsidiaries.
Special Purpose Securitization Subsidiary shall mean (i) a direct or indirect Restricted Subsidiary of the Issuer established in connection with a Permitted Securitization Financing for the acquisition of Securitization Assets or interests therein and/or Equity Interests in other Special Purpose Securitization Subsidiaries, and which is organized in a manner (as determined by the Issuer in good faith) intended to reduce the likelihood that it would be substantively consolidated with the Issuer or any of its Restricted Subsidiaries (other than Special Purpose Securitization Subsidiaries) in the event the Issuer or any such Restricted Subsidiary becomes subject to a proceeding under the Bankruptcy Code (or other insolvency law) and (ii) any subsidiary of a Special Purpose Securitization Subsidiary.
Sponsors means (i) one or more investment funds affiliated with Apollo Global Management, LLC and any of their respective Affiliates other than any portfolio companies (collectively, the Apollo Sponsors) and (ii) any Person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with the Apollo Sponsors; provided that any Apollo Sponsor (x) owns a majority of the voting power and (y) controls a majority of the Board of Directors of the Issuer.
Stated Maturity means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable.
Subordinated Indebtedness means (a) with respect to the Issuer, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and (b) with respect to any Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor which is by its terms subordinated in right of payment to its Subsidiary Guarantee.
Subsidiary means, with respect to any Person, (1) any corporation, association or other business entity (other than a partnership, joint venture or limited liability company) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or
44
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, and (2) any partnership, joint venture or limited liability company of which (x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, and (y) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
Subsidiary Guarantee means any guarantee of the obligations of the Issuer under this Indenture and the Notes by any Subsidiary Guarantor in accordance with the provisions of this Indenture.
Subsidiary Guarantor means any Subsidiary that Incurs a Subsidiary Guarantee; provided that upon the release or discharge of such Person from its Subsidiary Guarantee in accordance with this Indenture, such Subsidiary ceases to be a Subsidiary Guarantor.
Suspension Period means the period of time between a Covenant Suspension Event and the related Reversion Date.
Tax Distributions means any distributions described in Section 4.04(b)(xii).
Third Party Funds means any accounts or funds, or any portion thereof, received by the Issuer or any of its Subsidiaries as agent on behalf of third parties in accordance with a written agreement that imposes a duty upon the Issuer or one or more of its Subsidiaries to collect and remit those funds to such third parties.
TIA means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
Total Assets means the total consolidated assets of the Issuer and the Restricted Subsidiaries, as shown on the most recent balance sheet of the Issuer, without giving effect to any impairment or amortization of the amount of intangible assets since January 31, 2016, calculated on a pro forma basis after giving effect to any subsequent acquisition or disposition of a Person or business.
Total Indebtedness Leverage Ratio means, with respect to any Person, at any date, the ratio of (i) Consolidated Total Indebtedness of such Person and its Restricted Subsidiaries as of such date of calculation (determined on a consolidated basis in accordance with GAAP) less the amount of cash and Cash Equivalents in excess of any Restricted Cash that would be stated on the balance sheet of such Person and its Restricted Subsidiaries and held by such Person and its Restricted Subsidiaries as of such date of determination to (ii) EBITDA of such Person for the four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred. In the event that the Issuer or any Restricted Subsidiary Incurs, repays, repurchases or redeems any Indebtedness subsequent to the commencement of the period for which the Total Indebtedness Leverage Ratio is being calculated but prior to the event for which the calculation
45
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
of the Total Indebtedness Leverage Ratio is made (the Total Indebtedness Leverage Calculation Date), then the Total Indebtedness Leverage Ratio shall be calculated giving pro forma effect to such Incurrence, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or Preferred Stock as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, amalgamations, consolidations and discontinued operations (as determined in accordance with GAAP), in each case with respect to an operating unit of a business, and any operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations that the Issuer or any Restricted Subsidiary has determined to make and/or made during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Total Indebtedness Leverage Calculation Date (each, for purposes of this definition, a pro forma event) shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, amalgamations, consolidations, discontinued operations and other operational changes, business realignment projects or initiatives, New Projects, restructurings or reorganizations (and the change of any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation, amalgamation, discontinued operation, operational change, business realignment project or initiative, New Project, restructuring or reorganization, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Total Indebtedness Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger, amalgamation, consolidation, operational change, business realignment project or initiative, New Project, restructuring or reorganization had occurred at the beginning of the applicable four-quarter period. If since the beginning of such period any Restricted Subsidiary is designated an Unrestricted Subsidiary or any Unrestricted Subsidiary is designated a Restricted Subsidiary, then the Total Indebtedness Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such designation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to any pro forma event, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer. Any such pro forma calculation may include adjustments appropriate, in the reasonable good faith determination of the Issuer as set forth in an Officers Certificate, to reflect (1) operating expense reductions and other operating improvements or synergies reasonably expected to result from the applicable event, which adjustments pursuant to this clause (1) (other than in connection with the Transactions as specified in the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum) shall not exceed 20% of EBITDA for the applicable four fiscal quarter period (calculated prior to giving effect to such capped adjustments (but, for the avoidance of doubt, after giving effect to other uncapped pro forma adjustments)), and such adjustments shall only be included to the extent that actions
46
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
resulting in such operating expense reductions and other operating improvements or synergies are taken or commenced or expected to be taken or commenced (in the good faith determination of the Issuer) within 12 months after the date any such calculation is performed, and (2) all adjustments of the nature used in connection with the calculation of Adjusted EBITDA as set forth in footnote (9) to the Summary Historical and Pro Forma Consolidated Financial Data under Summary in the Offering Memorandum to the extent such adjustments, without duplication, continue to be applicable to such four-quarter period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Total Indebtedness Leverage Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
For purposes of making the computation referred to above, in giving effect to each New Project which commences operations and records not less than one full fiscal quarters operations during such period, the operating results of such New Project shall be annualized on a straight line basis during such period, taking into account any seasonality adjustments determined by the Issuer in good faith.
For purposes of this definition, any amount in a currency other than U.S. dollars will be converted to U.S. dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination in a manner consistent with that used in calculating EBITDA for the applicable period.
Transactions means the transactions described under SummaryThe Transactions in the Offering Memorandum.
Treasury Rate means, as of the applicable redemption date, as determined by the Issuer, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to such redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such redemption date to May 1, 2019; provided, however, that if the period from such redemption date to May 1, 2019, as applicable, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
47
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Trust Officer means:
(1) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such persons knowledge of and familiarity with the particular subject, and
(2) who shall have direct responsibility for the administration of this Indenture.
Trustee means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.
Uniform Commercial Code or UCC means the New York Uniform Commercial Code as in effect from time to time.
Unrestricted Subsidiary means:
(1) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary;
The Issuer may designate any Subsidiary of the Issuer (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless at the time of such designation such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any property of, the Issuer or any other Restricted Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated, in each case at the time of such designation; provided, however, that (i) the Subsidiary to be so designated and its Subsidiaries do not at the time of designation have and do not thereafter Incur any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any of the Restricted Subsidiaries unless otherwise permitted under Section 4.04 and (ii) the Issuer may not designate any Subsidiary of the Issuer to be an Unrestricted Subsidiary during any Suspension Period; provided, further, however, that either:
(a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less; or
(b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04.
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Pursuant to 17 C.F.R. Section 200.83
The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation:
(x) (1) the Issuer could Incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a) or (2) the Fixed Charge Coverage Ratio of the Issuer and its Restricted Subsidiaries would be no less than such ratio immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and
(y) no Event of Default shall have occurred and be continuing.
Any such designation by the Issuer shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors or any committee thereof of the Issuer giving effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
U.S. Government Obligations means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged, or
(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,
which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness or Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing (1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment, by (2) the sum of all such payments.
Wholly Owned Restricted Subsidiary is any Wholly Owned Subsidiary that is a Restricted Subsidiary.
Wholly Owned Subsidiary of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors qualifying shares or shares required pursuant to applicable law) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person.
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SECTION 1.02 Other Definitions.
Term |
Section | |
$ |
1.03(j) | |
Affiliate Transaction |
4.07(a) | |
Agent Members |
Appendix A | |
Asset Sale Offer |
4.06(b) | |
Bankruptcy Law |
6.01 | |
Change of Control Offer |
4.08(b) | |
covenant defeasance option |
8.01(b) | |
Covenant Suspension Event |
4.15 | |
Custodian |
6.01 | |
Deemed Date |
4.03(c)(3) | |
Definitive Note |
Appendix A | |
Depository |
Appendix A | |
Event of Default |
6.01 | |
Excess Proceeds |
4.06(b) | |
Global Notes |
Appendix A | |
Global Notes Legend |
Appendix A | |
Guaranteed Obligations |
12.01(a) | |
IAI |
Appendix A | |
Increased Amount |
4.12(c) | |
Initial Notes |
Preamble | |
Initial Purchasers |
Appendix A | |
Issuer |
Preamble | |
Issuer Merger |
Preamble | |
legal defeasance option |
8.01(b) | |
Merger Sub |
Preamble | |
Notes |
Preamble | |
Notes Custodian |
Appendix A | |
Notice of Default |
6.01 | |
Offer Period |
4.06(d) | |
Paying Agent |
2.04(a) | |
Permitted Jurisdictions |
5.01(a) | |
protected purchaser |
2.08 | |
QIB |
Appendix A | |
Refinancing Indebtedness |
4.03(b)(xv) | |
Refunding Capital Stock |
4.04(b)(ii) | |
Registrar |
2.04(a) | |
Regulation S |
Appendix A | |
Regulation S Global Notes |
Appendix A | |
Regulation S Notes |
Appendix A | |
Reporting Entity |
4.02(b) | |
Restricted Notes Legend |
Appendix A | |
Restricted Payments |
4.04(a) | |
Restricted Period |
Appendix A | |
Retired Capital Stock |
4.04(b)(ii) |
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Pursuant to 17 C.F.R. Section 200.83
Term |
Section | |
Reversion Date |
4.15 | |
Rule 144A |
Appendix A | |
Rule 144A Global Notes |
Appendix A | |
Rule 144A Notes |
Appendix A | |
Rule 501 |
Appendix A | |
Second Commitment |
4.06(b) | |
Successor Company |
5.01(a)(i) | |
Successor Subsidiary Guarantor |
5.01(b)(i) | |
Suspended Covenants |
4.15 | |
The Fresh Market |
Preamble | |
Transfer |
5.01(b)(ii) | |
Transfer Restricted Definitive Notes |
Appendix A | |
Transfer Restricted Global Notes |
Appendix A | |
Transfer Restricted Notes |
Appendix A | |
Trustee |
Preamble | |
U.S. dollars |
1.03(j) | |
Unrestricted Definitive Notes |
Appendix A | |
Unrestricted Global Notes |
Appendix A |
SECTION 1.03 Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) or is not exclusive;
(d) including means including without limitation;
(e) words in the singular include the plural and words in the plural include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;
(g) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;
(h) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater;
(i) unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP; and
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(j) $ and U.S. dollars each refer to United States dollars, or such other money of the United States of America that at the time of payment is legal tender for payment of public and private debts.
SECTION 1.04 No Incorporation by Reference of Trust Indenture Act. This Indenture is not qualified under the TIA, and the TIA shall not apply to or in any way govern the terms of this Indenture. As a result, no provisions of the TIA are incorporated into this Indenture unless expressly incorporated pursuant to this Indenture.
ARTICLE II
THE NOTES
SECTION 2.01 Amount of Notes. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture on the Issue Date is $800,000,000.
The Issuer may from time to time after the Issue Date issue Additional Notes under this Indenture in an unlimited principal amount, so long as (i) the Incurrence of the Indebtedness represented by such Additional Notes is at such time permitted by Section 4.03 and the Liens with respect thereto are permitted by Section 4.12 and (ii) such Additional Notes are issued in compliance with the other applicable provisions of this Indenture. With respect to any Additional Notes issued after the Issue Date (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.09, 3.08, 4.06(e), 4.08(c) or Appendix A), there shall be (a) established in or pursuant to a resolution of the Board of Directors of the Issuer and (b) (i) set forth or determined in the manner provided in an Officers Certificate or (ii) established in one or more indentures supplemental hereto, prior to the issuance of such Additional Notes:
(1) the aggregate principal amount of such Additional Notes which may be authenticated and delivered under this Indenture;
(2) the issue price and issuance date of such Additional Notes, including the date from which interest on such Additional Notes shall accrue; and
(3) if applicable, that such Additional Notes shall be issuable in whole or in part in the form of one or more Global Notes and, in such case, the respective depositaries for such Global Notes, the form of any legend or legends which shall be borne by such Global Notes in addition to or in lieu of those set forth in Exhibit A hereto and any circumstances in addition to or in lieu of those set forth in Section 2.2 of Appendix A in which any such Global Note may be exchanged in whole or in part for Additional Notes registered, or any transfer of such Global Note in whole or in part may be registered, in the name or names of Persons other than the depositary for such Global Note or a nominee thereof.
If any of the terms of any Additional Notes are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action
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shall be certified by the Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee at or prior to the delivery of the Officers Certificate or an indenture supplemental hereto setting forth the terms of the Additional Notes.
The Initial Notes and any Additional Notes may, at the Issuers option, be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase; provided that if the Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, the Additional Notes will have a separate CUSIP number, if applicable.
SECTION 2.02 Form and Dating. Provisions relating to the Initial Notes are set forth in Appendix A, which is hereby incorporated in and expressly made a part of this Indenture. The (i) Initial Notes and the Trustees certificate of authentication and (ii) any Additional Notes and the Trustees certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer or any Subsidiary Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Issuer). Each Note shall be dated the date of its authentication. The Notes shall be issuable only in registered form without interest coupons and in denominations of $2,000 and any integral multiples of $1,000 in excess thereof, provided that Notes may be issued in denominations of less than $2,000 solely to accommodate book-entry positions that have been created by the Depository in denominations of less than $2,000.
SECTION 2.03 Execution and Authentication. The Trustee shall authenticate and make available for delivery upon a written order of the Issuer signed by one Officer of the Issuer (a) Initial Notes for original issue on the date hereof in an aggregate principal amount of $800,000,000 and (b) subject to the terms of this Indenture, Additional Notes in an aggregate principal amount to be determined at the time of issuance and specified therein. Such order shall specify the amount of separate Note certificates to be authenticated, the principal amount of each of the Notes to be authenticated, the date on which the original issue of Notes is to be authenticated, whether the Notes are to be Initial Notes or Additional Notes, the registered holder of each of the Notes and delivery instructions. Notwithstanding anything to the contrary in this Indenture or Appendix A, any issuance of Additional Notes after the Issue Date shall be in a principal amount of at least $2,000 and integral multiples of $1,000 in excess thereof.
One Officer shall sign the Notes for the Issuer by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee may appoint one or more authenticating agents reasonably acceptable to the Issuer to authenticate the Notes. Any such appointment shall be evidenced by an
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instrument signed by a Trust Officer, a copy of which shall be furnished to the Issuer. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.04 Registrar and Paying Agent.
(a) The Issuer shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange (the Registrar) and (ii) an office or agency where Notes may be presented for payment (the Paying Agent). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuer may have one or more co-registrars and one or more additional paying agents. The term Registrar includes any co-registrars. The term Paying Agent includes the Paying Agent and any additional paying agents. The Issuer initially appoints the Trustee as Registrar, Paying Agent and the Notes Custodian with respect to the Global Notes.
(b) The Issuer may enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuer shall notify the Trustee in writing of the name and address of any such agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Issuer or any of its domestically organized Subsidiaries may act as Paying Agent or Registrar.
(c) The Issuer may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) if applicable, acceptance of an appointment by a successor Registrar or Paying Agent, as the case may be, as evidenced by an appropriate agreement entered into by the Issuer and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Issuer and the Trustee; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08.
SECTION 2.05 Paying Agent to Hold Money in Trust. Prior to each due date of the principal of and interest on any Note, the Issuer shall deposit with each Paying Agent (or if the Issuer or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Issuer shall require each Paying Agent (other than the Trustee) to agree in writing that a Paying Agent shall hold in trust for the benefit of holders or the Trustee all money held by a Paying Agent for the payment of principal of and interest on the Notes, and shall notify the Trustee of any default by the Issuer in making any such payment. If the Issuer or a Subsidiary of the Issuer acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it in trust for the benefit of the Persons entitled thereto. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section 2.05, a Paying Agent shall have no further liability for the money delivered to the Trustee.
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SECTION 2.06 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of holders. If the Trustee is not the Registrar, the Issuer shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of holders.
SECTION 2.07 Transfer and Exchange. The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with Appendix A. When a Note is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements therefor are met. When Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrars request. The Issuer may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Issuer shall not be required to make, and the Registrar need not register, transfers or exchanges of Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or of any Notes for a period of 15 days before a selection of Notes to be redeemed.
Prior to the due presentation for registration of transfer of any Note, the Issuer, the Subsidiary Guarantors, the Trustee, the Paying Agent and the Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Subsidiary Guarantors, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.
Any holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by (a) the holder of such Global Note (or its agent) or (b) any holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants or beneficial owners of interests in any Global Note) other than to
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
None of the Trustee, Registrar or Paying Agent shall have any responsibility for any actions taken or not taken by the Depository.
SECTION 2.08 Replacement Notes. If a mutilated Note is surrendered to the Registrar or if the holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the holder (a) satisfies the Issuer and the Trustee within a reasonable time after such holder has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Issuer and the Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a protected purchaser) and (c) satisfies any other reasonable requirements of the Issuer and the Trustee. If required by the Trustee or the Issuer, such holder shall furnish an indemnity bond sufficient in the judgment of the Trustee, with respect to the Trustee, and the Issuer, with respect to the Issuer, to protect the Issuer, the Trustee, the Paying Agent and the Registrar, as applicable, from any loss or liability that any of them may suffer if a Note is replaced and subsequently presented or claimed for payment. The Issuer and the Trustee may charge the holder for their expenses in replacing a Note (including without limitation, attorneys fees and disbursements in replacing such Note). In the event any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Issuer in its discretion may pay such Note instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the Issuer.
The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
SECTION 2.09 Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 13.06, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.08 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.08.
If a Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the
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case may be, and no Paying Agent is prohibited from paying such money to the holders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10 Cancellation. The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and each Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and shall dispose of canceled Notes in accordance with its customary procedures. The Issuer may not issue new Notes to replace Notes they have redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Notes in place of canceled Notes other than pursuant to the terms of this Indenture.
SECTION 2.11 Defaulted Interest. If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay the defaulted interest then borne by the Notes (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuer may pay the defaulted interest to the Persons who are holders on a subsequent special record date. The Issuer shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each affected holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.12 CUSIP Numbers, ISINs, Etc. The Issuer in issuing the Notes may use CUSIP numbers, ISINs and Common Code numbers (if then generally in use), and the Trustee shall use any such CUSIP numbers, ISINs and Common Code numbers in notices of redemption as a convenience to holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Notes or as contained in any notice of a redemption that reliance may be placed only on the other identification numbers printed on the Notes and that any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall advise the Trustee of any change in any such CUSIP numbers, ISINs and Common Code numbers.
SECTION 2.13 Calculation of Principal Amount of Notes. The aggregate principal amount of the Notes, at any date of determination, shall be the principal amount of the Notes at such date of determination. With respect to any matter requiring consent, waiver, approval or other action of the holders of a specified percentage of the principal amount of all the Notes, such percentage shall be calculated, on the relevant date of determination, by dividing (a) the principal amount, as of such date of determination, of Notes, the holders of which have so consented, by (b) the aggregate principal amount, as of such date of determination, of the Notes then outstanding, in each case, as determined in accordance with the preceding sentence, Section 2.09 and Section 13.06 of this Indenture. Any calculation of the Applicable Premium made pursuant to this Indenture or the Notes shall be made by the Issuer and delivered to the Trustee pursuant to an Officers Certificate.
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ARTICLE III
REDEMPTION
SECTION 3.01 Redemption. The Notes may be redeemed, in whole or from time to time in part, subject to the conditions and at the redemption prices set forth in Paragraph 5 of the form of Note set forth in Exhibit A hereto, which is hereby incorporated by reference and made a part of this Indenture, together with accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date).
SECTION 3.02 Applicability of Article. Redemption of Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article III.
SECTION 3.03 Notices to Trustee. If the Issuer elects to redeem Notes pursuant to the optional redemption provisions of Paragraph 5 of the Note, the Issuer shall notify the Trustee in an Officers Certificate of (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. The Issuer shall give notice to the Trustee provided for in this paragraph at least 30 days but not more than 60 days before a redemption date if the redemption is a redemption pursuant to Paragraph 5 of the Note. The Issuer may also include a request in such Officers Certificate that the Trustee give the notice of redemption in the Issuers name and at its expense and setting forth the information to be stated in such notice as provided in Section 3.05. Any such notice may be canceled if written notice from the Issuer of such cancellation is actually received by the Trustee on the Business Day immediately prior to notice of such redemption being mailed to any holder or otherwise delivered in accordance with the applicable procedures of the Depository and shall thereby be void and of no effect. The Issuer shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 3.04.
SECTION 3.04 Selection of Notes to Be Redeemed. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed (and the Issuer shall notify the Trustee of any such listing), or if the Notes are not so listed, on a pro rata basis to the extent practicable or by lot or by such other method as the Trustee shall deem fair and appropriate (and, in such manner that complies with the requirements of the Depository, if applicable); provided that no Notes of $2,000 (and integral multiples of $1,000 in excess thereof) or less shall be redeemed in part. The Trustee shall make the selection from outstanding Notes not previously called for redemption. The Trustee may select for redemption portions of the principal of Notes that have denominations larger than $2,000. Notes and portions of them the Trustee selects shall be in amounts of $2,000 or integral multiples of $1,000 in excess thereof. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Issuer promptly of the Notes or portions of Notes to be redeemed.
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SECTION 3.05 Notice of Optional Redemption.
(a) At least 30 but not more than 60 days before a redemption date pursuant to Paragraph 5 of the Note, the Issuer shall mail or cause to be mailed by first-class mail at its registered address, or otherwise deliver in accordance with the procedures of the Depository, a notice of redemption to each holder whose Notes are to be redeemed (with a copy to the Trustee), except that redemption notices may be mailed or otherwise delivered more than 60 days prior to the redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Article VIII.
Any such notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price and the amount of accrued interest to the redemption date;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price, plus accrued and unpaid interest, if any;
(v) if fewer than all the outstanding Notes are to be redeemed, the certificate numbers and principal amounts of the particular Notes to be redeemed, the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption;
(vi) that, unless the Issuer defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date;
(vii) the CUSIP number, ISIN and/or Common Code number, if any, printed on the Notes being redeemed;
(viii) that no representation is made as to the correctness or accuracy of the CUSIP number or ISIN and/or Common Code number, if any, listed in such notice or printed on the Notes;
(ix) if the redemption is subject to the satisfaction of one or more conditions precedent, the notice thereof shall describe each such condition and, if applicable, shall state that, in the Issuers discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied, or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date, or by the redemption date as so delayed; and
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Pursuant to 17 C.F.R. Section 200.83
(x) at the Issuers option, that the payment of the redemption price and performance of the Issuers obligations with respect to such redemption may be performed by another Person.
Notice of any redemption upon any corporate transaction or other event (including any Equity Offering, incurrence of Indebtedness, Change of Control or other transaction) may be given prior to the completion thereof. In addition, any redemption or notice thereof may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event.
(b) At the Issuers request, the Trustee shall deliver the notice of redemption in the Issuers name and at the Issuers expense. In such event, the Issuer shall notify the Trustee of such request at least three (3) Business Days (or such shorter period as is acceptable to the Trustee) prior to the date such notice is to be provided to holders.
SECTION 3.06 Effect of Notice of Redemption. Once notice of redemption is mailed or otherwise delivered in accordance with Section 3.05, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice, except as provided in the final paragraph of paragraph 5 of the Notes or Section 3.05(a). Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest, if any, to, but excluding, the redemption date; provided, however, that if the redemption date is after a regular Record Date and on or prior to the next Interest Payment Date, the accrued interest shall be payable to the holder of the redeemed Notes registered on the relevant Record Date. Failure to give notice or any defect in the notice to any holder shall not affect the validity of the notice to any other holder.
SECTION 3.07 Deposit of Redemption Price. With respect to any Notes, prior to 10:00 a.m., New York City time, on the redemption date, the Issuer shall deposit with the Paying Agent (or, if the Issuer or a Subsidiary of the Issuer is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest, if any, on all Notes or portions thereof to be redeemed on that date other than Notes or portions of Notes called for redemption that have been delivered by the Issuer to the Trustee for cancellation. On and after the redemption date, interest shall cease to accrue on Notes or portions thereof called for redemption so long as the Issuer has deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest, if any, on, the Notes or portions thereof to be redeemed, unless the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture.
SECTION 3.08 Notes Redeemed in Part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. Upon surrender and cancellation of a Note that is redeemed in part, the Issuer shall execute and the Trustee shall authenticate for the holder (at the Issuers expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered and cancelled.
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Pursuant to 17 C.F.R. Section 200.83
ARTICLE IV
COVENANTS
SECTION 4.01 Payment of Notes. The Issuer shall promptly pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. An installment of principal of or interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds as of 12:00 p.m. New York City time money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the holders on that date pursuant to the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate borne by the Notes to the extent lawful.
SECTION 4.02 Reports and Other Information.
(a) For so long as any Notes are outstanding, the Issuer shall deliver to the Trustee a copy of all of the information and reports referred to below:
(i) within 15 days after the time period specified in the SECs rules and regulations for non-accelerated filers, annual reports of the Reporting Entity (as defined below) for such fiscal year containing the information that would have been required to be contained in an annual report on Form 10-K (or any successor or comparable form) if the Reporting Entity had been a reporting company under the Exchange Act, except to the extent permitted to be excluded by the SEC;
(ii) within 15 days after the time period specified in the SECs rules and regulations for non-accelerated filers, quarterly reports of the Reporting Entity for such fiscal quarter containing the information that would have been required to be contained in a quarterly report on Form 10-Q (or any successor or comparable form) if the Reporting Entity had been a reporting company under the Exchange Act, except to the extent permitted to be excluded by the SEC; and
(iii) within 15 days after the time period specified in the SECs rules and regulations for filing current reports on Form 8-K, current reports of the Reporting Entity containing substantially all of the information that would be required to be filed in a current report on Form 8-K under the Exchange Act on the Issue Date pursuant to Sections 1, 2 and 4, Items 5.01, 5.02(a), (b) and (c) and Item 9.01 (only to the extent relating to any of the foregoing) of Form 8-K if the Reporting Entity had been a reporting company under the Exchange Act; provided, however, that no such current reports will be required to be delivered if the Issuer determines in its good faith judgment that such event is not material to holders or the business, assets, operations, financial position or prospects of the Issuer and its Restricted Subsidiaries, taken as a whole.
In addition to providing such information and reports to the Trustee, the Issuer shall make available to the holders, prospective investors, market makers affiliated with any
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Pursuant to 17 C.F.R. Section 200.83
initial purchaser of the Notes and securities analysts the information required to be provided pursuant to the foregoing clauses (i), (ii) and (iii), by posting such information to its website (or the website of any of the Issuers parent companies, including the Reporting Entity) or on IntraLinks or any comparable password protected online data system or website. If at any time the Issuer or any direct or indirect parent of the Issuer has made a good faith determination to file a registration statement with the SEC with respect to an initial public offering of such entitys Capital Stock, the Issuer will not be required to disclose any information or take any actions that, in the good faith view of the Issuer, would violate the securities laws or the SECs gun jumping rules.
Notwithstanding the foregoing, (A) neither the Issuer nor another Reporting Entity will be required to deliver any information, certificates or reports that would otherwise be required by (i) Section 302 or Section 404 of the Sarbanes-Oxley Act of 2002, or related Items 307 or 308 of Regulation S-K or (ii) Item 10(e) of Regulation S-K promulgated by the SEC with respect to any non-generally accepted accounting principles financial measures contained therein, (B) such reports will not be required to contain financial information required by Rule 3-09, Rule 3-10 or Rule 3-16 of Regulation S-X or include any exhibits or certifications required by Form 10-K or Form 10-Q (or any successor forms) or related rules under Regulation S-K and (C) such reports shall be subject to exceptions, exclusions and other differences consistent with the presentation of financial and other information in the Offering Memorandum and shall not be required to present compensation or beneficial ownership information.
(b) The financial statements, information and other documents required to be provided as described in this Section 4.02 may be those of (i) the Issuer or (ii) any direct or indirect parent of the Issuer (any such entity, a Reporting Entity), so long as in the case of clause (ii) such direct or indirect parent of the Issuer shall not conduct, transact or otherwise engage, or commit to conduct, transact or otherwise engage, in any material business or operations other than its direct or indirect ownership of all of the Equity Interests in, and its management of, the Issuer; provided that, if the financial information so delivered relates to such direct or indirect parent of the Issuer, the same is accompanied by a reasonably detailed description of the quantitative differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.
(c) The Issuer will make such information and reports available to prospective investors upon request. The Issuer shall, for so long as any Notes remain outstanding during any period when neither it nor another Reporting Person is subject to Section 13 or 15(d) of the Exchange Act, or otherwise permitted to furnish the SEC with certain information pursuant to Rule 12g3-2(b) of the Exchange Act, furnish to the holders of the Notes and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) Notwithstanding the foregoing, the Issuer will be deemed to have delivered such reports and information referred to in this Section 4.02 to the holders, prospective investors, market makers, securities analysts and the Trustee for all purposes of this Indenture if the Issuer or another Reporting Entity has filed such reports with the SEC via the EDGAR filing system (or any successor system) and such reports are publicly available. In addition, the
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Pursuant to 17 C.F.R. Section 200.83
requirements of this Section 4.02 shall be deemed satisfied and the Issuer will be deemed to have delivered such reports and information referred to this Section 4.02 to the Trustee for all purposes of this Indenture by the posting of reports that would be required to be provided on the Issuers website (or that of any of the Issuers parent companies, including the Reporting Entity).
(e) The Issuer will also hold quarterly conference calls, beginning with the first fiscal quarter ending after the Issue Date, for all holders of the Notes, prospective investors, market makers affiliated with any initial purchaser of the Notes and securities analysts to discuss such financial information no later than ten Business Days after the distribution of such information required by clauses (i) or (ii) of Section 4.02(a) and, prior to the date of each such conference call, will announce the time and date of such conference call and either include all information necessary to access the call or inform holders of the Notes, prospective investors, market makers affiliated with any initial purchaser of the Notes and securities analysts how they can obtain such information, including, without limitation, the applicable password or login information (if applicable).
(f) Delivery of reports, information and documents to the Trustee pursuant to this Section 4.02 is for informational purposes only, and the Trustees receipt thereof shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuers compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely conclusively on the Officers Certificates). The Trustee is under no duty to examine such reports, information or documents to ensure compliance with the provision of this Indenture or to ascertain the correctness or otherwise of the information or the statements contained therein.
SECTION 4.03 Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.
(a) (i) The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (including Acquired Indebtedness) or issue any shares of Disqualified Stock; and (ii) the Issuer shall not permit any of the Restricted Subsidiaries (other than a Subsidiary Guarantor) to issue any shares of Preferred Stock; provided, however, that the Issuer and any Subsidiary Guarantor may Incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted Subsidiary of the Issuer that is not a Subsidiary Guarantor may Incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock or issue shares of Preferred Stock, in each case if the Fixed Charge Coverage Ratio of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding the date on which such additional Indebtedness is Incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00 determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been Incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided, further, that any Restricted Subsidiary that is not a Subsidiary Guarantor may not incur Indebtedness or issue shares of Disqualified Stock or Preferred Stock in excess of an amount, together with any Refinancing Indebtedness thereof pursuant to Section 4.03(b)(xv), equal to, after giving pro forma effect to such incurrence or issuance
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(including pro forma effect to the application of the net proceeds therefrom), the greater of $40 million and 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount).
(b) The limitations set forth in Section 4.03(a) shall not apply to:
(i) the Incurrence by the Issuer or any Restricted Subsidiary of Indebtedness (including under any Credit Agreement and the issuance and creation of letters of credit and bankers acceptances thereunder) up to an aggregate principal amount outstanding at the time of Incurrence that does not exceed an amount equal to the sum of (x) (A) $100 million plus (B) the greater of (i) $75 million and (ii) 0.50 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount) plus (y) an additional aggregate principal amount of Consolidated Total Indebtedness that at the time of Incurrence does not cause the Senior Secured Leverage Ratio for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee, determined on a pro forma basis, to exceed 4.00 to 1.00; provided that for purposes of determining the amount of Indebtedness that may be incurred under clause (a)(y), all Indebtedness incurred under this clause (a)(y) shall be treated as Secured Indebtedness constituting First-Priority Obligations;
(ii) the Incurrence by the Issuer and the Subsidiary Guarantors of Indebtedness represented by the Notes (not including any Additional Notes) and the Subsidiary Guarantees;
(iii) Indebtedness existing on the Issue Date (other than Indebtedness described in clauses (i) and (ii) of this Section 4.03(b));
(iv) (1) Indebtedness (including Capitalized Lease Obligations) Incurred by the Issuer or any Restricted Subsidiary, Disqualified Stock issued by the Issuer or any Restricted Subsidiary and Preferred Stock issued by any Restricted Subsidiary to finance (whether prior to or within 270 days after) the acquisition, lease, construction, repair, replacement or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount that, when aggregated with the principal amount or liquidation preference of all other Indebtedness, Disqualified Stock or Preferred Stock then outstanding and Incurred pursuant to this clause (iv)(1), together with any Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) below, does not exceed the greater of $75 million and 0.40 multiplied by
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount); and
(2) Capitalized Lease Obligations or other obligations or deferrals attributable to capital spending or in connection with store leases or any sale and leaseback arrangements not in violation of this Indenture;
(v) Indebtedness Incurred by the Issuer or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit and bank guarantees issued in the ordinary course of business, including without limitation letters of credit in respect of workers compensation claims, health, disability or other benefits to employees or former employees or their families or property, casualty or liability insurance or self-insurance, and letters of credit in connection with the maintenance of, or pursuant to the requirements of, environmental or other permits or licenses from governmental authorities, or other Indebtedness with respect to reimbursement type obligations regarding workers compensation claims;
(vi) Indebtedness arising from agreements of the Issuer or any Restricted Subsidiary providing for indemnification, adjustment of acquisition or purchase price or similar obligations (including earn-outs), in each case, Incurred or assumed in connection with the Transactions, any Investments or any acquisition or disposition of any business, assets or a Subsidiary not prohibited by this Indenture, other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition;
(vii) Indebtedness of the Issuer to a Restricted Subsidiary; provided that (except in respect of intercompany current liabilities incurred in the ordinary course of business in connection with the cash management, tax and accounting operations of the Issuer and its Subsidiaries) any such Indebtedness owed to a Restricted Subsidiary that is not a Subsidiary Guarantor is subordinated in right of payment to the obligations of the Issuer under the Notes; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien but not the transfer thereof upon foreclosure) shall be deemed, in each case, to be an Incurrence of such Indebtedness not permitted by this clause (vii);
(viii) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary that holds such shares of Preferred Stock of another Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to be an issuance of shares of Preferred Stock not permitted by this clause (viii);
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Pursuant to 17 C.F.R. Section 200.83
(ix) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Subsidiary Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Subsidiary Guarantor (except in respect of intercompany current liabilities incurred in the ordinary course of business in connection with the cash management, tax and accounting operations of the Issuer and its Subsidiaries), such Indebtedness is subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary holding such Indebtedness ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien but not the transfer thereof upon foreclosure) shall be deemed, in each case, to be an Incurrence of such Indebtedness not permitted by this clause (ix);
(x) Hedging Obligations that are not incurred for speculative purposes but (A) for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness that is permitted by the terms of this Indenture to be outstanding; (B) for the purpose of fixing or hedging currency exchange rate risk with respect to any currency exchanges; or (C) for the purpose of fixing or hedging commodity price risk with respect to any commodity purchases or sales and, in each case, extensions or replacements thereof;
(xi) obligations (including reimbursement obligations with respect to letters of credit, bank guarantees, warehouse receipts and similar instruments) in respect of performance, bid, appeal and surety bonds, completion guarantees and similar obligations provided by the Issuer or any Restricted Subsidiary in the ordinary course of business or consistent with past practice or industry practice;
(xii) Indebtedness or Disqualified Stock of the Issuer or Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount or liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and Incurred pursuant to this clause (xii), together with any Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) below, does not exceed the greater of $65 million and 0.35 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount);
(xiii) Indebtedness or Disqualified Stock of the Issuer or any Restricted Subsidiary and Preferred Stock of any Restricted Subsidiary in an aggregate principal
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Pursuant to 17 C.F.R. Section 200.83
amount or liquidation preference at any time outstanding, together with Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) hereof, not greater than 100% of the amount of net cash proceeds received by the Issuer and its Restricted Subsidiaries since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or any direct or indirect parent entity of the Issuer (which proceeds are contributed to the Issuer or its Restricted Subsidiary) or cash contributed to the capital of the Issuer (in each case other than proceeds of Disqualified Stock or sales of Equity Interests to, or contributions received from, the Issuer or any of its Subsidiaries) to the extent such net cash proceeds or cash have not been applied to increase the calculation of the Cumulative Credit pursuant to clauses (2) or (3) of the definition thereof or applied to make Restricted Payments specified in Sections 4.04(b)(ii), (iv), (ix), (x) or (xxi) or to make Permitted Investments specified in clauses (9), (10), (12) or (19) of the definition thereof) (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount);
(xiv) any guarantee by the Issuer or any Restricted Subsidiary of Indebtedness or other obligations of the Issuer or any Restricted Subsidiary so long as the Incurrence of such Indebtedness Incurred by the Issuer or such Restricted Subsidiary is permitted under the terms of this Indenture; provided that (A) if such Indebtedness is by its express terms subordinated in right of payment to the Notes or the Subsidiary Guarantee of the Issuer or such Restricted Subsidiary, as applicable, any such guarantee with respect to such Indebtedness shall be subordinated in right of payment to the Notes or such Subsidiary Guarantee, as applicable, substantially to the same extent as such Indebtedness is subordinated to the Notes or the Subsidiary Guarantee, as applicable, and (B) if such guarantee is of Indebtedness of the Issuer, such guarantee is Incurred in accordance with, or not in contravention of, Section 4.11 solely to the extent Section 4.11 is applicable;
(xv) the Incurrence by the Issuer or any of the Restricted Subsidiaries of Indebtedness or Disqualified Stock or Preferred Stock of a Restricted Subsidiary that serves to refund, refinance or defease any Indebtedness Incurred or Disqualified Stock or Preferred Stock issued as permitted under Section 4.03(a) and clauses (i)(x)(B)(ii), (i)(y), (ii), (iii), (iv), (xii), (xiii), (xv), (xvi), (xx) and (xxiii) of this Section 4.03(b) up to the outstanding principal amount (or, if applicable, the liquidation preference face amount, or the like) or, if greater, committed amount (only to the extent the committed amount could have been Incurred on the date of initial Incurrence and was deemed Incurred at such time for the purposes of this Section 4.03) of such Indebtedness or Disqualified Stock or Preferred Stock, in each case at the time such Indebtedness was Incurred or Disqualified Stock or Preferred Stock was issued pursuant to Section 4.03(a) or clauses (i)(x)(B)(ii), (i)(y), (ii), (iii), (iv), (xii), (xiii), (xv), (xvi), (xx) and (xxiii) of this Section 4.03(b), or any Indebtedness, Disqualified Stock or Preferred Stock Incurred to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock, plus any additional Indebtedness, Disqualified Stock or Preferred Stock Incurred to pay premiums (including tender premiums), accrued and unpaid interest, expenses, defeasance costs and fees in connection therewith (subject to the
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following proviso, Refinancing Indebtedness) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:
(1) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is Incurred which is not less than the shorter of (x) the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being refunded, refinanced or defeased and (y) the Weighted Average Life to Maturity that would result if all payments of principal on the Indebtedness, Disqualified Stock and Preferred Stock being refunded or refinanced that were due on or after the date that is one year following the last maturity date of any Notes then outstanding were instead due on such date (provided that this subclause (1) will not apply to any refunding or refinancing of any Secured Indebtedness constituting First-Priority Obligations);
(2) to the extent such Refinancing Indebtedness refinances (a) Indebtedness subordinated in right of payment to the Notes or a Subsidiary Guarantee, as applicable, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Subsidiary Guarantee, as applicable, or (b) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness is Disqualified Stock or Preferred Stock; and
(3) shall not include (x) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness of the Issuer or a Subsidiary Guarantor, or (y) Indebtedness of the Issuer or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary;
(xvi) Indebtedness, Disqualified Stock or Preferred Stock of (A) the Issuer or any Restricted Subsidiary incurred to finance an acquisition or (B) Persons that are acquired by the Issuer or any Restricted Subsidiary or merged, consolidated or amalgamated with or into the Issuer or any Restricted Subsidiary in accordance with the terms of this Indenture; provided that after giving effect to such acquisition or merger, consolidation or amalgamation, either:
(1) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a); or
(2) the Fixed Charge Coverage Ratio of the Issuer would be no less than immediately prior to such acquisition or merger, consolidation or amalgamation;
provided further that the aggregate principal amount of Indebtedness of Restricted Subsidiaries that are not Subsidiary Guarantors Incurred under clause (A) or clause (B) (solely if Incurred in contemplation of such acquisition or merger, consolidation or amalgamation), together with any Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) hereof, shall not exceed the greater of $40 million and 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount);
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(xvii) Indebtedness in connection with Permitted Securitization Financings;
(xviii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of its Incurrence;
(xix) Indebtedness of the Issuer or any Restricted Subsidiary supported by a letter of credit or bank guarantee issued pursuant to Bank Indebtedness, in a principal amount not in excess of the stated amount of such letter of credit;
(xx) Indebtedness of Restricted Subsidiaries that are not Subsidiary Guarantors; provided, however, that the aggregate principal amount of Indebtedness Incurred under this clause (xx), when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (xx), together with Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) hereof, does not exceed the greater of $25 million and 0.15 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such date on which such additional Indebtedness is Incurred and after giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount);
(xxi) Indebtedness of the Issuer or any Restricted Subsidiary consisting of (A) the financing of insurance premiums or (B) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(xxii) Indebtedness consisting of Indebtedness issued by the Issuer or a Restricted Subsidiary to current or former officers, directors and employees thereof or any direct or indirect parent thereof, their respective estates, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Issuer or any direct or indirect parent of the Issuer to the extent described in Section 4.04(b)(iv);
(xxiii) Indebtedness Incurred on behalf of, or representing guarantees of Indebtedness of, joint ventures of the Issuer and any Restricted Subsidiary; provided, however, that the aggregate principal amount of Indebtedness Incurred under this clause (xxiii), when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (xxiii), together with any Refinancing Indebtedness in respect thereof Incurred pursuant to clause (xv) hereof, does not exceed the greater of $25 million and 0.15 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters (plus, in the case of any Refinancing Indebtedness, the Additional Refinancing Amount);
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Pursuant to 17 C.F.R. Section 200.83
(xxiv) guarantees by the Issuer and its Restricted Subsidiaries of Indebtedness under customer financing lines of credit entered into in the ordinary course of business;
(xxv) Indebtedness in respect of Obligations of the Issuer or any Restricted Subsidiary to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and not in connection with the borrowing of money or any Hedging Obligations; and
(xxvi) Indebtedness of the Issuer or any Restricted Subsidiary to or on behalf of any joint venture (regardless of the form of legal entity) that is not a Restricted Subsidiary arising in the ordinary course of business in connection with the cash management operations (including with respect to intercompany self-insurance arrangements) of the Issuer and its Restricted Subsidiaries.
(c) For purposes of determining compliance with this Section 4.03:
(1) in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness described in clauses (i) through (xxvi) of Section 4.03(b) above or is entitled to be Incurred or issued pursuant to Section 4.03(a), then the Issuer may, in its sole discretion, classify or reclassify, or later divide, classify or reclassify (as if Incurred at such later time), such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) in any manner that complies with this Section 4.03; provided that Indebtedness outstanding under the Credit Agreement on the Issue Date shall be incurred under clause (i) of Section 4.03(b) above and may not be reclassified;
(2) at the time of Incurrence, classification or reclassification, the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the categories of Indebtedness described in Section 4.03(a) or clauses (i) through (xxvi) of Section 4.03(b) (or any portion thereof) without giving pro forma effect to the Indebtedness Incurred, classified or reclassified pursuant to any other clause or paragraph of Section 4.03 (or any portion thereof) when calculating the amount of Indebtedness that may be Incurred, classified or reclassified pursuant to any such clause or paragraph (or any portion thereof) at such time; and
(3) in connection with (x) the Incurrence or issuance, as applicable, of revolving loan Indebtedness under this Section 4.03 or (y) any commitment to Incur or issue Indebtedness, Disqualified Stock or Preferred Stock under this Section 4.03, the Issuer or applicable Restricted Subsidiary may designate such Incurrence or issuance as having occurred on the date of first Incurrence of such revolving loan Indebtedness or commitment (such date, the Deemed Date), and any related subsequent actual Incurrence or issuance will be deemed for all purposes under this Indenture to have been Incurred or issued on such Deemed Date, including without limitation for purposes of calculating the Fixed Charge Coverage Ratio, usage of any baskets hereunder (if
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applicable), the Total Indebtedness Leverage Ratio, the Senior Secured Leverage Ratio and EBITDA (and all such calculations on the Deemed Date shall be made on a pro forma basis after giving effect to the deemed Incurrence or issuance and related transactions in connection therewith).
Accrual of interest, the accretion of accreted value, the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as applicable, amortization of original issue discount, the accretion of liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an Incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 4.03. Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included in the determination of such amount of Indebtedness; provided that the Incurrence of the Indebtedness represented by such guarantee or letter of credit, as the case may be, was in compliance with this Section 4.03.
For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term debt, or first committed or first Incurred (whichever yields the lower U.S. dollar equivalent), in the case of revolving credit debt. However, if the Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and the refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of the refinancing, the U.S. dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of the refinancing Indebtedness does not exceed the principal amount of the Indebtedness being refinanced.
Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that the Issuer and its Restricted Subsidiaries may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, will be calculated based on the currency exchange rate applicable to the currencies in which the respective Indebtedness is denominated that is in effect on the date of the refinancing.
SECTION 4.04 Limitation on Restricted Payments.
(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of any of the Issuers or any of the Restricted Subsidiaries Equity Interests, including any payment made in connection with any merger, amalgamation or consolidation involving the Issuer (other than (A) dividends or distributions payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or (B) dividends or distributions
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by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities);
(ii) purchase or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer;
(iii) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment or scheduled maturity, any Subordinated Indebtedness of the Issuer or any Subsidiary Guarantor (other than the payment, redemption, repurchase, defeasance, acquisition or retirement of (A) Subordinated Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such payment, redemption, repurchase, defeasance, acquisition or retirement and (B) Indebtedness permitted under clauses (vii) and (ix) of Section 4.03(b)); or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as Restricted Payments), unless, at the time of such Restricted Payment:
(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a pro forma basis, the Issuer could Incur $1.00 of additional Indebtedness under Section 4.03(a); and
(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and the Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (vi)(C), (viii) and (xiii)(B) of Section 4.04(b), but excluding all other Restricted Payments permitted by Section 4.04(b)), is less than the amount equal to the Cumulative Credit.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) the payment of any dividend or distribution or the consummation of any redemption within 60 days after the date of declaration thereof, if at the date of declaration or the giving notice of such redemption, as applicable, such payment would have complied with the provisions of this Indenture;
(ii) (A) the redemption, repurchase, retirement or other acquisition of any Equity Interests (Retired Capital Stock) or Subordinated Indebtedness of the Issuer, any direct or indirect parent of the Issuer or any Subsidiary Guarantor in exchange for, or out of the proceeds of, the substantially concurrent sale of, Equity Interests of the Issuer or any direct or indirect parent of the Issuer or contributions to the equity capital of the Issuer (other than any Disqualified Stock or any Equity Interests sold to a Subsidiary of the Issuer) (collectively, including any such contributions, Refunding Capital Stock),
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(B) the declaration and payment of dividends on the Retired Capital Stock out of the proceeds of the substantially concurrent sale (other than to a Subsidiary of the Issuer) of Refunding Capital Stock, and
(C) if immediately prior to the retirement of Retired Capital Stock, the declaration and payment of dividends thereon was permitted under clause (vi) of this Section 4.04(b) and not made pursuant to clause (ii)(B), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Retired Capital Stock immediately prior to such retirement;
(iii) the redemption, repurchase, defeasance, or other acquisition or retirement of Subordinated Indebtedness of the Issuer or any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer or a Subsidiary Guarantor which is Incurred in accordance with Section 4.03 so long as:
(A) the principal amount (or accreted value, if applicable) of such new Indebtedness does not exceed the principal amount (or accreted value, if applicable), plus any accrued and unpaid interest, of the Subordinated Indebtedness being so redeemed, repurchased, defeased, acquired or retired for value (plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired, any tender premiums, plus any defeasance costs, fees and expenses incurred in connection therewith),
(B) such Indebtedness is subordinated to the Notes or the related Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be, at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, defeased, acquired or retired for value,
(C) such Indebtedness has a final scheduled maturity date equal to or later than the earlier of (x) the final scheduled maturity date of the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired and (y) 91 days following the last maturity date of any Notes then outstanding, and
(D) such Indebtedness has a Weighted Average Life to Maturity at the time Incurred which is not less than the shorter of (x) the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, repurchased, defeased, acquired or retired and (y) the Weighted Average Life to Maturity that would result if all payments of principal on the Subordinated
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Pursuant to 17 C.F.R. Section 200.83
Indebtedness being redeemed, repurchased, defeased, acquired or retired that were due on or after the date that is one year following the last maturity date of any Notes then outstanding were instead due on such date;
(iv) a Restricted Payment to pay for the repurchase, retirement or other acquisition for value of Equity Interests of the Issuer or any direct or indirect parent of the Issuer held by any future, present or former employee, director, officer or consultant of the Issuer or any direct or indirect parent of the Issuer or any Subsidiary of the Issuer pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement; provided, however, that the aggregate Restricted Payments made under this clause (iv) do not exceed $20 million in any calendar year (which shall increase to $40 million subsequent to the consummation of an underwritten public Equity Offering of Capital Stock of the Issuer or any direct or indirect parent of the Issuer), with unused amounts in any calendar year being permitted to be carried over to succeeding calendar years subject to a maximum of $40 million in any calendar year (which shall increase to $80 million subsequent to the consummation of an underwritten public Equity Offering of common stock); provided, further, however, that such amount in any calendar year may be increased by an amount not to exceed:
(A) the cash proceeds received by the Issuer or any of the Restricted Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of the Issuer or any direct or indirect parent of the Issuer (to the extent contributed to the Issuer) to employees, directors, officers or consultants of the Issuer and the Restricted Subsidiaries or any direct or indirect parent of the Issuer that occurs after the Issue Date (provided that the amount of such cash proceeds utilized for any such repurchase, retirement, other acquisition or dividend will not increase the amount available for Restricted Payments under Section 4.04(a)(iii)), plus
(B) the cash proceeds of key man life insurance policies received by the Issuer or any direct or indirect parent of the Issuer (to the extent contributed to the Issuer) or the Restricted Subsidiaries after the Issue Date;
provided that the Issuer may elect to apply all or any portion of the aggregate increase contemplated by clauses (A) and (B) above in any calendar year; and provided, further, that cancellation of Indebtedness owing to the Issuer or any Restricted Subsidiary from any present or former employees, directors, officers or consultants of the Issuer, any Restricted Subsidiary or the direct or indirect parents of the Issuer in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parents will not be deemed to constitute a Restricted Payment for purposes of this Section 4.04 or any other provision of this Indenture;
(v) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Issuer or any Restricted Subsidiary issued or incurred in accordance with Section 4.03;
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(vi) (A) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the Issue Date;
(B) a Restricted Payment to any direct or indirect parent of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any direct or indirect parent of the Issuer issued after the Issue Date; provided that the aggregate amount of dividends declared and paid pursuant to this clause (B) does not exceed the net cash proceeds actually received by the Issuer from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the Issue Date; and
(C) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to Section 4.04(b)(ii);
provided, however, in the case of each of clauses (A) and (C) above of this clause (vi), that for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions and treating such Designated Preferred Stock as Indebtedness for borrowed money for such purpose) on a pro forma basis (including a pro forma application of the net proceeds therefrom), the Issuer would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;
(vii) Investments in Unrestricted Subsidiaries having an aggregate Fair Market Value (as determined in good faith by the Issuer), taken together with all other Investments made pursuant to this clause (vii) that are at that time outstanding, not to exceed the sum of (a) the greater of $35 million and 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters and (b) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, however, that if any Investment pursuant to this clause (vii) is made in any Person that is not the Issuer or a Restricted Subsidiary at the date of the making of such Investment and such Person becomes the Issuer or a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) of the definition of Permitted Investments and shall cease to have been made pursuant to this clause (vii) for so long as such Person continues to be the Issuer or a Restricted Subsidiary;
(viii) (a) the payment of dividends after a public offering of Capital Stock of the Issuer or any direct or indirect parent of the Issuer on the Issuers Capital Stock (or a Restricted Payment to any such direct or indirect parent of the Issuer to fund the
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payment by such direct or indirect parent of the Issuer of dividends on such entitys Capital Stock) of up to 6% per annum of the net proceeds received by the Issuer from any public offering of such Capital Stock of the Issuer or any such direct or indirect parent of the Issuer, other than public offerings with respect to the Issuers (or such direct or indirect parents) Capital Stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution or (b) in lieu of all or a portion of the dividends permitted by sub-clause (a), repurchases of the Issuers Capital Stock (or a Restricted Payment to any direct or indirect parent of the Issuer to fund the repurchase by such direct or indirect parent of the Issuer of such entitys Capital Stock) for aggregate consideration that, when taken together with dividends permitted by sub-clause (a), does not exceed the amount contemplated by sub-clause (a);
(ix) Restricted Payments that are made with (or in an aggregate amount that does not exceed the aggregate amount of) Excluded Contributions;
(x) other Restricted Payments in an aggregate amount, when taken together with all other Restricted Payments made pursuant to this clause (x) that are at that time outstanding, not to exceed the greater of $30 million and 0.15 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such event and giving pro forma effect thereto as if such event occurred at the beginning of such four fiscal quarters;
(xi) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries;
(xii) (A) with respect to any taxable period for which the Issuer and/or any of its Subsidiaries are members of a consolidated, combined, affiliated, unitary or similar income tax group for U.S. federal and/or applicable state or local income tax purposes of which a direct or indirect parent of the Issuer is the common parent, or for which the Issuer is a partnership or disregarded entity for U.S. federal income tax purposes that is wholly-owned (directly or indirectly) by a C corporation for U.S. federal and/or applicable state or local income tax purposes, distributions to any direct or indirect parent of the Issuer in an amount not to exceed the amount of any U.S. federal, state and/or local income taxes that the Issuer and/or its Subsidiaries, as applicable, would have paid for such taxable period had the Issuer and/or its Subsidiaries, as applicable, been a stand-alone corporate taxpayer or a stand-alone corporate group, and (B) with respect to any taxable period ending after the Issue Date for which the Issuer is a partnership or disregarded entity for U.S. federal income tax purposes (other than a partnership or disregarded entity described in clause (A)), distributions to any direct or indirect parent of the Issuer in an amount necessary to permit such direct or indirect parent of the Issuer to make a pro rata distribution to its owners such that each direct or indirect owner of the Issuer receives an amount from such pro rata distribution sufficient to enable such owner to pay its U.S. federal, state and/or local income taxes (as applicable) attributable to its direct or indirect ownership
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of the Issuer and its Subsidiaries with respect to such taxable period (assuming that each owner is subject to tax at the highest combined marginal federal, state, and/or local income tax rate applicable to any owner for such taxable period and taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes (and any limitations thereon), the alternative minimum tax, any cumulative net taxable loss of the Issuer for prior taxable periods ending after the Issue Date to the extent such loss is of a character that would allow such loss to be available to reduce taxes in the current taxable period (taking into account any limitations on the utilization of such loss to reduce such taxes and assuming such loss had not already been utilized) and the character (e.g., long-term or short-term capital gain or ordinary or exempt) of the applicable income);
(xiii) any Restricted Payment, if applicable:
(A) in amounts required for any direct or indirect parent of the Issuer to pay fees and expenses (including franchise or similar taxes) required to maintain its corporate existence, customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers and employees of any direct or indirect parent of the Issuer and general corporate operating and overhead expenses of any direct or indirect parent of the Issuer in each case to the extent such fees and expenses are attributable to the ownership or operation of the Issuer, if applicable, and its Subsidiaries;
(B) in amounts required for any direct or indirect parent of the Issuer, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Issuer or any Restricted Subsidiary and that has been guaranteed by, or is otherwise considered Indebtedness of, the Issuer Incurred in accordance with Section 4.03; and
(C) in amounts required for any direct or indirect parent of the Issuer to pay fees and expenses related to any equity or debt offering of such parent (whether or not successful);
(xiv) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(xv) purchases of Securitization Assets pursuant to a Securitization Repurchase Obligation in connection with a Permitted Securitization Financing and the payment or distribution of Securitization Fees;
(xvi) Restricted Payments by the Issuer or any Restricted Subsidiary to allow the payment of cash in lieu of the issuance of fractional shares upon the exercise of options or warrants or upon the conversion or exchange of Equity Interests of any such Person;
(xvii) the repurchase, redemption or other acquisition or retirement for value of any Preferred Stock or any Subordinated Indebtedness pursuant to provisions
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similar to those described in Section 4.06 and Section 4.08; provided that all Notes tendered by holders of the Notes in connection with a Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;
(xviii) payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, amalgamation, merger or transfer of all or substantially all of the assets of the Issuer and the Restricted Subsidiaries, taken as a whole, that complies with Section 5.01; provided that as a result of such consolidation, amalgamation, merger or transfer of assets, the Issuer shall have made a Change of Control Offer (if required by this Indenture) and that all Notes tendered by holders in connection with such Change of Control Offer have been repurchased, redeemed or acquired for value;
(xix) any Restricted Payment used to fund the Transactions and the payment of fees and expenses Incurred in connection with the Transactions or owed by the Issuer or any direct or indirect parent of the Issuer or Restricted Subsidiaries of the Issuer to Affiliates, and any other payments made, including any such payments made to any direct or indirect parent of the Issuer to enable it to make payments in connection with the consummation of the Transactions, whether payable on the Issue Date or thereafter, in each case to the extent permitted by Section 4.07;
(xx) any Restricted Payment made under the Acquisition Documents (as in effect on the Issue Date); and
(xxi) other Restricted Payments so long as, immediately after giving effect to such Restricted Payment, the Total Indebtedness Leverage Ratio for the most recently ended four fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding such Restricted Payment is not greater than 3.00 to 1.00 on a pro forma basis;
provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (vi)(B), (vii), (x), (xi), (xiii)(B) and (xxi) of this Section 4.04(b), no Default shall have occurred and be continuing or would occur as a consequence thereof; provided, further, that any Restricted Payments made with property other than cash shall be calculated using the Fair Market Value (as determined in good faith by the Issuer) of such property.
Any equity contribution or purchase of Capital Stock by the Sponsors to fund shares that have selected appraisal rights (including any settlement in respect thereof) shall be deemed to have been made on the Issue Date, and any payment to the holders of such shares shall be deemed to have been made on the Issue Date as part of the Transactions.
(c) As of the Issue Date, all of the Subsidiaries of the Issuer will be Restricted Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the definition of Unrestricted Subsidiary. For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
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Pursuant to 17 C.F.R. Section 200.83
by the Issuer and the Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of Investments. Such designation will only be permitted if a Restricted Payment or Permitted Investment in such amount would be permitted at such time and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.05 Dividend and Other Payment Restrictions Affecting Subsidiaries. The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Issuer or any Restricted Subsidiary (1) on its Capital Stock; or (2) with respect to any other interest or participation in, or measured by, its profits; or (ii) pay any Indebtedness owed to the Issuer or any Restricted Subsidiary;
(b) make loans or advances to the Issuer or any Restricted Subsidiary; or
(c) sell, lease or transfer any of its properties or assets to the Issuer or any Restricted Subsidiary;
except in each case for such encumbrances or restrictions existing under or by reason of:
(1) (A) contractual encumbrances or restrictions in effect on the Issue Date and (B) contractual encumbrances or restrictions pursuant to the Credit Agreement and the other Credit Agreement Documents and, in each case, any similar contractual encumbrances or restrictions or any amendments, modifications, restatements, renewals, supplements, refundings, replacements or refinancings of such agreements or instruments;
(2) this Indenture, the Notes or the Subsidiary Guarantees;
(3) applicable law or any applicable rule, regulation or order;
(4) any agreement or other instrument of a Person acquired by the Issuer or any Restricted Subsidiary which was in existence at the time of such acquisition (but not created in contemplation thereof or to provide all or any portion of the funds or credit support utilized to consummate such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries, or the property or assets of the Person and its Subsidiaries, so acquired;
(5) contracts or agreements for the sale of assets, including any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Capital Stock or assets of such Restricted Subsidiary;
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Pursuant to 17 C.F.R. Section 200.83
(6) Secured Indebtedness otherwise permitted to be Incurred pursuant to Section 4.03 and Section 4.12 that limit the right of the debtor to dispose of the assets securing such Indebtedness;
(7) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(8) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;
(9) purchase money obligations for property acquired and Capitalized Lease Obligations in the ordinary course of business that impose restrictions of the nature discussed in Section 4.05(c) above on the property so acquired;
(10) customary provisions contained in leases, licenses and other similar agreements entered into in the ordinary course of business or consistent with past practice or industry norm;
(11) in the case of Section 4.05(c) above, any encumbrance or restriction that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license (including without limitations, licenses of intellectual property) or other contracts;
(12) any encumbrances or restrictions contained in any Permitted Securitization Document with respect to any Special Purpose Securitization Subsidiary;
(13) other Indebtedness, Disqualified Stock or Preferred Stock (a) of the Issuer or any Restricted Subsidiary that is a Subsidiary Guarantor or a Foreign Subsidiary or (b) of any Restricted Subsidiary that is not a Subsidiary Guarantor or a Foreign Subsidiary so long as such encumbrances and restrictions contained in any agreement or instrument will not materially affect the Issuers ability to make anticipated principal or interest payments on the Notes (as determined in good faith by the Issuer), provided that in the case of each of clauses (a) and (b), such Indebtedness, Disqualified Stock or Preferred Stock is permitted to be Incurred subsequent to the Issue Date pursuant to Section 4.03;
(14) any Restricted Investment not prohibited by Section 4.04 and any Permitted Investment; or
(15) any encumbrances or restrictions of the type referred to in Section 4.05(a), (b) or (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (14) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
For purposes of determining compliance with this Section 4.05, (i) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock and (ii) the subordination of loans or advances made to the Issuer or a Restricted Subsidiary to other Indebtedness Incurred by the Issuer or any such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances.
SECTION 4.06 Asset Sales.
(a) The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, cause or make an Asset Sale, unless (x) the Issuer or any Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of, and (y) at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of:
(i) any liabilities (as shown on the Issuers or a Restricted Subsidiarys most recent balance sheet or in the notes thereto) of the Issuer or a Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets or that are otherwise cancelled or terminated in connection with the transaction with such transferee,
(ii) any notes or other obligations or other securities or assets received by the Issuer or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash within 180 days of the receipt thereof (to the extent of the cash received),
(iii) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Sale, to the extent that the Issuer and each other Restricted Subsidiary are released from any guarantee of payment of such Indebtedness in connection with the Asset Sale,
(iv) consideration consisting of Indebtedness of the Issuer (other than Subordinated Indebtedness) received after the Issue Date from Persons who are not the Issuer or any Restricted Subsidiary, and
(v) any Designated Non-cash Consideration received by the Issuer or any Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value (as determined in good faith by the Issuer), taken together with all other Designated Non-cash Consideration received pursuant to this Section 4.06(a)(v) that is at that time outstanding, not to exceed the greater of $35 million and 0.20 multiplied by the Pro Forma EBITDA of the Issuer for the most recently ended four full fiscal quarters for which financial statements have been delivered to the Trustee immediately preceding
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the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value),
shall in each case be deemed to be Cash Equivalents for the purposes of this Section 4.06(a).
(b) Within 365 days after the Issuers or any Restricted Subsidiarys receipt of the Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its option:
(i) to repay (A) Indebtedness constituting First-Priority Obligations (and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto), (B) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor, (C) Obligations under the Notes or (D) other Pari Passu Indebtedness other than First-Priority Obligations so long as the Net Proceeds are with respect to assets not constituting Collateral (provided that if the Issuer or any Subsidiary Guarantor shall so reduce other First-Priority Obligations (other than Obligations with priority under the Priority Waterfall) pursuant to clause (A) or Pari Passu Indebtedness that does not constitute First-Priority Obligations under this clause (D) (which, for the avoidance of doubt, does not include Indebtedness described in clauses (A), (B) and (C) even if such Indebtedness may also constitute Pari Passu Indebtedness), the Issuer will equally and ratably reduce Notes Obligations pursuant to Section 3.01, through open-market purchases (provided that such purchases are at or above 100% of the principal amount thereof or, in the event that the Notes were issued with significant original issue discount, 100% of the accreted value thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all holders to purchase a pro rata principal amount of Notes at a purchase price equal to 100% of the principal amount thereof (or, in the event that the Notes were issued with significant original issue discount, 100% of the accreted value thereof), plus accrued and unpaid interest, if any), in each case other than Indebtedness owed to the Issuer or an Affiliate of the Issuer; or
(ii) to make an investment in any one or more businesses (provided that if such investment is in the form of the acquisition of Capital Stock of a Person, such acquisition results in such Person becoming a Restricted Subsidiary of the Issuer or in an increase in the percentage ownership by the Issuer (or a Restricted Subsidiary) in such Restricted Subsidiary), assets, or property or capital expenditures, in each case (A) used or useful in a Similar Business or (B) that replace the properties and assets that are the subject of such Asset Sale or, in each case, to reimburse the cost of any of the foregoing incurred on or after the date on which the Asset Sale giving rise to such Net Proceeds was contractually committed.
In the case of Section 4.06(b)(ii), a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the 18-month anniversary of the date of the receipt of such Net Proceeds; provided that in the event such binding commitment is later canceled or terminated for any reason after the 365th day after the receipt of such Net Proceeds but before such Net Proceeds are so applied, then such Net
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Proceeds shall constitute Excess Proceeds unless the Issuer or such Restricted Subsidiary enters into another binding commitment (a Second Commitment) within six months of such cancellation or termination of the prior binding commitment; provided, further, that the Issuer or such Restricted Subsidiary may only enter into a Second Commitment under the foregoing provision one time with respect to each Asset Sale and to the extent such Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied or are not applied within 180 days of such Second Commitment, then such Net Proceeds shall constitute Excess Proceeds.
Pending the final application of any such Net Proceeds, the Issuer or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture. Any Net Proceeds from any Asset Sale that are not applied as provided and within the time period set forth in the first paragraph of this Section 4.06(b) (it being understood that any portion of such Net Proceeds used to make an offer to purchase Notes, as described in clause (i) of this Section 4.06(b), shall be deemed to have been so applied whether or not such offer is accepted) will be deemed to constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $40 million, the Issuer shall make an offer to all holders of Notes (and, at the option of the Issuer, to holders of any other First-Priority Obligations or, unless the Asset Sale is with respect to Collateral, other Pari Passu Indebtedness) (an Asset Sale Offer) to purchase the maximum principal amount of Notes (and such First-Priority Obligations or other Pari Passu Indebtedness), that is at least $2,000 and an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof (or, in the event the Notes or such First-Priority Obligations or other Pari Passu Indebtedness were issued with significant original issue discount, 100% of the accreted value thereof), plus accrued and unpaid interest, if any (or, in respect of such First-Priority Obligations or other Pari Passu Indebtedness, such lesser price, if any, as may be provided for by the terms of such First-Priority Obligations or other Pari Passu Indebtedness), to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Section 4.06. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within ten (10) Business Days after the date that Excess Proceeds exceeds $40 million by mailing, or delivering electronically if held by the Depository, the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes (and such First-Priority Obligations or other Pari Passu Indebtedness) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any purpose that is not prohibited by this Indenture. If the aggregate principal amount of Notes (and such First-Priority Obligations or other Pari Passu Indebtedness) surrendered by holders thereof exceeds the amount of Excess Proceeds, the Issuer shall select the Notes to be purchased in the manner described in Section 4.06(e). Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
(c) The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.
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(d) Not later than the date upon which written notice of an Asset Sale Offer is delivered to the Trustee as provided above, the Issuer shall deliver to the Trustee an Officers Certificate as to (i) the amount of the Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset Sales pursuant to which such Asset Sale Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(b). On such date, the Issuer shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Issuer or a Subsidiary is acting as the Paying Agent, segregate and hold in trust) an amount equal to the Excess Proceeds to be invested in Cash Equivalents, as directed in writing by the Issuer and to be held for payment in accordance with the provisions of this Section 4.06. Upon the expiration of the period for which the Asset Sale Offer remains open (the Offer Period), the Issuer shall deliver to the Trustee for cancellation the Notes or portions thereof that have been properly tendered to and are to be accepted by the Issuer. The Trustee (or the Paying Agent, if not the Trustee) shall, on the date of purchase, mail or deliver payment to each tendering holder in the amount of the purchase price. In the event that the Excess Proceeds delivered by the Issuer to the Trustee are greater than the purchase price of the Notes tendered, the Trustee shall deliver the excess to the Issuer immediately after the expiration of the Offer Period for application in accordance with this Section 4.06.
(e) Holders electing to have a Note purchased shall be required to surrender such Note, with an appropriate form duly completed, to the Issuer at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Issuer receives not later than one Business Day prior to the purchase date, a facsimile transmission or letter setting forth the name of the holder, the principal amount of the Note which was delivered by the holder for purchase and a statement that such holder is withdrawing his election to have such Note purchased. If at the end of the Offer Period more Notes (and such First-Priority Obligations or other Pari Passu Indebtedness) are tendered pursuant to an Asset Sale Offer than the Issuer is required to purchase, selection of such Notes for purchase shall be made by the Issuer in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed (and the Issuer shall notify the Trustee of any such listing), or if such Notes are not so listed, on a pro rata basis to the extent practicable, by lot or by such other method (and in such manner as complies with the requirements of the Depository, if applicable); provided that no Notes of $2,000 or less shall be purchased in part. Selection of such First-Priority Obligations or other Pari Passu Indebtedness shall be made pursuant to the terms of such First-Priority Obligations or other Pari Passu Indebtedness.
(f) Notices of an Asset Sale Offer shall be mailed by the Issuer by first class mail, postage prepaid, or delivered electronically if held by the Depository, at least 30 but not more than 60 days before the purchase date to each holder of Notes at such holders registered address. If any Note is to be purchased in part only, any notice of purchase that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased.
SECTION 4.07 Transactions with Affiliates.
(a) The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into
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or make or amend any transaction or series of transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an Affiliate Transaction) involving aggregate consideration in excess of $25 million, unless:
(i) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Restricted Subsidiary than those that could have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and
(ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $50 million, the Issuer delivers to the Trustee a resolution adopted in good faith by the majority of the Board of Directors of the Issuer, approving such Affiliate Transaction and set forth in an Officers Certificate certifying that such Affiliate Transaction complies with clause (i) above.
(b) The provisions of Section 4.07(a) shall not apply to the following:
(i) transactions between or among the Issuer and/or any of the Restricted Subsidiaries (or an entity that becomes a Restricted Subsidiary as a result of such transaction) and any merger, consolidation or amalgamation of the Issuer and any direct parent of the Issuer; provided that such parent shall have no material liabilities and no material assets other than cash, Cash Equivalents and the Capital Stock of the Issuer and such merger, consolidation or amalgamation is otherwise in compliance with the terms of this Indenture and effected for a bona fide business purpose;
(ii) Restricted Payments permitted by Section 4.04 and Permitted Investments;
(iii) the payment of reasonable and customary fees and reimbursement of expenses paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Issuer, any Restricted Subsidiary, or any direct or indirect parent of the Issuer;
(iv) transactions in which the Issuer or any Restricted Subsidiary, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or meets the requirements of clause (i) of Section 4.07(a);
(v) payments or loans (or cancellation of loans) to officers, directors, employees or consultants which are approved by a majority of the Board of Directors of the Issuer in good faith;
(vi) any agreement as in effect as of the Issue Date or any amendment thereto (so long as any such agreement together with all amendments thereto, taken as a whole, is not more disadvantageous to the holders of the Notes in any material respect than the original agreement as in effect on the Issue Date, as determined in good faith by the Issuer) or any transaction contemplated thereby;
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(vii) the existence of, or the performance by the Issuer or any Restricted Subsidiary of its obligations under the terms of, any stockholders or other agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date, and any transaction, agreement or arrangement described in the Offering Memorandum and, in each case, any amendment thereto or similar transactions, agreements or arrangements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any Restricted Subsidiary of its obligations under, any future amendment to any such existing transaction, agreement or arrangement or under any similar transaction, agreement or arrangement entered into after the Issue Date shall only be permitted by this clause (vii) to the extent that the terms of any such existing transaction, agreement or arrangement together with all amendments thereto, taken as a whole, or new transaction, agreement or arrangement are not otherwise more disadvantageous to the holders of the Notes in any material respect than the original transaction, agreement or arrangement as in effect on the Issue Date, as determined in good faith by the Issuer;
(viii) the execution of the Transactions, and the payment of all fees, expenses, bonuses and awards related to the Transactions, including fees to the Co-Investors;
(ix) (A) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, or transactions otherwise relating to the purchase or sale of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Issuer and the Restricted Subsidiaries in the reasonable determination of the Board of Directors or the senior management of the Issuer, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party or (B) transactions with joint ventures or Unrestricted Subsidiaries entered into in the ordinary course of business or consistent with past practice or industry norm;
(x) any transaction pursuant to any Permitted Securitization Financing;
(xi) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any Person;
(xii) the issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock option and stock ownership plans or similar employee benefit plans approved by the Board of Directors of the Issuer or any direct or indirect parent of the Issuer or of a Restricted Subsidiary, as appropriate, in good faith;
(xiii) the entering into of any tax sharing agreement or arrangement that complies with Section 4.04(b)(xii) and the performance under any such agreement or arrangement;
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(xiv) any contribution to the capital of the Issuer;
(xv) transactions permitted by, and complying with, Section 5.01;
(xvi) transactions between the Issuer or any Restricted Subsidiary and any Person, a director of which is also a director of the Issuer or any direct or indirect parent of the Issuer; provided, however, that such director abstains from voting as a director of the Issuer or such direct or indirect parent, as the case may be, on any matter involving such other Person;
(xvii) pledges of Equity Interests of Unrestricted Subsidiaries;
(xviii) the formation and maintenance of any consolidated group or subgroup for tax, accounting or cash pooling or management purposes in the ordinary course of business;
(xix) any employment agreements entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business;
(xx) (a) the entering into of any agreement (and any amendment or modification of any such agreement so long as, in the good faith judgment of the Board of Directors of the Issuer, any such amendment or modification is not more disadvantageous, taken as a whole, to holders in any material respect as compared to the agreement as in effect on the Issue Date) to pay, and the payment of, monitoring, consulting, management, transaction, advisory or similar fees payable to the Co-Investors (A) in an aggregate amount in any fiscal year not to exceed the sum of (1) the greater of $4 million and 2% of EBITDA of the Issuer for such fiscal year, plus reasonable out-of-pocket costs and expenses in connection therewith and unpaid amounts accrued for prior periods; plus (2) any deferred fees (to the extent such fees were within such amount in clause (1) above originally) plus (B) in an amount not to exceed 1% of transaction value with respect to any transaction in which any Sponsor provides any transaction, advisory or other services, including the Transactions, and (b) the payment of the present value of all amounts payable pursuant to any agreement described in clause (xx)(a) in connection with the termination of such agreement;
(xxi) payments by the Issuer or any of its Restricted Subsidiaries to any of the Sponsors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors of the Issuer in good faith;
(xxii) transactions undertaken in good faith (as certified by a responsible financial or accounting officer of the Issuer in an Officers Certificate) for the purpose of improving the consolidated tax efficiency of the Issuer and its Subsidiaries and not for the purpose of circumventing any covenant set forth in this Indenture; and
(xxiii) investments by the Co-Investors in securities of the Issuer or any Restricted Subsidiary (and payment of reasonable out-of-pocket expenses incurred by
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the Co-Investors in connection therewith) so long as (i) the investment is being generally offered to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5% of the proposed or outstanding issue amount of such class of securities.
SECTION 4.08 Change of Control.
(a) Upon the occurrence of a Change of Control, each holder shall have the right to require the Issuer to repurchase all or any part of such holders Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), in accordance with the terms contemplated in this Section 4.08; provided, however, that notwithstanding the occurrence of a Change of Control, the Issuer shall not be obligated to purchase any Notes pursuant to this Section 4.08 in the event that it has previously or concurrently exercised its right to redeem such Notes in accordance with Article III of this Indenture. In the event that at the time of such Change of Control, the terms of the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this Section 4.08, then within 30 days following any Change of Control, the Issuer shall: (i) repay in full all Bank Indebtedness or, if doing so will allow the purchase of Notes, offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender and/or noteholder who has accepted such offer; or (ii) obtain the requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of the Notes as provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control, except to the extent that the Issuer has exercised its right to redeem the Notes in accordance with Article III of this Indenture, the Issuer shall mail to each holder, or deliver electronically if held by the Depository, with a copy to the Trustee a notice (a Change of Control Offer) stating:
(i) that a Change of Control has occurred and that such holder has the right to require the Issuer to repurchase such holders Notes at a repurchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase (subject to the right of holders of record on the relevant Record Date to receive interest on the relevant Interest Payment Date);
(ii) the circumstances and relevant facts and financial information regarding such Change of Control;
(iii) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed or delivered electronically); and
(iv) the instructions determined by the Issuer, consistent with this Section 4.08, that a holder must follow in order to have its Notes purchased.
(c) Holders electing to have a Note purchased shall be required to surrender the Note, with an appropriate form duly completed, to the Issuer at the address specified in the notice at least three Business Days prior to the purchase date. The holders shall be entitled to withdraw their election if the Trustee or the Issuer receives not later than one Business Day prior
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to the purchase date a facsimile transmission or letter setting forth the name of the holder, the principal amount of the Note which was delivered for purchase by the holder and a statement that such holder is withdrawing his election to have such Note purchased. Holders whose Notes are purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered.
(d) On the purchase date, all Notes purchased by the Issuer under this Section 4.08 shall be delivered to the Trustee for cancellation, and the Issuer shall pay the purchase price plus accrued and unpaid interest, if any, to the holders entitled thereto.
(e) A Change of Control Offer may be made in advance of a Change of Control, and conditioned upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.
(f) Notwithstanding the provisions of this Section 4.08, the Issuer shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.
(g) Notes repurchased by the Issuer pursuant to a Change of Control Offer will have the status of Notes issued but not outstanding or will be retired and canceled at the option of the Issuer. Notes purchased by a third party pursuant to the preceding clause (f) will have the status of Notes issued and outstanding.
(h) At the time the Issuer delivers Notes to the Trustee which are to be accepted for purchase, the Issuer shall also deliver an Officers Certificate stating that such Notes are to be accepted by the Issuer pursuant to and in accordance with the terms of this Section 4.08. A Note shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering holder.
(i) Prior to any Change of Control Offer, the Issuer shall deliver to the Trustee an Officers Certificate stating that all conditions precedent contained herein to the right of the Issuer to make such offer have been complied with.
(j) The Issuer shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this Section 4.08. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.08, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.08 by virtue thereof.
(k) If holders of not less than 90% in aggregate principal amount of the outstanding Notes validly tender and do not withdraw such Notes in a Change of Control Offer and the Issuer, or any third party making a Change of Control Offer in lieu of the Issuer as described above, purchases all of the Notes validly tendered and not withdrawn by such holders, the Issuer or such third party will have the right, upon not less than 30 nor more than 60 days
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prior notice, given not more than 30 days following such purchase pursuant to the Change of Control Offer, to redeem all Notes that remain outstanding following such purchase at a price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the date of redemption. Any such redemption shall be effected pursuant to Article III.
SECTION 4.09 Compliance Certificate. The Issuer shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuer, beginning with the fiscal year ending in January 2017, an Officers Certificate stating that in the course of the performance by the signer of his or her duties as an Officer of the Issuer he or she would normally have knowledge of any Default and whether or not the signer knows of any Default that occurred during such period. If such Officer does, the certificate shall describe the Default, its status and what action the Issuer is taking or proposes to take with respect thereto. Except with respect to receipt of payments of principal and interest on the Notes and any Default or Event of Default information contained in the Officers Certificate delivered to it pursuant to this Section 4.09, the Trustee shall have no duty to review, ascertain or confirm the Issuers compliance with or the breach of any representation, warranty or covenant made in this Indenture.
SECTION 4.10 Further Instruments and Acts. Upon request of the Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 4.11 Future Subsidiary Guarantors. The Issuer shall cause each Restricted Subsidiary that guarantees or becomes a borrower under the Credit Agreement and each Wholly Owned Restricted Subsidiary that is not an Excluded Subsidiary that guarantees any other Indebtedness of the Issuer or any of the Subsidiary Guarantors to execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit C hereto pursuant to which such Restricted Subsidiary will guarantee the Issuers Obligations under the Notes and this Indenture.
SECTION 4.12 Liens.
(a) The Issuer shall not, and shall not permit any Subsidiary Guarantor to, directly or indirectly, create, Incur or suffer to exist any Lien (except Permitted Liens) on any asset or property of the Issuer or such Subsidiary Guarantor securing Indebtedness of the Issuer or a Subsidiary Guarantor.
(b) For purposes of determining compliance with this Section 4.12, (i) a Lien securing an item of Indebtedness need not be permitted solely by reference to one category of permitted Liens (or any portion thereof) described in the definition of Permitted Liens or pursuant to Section 4.12(a) but may be permitted in part under any combination thereof and (ii) in the event that a Lien securing an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories of permitted Liens (or any portion thereof) described in the definition of Permitted Liens or pursuant to Section 4.12(a), the Issuer shall, in its sole discretion, classify or reclassify, or later divide, classify or reclassify (as if Incurred at such later time), such Lien securing such item of Indebtedness (or any portion thereof) in any manner that complies with this covenant and will be entitled to only include the amount and type of such Lien or such item of Indebtedness secured by such Lien (or any portion thereof) in one of the
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categories of permitted Liens (or any portion thereof) described in the definition of Permitted Liens or pursuant to Section 4.12(a) and, in such event, such Lien securing such item of Indebtedness (or any portion thereof) will be treated as being Incurred or existing pursuant to only such clause or clauses (or any portion thereof) or pursuant to Section 4.12(a) without giving pro forma effect to such item (or portion thereof) when calculating the amount of Liens or Indebtedness that may be Incurred pursuant to any other clause or paragraph (or portion thereof) at such time. In addition, with respect to any revolving loan Indebtedness or commitment to Incur Indebtedness that is designated to be Incurred on any Deemed Date pursuant to Section 4.03(c)(3), any Lien that does or that shall secure such Indebtedness may also be designated by the Issuer or any Restricted Subsidiary to be Incurred on such Deemed Date and, in such event, any related subsequent actual Incurrence of such Lien shall be deemed for all purposes under this Indenture to be Incurred on such prior date, including for purposes of calculating usage of any
Permitted Lien.
(c) With respect to any Lien securing Indebtedness that was permitted to secure such Indebtedness at the time of the Incurrence of such Indebtedness, such Lien shall also be permitted to secure any Increased Amount of such Indebtedness. The Increased Amount of any Indebtedness shall mean any increase in the amount of such Indebtedness in connection with any accrual of interest, the accretion of accreted value, the amortization of original issue discount, the payment of interest in the form of additional Indebtedness with the same terms or in the form of common stock of the Issuer, the payment of dividends on Preferred Stock in the form of additional shares of Preferred Stock of the same class, accretion of original issue discount or liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies or increases in the value of property securing Indebtedness described in clause (3) of the definition of Indebtedness.
SECTION 4.13 After-Acquired Property.
(a) Upon the acquisition by an Issuer or any Subsidiary Guarantor of any After-Acquired Property, or upon any additional Restricted Subsidiary becoming a Subsidiary Guarantor, such Issuer or Subsidiary Guarantor shall execute and deliver such mortgages, deeds of trust, security instruments, financing statements and other Security Documents as shall be reasonably necessary to vest in the First-Priority Collateral Agent a perfected first-priority security interest, subject only to Permitted Liens and Liens permitted under Section 4.12, in such After-Acquired Property and to have such After-Acquired Property (but subject to the limitations as described in Article XI, the Security Documents and the First Lien Intercreditor Agreement) added to the Collateral (or in the case of a Subsidiary Guarantor, all of its assets that constitute After-Acquired Property), and thereupon all provisions of this Indenture relating to the Collateral shall be deemed to relate to such After-Acquired Property to the same extent and with the same force and effect.
(b) Notwithstanding the foregoing, if granting a security interest in any property pursuant to the foregoing clause (a) requires the consent of a third party, the Issuer shall use commercially reasonable efforts to obtain such consent with respect to such security interest for the benefit of the First-Priority Collateral Agent on behalf of the Trustee and the holders of the Notes. If such third party does not consent to the granting of such security interest after the use of such commercially reasonable efforts, the applicable entity will not be required to provide such security interest.
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SECTION 4.14 Maintenance of Office or Agency.
(a) The Issuer shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Notes may be surrendered for registration of transfer or for exchange. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders may be made at the Corporate Trust Office of the Trustee as set forth in Section 13.02.
(b) The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency for such purposes. The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
(c) The Issuer hereby designates the Corporate Trust Office of the Trustee or its agent as such office or agency of the Issuer in accordance with Section 2.04.
SECTION 4.15 Covenant Suspension. If on any date following the Issue Date, (i) the Notes have Investment Grade Ratings from both Rating Agencies, and (ii) no Default has occurred and is continuing under this Indenture, then, beginning on that day (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event), and subject to the provisions of the following paragraph, the Issuer and the Restricted Subsidiaries shall not be subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.11 and 5.01(a)(iv) (collectively the Suspended Covenants).
In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants under this Indenture for any period of time as a result of the foregoing, and on any subsequent date (the Reversion Date) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating, then the Issuer and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events.
The Issuer shall provide the Trustee with notice of each Covenant Suspension Event or Reversion Date within five Business Days of the occurrence thereof. The Trustee shall have no duty to monitor or provide notice to the holders of the Notes of any such Covenant Suspension Event or Reversion Date.
On each Reversion Date, all Indebtedness Incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be classified as having been Incurred or issued pursuant to Sections 4.03(a) or (b) (to the extent such Indebtedness or Disqualified Stock or Preferred Stock would be permitted to be Incurred or issued thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred or issued prior to the Suspension
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Period and outstanding on the Reversion Date). To the extent such Indebtedness or Disqualified Stock or Preferred Stock would not be so permitted to be Incurred or issued pursuant to Sections 4.03(a) or (b), such Indebtedness or Disqualified Stock or Preferred Stock will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under Section 4.03(b)(iii). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.04 will be made as though Section 4.04 had been in effect since the Issue Date and prior to, but not during, the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will not reduce the amount available to be made as Restricted Payments under Section 4.04(a). As described above, however, no Default or Event of Default will be deemed to have occurred on the Reversion Date as a result of any actions taken by the Issuer or its Restricted Subsidiaries during the Suspension Period. Within 30 days of such Reversion Date, the Issuer must comply with the terms of Section 4.11.
For purposes of Section 4.06, on the Reversion Date, the unutilized Excess Proceeds amount will be reset to zero.
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01 When Issuer and Subsidiary Guarantors May Merge or Transfer Assets.
(a) The Issuer may not, directly or indirectly, consolidate, amalgamate or merge with or into or wind up or convert into (whether or not the Issuer is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to any Person unless:
(i) the Issuer is the surviving Person or the Person formed by or surviving any such consolidation, amalgamation, merger, winding up or conversion (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company or similar entity organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (the Issuer or such Person, as the case may be, being herein called the Successor Company); provided that in the event that the Successor Company is not a corporation, a co-obligor of the Notes is a corporation;
(ii) the Successor Company (if other than the Issuer) expressly assumes all the obligations of the Issuer under this Indenture and the Security Documents pursuant to supplemental indentures or other applicable documents or instruments;
(iii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction) no Default shall have occurred and be continuing;
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(iv) immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), either
(1) the Successor Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a); or
(2) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be no less than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;
(v) if the Issuer is not the Successor Company, each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such Persons obligations under this Indenture and the Notes; and
(vi) the Successor Company shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation or transfer and such supplemental indentures (if any) comply with this Indenture.
The Successor Company (if other than the Issuer) will succeed to, and be substituted for, the Issuer under this Indenture, the Notes and the Security Documents, and in such event the Issuer will automatically be released and discharged from its obligations under this Indenture, the Notes and the Security Documents. Notwithstanding the foregoing clauses (iii) and (iv) of this Section 5.01(a), (A) the Issuer or any Restricted Subsidiary may merge, consolidate or amalgamate with or transfer all or part of its properties and assets to a Restricted Subsidiary and (B) the Issuer may merge, consolidate or amalgamate with an Affiliate incorporated solely for the purpose of reincorporating or reorganizing the Issuer in another state of the United States, the District of Columbia or any territory of the United States (collectively, Permitted Jurisdictions) or may convert into a corporation, partnership or limited liability company, so long as the amount of Indebtedness of the Issuer and the Restricted Subsidiaries is not increased thereby. This Section 5.01(a) will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Issuer and the Restricted Subsidiaries.
Notwithstanding the foregoing Section 5.01(a), Merger Sub may merge with and into The Fresh Market. Upon the consummation of the Issuer Merger, The Fresh Market and each Subsidiary Guarantor shall immediately execute and deliver to the Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to which The Fresh Market will expressly assume all the obligations of Merger Sub under this Indenture and the Security Documents as required by the foregoing clause (ii) of this Section 5.01(a), and each Subsidiary Guarantor will provide a Subsidiary Guarantee in respect of the Issuers obligations under this Indenture and the
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Notes. Notwithstanding the foregoing, neither an Opinion of Counsel nor an Officers Certificate pursuant to Section 4.11, this Section 5.01, Section 9.05 or Section 12.07 will be required for the Trustee to execute a supplemental indenture to this Indenture in connection with the Issuer Merger.
(b) Subject to the provisions of Section 11.04 and Section 12.02(b), no Subsidiary Guarantor shall, and the Issuer shall not permit any Subsidiary Guarantor to, consolidate, amalgamate or merge with or into or wind up into (whether or not such Subsidiary Guarantor is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless:
(i) either (A) such Subsidiary Guarantor is the surviving Person or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than such Subsidiary Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a company, corporation, partnership or limited liability company or similar entity organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Subsidiary Guarantor or such Person, as the case may be, being herein called the Successor Subsidiary Guarantor) and the Successor Subsidiary Guarantor (if other than such Subsidiary Guarantor) expressly assumes all the obligations of such Subsidiary Guarantor under this Indenture, the Security Documents and the Notes or the Subsidiary Guarantee, as applicable, pursuant to a supplemental indenture or other applicable documents or instruments, or (B) such sale or disposition or consolidation, amalgamation or merger is not in violation of Section 4.06; and
(ii) the Successor Subsidiary Guarantor (if other than such Subsidiary Guarantor) shall have delivered or caused to be delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, amalgamation, merger or transfer and such supplemental indenture (if any) comply with this Indenture.
Except as otherwise provided in this Indenture, the Successor Subsidiary Guarantor (if other than such Subsidiary Guarantor) will succeed to, and be substituted for, such Subsidiary Guarantor under this Indenture, the Notes and the Security Documents and the Subsidiary Guarantee, as applicable, and such Subsidiary Guarantor will automatically be released and discharged from its obligations under this Indenture, the Notes and the Security Documents and its Subsidiary Guarantee. Notwithstanding the foregoing, (1) a Subsidiary Guarantor may merge, amalgamate or consolidate with an Affiliate incorporated solely for the purpose of reincorporating or reorganizing such Subsidiary Guarantor in a Permitted Jurisdiction or may convert into a limited liability company, corporation, partnership or similar entity organized or existing under the laws of any Permitted Jurisdiction so long as the amount of Indebtedness of such Subsidiary Guarantor is not increased thereby and (2) a Subsidiary Guarantor may merge, amalgamate or consolidate with the Issuer or any Subsidiary Guarantor.
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In addition, notwithstanding the foregoing, a Subsidiary Guarantor may consolidate, amalgamate or merge with or into or wind up into, liquidate, dissolve, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (collectively, a Transfer) to the Issuer or any Restricted Subsidiary.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. An Event of Default occurs with respect to Notes if:
(a) there is a default in any payment of interest on any Note when due and payable, and such default continues for a period of 30 days,
(b) there is a default in the payment of principal or premium, if any, of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise,
(c) there is a failure by the Issuer for 120 days after receipt of written notice given by the Trustee or the holders of not less than 30% in aggregate principal amount of the Notes then outstanding (with a copy to the Trustee) to comply with any of its obligations, covenants or agreements in Section 4.02,
(d) there is a failure by the Issuer or any Restricted Subsidiary for 60 days after written notice given by the Trustee or the holders of not less than 30% in principal amount of the Notes then outstanding (with a copy to the Trustee) to comply with its other obligations, covenants or agreements (other than a default referred to in clauses (a), (b) and (c) above) contained in the Notes or this Indenture,
(e) there is a failure by the Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) to pay any Indebtedness (other than Indebtedness owing to the Issuer or a Restricted Subsidiary or any Permitted Securitization Financing) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default, in each case, if the total amount of such Indebtedness unpaid or accelerated exceeds $60 million or its foreign currency equivalent,
(f) the Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an involuntary case;
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(iii) consents to the appointment of a Custodian of it or for any substantial part of its property; or
(iv) makes a general assignment for the benefit of its creditors or takes any comparable action under any foreign laws relating to insolvency,
(g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i) is for relief against the Issuer or any Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Issuer or any Significant Subsidiary or for any substantial part of its property; or
(iii) orders the winding up or liquidation of the Issuer or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days,
(h) there is a failure by the Issuer or any Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) to pay final judgments aggregating in excess of $60 million or its foreign currency equivalent (net of any amounts which are covered by enforceable insurance policies issued by solvent carriers), which judgments are not discharged, waived or stayed for a period of 60 days,
(i) the Subsidiary Guarantee of a Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) with respect to the Notes ceases to be in full force and effect (except as contemplated by the terms thereof) or the Issuer or any Subsidiary Guarantor that qualifies as a Significant Subsidiary (or any group of Subsidiaries that together would constitute a Significant Subsidiary) denies or disaffirms its obligations under this Indenture or any Subsidiary Guarantee with respect to the Notes (except as contemplated by the terms thereof) and such Default continues for 10 days,
(j) unless such Liens have been released in accordance with the provisions of this Indenture, the Security Documents or the First Lien Intercreditor Agreement, the Liens in favor of the holders of the Notes with respect to all or substantially all of the Collateral cease to be valid or enforceable and such Default continues for 30 days; or
(k) the failure by the Issuer or any Subsidiary Guarantor to comply for 60 days after notice to the Issuer or such Subsidiary Guarantor with its other agreements contained in the Security Documents except for a failure that would not be material to the holders of the Notes and would not materially affect the value of the Collateral taken as a whole.
The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.
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However, a default under clauses (c), (d) or (k) above shall not constitute an Event of Default until the Trustee notifies the Issuer or the holders of at least 30% in principal amount of outstanding Notes notify the Issuer, with a copy to the Trustee, of the default and the Issuer does not cure such default within the time specified in clauses (c), (d) or (k) hereof after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a Notice of Default. The Issuer shall deliver to the Trustee, within five Business Days after the occurrence thereof, written notice in the form of an Officers Certificate of any event which is, or with the giving of notice or the lapse of time or both would become, an Event of Default, its status and what action the Issuer is taking or proposes to take with respect thereto.
The term Bankruptcy Law means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term Custodian means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
SECTION 6.02 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(f) or (g) with respect to the Issuer) occurs and is continuing, the Trustee by notice to the Issuer or the holders of at least 30% in principal amount of outstanding Notes by notice to the Issuer (with a copy to the Trustee) may declare the principal of, premium, if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(f) or (g) with respect to the Issuer occurs, the principal of, premium, if any, and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any holders. Under certain circumstances, the holders of a majority in principal amount of outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
In the event of any Event of Default specified in Section 6.01(e), such Event of Default and all consequences thereof (excluding, however, any resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the holders of the Notes, if within 20 days after such Event of Default arose the Issuer delivers an Officers Certificate to the Trustee stating that (x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged or (y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default or (z) the default that is the basis for such Event of Default has been cured, it being understood that in no event shall an acceleration of the principal amount of the Notes as described above be annulled, waived or rescinded upon the happening of any such events.
SECTION 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes, this Indenture or the Security Documents.
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The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. To the extent required by law, all available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults. Provided the Notes are not then due and payable by reason of a declaration of acceleration, the holders of a majority in principal amount of the Notes then outstanding by written notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on a Note, (b) a Default arising from the failure to redeem or purchase any Note when required pursuant to the terms of this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each holder affected. When a Default is waived, it is deemed cured and the Issuer, the Trustee and the holders will be restored to their former positions and rights under this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.
SECTION 6.05 Control by Majority. The holders of a majority in principal amount of outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, if the Trustee, being advised by counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or expense for which it is not adequately indemnified, or subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification satisfactory to it against all losses and expenses caused by taking or not taking such action.
SECTION 6.06 Limitation on Suits.
(a) Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder may pursue any remedy with respect to this Indenture or the Notes unless:
(i) such holder has previously given the Trustee notice that an Event of Default is continuing,
(ii) holders of at least 30% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy,
(iii) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity, and
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(v) the holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.
(b) A holder may not use this Indenture to prejudice the rights of another holder or to obtain a preference or priority over another holder.
SECTION 6.07 Contractual Rights of the Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the contractual right of any holder to receive payment of principal of and interest on the Note held by such holder, on or after the respective due dates thereof, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such holder.
SECTION 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor on the Notes for the whole amount then due and owing (together with interest on overdue principal and (to the extent lawful) on any unpaid interest at the rate provided for in the Notes) and the amounts provided for in Section 7.07.
SECTION 6.09 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim, statements of interest and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation, expenses disbursements and advances of the Trustee (including counsel, accountants, experts or such other professionals as the Trustee deems necessary, advisable or appropriate)) and the holders allowed in any judicial proceedings relative to the Issuer, the Subsidiary Guarantors, their creditors or their property, shall be entitled to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matters and, unless prohibited by law or applicable regulations, may vote on behalf of the holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any holder, or to authorize the Trustee to vote in respect of the claim of any holder in any such proceeding.
SECTION 6.10 Priorities. Subject to the terms of the First Lien Intercreditor Agreement and the Security Documents (including the Priority Waterfall), any money or property collected by the Trustee pursuant to this Article VI and any other money or property distributable in respect of the Issuers or any Subsidiary Guarantors obligations under this
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Indenture (including upon exercise of any remedies in respect of Collateral) after an Event of Default shall be applied in the following order:
FIRST: to the Trustee and the First-Priority Collateral Agent for amounts due hereunder and under the Security Documents;
SECOND: to the holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and
THIRD: to the Issuer or, to the extent the Trustee collects any amount for any Subsidiary Guarantor, to such Subsidiary Guarantor.
The Trustee may fix a record date and payment date for any payment to the holders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each holder and the Issuer a notice that states the record date, the payment date and the amount to be paid.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Article VI does not apply to a suit by the Trustee, a suit by a holder pursuant to Section 6.07 or a suit by holders of more than 10% in principal amount of the Notes.
SECTION 6.12 Waiver of Stay or Extension Laws. Neither the Issuer nor any Subsidiary Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer and the Subsidiary Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE VII
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default with respect to the Notes and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such persons own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee (it being agreed that the permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty); and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee shall be under no duty to make any investigation as to any statement contained in any such instance, but may accept the same as conclusive evidence of the truth and accuracy of such statement or the correctness of such opinions. However, in the case of certificates or opinions required by any provision hereof to be provided to it, the Trustee shall examine the form of certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05; and
(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise Incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
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(g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01.
SECTION 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be responsible or liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustees conduct does not constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel of its own selection and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the holders of not less than a majority in principal amount of the Notes at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney, at the expense of the Issuer and shall Incur no liability of any kind by reason of such inquiry or investigation.
(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or the Security Documents at the request or direction of any of the holders pursuant to this Indenture, unless such holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be Incurred by it in compliance with such request or direction.
(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder, including the First-Priority Collateral Agent.
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(i) The Trustee shall not be responsible or liable for any action taken or omitted by it in good faith at the direction of the holders of not less than a majority in principal amount of the Notes as to the time, method and place of conducting any proceedings for any remedy available to the Trustee or the exercising of any power conferred by this Indenture.
(j) Any action taken, or omitted to be taken, by the Trustee in good faith pursuant to this Indenture upon the request or authority or consent of any person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding upon future holders of Notes and upon Notes executed and delivered in exchange therefor or in place thereof.
(k) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(l) The Trustee may request that the Issuer delivers an Officers Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers Certificate may be signed by any Person authorized to sign an Officers Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
(m) The Trustee shall not be responsible or liable for punitive, special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of actions.
(n) The Trustee shall not be required to give any bond or surety in respect of the execution of the trusts and powers under this Indenture.
(o) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunction of utilities, computer (hardware or software) or communication services; accidents; labor disputes; and acts of civil or military authorities and governmental action.
SECTION 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04 Trustees Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Subsidiary Guarantees or the Notes, it shall not be accountable for the Issuers use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer or any Subsidiary Guarantor
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in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustees certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default under Sections 6.01(c), (d), (e), (f), (g), (h), (i), (j) or (k), or of the identity of any Significant Subsidiary unless either (a) a Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have received written notice thereof in accordance with Section 13.02 hereof from the Issuer, any Subsidiary Guarantor or any holder. In accepting the trust hereby created, the Trustee acts solely as Trustee under this Indenture and not in its individual capacity and all persons, including without limitation the holders of Notes and the Issuer having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein.
SECTION 7.05 Notice of Defaults. If a Default occurs and is continuing and is actually known to a Trust Officer of the Trustee, the Trustee shall mail, or deliver electronically if held by the Depository, to each holder of the Notes notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note, the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the noteholders. The Issuer is required to deliver to the Trustee, annually, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Issuer also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Issuer is taking or proposes to take in respect thereof.
SECTION 7.06 [Reserved].
SECTION 7.07 Compensation and Indemnity. The Issuer shall pay to the Trustee from time to time compensation for the Trustees acceptance of this Indenture and its services hereunder. The Trustees compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses Incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustees agents, counsel, accountants and experts. The Issuer and the Subsidiary Guarantors, jointly and severally, shall indemnify the Trustee or any predecessor Trustee and their directors, officers, employees and agents against any and all loss, liability, claim, damage or expense (including reasonable attorneys fees and expenses and including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) Incurred by or in connection with the acceptance or administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture or Subsidiary Guarantee against the Issuer or any Subsidiary Guarantor (including this Section 7.07) and defending itself against or investigating any claim (whether asserted by the Issuer, any Subsidiary Guarantor, any holder or any other Person). The obligation to pay such amounts shall survive the payment in full or defeasance of the Notes or the removal or resignation of the Trustee. The Trustee shall notify the Issuer of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Issuer shall not relieve the Issuer or
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any Subsidiary Guarantor of its indemnity obligations hereunder. The Issuer shall defend the claim and the indemnified party shall provide reasonable cooperation at the Issuers expense in the defense. Such indemnified parties may have separate counsel and the Issuer and such Subsidiary Guarantor, as applicable, shall pay the fees and expenses of such counsel; provided, however, that the Issuer shall not be required to pay such fees and expenses if it assumes such indemnified parties defense and, in such indemnified parties reasonable judgment, there is no actual or potential conflict of interest between the Issuer and the Subsidiary Guarantors, as applicable, and such parties in connection with such defense. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense Incurred by an indemnified party through such partys own willful misconduct, negligence or bad faith.
To secure the Issuers and the Subsidiary Guarantors payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes.
The Issuers and the Subsidiary Guarantors payment obligations pursuant to this Section 7.07 shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Trustee. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee Incurs expenses after the occurrence of a Default specified in Section 6.01(f) or (g) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.
No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise Incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if repayment of such funds or adequate indemnity against such risk or liability is not assured to its satisfaction.
SECTION 7.08 Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying the Issuer. The holders of a majority in principal amount of the Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuer shall remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns, is removed by the Issuer or by the holders of a majority in principal amount of the Notes and such holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
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(c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to the holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 7.07.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the holders of 10% in principal amount of the Notes may petition at the expense of the Issuer any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, unless the Trustees duty to resign is stayed as provided in Section 310(b) of the TIA, any holder who has been a bona fide holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuers obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.
SECTION 7.09 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of Section 310(a) of the TIA. The Trustee shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with Section 310(b) of the TIA, subject to its right to apply for a stay of its duty to resign under the penultimate paragraph of Section 310(b) of the TIA; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the TIA any series of securities issued under this Indenture and any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuer are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the TIA are met.
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SECTION 7.11 Preferential Collection of Claims Against the Issuer. The Trustee shall comply with Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of the TIA. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the TIA to the extent indicated.
SECTION 7.12 Limitation on Duty of Trustee in Respect of Collateral; Indemnification.
(a) Beyond the exercise of reasonable care in the custody thereof, the Trustee shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Trustee shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any loss or diminution in the value of any of the Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Trustee in good faith.
(b) The Trustee shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of the Issuer to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. Subject to Section 7.01 of this Indenture, the Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture, the First Lien Intercreditor Agreement, the Collateral Agreement or any other Security Document by the Issuer, the Subsidiary Guarantors or the First-Priority Collateral Agent. The Trustee may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any counsel, accountant, appraiser or other expert or adviser, whether retained or employed by the Issuer or by the Trustee, in relation to any matter arising in the administration of this Indenture or the Security Documents.
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Discharge of Liability on Notes; Defeasance.
(a) This Indenture shall be discharged and shall cease to be of further effect (except as to surviving rights and immunities of the Trustee and rights of registration or transfer or exchange of Notes, as expressly provided for in this Indenture) as to all outstanding Notes when:
(i) either (A) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust) have been delivered to the Trustee for cancellation or (B) all of the Notes (1) have become due and payable, (2) will become due and payable at their stated maturity within one year or (3) if redeemable at the option of the Issuer, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Issuer directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; provided that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of the redemption only required to be deposited with the Trustee on or prior to the date of the redemption;
(ii) the Issuer and/or the Subsidiary Guarantors have paid all other sums payable under this Indenture; and
(iii) the Issuer has delivered to the Trustee an Officers Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with.
(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any time may terminate (i) all of its obligations under the Notes and this Indenture with respect to the holders of the Notes (legal defeasance option), and (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.11, 4.12, 4.13 and 4.15 and the operation of Section 5.01 for the benefit of the holders of the Notes, and Sections 6.01(c), 6.01(d), 6.01(e), 6.01(f), 6.01(g) (in the case of Sections 6.01(f) and 6.01(g) with respect to Significant Subsidiaries only), 6.01(h), 6.01(i), 6.01(j) and 6.01(k) (covenant defeasance option). The Issuer may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event that the
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Issuer terminates all of its obligations under the Notes and this Indenture (with respect to such Notes) by exercising its legal defeasance option or its covenant defeasance option, the obligations of each Subsidiary Guarantor with respect to its Subsidiary Guarantee and the Security Documents shall be terminated simultaneously with the termination of such obligation.
If the Issuer exercises its legal defeasance option, payment of the Notes so defeased may not be accelerated because of an Event of Default. If the Issuer exercises its covenant defeasance option, payment of the Notes so defeased may not be accelerated because of an Event of Default specified in Sections 6.01(c), 6.01(d), 6.01(e), 6.01(f), 6.01(g) (in the case of Sections 6.01(f) and (g), with respect to Significant Subsidiaries only), 6.01(h), 6.01(i), 6.01(j) or 6.01(k) or because of the failure of the Issuer to comply with Section 5.01(a)(iv).
Upon satisfaction of the conditions set forth herein and upon request of the Issuer, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuer terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08 and 2.09 and Article VII, including, without limitation, Sections 7.07 and 7.08 and in this Article VIII and the rights and immunities of the Trustee under this Indenture shall survive until the Notes have been paid in full. Thereafter, the Issuers obligations in Sections 7.07, 7.08, 8.05 and 8.06 and the rights and immunities of the Trustee under this Indenture shall survive such satisfaction and discharge.
SECTION 8.02 Conditions to Defeasance.
(a) The Issuer may exercise its legal defeasance option or its covenant defeasance option only if:
(i) the Issuer irrevocably deposits in trust with the Trustee cash in U.S. Dollars, U.S. Government Obligations or a combination thereof sufficient to pay the principal of and premium (if any) and interest on the Notes when due at maturity or redemption, as the case may be;
(ii) the Issuer delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium, if any, and interest when due on all the Notes to maturity or redemption, as the case may be;
(iii) no Default specified in Section 6.01(f) or (g) with respect to the Issuer shall have occurred or is continuing on the date of such deposit;
(iv) the deposit does not constitute a default under any other material agreement or instrument binding on the Issuer;
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(v) in the case of the legal defeasance option, the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that (1) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling, or (2) since the date of this Indenture there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; provided that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of the redemption only required to be deposited with the Trustee on or prior to the date of the redemption. Notwithstanding the foregoing, the Opinion of Counsel required by the immediately preceding sentence with respect to a legal defeasance need not be delivered if all of the Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable at their Stated Maturity within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer;
(vi) such exercise does not impair the right of any holder to receive payment of principal of, premium, if any, and interest on such holders Notes on or after the due dates therefore or to institute suit for the enforcement of any payment on or with respect to such holders Notes;
(vii) in the case of the covenant defeasance option, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that the holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and
(viii) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Notes to be so defeased and discharged as contemplated by this Article VIII have been complied with.
(b) Before or after a deposit, the Issuer may make arrangements satisfactory to the Trustee for the redemption of such Notes at a future date in accordance with Article III.
SECTION 8.03 Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations (including proceeds thereof) deposited with it pursuant to this Article VIII. The Trustee shall apply the deposited money and the money from U.S. Government Obligations through each Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Notes so discharged or defeased.
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SECTION 8.04 Repayment to Issuer. Each of the Trustee and each Paying Agent shall promptly turn over to the Issuer upon request any money or U.S. Government Obligations held by it as provided in this Article VIII that, in the written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if U.S. Government Obligations have been so deposited), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent discharge or defeasance in accordance with this Article VIII.
Subject to any applicable abandoned property law, the Trustee and each Paying Agent shall pay to the Issuer upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, holders entitled to the money must look to the Issuer for payment as general creditors, and the Trustee and each Paying Agent shall have no further liability with respect to such monies.
SECTION 8.05 Indemnity for U.S. Government Obligations. The Issuer shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations.
SECTION 8.06 Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers obligations under this Indenture and the Notes so discharged or defeased shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or any Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Issuer has made any payment of principal of, or interest on, any such Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or any Paying Agent.
ARTICLE IX
AMENDMENTS AND WAIVERS
SECTION 9.01 Without Consent of the Holders.
(a) The Issuer, the Trustee and the First-Priority Collateral Agent may amend this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents and/or the First Lien Intercreditor Agreement without notice to or the consent of any holder:
(i) to cure any ambiguity, omission, mistake, defect or inconsistency;
(ii) to provide for the assumption by a Successor Company (with respect to the Issuer) of the obligations of the Issuer under this Indenture, the Notes, the Security Documents and the First Lien Intercreditor Agreement;
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(iii) to provide for the assumption by a Successor Subsidiary Guarantor (with respect to any Subsidiary Guarantor), as the case may be, of the obligations of a Subsidiary Guarantor under this Indenture, its Subsidiary Guarantee, the Security Documents and the First Lien Intercreditor Agreement;
(iv) to provide for uncertificated Notes in addition to or in place of certificated Notes, provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code;
(v) to conform the text of this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents or the First Lien Intercreditor Agreement to any provision of the Description of Notes in the Offering Memorandum to the extent that such provision in this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents or the First Lien Intercreditor Agreement was intended by the Issuer to be a verbatim recitation of a provision in the Description of Notes in the Offering Memorandum, as stated in an Officers Certificate;
(vi) to add a Subsidiary Guarantee or collateral with respect to the Notes;
(vii) to release or subordinate Collateral as permitted by this Indenture, the Security Documents or the First Lien Intercreditor Agreement;
(viii) to add additional secured creditors holding other First-Priority Obligations (including First-Priority Obligations that have priority under the Priority Waterfall) or Junior Lien Obligations so long as such obligations are not prohibited by this Indenture;
(ix) to add to the covenants of the Issuer for the benefit of the holders or to surrender any right or power herein conferred upon the Issuer;
(x) to comply with any requirement of the SEC in connection with qualifying or maintaining the qualification of, this Indenture under the TIA (if the Issuer elects to qualify this Indenture under the TIA);
(xi) to make any change that does not adversely affect the rights of any holder in any material respect; or
(xii) to make changes to provide for the issuance of Additional Notes, which shall have terms substantially identical in all material respects to the Initial Notes, and which shall be treated, together with any outstanding Initial Notes, as a single issue of securities.
(b) The First Lien Intercreditor Agreement may be amended without notice to or the consent of any holder, the Trustee or the First-Priority Collateral Agent in connection with the permitted entry into the First Lien Intercreditor Agreement of any class of additional secured creditors holding other First-Priority Obligations.
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(c) After an amendment under this Section 9.01 becomes effective, the Issuer shall mail, or otherwise deliver in accordance with the procedures of the Depository, to the holders a notice briefly describing such amendment. The failure to give such notice to all holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.01.
SECTION 9.02 With Consent of the Holders. The Issuer, the Trustee and the First-Priority Collateral Agent may amend this Indenture, the Notes, the Subsidiary Guarantees, the Security Documents and the First Lien Intercreditor Agreement with the consent of the Issuer and the holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange for the Notes). However, without the consent of each holder of an outstanding Note affected, an amendment may not:
(1) reduce the amount of Notes whose holders must consent to an amendment,
(2) reduce the rate of or extend the time for payment of interest on any Note,
(3) reduce the principal of or change the Stated Maturity of any Note,
(4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article III,
(5) make any Note payable in money other than that stated in such Note,
(6) expressly subordinate the Notes or any Subsidiary Guarantee to any other Indebtedness of the Issuer or any Subsidiary Guarantor,
(7) impair the contractual right of any holder to receive payment of principal of, premium, if any, and interest on such holders Note on or after the due dates thereof or to institute suit for the enforcement of any payment on or with respect to such holders Note,
(8) make any change in the amendment provisions which require each holders consent or in the waiver provisions, or
(9) make any change to the provisions of this Indenture, the First Lien Intercreditor Agreement or the Security Documents with respect to the pro rata application of proceeds of Collateral in respect of the Notes required thereby in a manner that by its terms modifies the application of such proceeds in respect of the Notes required thereby to be on a less than pro rata basis to the holder of such Note.
Except as expressly provided by this Indenture, the Security Documents or the First Lien Intercreditor Agreement, without the consent of the holders of at least 66.67% in aggregate principal amount of the Notes then outstanding, no amendment or waiver may release all or substantially all of the Collateral from the Lien of this Indenture and the Security Documents with respect to the Notes.
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It shall not be necessary for the consent of the holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the Issuer shall mail, or otherwise deliver in accordance with the procedures of the Depository, to the holders a notice briefly describing such amendment. The failure to give such notice to all holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.02.
SECTION 9.03 Revocation and Effect of Consents and Waivers.
(a) A consent to an amendment or a waiver by a holder of a Note shall bind the holder and every subsequent holder of that Note or portion of the Note that evidences the same debt as the consenting holders Note, even if notation of the consent or waiver is not made on the Note. However, any such holder or subsequent holder may revoke the consent or waiver as to such holders Note or portion of the Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers Certificate from the Issuer certifying that the requisite principal amount of Notes have consented. After an amendment or waiver becomes effective, it shall bind every holder. An amendment or waiver becomes effective upon the (i) receipt by the Issuer or the Trustee of consents by the holders of the requisite principal amount of securities, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any indenture supplemental hereto containing such amendment or waiver and (iii) execution of such amendment or waiver (or supplemental indenture) by the Issuer, the Subsidiary Guarantors and the Trustee.
(b) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.
SECTION 9.04 Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the holder. Alternatively, if the Issuer or the Trustee so determine, the Issuer in exchange for the Note shall issue and, upon written order of the Issuer signed by an Officer, the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.05 Trustee to Sign Amendments. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment, the Trustee shall be entitled to
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receive indemnity satisfactory to it and shall be provided with, and (subject to Section 7.01) shall be fully protected in relying upon, (i) an Officers Certificate, (ii) an Opinion of Counsel stating that such amendment, supplement or waiver is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Subsidiary Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof, (iii) a copy of the resolution of the Board of Directors, certified by the Secretary or Assistant Secretary of the Issuer, authorizing the execution of such amendment, supplement or waiver and (iv) if such amendment, supplement or waiver is executed pursuant to Section 9.02, evidence reasonably satisfactory to the Trustee of the consent of the holders required to consent thereto.
SECTION 9.06 Additional Voting Terms; Calculation of Principal Amount. All Notes issued under this Indenture shall vote and consent together on all matters (as to which any of such Notes may vote) as one class and no Notes will have the right to vote or consent as a separate class on any matter. Determinations as to whether holders of the requisite aggregate principal amount of Notes have concurred in any direction, waiver or consent shall be made in accordance with this Article IX and Section 2.13.
ARTICLE X
RANKING OF NOTE LIENS
SECTION 10.01 Relative Rights. The First Lien Intercreditor Agreement governs the relative rights and remedies, as lienholders, among holders of Liens securing First-Priority Obligations. Nothing in this Indenture or the First Lien Intercreditor Agreement will:
(a) impair, as between the Issuer and holders of Notes, the obligation of the Issuer which is absolute and unconditional, to pay principal of, premium and interest on Notes in accordance with their terms or to perform any other obligation of the Issuer or any other obligor under this Indenture, the Notes, the Subsidiary Guarantees and the Security Documents;
(b) restrict the right of any holder to sue for payments that are then due and owing, in a manner not inconsistent with the provisions of the First Lien Intercreditor Agreement;
(c) prevent the Trustee, the First-Priority Collateral Agent or any holder from exercising against the Issuer or any other obligor any of its other available remedies upon a Default or Event of Default (other than its rights as a secured party, which are subject to the First Lien Intercreditor Agreement); or
(d) restrict the right of the Trustee, the First-Priority Collateral Agent or any holder:
(1) to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to any obligor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against any obligor;
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(2) to make, support or oppose any request for an order for dismissal, abstention or conversion in any insolvency or liquidation proceeding;
(3) to make, support or oppose, in any insolvency or liquidation proceeding, any request for an order extending or terminating any period during which the debtor (or any other Person) has the exclusive right to propose a plan of reorganization or other dispositive restructuring or liquidation plan therein;
(4) to seek the creation of, or appointment to, any official committee representing creditors (or certain of the creditors) in any insolvency or liquidation proceedings and, if appointed, to serve and act as a member of such committee without being in any respect restricted or bound by, or liable for, any of the obligations under this Article X;
(5) to seek or object to the appointment of any professional person to serve in any capacity in any insolvency or liquidation proceeding or to support or object to any request for compensation made by any professional person or others therein;
(6) to make, support or oppose any request for order appointing a trustee or examiner in any insolvency or liquidation proceedings; or
(7) otherwise to make, support or oppose any request for relief in any insolvency or liquidation proceeding that it is permitted by law to make, support or oppose if it were a holder of unsecured claims, or as to any matter relating to (x) any plan of reorganization or other restructuring or liquidation plan or (y) the administration of the estate or the disposition of the case or proceeding (in each case except as set forth in the First Lien Intercreditor Agreement).
ARTICLE XI
COLLATERAL
SECTION 11.01 Security Documents. (a) The payment of the principal of and interest and premium, if any, on the Notes when due, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise and whether by the Issuer pursuant to the Notes or by the Subsidiary Guarantors pursuant to the Subsidiary Guarantees, the payment of all other Notes Obligations and the performance of all other obligations of the Issuer and the Subsidiary Guarantors under this Indenture, the Notes, the Subsidiary Guarantees and the Security Documents shall be secured as provided in the Security Documents, which the Issuer and the applicable Subsidiary Guarantors entered into on the Issue Date and will be secured by Security Documents hereafter delivered as required or permitted by this Indenture. The Issuer shall, and shall cause each Restricted Subsidiary to, and each Restricted Subsidiary shall, make all filings (including filings of continuation statements and amendments to UCC financing statements that may be necessary to continue the effectiveness of such UCC financing statements) and all other actions as are necessary or required by the Security Documents to maintain (at the sole cost and expense of the Issuer and the Restricted Subsidiaries) the security interest created by the Security Documents in the Collateral (other than with respect to any Collateral the security interest in which is not required to be perfected under the Security Documents) as a perfected security interest subject only to Permitted Liens and Liens permitted by Section 4.12.
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(b) Notwithstanding the foregoing, the Issuer shall use commercially reasonable efforts to perfect all security interests in the Collateral (other than Excluded Property) on or prior to the Issue Date and, with respect to any Collateral (other than Excluded Property), for which security interests have not been granted or perfected on or prior to the Issue Date, use commercially reasonable efforts to cause the taking of additional actions required to grant or perfect the security interest in the Collateral required to be pledged under this Indenture and the Security Documents within 90 days following the Issue Date.
SECTION 11.02 First-Priority Collateral Agent.
(a) The First-Priority Collateral Agent is authorized and empowered to appoint one or more co-First-Priority Collateral Agents as it deems necessary or appropriate.
(b) Subject to Section 7.01, neither the Trustee nor the First-Priority Collateral Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency or protection of any Lien securing First-Priority Obligations, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens securing First-Priority Obligations or the Security Documents or any delay in doing so.
(c) The First-Priority Collateral Agent will be subject to such directions as may be given it by the Trustee from time to time (as required or permitted by this Indenture); provided that in the event of conflict between directions received pursuant to the Security Documents and the First Lien Intercreditor Agreement and directions received hereunder, the First-Priority Collateral Agent will be subject to directions received pursuant to the Security Documents and the First Lien Intercreditor Agreement. Except as directed by the Trustee as required or permitted by this Indenture and any other representatives or pursuant to the Security Documents or the First Lien Intercreditor Agreement, the First-Priority Collateral Agent will not be obligated:
(1) to act upon directions purported to be delivered to it by any other Person;
(2) to foreclose upon or otherwise enforce any Lien securing First-Priority Obligations; or
(3) to take any other action whatsoever with regard to any or all of the Liens securing First-Priority Obligations, Security Documents or Collateral.
(d) The First-Priority Collateral Agent will be accountable only for amounts that it actually receives as a result of the enforcement of the Liens securing First-Priority Obligations or the Security Documents.
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(e) In acting as First-Priority Collateral Agent or co-First-Priority Collateral Agent, the First-Priority Collateral Agent and each co-First-Priority Collateral Agent may rely upon and enforce each and all of the rights, powers, immunities, indemnities and benefits of the Trustee under Article VII hereof.
(f) The holders of Notes agree that the First-Priority Collateral Agent shall be entitled to the rights, privileges, protections, immunities, indemnities and benefits provided to the First-Priority Collateral Agent by this Indenture and the Security Documents. Furthermore, each holder of a Note, by accepting such Note, consents to the terms of and authorizes and directs the Trustee (in each of its capacities) and the First-Priority Collateral Agent to enter into and perform each of the First Lien Intercreditor Agreement and Security Documents in each of its capacities thereunder.
(g) If the Issuer (i) Incurs Other First-Priority Obligations at any time when no intercreditor agreement is in effect or at any time when Indebtedness constituting Other First-Priority Obligations entitled to the benefit of First Lien Intercreditor Agreement is concurrently retired, and (ii) delivers to the First-Priority Collateral Agent an Officers Certificate so stating and requesting the First-Priority Collateral Agent to enter into an intercreditor agreement (on substantially the same terms as the First Lien Intercreditor Agreement) in favor of a designated agent or representative for the holders of the Other First-Priority Obligations so Incurred, the First-Priority Collateral Agent shall (and is hereby authorized and directed to) enter into such intercreditor agreement, bind the holders on the terms set forth therein and perform and observe its obligations thereunder.
(h) At all times when the Trustee is not itself the First-Priority Collateral Agent, the Issuer will deliver to the Trustee copies of all Security Documents delivered to the First-Priority Collateral Agent and copies of all documents delivered to the First-Priority Collateral Agent pursuant to this Indenture and the Security Documents.
(i) If the Issuer Incurs any Junior Lien Obligations and delivers to the First-Priority Collateral Agent and/or the Trustee, as applicable, an Officers Certificate requesting the First-Priority Collateral Agent and/or the Trustee, as applicable, to enter into an intercreditor agreement with a designated agent or representative for the holders of the Junior Lien Obligations so Incurred, the First-Priority Collateral Agent and/or the Trustee, as applicable, shall (and each is hereby authorized and directed to) enter into such intercreditor agreement, bind the holders on the terms set forth therein and perform and observe its obligations thereunder.
SECTION 11.03 Authorization of Actions to Be Taken. (a) Each holder of Notes, by its acceptance thereof, consents and agrees to the terms of each Security Document and the First Lien Intercreditor Agreement as originally in effect and as amended, supplemented or replaced from time to time in accordance with its terms or the terms of this Indenture, authorizes and directs the Trustee and/or the First-Priority Collateral Agent to enter into the First Lien Intercreditor Agreement and the Security Documents to which it is a party, authorizes and empowers the Trustee to direct the First-Priority Collateral Agent to enter into, and the First-Priority Collateral Agent to execute and deliver, the Security Documents and First Lien Intercreditor Agreement and authorizes and empowers the Trustee and the First-Priority Collateral Agent to bind the holders of Notes and other holders of Obligations as set forth in the Security Documents to which it is a party and the First Lien Intercreditor Agreement and to perform its obligations and exercise its rights and powers thereunder.
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(b) Subject to the provisions of the First Lien Intercreditor Agreement and the Security Documents, the Trustee and the First-Priority Collateral Agent are authorized and empowered to receive for the benefit of the holders of Notes any funds collected or distributed under the Security Documents to which the First-Priority Collateral Agent or Trustee is a party and to make further distributions of such funds to the holders of Notes according to the provisions of this Indenture.
(c) Subject to the provisions of Article VI, Section 7.01 and Section 7.02 hereof, the First Lien Intercreditor Agreement and the Security Documents, upon the occurrence and continuance of an Event of Default, the Trustee may, in its sole discretion and without the consent of the holders, direct, on behalf of the holders, the First-Priority Collateral Agent to take all actions it deems necessary or appropriate in order to:
(1) foreclose upon or otherwise enforce any or all of the Liens securing the First-Priority Obligations;
(2) enforce any of the terms of the Security Documents to which the First-Priority Collateral Agent or Trustee is a party; or
(3) collect and receive payment of any and all Obligations.
Subject to the First Lien Intercreditor Agreement, the Trustee is authorized and empowered to institute and maintain, or direct the First-Priority Collateral Agent to institute and maintain, such suits and proceedings as it may deem expedient to protect or enforce the Liens securing the First-Priority Obligations or the Security Documents to which the First-Priority Collateral Agent or Trustee is a party or to prevent any impairment of Collateral by any acts that may be unlawful or in violation of the Security Documents to which the First-Priority Collateral Agent or Trustee is a party or this Indenture, and such suits and proceedings as the Trustee or the First-Priority Collateral Agent may deem expedient to preserve or protect its interests and the interests of the holders of Notes in the Collateral, including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of holders, the Trustee or the First-Priority Collateral Agent.
SECTION 11.04 Release of Liens. (a) Notwithstanding anything to the contrary in the Security Documents or the First Lien Intercreditor Agreement, Collateral may be released from the Lien and security interest created by the Security Documents to secure the Notes and obligations under this Indenture at any time or from time to time in accordance with the provisions of the First Lien Intercreditor Agreement or the Security Documents or as provided hereby. The applicable assets included in the Collateral shall be automatically released from the Liens securing the Notes, and the applicable Subsidiary Guarantor shall be automatically released from its obligations under this Indenture and the Security Documents, under any one
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or more of the following circumstances or any applicable circumstance as provided in the First Lien Intercreditor Agreement or the Security Documents:
(1) to enable the Issuer or any Subsidiary Guarantor to consummate the disposition (other than any disposition to the Issuer or another Subsidiary Guarantor) of such property or assets to the extent not prohibited under Section 4.06;
(2) in respect of the property and assets of a Subsidiary Guarantor, upon the designation of such Subsidiary Guarantor to be an Unrestricted Subsidiary in accordance with Section 4.04 and the definition of Unrestricted Subsidiary, and such Subsidiary Guarantor shall be automatically released from its obligations hereunder and under the Security Documents;
(3) in respect of the property and assets of a Subsidiary Guarantor, upon the release or discharge of the Subsidiary Guarantee of such Subsidiary Guarantor in accordance with this Indenture;
(4) in respect of any property and assets of the Issuer or a Subsidiary Guarantor that would constitute Collateral but is at such time not subject to a Lien securing First-Priority Obligations (other than the Notes Obligations), other than any property or assets that cease to be subject to a Lien securing First-Priority Obligations in connection with a Discharge of First-Priority Obligations; provided that if such property and assets are subsequently subject to a Lien securing First-Priority Obligations (other than Excluded Property), such property and assets shall subsequently constitute Collateral under this Indenture;
(5) in respect of any Common Collateral transferred to a third party or otherwise disposed of in connection with any enforcement by the First-Priority Collateral Agent in accordance with the First Lien Intercreditor Agreement;
(6) pursuant to an amendment or waiver in accordance with Article IX; and
(7) if the Notes have been discharged or defeased pursuant to Section 8.01.
In addition, (i) the security interests granted pursuant to the Security Documents securing the Obligations shall automatically terminate and/or be released all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the applicable Pledgors (as defined in the Collateral Agreement), as of the date when all the Obligations under this Indenture and the Security Documents (other than contingent or unliquidated obligations or liabilities not then due) have been paid in full in cash or immediately available funds; and (ii) the security interests granted pursuant to the Security Documents securing the Obligations shall automatically terminate as of the date when the holders of at least two thirds in aggregate principal amount of all Notes issued under this Indenture consent to the termination of the Security Documents.
In connection with any termination or release pursuant to this Section 11.04(a), the First-Priority Collateral Agent shall execute and deliver to any Pledgor (as defined in the Collateral Agreement), at such Pledgors expense, all documents that such Pledgor shall
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reasonably request to evidence such termination or release (including, without limitation, UCC termination statements), and will duly assign and transfer to such Pledgor, such of the Pledged Collateral (as defined in the Collateral Agreement) that may be in the possession of the First-Priority Collateral Agent and has not theretofore been sold or otherwise applied or released pursuant to this Indenture or the Security Documents. Any execution and delivery of documents pursuant to this Section 11.04(a) shall be without recourse to or warranty by the First-Priority Collateral Agent. In connection with any release pursuant to this Section 11.04(a), the Pledgors shall be permitted to take any action in connection therewith consistent with such release including, without limitation, the filing of UCC termination statements.
Upon the receipt of an Officers Certificate from the Issuer, as described in Section 11.04(b) below, if applicable, and any necessary or proper instruments of termination, satisfaction or release prepared by the Issuer, the First-Priority Collateral Agent shall execute, deliver or acknowledge such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents or the First Lien Intercreditor Agreement.
(b) Notwithstanding anything herein to the contrary, in connection with (x) any release of Collateral pursuant to Section 11.04(a)(2), (3) or (6), such Collateral may not be released from the Lien and security interest created by the Security Documents and (y) any release of Collateral pursuant to Section 11.04(a)(1), (4) and (5) the First-Priority Collateral Agent shall not be required to execute, deliver or acknowledge any instruments of termination, satisfaction or release unless, in each case, an Officers Certificate and Opinion of Counsel certifying that all conditions precedent, including, without limitation, this Section 11.04, have been met and stating under which of the circumstances set forth in Section 11.04(a) above the Collateral is being released have been delivered to the First-Priority Collateral Agent on or prior to the date of such release or, in the case of clause (y) above, the date on which the First-Priority Collateral Agent executes any such instrument.
(c) Notwithstanding anything herein to the contrary, at any time when a Default or Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated (whether by declaration or otherwise) and the Trustee has delivered a notice of acceleration to the First-Priority Collateral Agent, no release of Collateral pursuant to the provisions of this Indenture or the Security Documents will be effective as against the holders, except as otherwise provided in the First Lien Intercreditor Agreement.
SECTION 11.05 Powers Exercisable by Receiver or Trustee. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XI upon the Issuer or the Subsidiary Guarantors with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or the Subsidiary Guarantors or of any officer or officers thereof required by the provisions of this Article XI; and if the Trustee, First-Priority Collateral Agent or a nominee of the Trustee or First-Priority Collateral Agent shall be in the possession of the Collateral under any provision of this Indenture, then such powers may be exercised by the Trustee, First-Priority Collateral Agent or a nominee of the Trustee or First-Priority Collateral Agent.
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SECTION 11.06 Release Upon Termination of the Issuers Obligations. In the event (i) that the Issuer delivers to the Trustee an Officers Certificate and Opinion of Counsel certifying that all the obligations under this Indenture, the Notes and the Security Documents have been satisfied and discharged by the payment in full of the Issuers obligations under the Notes, this Indenture and the Security Documents, and all such obligations have been so satisfied, or (ii) a discharge, legal defeasance or covenant defeasance of this Indenture occurs under Article VIII, the Trustee shall deliver to the Issuer and the First-Priority Collateral Agent a notice stating that the Trustee, on behalf of the holders, disclaims and gives up any and all rights it has in or to the Collateral, and any rights it has under the Security Documents, and upon receipt by the First-Priority Collateral Agent of such notice, the First-Priority Collateral Agent shall be deemed not to hold a Lien in the Collateral on behalf of the Trustee and shall do or cause to be done all acts reasonably necessary at the request and expense of the Issuer to release such Lien as soon as is reasonably practicable.
SECTION 11.07 Designations. Except as provided in the next sentence, for purposes of the provisions hereof and the First Lien Intercreditor Agreement requiring the Issuer to designate Indebtedness for the purposes of the terms Other First-Priority Obligations, Junior Lien Obligations or any other such designations hereunder or under the First Lien Intercreditor Agreement, any such designation shall be sufficient if the relevant designation provides in writing that such Other First-Priority Obligations or Junior Lien Obligations are permitted under this Indenture and is signed on behalf of the Issuer by an Officer and delivered to the Trustee and the First-Priority Collateral Agent. For all purposes hereof and the First Lien Intercreditor Agreement, the Issuer hereby designates the Obligations pursuant to the Credit Agreement as in effect on the Issue Date as First-Priority Obligations.
ARTICLE XII
GUARANTEE
SECTION 12.01 Subsidiary Guarantee.
(a) Each Subsidiary Guarantor hereby jointly and severally, irrevocably and unconditionally guarantees, on a senior basis, as a primary obligor and not merely as a surety, to each holder and to the Trustee and its successors and assigns (i) the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Issuer under this Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on the Notes and all other monetary obligations of the Issuer under this Indenture and the Notes and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Issuer whether for fees, expenses, indemnification or otherwise under this Indenture and the Notes (all the foregoing being hereinafter collectively called the Guaranteed Obligations). The Guaranteed Obligations of all Subsidiary Guarantors shall be secured by first-priority security interests (subject to Permitted Liens and Liens permitted by Section 4.12) in the Collateral owned by such Subsidiary Guarantor on a pari passu basis with all other First-Priority Obligations pursuant to the terms of the Security Documents and the First Lien Intercreditor Agreement, but subject to the terms and conditions of the Security Documents and the First Lien Intercreditor Agreement (including the Priority Waterfall). Each Subsidiary Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole
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or in part, without notice or further assent from any Subsidiary Guarantor, and that each Subsidiary Guarantor shall remain bound under this Article XII notwithstanding any extension or renewal of any Guaranteed Obligation.
(b) Each Subsidiary Guarantor waives presentation to, demand of payment from and protest to the Issuer of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Notes or the Guaranteed Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (i) the failure of any holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Issuer or any other Person under this Indenture, the Notes or any other agreement or otherwise; (ii) any extension or renewal of this Indenture, the Notes or any other agreement; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (iv) the release of any security held by any holder or the Trustee for the Guaranteed Obligations or each Subsidiary Guarantor; (v) the failure of any holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of each Subsidiary Guarantor, except as provided in Section 12.02(b). Each Subsidiary Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Subsidiary Guarantors, such that such Subsidiary Guarantors obligations would be less than the full amount claimed.
(c) Each Subsidiary Guarantor hereby waives any right to which it may be entitled to have the assets of the Issuer first be used and depleted as payment of the Issuers or such Subsidiary Guarantors obligations hereunder prior to any amounts being claimed from or paid by such Subsidiary Guarantor hereunder. Each Subsidiary Guarantor hereby waives any right to which it may be entitled to require that the Issuer be sued prior to an action being initiated against such Subsidiary Guarantor.
(d) Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any holder or the Trustee to any security held for payment of the Guaranteed Obligations.
(e) The Subsidiary Guarantee of each Subsidiary Guarantor is, to the extent and in the manner set forth in Article XII, equal in right of payment to all existing and future Pari Passu Indebtedness (but subject to the terms and conditions of the Security Documents and the First Lien Intercreditor Agreement (including the Priority Waterfall)), senior in right of payment to all existing and future Subordinated Indebtedness of such Subsidiary Guarantor.
(f) Except as expressly set forth in Sections 8.01(b), 12.02 and 12.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any holder or the Trustee to assert any claim or
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demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Subsidiary Guarantor or would otherwise operate as a discharge of any Subsidiary Guarantor as a matter of law or equity.
(g) Each Subsidiary Guarantor agrees that its Subsidiary Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any holder or the Trustee upon the bankruptcy or reorganization of the Issuer or otherwise.
(h) In furtherance of the foregoing and not in limitation of any other right which any holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Subsidiary Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by applicable law) and (iii) all other monetary obligations of the Issuer to the holders and the Trustee.
(i) Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the holders and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of the Subsidiary Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article VI, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purposes of this Section 12.01.
(j) Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable out-of-pocket attorneys fees and expenses) Incurred by the Trustee, the First-Priority Collateral Agent or any holder in enforcing any rights under this Section 12.01.
(k) Upon request of the Trustee, each Subsidiary Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.
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SECTION 12.02 Limitation on Liability.
(a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by each Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee or this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or capital maintenance or corporate benefit rules applicable to guarantees for obligations of affiliates.
(b) A Subsidiary Guarantee as to any Restricted Subsidiary that is (or becomes) a party hereto on the date hereof or that executes a supplemental indenture in accordance with Section 4.11 hereof and provides a guarantee shall terminate and be of no further force or effect and such Subsidiary Guarantee shall be deemed to be automatically released from all obligations under this Article XII upon any of the following:
(i) the sale, disposition, exchange or other transfer (including through merger, consolidation, amalgamation or otherwise) of the Capital Stock (including any sale, disposition or other transfer following which the applicable Subsidiary Guarantor is no longer a Restricted Subsidiary), of the applicable Subsidiary Guarantor if such sale, disposition, exchange or other transfer is made in a manner not in violation of this Indenture;
(ii) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the provisions of Section 4.04 and the definition of Unrestricted Subsidiary;
(iii) the release or discharge of the guarantee by such Subsidiary Guarantor of the Indebtedness (other than Indebtedness under the Credit Agreement) which resulted in the obligation to guarantee the Notes;
(iv) the Issuers exercise of its legal defeasance option or covenant defeasance option under Article VIII or if the Issuers obligations under this Indenture are discharged in accordance with the terms of this Indenture;
(v) such Subsidiary ceasing to be a Subsidiary as a result of any foreclosure of any pledge or security interest in favor of the First-Priority Obligations or other exercise of remedies in respect thereof, subject to, in each case, the application of the proceeds of such foreclosure or exercise of remedies in the manner described in the Security Documents; and
(vi) the occurrence of a Covenant Suspension Event.
SECTION 12.03 [Intentionally Omitted].
SECTION 12.04 Successors and Assigns. This Article XII shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall inure to the benefit of
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Pursuant to 17 C.F.R. Section 200.83
the successors and assigns of the Trustee and the holders and, in the event of any transfer or assignment of rights by any holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.
SECTION 12.05 No Waiver. Neither a failure nor a delay on the part of either the Trustee or the holders in exercising any right, power or privilege under this Article XII shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XII at law, in equity, by statute or otherwise.
SECTION 12.06 Modification. No modification, amendment or waiver of any provision of this Article XII, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle any Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances.
SECTION 12.07 Execution of Supplemental Indenture for Future Subsidiary Guarantors. Each Subsidiary which is required to become a Subsidiary Guarantor of the Notes pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant to which such Subsidiary shall become a Subsidiary Guarantor under this Article XII and shall guarantee the Notes. Concurrently with the execution and delivery of such supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of Counsel and an Officers Certificate certifying that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms and/or to such other matters as the Trustee may reasonably request.
SECTION 12.08 Non-Impairment. The failure to endorse a Subsidiary Guarantee on any Note shall not affect or impair the validity thereof.
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Pursuant to 17 C.F.R. Section 200.83
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 [Reserved].
SECTION 13.02 Notices.
(a) Any notice or communication required or permitted hereunder shall be in writing and delivered in person, via facsimile or mailed by first-class mail addressed as follows:
if to the Issuer or a Subsidiary Guarantor:
c/o The Fresh Market, Inc.
628 Green Valley Road
Greensboro, NC 27408
Attention: General Counsel
Fax: 336-272-1664
with copies to:
c/o Apollo Management, L.P.
9 West 57th Street, 43rd Floor
New York, NY 10019
Attention: Chief Legal Officer
Fax: 646-417-6651
and
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Gregory A. Ezring
Brian M. Janson
Fax: 212-757-3990
if to the Trustee:
Wilmington Trust, National Association
Global Capital Markets
50 South Sixth Street, Suite 1290
Minneapolis, MN 55402
Attention: The Fresh Market, Inc. Administrator
Fax: 612-217-5651
The Issuer or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
(b) Any notice or communication mailed to a holder shall be mailed, first class mail, to the holder at the holders address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.
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Pursuant to 17 C.F.R. Section 200.83
(c) Failure to mail a notice or communication to a holder or any defect in it shall not affect its sufficiency with respect to other holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that notices to the Trustee are effective only if received.
The Trustee may, in its sole discretion, agree to accept and act upon instructions or directions pursuant to this Indenture sent by e-mail, facsimile transmission or other similar electronic methods. If the party elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustees understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustees reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The party providing electronic instructions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.
Notwithstanding anything to the contrary contained herein, as long as the Notes are in the form of a Global Note, notice to the holders may be made electronically in accordance with procedures of the Depository.
SECTION 13.03 [Reserved].
SECTION 13.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee:
(a) an Officers Certificate in form reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
SECTION 13.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 4.09) shall include:
(a) a statement that the individual making such certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
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(c) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers Certificate or certificates of public officials.
SECTION 13.06 When Notes Disregarded. In determining whether the holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, the Subsidiary Guarantors or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Subsidiary Guarantors shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.
SECTION 13.07 Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of the holders. The Registrar and a Paying Agent may make reasonable rules for their functions.
SECTION 13.08 Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue on any amount that would have been otherwise payable on such payment date if it were a Business Day for the intervening period. If a regular Record Date is not a Business Day, the Record Date shall not be affected.
SECTION 13.09 GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 13.10 No Recourse Against Others. No director, officer, employee, manager, incorporator or holder of any Equity Interests in the Issuer or any direct or indirect parent companies, as such, shall have any liability for any obligations of the Issuer or any Subsidiary Guarantor under the Notes, the Subsidiary Guarantees or this Indenture, as applicable, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
SECTION 13.11 Successors. All agreements of the Issuer and the Subsidiary Guarantors in this Indenture and the Notes shall bind such persons successors, including, without limitation, The Fresh Market in the case of Merger Sub. All agreements of the Trustee in this Indenture shall bind its successors.
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SECTION 13.12 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.
SECTION 13.13 Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
SECTION 13.14 Indenture Controls. If and to the extent that any provision of the Notes limits, qualifies or conflicts with a provision of this Indenture, such provision of this Indenture shall control.
SECTION 13.15 Severability. In case any provision in this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.
SECTION 13.16 Intercreditor Agreement. The terms of this Indenture are subject to the terms of the First Lien Intercreditor Agreement.
SECTION 13.17 Waiver of Jury Trial. EACH OF THE ISSUER, THE SUBSIDIARY GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
POMEGRANATE MERGER SUB, INC. | ||
By: |
| |
Name: Laurie D. Medley | ||
Title: Vice President |
[Signature Page to Indenture]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee | ||
By: |
| |
Name: Jane Schweiger | ||
Title: Vice President |
[Signature Page to Indenture]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES AND ADDITIONAL NOTES
1. Definitions.
1.1 Definitions.
For the purposes of this Appendix A the following terms shall have the meanings indicated below:
Definitive Note means a certificated Initial Note or Additional Note (bearing the Restricted Notes Legend if the transfer of such Note is restricted by applicable law) that does not include the Global Notes Legend.
Depository means The Depository Trust Company, its nominees and their respective successors.
Global Notes Legend means the legend set forth under that caption in the applicable Exhibit to this Indenture.
IAI means an institutional accredited investor as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Initial Purchasers means Barclays Capital Inc., RBC Capital Markets, LLC, Jefferies LLC, Macquarie Capital (USA) Inc., UBS Securities LLC and Apollo Global Securities, LLC.
Notes Custodian means the custodian with respect to a Global Note (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee.
QIB means a qualified institutional buyer as defined in Rule 144A.
Regulation S means Regulation S under the Securities Act.
Regulation S Notes means all Initial Notes offered and sold outside the United States in reliance on Regulation S.
Restricted Notes Legend means the legend set forth in Section 2.2(f)(i) herein.
Restricted Period, with respect to any Notes, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Notes are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Issuer to the Trustee, and (b) the Issue Date, and with respect to any Additional Notes that are Transfer Restricted Notes, it means the comparable period of 40 consecutive days.
Rule 501 means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Appendix A-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Rule 144A means Rule 144A under the Securities Act.
Rule 144A Notes means all Initial Notes initially offered and sold to QIBs in reliance on Rule 144A.
Transfer Restricted Definitive Notes means Definitive Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
Transfer Restricted Global Notes means Global Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
Transfer Restricted Notes means the Transfer Restricted Definitive Notes and Transfer Restricted Global Notes.
Unrestricted Definitive Notes means Definitive Notes that are not required to bear, or are not subject to, the Restricted Notes Legend.
Unrestricted Global Notes means Global Notes that are not required to bear, or are not subject to, the Restricted Notes Legend.
1.2 Other Definitions.
Term: | Defined in Section: | |||
Agent Members |
2.1(b) | |||
Global Notes |
2.1(b) | |||
Regulation S Global Notes |
2.1(b) | |||
Regulation S Permanent Notes |
2.1(b) | |||
Regulation S Temporary Global Notes |
2.1(b) | |||
Rule 144A Global Notes |
2.1(b) |
2. The Notes.
2.1 Form and Dating; Global Notes.
(a) The Initial Notes issued on the date hereof will be (i) privately placed by the Issuer pursuant to the Offering Memorandum and (ii) sold, initially only to (1) QIBs in reliance on Rule 144A and (2) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such Initial Notes may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs in accordance with Rule 501. One or more Rule 144A Notes may be issued with a separate CUSIP number for purposes of transfers of Notes to IAIs in accordance with Rule 501. On the Issue Date, the Issuer shall execute, and the Trustee shall authenticate, a Rule 144A Global Note with a zero outstanding balance and the CUSIP number 35804HAB2 for purposes of transfers of Initial Notes to IAIs in accordance with Rule 501 at any time on or after the Issue Date. Additional Notes offered after the date hereof may be offered and sold by the Issuer from time to time pursuant to one or more agreements in accordance with applicable law.
Appendix A-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) Global Notes. (i) Except as provided in clause (d) of Section 2.2 below, Rule 144A Notes initially shall be represented by one or more Notes in definitive, fully registered, global form without interest coupons (collectively, the Rule 144A Global Notes).
Regulation S Notes initially shall be represented by one or more Notes in fully registered, global form without interest coupons (collectively, the Regulation S Temporary Global Note and, together with the Regulation S Permanent Global Note (defined below), the Regulation S Global Notes), which shall be registered in the name of the Depository or the nominee of the Depository for the accounts of designated agents holding on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear system (Euroclear) or Clearstream Banking, Société Anonyme (Clearstream).
Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in a permanent Global Note (the Regulation S Permanent Global Note) pursuant to the applicable procedures of the Depository. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
The provisions of the Operating Procedures of the Euroclear System and Terms and Conditions Governing Use of Euroclear and the General Terms and Conditions of Clearstream Banking and Customer Handbook of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by Participants through Euroclear or Clearstream.
The term Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. The Global Notes shall bear the Global Note Legend. The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, in each case for credit to an account of an Agent Member, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear the Restricted Notes Legend.
Members of, or direct or indirect participants in, the Depository (collectively, the Agent Members) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes. The Depository may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository, or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note.
(ii) Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Definitive Notes only in
Appendix A-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
accordance with the applicable rules and procedures of the Depository and the provisions of Section 2.2. In addition, a Global Note shall be exchangeable for Definitive Notes if (x) the Depository (1) notifies the Issuer that it is unwilling or unable to continue as depository for such Global Note and the Issuer thereupon fails to appoint a successor depository or (2) has ceased to be a clearing agency registered under the Exchange Act or (y) there shall have occurred and be continuing an Event of Default with respect to such Global Note and a request has been made for such exchange; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Issuer for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. In all cases, Definitive Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository in accordance with its customary procedures.
(iii) In connection with the transfer of a Global Note as an entirety to beneficial owners pursuant to subsection (i) of this Section 2.1(b), such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and, upon written order of the Issuer signed by an Officer, the Trustee shall authenticate and make available for delivery, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations.
(iv) Any Transfer Restricted Note delivered in exchange for an interest in a Global Note pursuant to Section 2.2 shall, except as otherwise provided in Section 2.2, bear the Restricted Notes Legend.
(v) Notwithstanding the foregoing, through the Restricted Period, a beneficial interest in a Regulation S Global Note may be held only through Euroclear or Clearstream unless delivery is made in accordance with the applicable provisions of Section 2.2.
(vi) The holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Notes.
2.2 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except as set forth in Section 2.1(b). Global Notes will not be exchanged by the Issuer for Definitive Notes except under the circumstances described in Section 2.1(b)(ii). Global Notes also may be exchanged or replaced, in whole or in part, as provided in Section 2.08 of this Indenture. Beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.2(b).
Appendix A-4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depository, in accordance with the provisions of this Indenture and the applicable rules and procedures of the Depository. Beneficial interests in Transfer Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in Global Notes shall be transferred or exchanged only for beneficial interests in Global Notes. Transfers and exchanges of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Transfer Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Transfer Restricted Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in a Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person. A beneficial interest in an Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.2(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests in any Global Note that is not subject to Section 2.2(b)(i), the transferor of such beneficial interest must deliver to the Registrar (1) a written order from an Agent Member given to the Depository in accordance with the applicable rules and procedures of the Depository directing the Depository to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the applicable rules and procedures of the Depository containing information regarding the Agent Member account to be credited with such increase. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note pursuant to Section 2.2(i).
(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in a Transfer Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Transfer Restricted Global Note if the transfer complies with the requirements of Section 2.2(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in a Rule 144A Global Note, then the transferor must deliver a certificate in the form attached to the applicable Note; and
Appendix A-5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(B) if the transferee will take delivery in the form of a beneficial interest in a Regulation S Global Note, then the transferor must deliver a certificate in the form attached to the applicable Note.
(iv) Transfer and Exchange of Beneficial Interests in a Transfer Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in a Transfer Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.2(b)(ii) above and the Registrar receives the following:
(A) if the holder of such beneficial interest in a Transfer Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such beneficial interest in a Transfer Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note,
and, in each such case, if the Issuer or the Registrar so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer or exchange is effected pursuant to this subparagraph (iv) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an written order of the Issuer in the form of an Officers Certificate in accordance with Section 2.01, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred or exchanged pursuant to this subparagraph (iv).
(v) Transfer and Exchange of Beneficial Interests in an Unrestricted Global Note for Beneficial Interests in a Transfer Restricted Global Note. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Transfer Restricted Global Note.
(c) Transfer and Exchange of Beneficial Interests in Global Notes for Definitive Notes. A beneficial interest in a Global Note may not be exchanged for a Definitive Note except under the circumstances described in Section 2.1(b)(ii). A beneficial interest in a Global Note may not be transferred to a Person who takes delivery thereof in the form of a Definitive Note except under the circumstances described in Section 2.1(b)(ii). In any case, beneficial interests in Global Notes shall be transferred or exchanged only for Definitive Notes.
Appendix A-6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. Transfers and exchanges of Definitive Notes for beneficial interests in the Global Notes also shall require compliance with either subparagraph (i), (ii) or (iii) below, as applicable:
(i) Transfer Restricted Definitive Notes to Beneficial Interests in Transfer Restricted Global Notes. If any holder of a Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for a beneficial interest in a Transfer Restricted Global Note or to transfer such Transfer Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Note for a beneficial interest in a Transfer Restricted Global Note, a certificate from such holder in the form attached to the applicable Note;
(B) if such Transfer Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(C) if such Transfer Restricted Definitive Note is being transferred to a Non U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(D) if such Transfer Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(E) if such Transfer Restricted Definitive Note is being transferred to an IAI in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate from such holder in the form attached to the applicable Note, including the certifications, certificates and Opinion of Counsel, if applicable; or
(F) if such Transfer Restricted Definitive Note is being transferred to the Issuer or a Subsidiary thereof, a certificate from such holder in the form attached to the applicable Note;
the Trustee shall cancel the Transfer Restricted Definitive Note, and increase or cause to be increased the aggregate principal amount of the appropriate Transfer Restricted Global Note.
(ii) Transfer Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of a Transfer Restricted Definitive Note may exchange such Transfer Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Transfer Restricted Definitive Note to a Person who takes delivery
Appendix A-7
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such Transfer Restricted Definitive Notes proposes to transfer such Transfer Restricted Definitive Note to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note,
and, in each such case, if the Issuer or the Registrar so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of this subparagraph (ii), the Trustee shall cancel the Transfer Restricted Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. If any such transfer or exchange is effected pursuant to this subparagraph (ii) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an written order of the Issuer in the form of an Officers Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of Transfer Restricted Notes transferred or exchanged pursuant to this subparagraph (ii).
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of an Unrestricted Definitive Note may exchange such Unrestricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such transfer or exchange is effected pursuant to this subparagraph (iii) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an written order of the Issuer in the form of an Officers Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of Unrestricted Definitive Notes transferred or exchanged pursuant to this subparagraph (iii).
(iv) Unrestricted Definitive Notes to Beneficial Interests in Transfer Restricted Global Notes. An Unrestricted Definitive Note cannot be exchanged for, or transferred to a Person who takes delivery thereof in the form of, a beneficial interest in a Transfer Restricted Global Note.
Appendix A-8
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a holder of Definitive Notes and such holders compliance with the provisions of this Section 2.2(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such holder or by its attorney, duly authorized in writing. In addition, the requesting holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.2(e).
(i) Transfer Restricted Definitive Notes to Transfer Restricted Definitive Notes. A Transfer Restricted Note may be transferred to and registered in the name of a Person who takes delivery thereof in the form of a Transfer Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Note;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904 under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Note;
(C) if the transfer will be made pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate in the form attached to the applicable Note;
(D) if the transfer will be made to an IAI in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) through (D) above, a certificate in the form attached to the applicable Note; and
(E) if such transfer will be made to the Issuer or a Subsidiary thereof, a certificate in the form attached to the applicable Note.
(ii) Transfer Restricted Definitive Notes to Unrestricted Definitive Notes. Any Transfer Restricted Definitive Note may be exchanged by the holder thereof for an Unrestricted Definitive Note or transferred to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for an Unrestricted Definitive Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such Transfer Restricted Definitive Note proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form attached to the applicable Note,
Appendix A-9
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
and, in each such case, if the Issuer or the Registrar so request, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A holder of an Unrestricted Definitive Note may transfer such Unrestricted Definitive Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note at any time. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the holder thereof.
(iv) Unrestricted Definitive Notes to Transfer Restricted Definitive Notes. An Unrestricted Definitive Note cannot be exchanged for, or transferred to a Person who takes delivery thereof in the form of, a Transfer Restricted Definitive Note.
At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.
(f) Legend.
(i) Except as permitted by the following paragraph (iii), (iv) or (v), each Note certificate evidencing the Global Notes and any Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
Appendix A-10
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE FIRST LIEN INTERCREDITOR AGREEMENT AMONG WILMINGTON TRUST, NATIONAL ASSOCIATION, AS COLLATERAL AGENT, BARCLAYS BANK PLC, AS ADMINISTRATIVE AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS INITIAL OTHER AUTHORIZED REPRESENTATIVE, AND THE OTHER PARTIES FROM TIME TO TIME PARTY THERETO, ENTERED INTO ON THE ISSUE DATE, AS IT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH THE INDENTURE.
Appendix A-11
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Each Regulation S Note shall bear the following additional legend:
BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
Each Definitive Note shall bear the following additional legend:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted Definitive Note, the Registrar shall permit the holder thereof to exchange such Transfer Restricted Note for a Definitive Note that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Definitive Note if the holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Note).
(iii) Upon a sale or transfer after the expiration of the Restricted Period of any Initial Note acquired pursuant to Regulation S, all requirements that such Initial Note bear the Restricted Notes Legend shall cease to apply and the requirements requiring any such Initial Note be issued in global form shall continue to apply.
(iv) Any Additional Notes sold in a registered offering shall not be required to bear the Restricted Notes Legend (other than the portion thereof relating to the First Lien Intercreditor Agreement).
(g) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 of this Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.
Appendix A-12
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(h) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate, Definitive Notes and Global Notes at the Registrars request.
(ii) No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 3.06, 4.06, 4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of transfer of any Note, the Issuer, the Trustee, a Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.
(iv) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.
(i) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or any other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the holders and all payments to be made to the holders under the Notes shall be given or made only to the registered holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in
Appendix A-13
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
Appendix A-14
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSORS NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend for Notes Offered in Reliance on Regulation S]
BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN [IN THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) RESELL
Exhibit A-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
[Restricted Notes Legend]
THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE FIRST LIEN INTERCREDITOR AGREEMENT AMONG WILMINGTON TRUST, NATIONAL ASSOCIATION, AS COLLATERAL AGENT, BARCLAYS BANK PLC, AS ADMINISTRATIVE AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS INITIAL OTHER AUTHORIZED REPRESENTATIVE, AND THE OTHER PARTIES FROM TIME TO TIME PARTY THERETO, ENTERED INTO ON THE ISSUE DATE, AS IT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH THE INDENTURE.
[Definitive Notes Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
A-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[FORM OF INITIAL NOTE]
POMEGRANATE MERGER SUB, INC.
(to be merged with and into The Fresh Market, Inc.)
No. [ ]
144A CUSIP No. 35804H AA4
144A ISIN No. US35804HAA41
REG S CUSIP No. U3144H AA8
REG S ISIN No. USU3144HAA87
$[ ]
9.75% First-Priority Senior Secured Note due 2023
Pomegranate Merger Sub, Inc., a Delaware corporation (together with its successors and assigns under the Indenture, including, without limitation, The Fresh Market, Inc., a Delaware corporation), promises to pay to Cede & Co., or registered assigns, the principal sum set forth on the Schedule of Increases or Decreases in Global Note attached hereto on May 1, 2023.
Interest Payment Dates: May 1 and November 1, commencing [ ]1
Record Dates April 15 and October 15
Additional provisions of this Note are set forth on the other side of this Note.
1 | To be November 1, 2016 for Notes issued on April 27, 2016. |
A-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.
POMEGRANATE MERGER SUB, INC. | ||
By: |
| |
Name: | ||
Title: |
Dated:
A-4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TRUSTEES CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST, NATIONAL ASSOCIATION
as Trustee, certifies that this is one of the Notes referred to in the Indenture. | ||
By: |
| |
Authorized Signatory | ||
Dated: | ||
*/ | If the Note is to be issued in global form, add the Global Notes Legend and the attachment from Exhibit A captioned TO BE ATTACHED TO GLOBAL NOTES -SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE. |
A-5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[FORM OF REVERSE SIDE OF INITIAL NOTE]
9.75% First-Priority Senior Secured Note Due 2023
1. | Interest |
POMEGRANATE MERGER SUB, INC., a Delaware corporation (such entity, and its successors and assigns under the Indenture, including, without limitation, THE FRESH MARKET, INC., hereinafter referred to, being herein called, the Issuer), promises to pay interest on the principal amount of this Note at the rate per annum shown above. The Issuer shall pay interest semiannually on May 1 and November 1 of each year (each an Interest Payment Date), commencing [ ]2. Interest on the Notes shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from April 27, 2016, until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest on overdue principal at the rate borne by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.
2. | Method of Payment |
The Issuer shall pay interest on the Notes (except defaulted interest) to the Persons who are registered holders at the close of business on April 15 or October 15 (each a Record Date) immediately preceding the Interest Payment Date even if Notes are canceled after the Record Date and on or before the Interest Payment Date (whether or not a Business Day). Holders must surrender Notes to the Paying Agent to collect principal payments. The Issuer shall pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company or any successor depositary. The Issuer shall make all payments in respect of a certificated Note (including principal, premium, if any, and interest) at the office of the Paying Agent, except that, at the option of the Issuer, payment of interest may be made by mailing a check to the registered address of each holder thereof; provided, however, that payments on the Notes may also be made, in the case of a holder of at least $1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
2 | To be November 1, 2016 for Notes issued on April 27, 2016. |
A-6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
3. | Paying Agent and Registrar |
Initially, Wilmington Trust, National Association, as trustee under the Indenture (the Trustee), will act as Paying Agent and Registrar. The Issuer may appoint and change any Paying Agent or Registrar without notice. The Issuer or any of its domestically incorporated Subsidiaries may act as Paying Agent or Registrar.
4. | Indenture |
The Issuer issued the Notes under an Indenture dated as of April 27, 2016 (the Indenture), among the Issuer, the Subsidiary Guarantors party thereto and the Trustee. Capitalized terms used herein are used as defined in the Indenture, unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all terms and provisions of the Indenture, and the holders (as defined in the Indenture) are referred to the Indenture for a statement of such terms and provisions. If and to the extent that any provision of the Notes limits, qualifies or conflicts with a provision of the Indenture, such provision of the Indenture shall control.
The Notes are senior secured obligations of the Issuer. This Note is one of the Initial Notes referred to in the Indenture. The Notes include the Initial Notes and any Additional Notes. The Initial Notes and any Additional Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Issuer and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, Incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of certain capital stock of the Issuer and such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or Incur Liens and make Asset Sales. The Indenture also imposes limitations on the ability of the Issuer and each Subsidiary Guarantor to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of its property.
To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Issuer under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed the Guaranteed Obligations pursuant to the terms of the Indenture and any Subsidiary Guarantor that executes a Subsidiary Guarantee will unconditionally guarantee the Guaranteed Obligations on a senior secured basis pursuant to the terms of the Indenture.
5. | Redemption |
On or after May 1, 2019, the Issuer may redeem the Notes at its option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice mailed by the Issuer by first-class mail to each holders registered address, or delivered electronically if held by DTC, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
on the relevant Interest Payment Date), if redeemed during the 12-month period commencing on May 1 of the years set forth below:
Period |
Redemption Price | |||
2019 |
107.313 | % | ||
2020 |
104.875 | % | ||
2021 |
102.438 | % | ||
2022 and thereafter |
100.000 | % |
In addition, prior to May 1, 2019, the Issuer may redeem the Notes at its option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days prior notice mailed by the Issuer by first-class mail to each holders registered address, or delivered electronically if held by DTC, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date).
Notwithstanding the foregoing, at any time and from time to time on or prior to May 1, 2019, the Issuer may redeem in the aggregate up to 35% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of Additional Notes) in an amount equal to the net cash proceeds of one or more Equity Offerings (1) by the Issuer or (2) by any direct or indirect parent of the Issuer to the extent the net cash proceeds thereof are contributed to the common equity capital of the Issuer or are used to purchase Capital Stock (other than Disqualified Stock) of the Issuer, at a redemption price (expressed as a percentage of principal amount thereof) of 109.75%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date); provided, however, that at least 50% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of Additional Notes) must remain outstanding after each such redemption; provided, further, that such redemption shall occur within 90 days after the date on which any such Equity Offering is consummated upon not less than 30 nor more than 60 days notice mailed by the Issuer to each holder of Notes being redeemed, or delivered electronically if held by DTC, and otherwise in accordance with the procedures set forth in the Indenture.
Notice of any redemption upon any corporate transaction or other event (including any Equity Offering, incurrence of Indebtedness, Change of Control or other transaction) may be given prior to the completion thereof. In addition, any redemption described above or notice thereof may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event.
6. | Mandatory Redemption |
The Issuer will not be required to make any mandatory redemption or sinking fund payments with respect to the Notes.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
7. | Notice of Redemption |
Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date, to each holder of Notes to be redeemed at its registered address (with a copy to the Trustee) or otherwise in accordance with the procedures of The Depository Trust Company (DTC), except that redemption notices may be mailed more than 60 days prior to the redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture pursuant to Article VIII thereof. If money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with a Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date, interest ceases to accrue on such Notes (or such portions thereof) called for redemption.
8. | Repurchase of Notes at the Option of the Holders upon Change of Control and Asset Sales. |
Upon the occurrence of a Change of Control, each holder shall have the right, subject to certain conditions specified in the Indenture, to cause the Issuer to repurchase all or any part of such holders Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), as provided in, and subject to the terms of, the Indenture.
In accordance with Section 4.06 of the Indenture, the Issuer will be required to offer to purchase Notes upon the occurrence of certain events.
9. | Ranking and Collateral. |
From the Issue Date, the Notes and the Subsidiary Guarantees will be secured by first-priority security interest (subject to the Permitted Liens and Liens permitted by Section 4.12 of the Indenture) in the Collateral pursuant to the Security Documents (but subject to the terms and conditions of the Security Documents and the First Lien Intercreditor Agreement (including the Priority Waterfall)). The Liens upon any and all Collateral are, to the extent and in the manner provided in the First Lien Intercreditor Agreement, equal in ranking with all present and future Liens securing First-Priority Obligations and will be senior in ranking to all present and future Liens securing Junior Lien Obligations.
10. | Denominations; Transfer; Exchange |
The Notes are in registered form, without coupons, in denominations of $2,000 principal amount and integral multiples of $1,000 in excess thereof. A holder shall register the transfer of or exchange of the Notes in accordance with the Indenture. Upon any registration of transfer or exchange, the Registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or to transfer or exchange any Notes for a period of 15 days prior to a selection of Notes to be redeemed.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
11. | Persons Deemed Owners |
The registered holder of this Note shall be treated as the owner of it for all purposes.
12. | Unclaimed Money |
If money for the payment of principal or interest remains unclaimed for two years, the Trustee and a Paying Agent shall pay the money back to the Issuer at its written request unless an abandoned property law designates another Person. After any such payment, the holders entitled to the money must look to the Issuer for payment as general creditors and the Trustee and a Paying Agent shall have no further liability with respect to such monies.
13. | Discharge and Defeasance |
Subject to certain conditions, the Issuer at any time may terminate some of or all its obligations under the Notes and the Indenture if the Issuer deposit with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be.
14. | Amendment; Waiver |
Subject to certain exceptions set forth in the Indenture, (i) the Indenture, the Notes, the Subsidiary Guarantees, the Security Documents and the First Lien Intercreditor Agreement may be amended with the written consent of the holders of at least a majority in aggregate principal amount of the Notes then outstanding and (ii) any past default or compliance with any provisions may be waived with the written consent of the holders of at least a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of any holder, the Issuer, the First-Priority Collateral Agent and the Trustee may amend the Indenture, the Notes, the Subsidiary Guarantees, the Security Documents and/or the First Lien Intercreditor Agreement (i) to cure any ambiguity, omission, mistake, defect or inconsistency; (ii) to provide for the assumption by a Successor Company (with respect to the Issuer) of the obligations of the Issuer under the Indenture, the Notes, the Security Documents and the First Lien Intercreditor Agreement; (iii) to provide for the assumption by a Successor Subsidiary Guarantor (with respect to any Subsidiary Guarantor), as the case may be, of the obligations of a Subsidiary Guarantor under the Indenture, its Subsidiary Guarantee, the Security Documents and the First Lien Intercreditor Agreement; (iv) to provide for uncertificated Notes in addition to or in place of certificated Notes, provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (v) to conform the text of the Indenture, the Subsidiary Guarantees, the Notes, the Security Documents or the First Lien Intercreditor Agreement to any provision of the Description of Notes in the Offering Memorandum to the extent that such provision in the Indenture, the Subsidiary Guarantee, the Notes, the Security Documents or the First Lien Intercreditor Agreement, as applicable, was intended by the Issuer to be a verbatim recitation of a provision in the Description of Notes in the Offering Memorandum, as stated in an Officers Certificate; (vi) to add a Subsidiary Guarantee or
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
collateral with respect to the Notes, (vii) to release or subordinate Collateral as permitted by the Indenture, the Security Documents or the First Lien Intercreditor Agreement; (viii) to add additional secured creditors holding other First-Priority Obligations (including First-Priority Obligations that have priority under the Priority Waterfall) or Junior Lien Obligations so long as such obligations are not prohibited by the Indenture; (ix) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA (if the Issuer elects to qualify the Indenture under the TIA), (x) to add to the covenants of the Issuer for the benefit of the holders or to surrender any right or power herein conferred upon the Issuer; (xi) to make any change that does not adversely affect the rights of any holder in any material respect; or (xii) to make changes to provide for the issuance of Additional Notes, which shall have terms substantially identical in all material respects to the Initial Notes, and which shall be treated, together with any outstanding Initial Notes, as a single issue of securities.
In addition, the First Lien Intercreditor Agreement may be amended without notice to or the consent of any holder, the Trustee or the First-Priority Collateral Agent in connection with the permitted entry into the First Lien Intercreditor Agreement of any class of additional secured creditors holding Other First-Priority Obligations.
15. | Defaults and Remedies |
If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Issuer) occurs and is continuing, the Trustee by notice to the Issuer or the holders of at least 30% in principal amount of outstanding Notes by notice to the Issuer, with a copy to the Trustee, may declare the principal of, premium, if any, and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of, premium, if any, and interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any holders. Under certain circumstances, the holders of a majority in principal amount of outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture or the Security Documents at the request or direction of any of the holders unless such holders have offered to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense and certain other conditions are complied with. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder may pursue any remedy with respect to the Indenture or the Notes unless (i) such holder has previously given the Trustee notice that an Event of Default is continuing, (ii) holders of at least 30% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy, (iii) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity, and (v) the holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the holders of a majority in principal amount of outstanding Notes are given the right to direct the time, method and place of conducting any
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification reasonably satisfactory to it against all losses and expenses caused by taking or not taking such action.
16. | Trustee Dealings with the Issuer |
Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee.
17. | No Recourse Against Others |
No director, officer, employee, manager, incorporator or holder of any Equity Interests in the Issuer or any Subsidiary Guarantor or any direct or indirect parent companies, as such, will have any liability for any obligations of the Issuer or any Subsidiary Guarantor under the Notes, the Indenture or the Subsidiary Guarantees, as applicable, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability.
18. | Authentication |
This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.
19. | Abbreviations |
Customary abbreviations may be used in the name of a holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
20. | Governing Law |
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
21. | CUSIP Numbers; ISINs |
The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and have directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as a convenience to the holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
The Issuer will furnish to any holder of Notes upon written request and without charge to the holder a copy of the Indenture which has in it the text of this Note.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
|
(Print or type assignees name, address and zip code) |
|
(Insert assignees soc. sec. or tax I.D. No.) |
and irrevocably appoint agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.
Date: | Your Signature: |
| ||
| ||||
Sign exactly as your name appears on the other side of this Note. | ||||
Signature Guarantee: |
Date: |
| |||
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee | Signature of Signature Guarantee |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER RESTRICTED NOTES
This certificate relates to $ principal amount of Notes held in (check applicable space) book-entry or definitive form by the undersigned.
The undersigned (check one box below):
☐ | has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depository a Note or Notes in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above); |
☐ | has requested the Trustee by written order to exchange or register the transfer of a Note or Notes. |
In connection with any transfer of any of the Notes evidenced by this certificate occurring while this Note is still a Transfer Restricted Definitive Note or a Transfer Restricted Global Note, the undersigned confirms that such Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) | ☐ | to the Issuer; or | ||
(2) | ☐ | to the Registrar for registration in the name of the holder, without transfer; or | ||
(3) | ☐ | pursuant to an effective registration statement under the Securities Act of 1933; or | ||
(4) | ☐ | inside the United States to a qualified institutional buyer (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or | ||
(5) | ☐ | outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933 and such Note shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in the Indenture); or | ||
(6) | ☐ | to an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or | ||
(7) | ☐ | pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any Person other than the registered holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Issuer or the Trustee have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
Date: | Your Signature: |
| ||
| ||||
Sign exactly as your name appears on the other side of this Note. | ||||
Signature Guarantee: |
Date: |
| |||
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee | Signature of Signature Guarantee |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigneds foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Date: |
| |||
NOTICE: To be executed by an executive officer |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of this Global Note is $ . The following increases or decreases in this Global Note have been made:
Date of Exchange |
Amount of decrease in Principal Amount of this Global Note |
Amount of increase in Principal Amount of this Global Note |
Principal amount of this Global Note following such decrease or increase |
Signature of authorized signatory of Trustee or Notes Custodian | ||||
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, check the box:
Asset Sale ☐ Change of Control ☐
If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of the Indenture, state the amount ($2,000 or any integral multiple of $1,000 in excess thereof):
$
Date: | Your Signature: | |
(Sign exactly as your name appears on the other side of this Note) |
Signature Guarantee: |
| |
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee |
A-19
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT B
[FORM OF TRANSFEREE LETTER OF REPRESENTATION]
TRANSFEREE LETTER OF REPRESENTATION
[THE | FRESH MARKET, INC.] |
[c/o Wilmington Trust, National Association
Global Capital Markets
50 South Sixth Street, Suite 1290
Minneapolis, MN 55402
Attention: The Fresh Market, Inc. Administrator ]
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[ ] principal amount of the 9.75% First-Priority Senior Secured Notes due 2023 (the Notes) of [THE FRESH MARKET, INC.] (collectively with its successors and assigns, the Issuer).
Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
Name: |
Address: |
Taxpayer ID Number: |
The undersigned represents and warrants to you that:
1. We are an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the Securities Act)), purchasing for our own account or for the account of such an institutional accredited investor at least $100,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date that is one year after the later of the date of original issue and the last date on which either of the Issuer or any affiliate of the Issuer was the owner of such Notes (or any predecessor thereto) (the Resale Restriction Termination Date) only (a) in the United States to a person whom we reasonably believe is a qualified institutional buyer (as defined in rule 144A under the Securities Act) in a
B-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
transaction meeting the requirements of Rule 144A, (b) outside the United States in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if applicable) or (d) pursuant to an effective registration statement under the Securities Act, in each of cases (a) through (d) in accordance with any applicable securities laws of any state of the United States. In addition, we will, and each subsequent holder is required to, notify any purchaser of the Note evidenced hereby of the resale restrictions set forth above. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made to an institutional accredited investor prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause 1(b), 1(c) or 1(d) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Issuer and the Trustee.
Dated: |
TRANSFEREE: | , |
By: |
|
B-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT C
[FORM OF SUPPLEMENTAL INDENTURE]
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this Supplemental Indenture) dated as of [ ], among [SUBSIDIARY GUARANTOR] (the New Subsidiary Guarantor), a subsidiary of THE FRESH MARKET, INC., a Delaware Corporation (or its successor) (the Issuer), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association, as trustee under the indenture referred to below (the Trustee).
W I T N E S S E T H :
WHEREAS the Issuer, certain Subsidiary Guarantors and the Trustee have heretofore executed an indenture, dated as of April 27, 2016 (as amended, supplemented or otherwise modified, the Indenture), providing for the issuance of the Issuers 9.75% First-Priority Senior Secured Notes due 2023 (the Notes), initially in the aggregate principal amount of $800,000,000;
WHEREAS Sections 4.11 and 12.07 of the Indenture provide that under certain circumstances the Issuer is required to cause the New Subsidiary Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee all the Issuers Obligations under the Notes and the Indenture pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee and the Issuer are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantor, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:
1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term holders in this Supplemental Indenture shall refer to the term holders as defined in the Indenture and the Trustee acting on behalf of and for the benefit of such holders. The words herein, hereof and hereby and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.
2. Agreement to Guarantee. The New Subsidiary Guarantor hereby agrees, jointly and severally with all existing Subsidiary Guarantors (if any), to unconditionally guarantee the Issuers Obligations under the Notes and the Indenture on the terms and subject to the conditions set forth in Article XII of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes and to perform all of the obligations and agreements of a Subsidiary Guarantor under the Indenture.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
3. Notices. All notices or other communications to the New Subsidiary Guarantor shall be given as provided in Section 13.02 of the Indenture.
4. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.
5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
6. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.
7. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
8. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction thereof.
[Remainder of page intentionally left blank.]
C-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
[THE FRESH MARKET, INC.] | ||
By: |
| |
Name: | ||
Title: | ||
[NEW SUBSIDIARY GUARANTOR], as a Subsidiary Guarantor | ||
By: |
| |
Name: [ ] | ||
Title: [ ] | ||
WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee | ||
By: |
| |
Name: [ ] | ||
Title: [ ] |
C-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT D
[FORM OF SUPPLEMENTAL INDENTURE]
SUPPLEMENTAL INDENTURE NO. 1
SUPPLEMENTAL INDENTURE NO. 1 (this Supplemental Indenture), dated as of April 27, 2016, among The Fresh Market, Inc., a Delaware corporation (The Fresh Market), The Fresh Market Gift Company, LLC, a Virginia limited liability company (TFM Gift Company), The Fresh Market of Massachusetts, Inc., a Massachusetts corporation (TFM Massachusetts), TFM License Holdings 1, LLC, a Texas limited liability company (TFM License 1), TFM License Holdings 2, LLC, a Texas limited liability company (TFM License 2), and TFM License Holdings 3, LLC, a Texas limited liability company (TFM License 3 and, together with TFM Gift Company, TFM Massachusetts, TFM License 1 and TMF License 2, the Guarantors), and Wilmington Trust, National Association, a national banking association, as trustee under the indenture referred to below (the Trustee).
W I T N E S S E T H :
WHEREAS Pomegranate Merger Sub, Inc. (to be merged with and into The Fresh Market), a Delaware corporation (Merger Sub) and the Trustee have heretofore executed an indenture, dated as of April 27, 2016 (as amended, supplemented or otherwise modified, the Indenture), providing for the issuance of 9.75% First-Priority Senior Secured Notes due 2023 (the Notes), initially in the aggregate principal amount of $800,000,000;
WHEREAS Section 5.01(a) of the Indenture provides that upon the consummation of the Issuer Merger, The Fresh Market and each Guarantor shall immediately execute and deliver to the Trustee a supplemental indenture pursuant to which (a) The Fresh Market will expressly assume all the obligations of Merger Sub under the Indenture and the Security Documents, and (b) each Guarantor will provide a Subsidiary Guarantee in respect of The Fresh Markets obligations under the Indenture and the Notes; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, The Fresh Market and the Guarantors are authorized to execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, The Fresh Market, the Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:
1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term holders in this Supplemental Indenture shall refer to the term holders as defined in the Indenture and the Trustee acting on behalf of and for the benefit of such holders. The words herein, hereof and hereby and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof.
D-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
2. Agreement to Assume Obligations. The Fresh Market hereby agrees to unconditionally assume Merger Subs Obligations under the Notes, the Indenture and the Security Documents and to be bound by all other applicable provisions of the Notes, the Indenture and the Security Documents on the terms provided for therein and to perform all of the obligations and agreements of Merger Sub under the Indenture.
3. Agreement to Guarantee. Each of the Guarantors hereby agrees, jointly and severally, to unconditionally guarantee The Fresh Markets Obligations under the Notes and the Indenture on the terms and subject to the conditions set forth in Article XII of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes and to perform all of the obligations and agreements of a Subsidiary Guarantor under the Indenture.
4. Notices. All notices or other communications to The Fresh Market and each of the Guarantors shall be given as provided in Section 13.02 of the Indenture.
5. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.
6. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
7. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture or to statements made in the recitals.
8. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction thereof.
[Remainder of page intentionally left blank.]
D-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above.
THE FRESH MARKET, INC. | ||||
By: |
| |||
Name: | ||||
Title: | ||||
TFM LICENSE HOLDINGS 3, LLC | ||||
By: |
| |||
Name: | ||||
Title: | ||||
THE FRESH MARKET OF MASSACHUSETTS, INC. | ||||
By: |
| |||
Name: | ||||
Title: | ||||
TFM LICENSE HOLDINGS 1, LLC | ||||
By: |
| |||
Name: | ||||
Title: | ||||
TFM LICENSE HOLDINGS 2, LLC | ||||
By: |
| |||
Name: | ||||
Title: | ||||
THE FRESH MARKET GIFT COMPANY, LLC | ||||
By: |
| |||
Name: | ||||
Title: |
D-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee | ||
By: |
| |
Name: | ||
Title: |
D-4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.4
EXECUTION VERSION
THE FRESH MARKET, INC.,
as Issuer,
and the Guarantors party hereto from time to time,
Super Senior Secured Notes due 2025
INDENTURE
Dated as of March 13, 2020
and
Wilmington Trust, National Association
as Trustee
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TABLE OF CONTENTS
Page | ||||||
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE |
1 | |||||
SECTION 1.01 |
Definitions |
1 | ||||
SECTION 1.02 |
Terms Generally |
51 | ||||
SECTION 1.03 |
Effectuation of Transactions |
52 | ||||
SECTION 1.04 |
Exchange Rates; Currency Equivalents |
52 | ||||
SECTION 1.05 |
Times of Day |
52 | ||||
SECTION 1.06 |
No Incorporation by Reference of Trust Indenture Act |
52 | ||||
SECTION 1.07 |
Accounting Terms |
52 | ||||
ARTICLE II. THE NOTES |
52 | |||||
SECTION 2.01 |
Amount of Notes |
52 | ||||
SECTION 2.02 |
Form and Dating |
53 | ||||
SECTION 2.03 |
Execution and Authentication |
54 | ||||
SECTION 2.04 |
Registrar and Paying Agent |
54 | ||||
SECTION 2.05 |
Paying Agent to Hold Money in Trust |
55 | ||||
SECTION 2.06 |
Holder Lists |
55 | ||||
SECTION 2.07 |
Transfer and Exchange |
55 | ||||
SECTION 2.08 |
Replacement Notes |
56 | ||||
SECTION 2.09 |
Outstanding Notes |
57 | ||||
SECTION 2.10 |
Cancellation |
57 | ||||
SECTION 2.11 |
Defaulted Interest |
58 | ||||
SECTION 2.12 |
CUSIP Numbers, ISINs, Etc. |
58 | ||||
SECTION 2.13 |
Calculation of Principal Amount of Notes |
58 | ||||
SECTION 2.14 |
[Reserved] |
59 | ||||
SECTION 2.15 |
Interest |
59 | ||||
SECTION 2.16 |
[Reserved] |
60 | ||||
SECTION 2.17 |
Benchmark Replacement |
60 | ||||
ARTICLE III. REDEMPTION |
61 | |||||
SECTION 3.01 |
Amortization; Redemption of Notes |
61 | ||||
SECTION 3.02 |
Voluntary and Mandatory Redemption and Repurchase of Notes |
62 | ||||
SECTION 3.03 |
Notices to Trustee |
66 | ||||
SECTION 3.04 |
Selection of Notes to be Redeemed |
67 | ||||
SECTION 3.05 |
Notice of Redemption |
67 | ||||
SECTION 3.06 |
Effect of Notice of Redemption |
69 | ||||
SECTION 3.07 |
Deposit of Redemption Price |
69 | ||||
SECTION 3.08 |
Applicability of Article |
69 | ||||
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE ISSUER |
70 | |||||
SECTION 4.01 |
Organization; Powers |
70 | ||||
SECTION 4.02 |
Authorization |
70 | ||||
SECTION 4.03 |
Enforceability |
70 |
i
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 4.04 |
Governmental Approvals |
71 | ||||
SECTION 4.05 |
Financial Statements |
71 | ||||
SECTION 4.06 |
No Material Adverse Effect |
71 | ||||
SECTION 4.07 |
Title to Properties; Possession Under Leases |
71 | ||||
SECTION 4.08 |
Subsidiaries |
72 | ||||
SECTION 4.09 |
Litigation; Compliance with Laws |
72 | ||||
SECTION 4.10 |
Federal Reserve Regulations |
73 | ||||
SECTION 4.11 |
Investment Company Act |
73 | ||||
SECTION 4.12 |
Use of Proceeds |
73 | ||||
SECTION 4.13 |
Tax Returns |
73 | ||||
SECTION 4.14 |
No Material Misstatements |
74 | ||||
SECTION 4.15 |
Employee Benefit Plans |
74 | ||||
SECTION 4.16 |
Environmental Matters |
75 | ||||
SECTION 4.17 |
Security Documents |
76 | ||||
SECTION 4.18 |
Location of Real Property |
77 | ||||
SECTION 4.19 |
[Reserved] |
77 | ||||
SECTION 4.20 |
Labor Matters |
77 | ||||
SECTION 4.21 |
Insurance |
77 | ||||
SECTION 4.22 |
No Default |
77 | ||||
SECTION 4.23 |
Intellectual Property; Licenses, Etc. |
77 | ||||
SECTION 4.24 |
Senior Debt; First Priority Obligations |
78 | ||||
SECTION 4.25 |
USA PATRIOT Act; Sanctions; Anti-Terrorism and Anti-Corruption Laws |
78 | ||||
SECTION 4.26 |
[Reserved] |
79 | ||||
SECTION 4.27 |
Food Laws |
79 | ||||
ARTICLE V. [RESERVED] |
80 | |||||
ARTICLE VI. [RESERVED] |
80 | |||||
ARTICLE VII. AFFIRMATIVE COVENANTS |
80 | |||||
SECTION 7.01 |
Existence; Business and Properties |
80 | ||||
SECTION 7.02 |
Insurance |
81 | ||||
SECTION 7.03 |
Taxes |
82 | ||||
SECTION 7.04 |
Financial Statements, Reports, etc. |
82 | ||||
SECTION 7.05 |
Litigation and Other Notices |
85 | ||||
SECTION 7.06 |
Compliance with Laws |
85 | ||||
SECTION 7.07 |
Maintaining Records; Access to Properties and Inspections |
85 | ||||
SECTION 7.08 |
Use of Proceeds |
86 | ||||
SECTION 7.09 |
Compliance with Environmental Laws |
86 | ||||
SECTION 7.10 |
Further Assurances; Additional Security |
86 | ||||
SECTION 7.11 |
[Reserved] |
89 | ||||
SECTION 7.12 |
Post-Closing |
89 | ||||
SECTION 7.13 |
Compliance with the USA PATRIOT Act, Anti-Terrorism Laws, Anti-Corruption Laws and Sanctions |
89 | ||||
SECTION 7.14 |
Cash Management Systems |
89 | ||||
SECTION 7.15 |
Employee Benefit Plans |
90 | ||||
SECTION 7.16 |
ERISA-Related Information |
90 |
ii
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ARTICLE VIII. NEGATIVE COVENANTS |
92 | |||||
SECTION 8.01 |
Indebtedness |
92 | ||||
SECTION 8.02 |
Liens |
95 | ||||
SECTION 8.03 |
Sale and Lease-Back Transactions |
100 | ||||
SECTION 8.04 |
Investments, Loans and Advances |
100 | ||||
SECTION 8.05 |
Mergers, Consolidations, Sales of Assets and Acquisitions |
103 | ||||
SECTION 8.06 |
Dividends and Distributions |
105 | ||||
SECTION 8.07 |
Transactions with Affiliates |
106 | ||||
SECTION 8.08 |
Business of the Issuer and the Subsidiaries |
109 | ||||
SECTION 8.09 |
Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. |
110 | ||||
SECTION 8.10 |
Fiscal Year |
113 | ||||
SECTION 8.11 |
Financial Covenant |
113 | ||||
SECTION 8.12 |
Compliance with ERISA |
113 | ||||
SECTION 8.13 |
Compliance with Anti-Terrorism and Anti-Corruption Laws and Sanctions |
113 | ||||
SECTION 8.14 |
Negative Pledge |
114 | ||||
ARTICLE IX. HOLDINGS NEGATIVE COVENANTS |
114 | |||||
ARTICLE X. DEFAULTS AND REMEDIES |
115 | |||||
SECTION 10.01 |
Events of Default |
115 | ||||
SECTION 10.02 |
Recission |
118 | ||||
SECTION 10.03 |
Treatment of Certain Payments |
119 | ||||
SECTION 10.04 |
[Reserved] |
119 | ||||
SECTION 10.05 |
Control by Majority |
119 | ||||
ARTICLE XI. TRUSTEE |
120 | |||||
SECTION 11.01 |
Duties of Trustee |
120 | ||||
SECTION 11.02 |
Rights of Trustee |
121 | ||||
SECTION 11.03 |
Individual Rights of Trustee |
123 | ||||
SECTION 11.04 |
Trustees Disclaimer |
123 | ||||
SECTION 11.05 |
Notice of Defaults |
124 | ||||
SECTION 11.06 |
[Reserved] |
124 | ||||
SECTION 11.07 |
Expenses; Indemnity |
124 | ||||
SECTION 11.08 |
Replacement of Trustee |
126 | ||||
SECTION 11.09 |
Successor Trustee by Merger |
127 | ||||
SECTION 11.10 |
Eligibility; Disqualification |
127 | ||||
SECTION 11.11 |
Limitation on Duty of Trustee in Respect of Collateral; Indemnification |
127 | ||||
ARTICLE XII. DISCHARGE OF INDENTURE; DEFEASANCE |
128 | |||||
SECTION 12.01 |
Discharge of Liability on Notes; Defeasance |
128 | ||||
SECTION 12.02 |
Conditions to Defeasance |
130 | ||||
SECTION 12.03 |
Application of Trust Money |
131 | ||||
SECTION 12.04 |
Repayment to Issuer |
131 | ||||
SECTION 12.05 |
Reinstatement |
131 |
iii
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ARTICLE XIII. AMENDMENTS AND WAIVERS |
131 | |||||
SECTION 13.01 |
Amendments and Waivers |
131 | ||||
SECTION 13.02 |
Revocation and Effect of Consents and Waivers |
135 | ||||
SECTION 13.03 |
Notation on or Exchange of Notes |
135 | ||||
SECTION 13.04 |
Trustee to Sign Amendments |
135 | ||||
SECTION 13.05 |
Calculation of Principal Amount |
136 | ||||
ARTICLE XIV. RANKING OF NOTE LIENS |
136 | |||||
SECTION 14.01 |
Relative Rights |
136 | ||||
SECTION 14.02 |
Trustee Not Fiduciary for Noteholders or Other First Lien Holders |
137 | ||||
ARTICLE XV. COLLATERAL |
137 | |||||
SECTION 15.01 |
Appointment |
137 | ||||
SECTION 15.02 |
Delegation of Duties |
138 | ||||
SECTION 15.03 |
Exculpatory Provisions |
138 | ||||
SECTION 15.04 |
Reliance by Agents |
139 | ||||
SECTION 15.05 |
Notice of Default |
140 | ||||
SECTION 15.06 |
Non-Reliance on Agents and other Noteholder Parties |
140 | ||||
SECTION 15.07 |
Indemnification |
140 | ||||
SECTION 15.08 |
Agent in Its Individual Capacity |
141 | ||||
SECTION 15.09 |
Security Documents |
141 | ||||
SECTION 15.10 |
[Reserved] |
142 | ||||
SECTION 15.11 |
Authorization of Actions to Be Taken |
142 | ||||
SECTION 15.12 |
Release of Liens |
143 | ||||
SECTION 15.13 |
Powers Exercisable by Receiver or Trustee |
145 | ||||
SECTION 15.14 |
Release Upon Termination of the Issuers Obligations |
145 | ||||
SECTION 15.15 |
Designations |
145 | ||||
SECTION 15.16 |
Right to Realize on Collateral and Enforce Guarantees |
145 | ||||
ARTICLE XVI. MISCELLANEOUS |
146 | |||||
SECTION 16.01 |
Notices; Communications |
146 | ||||
SECTION 16.02 |
Certificate and Opinion as to Conditions Precedent |
148 | ||||
SECTION 16.03 |
Statements Required in Certificate or Opinion |
148 | ||||
SECTION 16.04 |
When Notes Disregarded |
148 | ||||
SECTION 16.05 |
Survival of Indenture |
148 | ||||
SECTION 16.06 |
Binding Effect |
149 | ||||
SECTION 16.07 |
Successors and Assigns; Assignments and Transfers |
149 | ||||
SECTION 16.08 |
No Waiver |
150 | ||||
SECTION 16.09 |
Modification |
150 | ||||
SECTION 16.10 |
[Reserved] |
150 | ||||
SECTION 16.11 |
Rules by Trustee, Paying Agent and Registrar |
151 | ||||
SECTION 16.12 |
Legal Holidays |
151 | ||||
SECTION 16.13 |
GOVERNING LAW |
151 | ||||
SECTION 16.14 |
Entire Agreement |
151 |
iv
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 16.15 |
WAIVER OF JURY TRIAL |
151 | ||||
SECTION 16.16 |
Severability |
151 | ||||
SECTION 16.17 |
No Recourse Against Others |
152 | ||||
SECTION 16.18 |
Successors |
152 | ||||
SECTION 16.19 |
Counterparts |
152 | ||||
SECTION 16.20 |
Headings |
152 | ||||
SECTION 16.21 |
Jurisdiction; Consent to Service of Process |
152 | ||||
SECTION 16.22 |
Confidentiality |
153 | ||||
SECTION 16.23 |
Tax Treatment |
154 | ||||
SECTION 16.24 |
USA Patriot Act Notice |
154 | ||||
SECTION 16.25 |
Indenture Controls |
154 | ||||
SECTION 16.26 |
Intercreditor Agreement |
154 |
v
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT, SCHEDULE & APPENDIX INDEX
Appendix A |
Provisions Relating to Initial Notes and Additional Notes | |
Exhibit A |
Form of Note | |
Exhibit B |
Form of Transferee Letter of Representation | |
Exhibit C |
Form of Mortgage | |
Schedule 1.01(A) |
Certain Excluded Equity Interests | |
Schedule 1.01(B) |
Immaterial Subsidiaries | |
Schedule 1.01(C) |
EBITDA | |
Schedule 4.04 |
Governmental Approvals | |
Schedule 4.05 |
Financial Statements | |
Schedule 4.08(a) |
Subsidiaries | |
Schedule 4.08(b) |
Subscriptions | |
Schedule 4.13 |
Taxes | |
Schedule 4.15 |
Employee Benefit Plans | |
Schedule 4.16 |
Environmental Matters | |
Schedule 4.21 |
Insurance | |
Schedule 4.23 |
Intellectual Property | |
Schedule 7.12 |
Post-Closing Items | |
Schedule 8.01 |
Indebtedness | |
Schedule 8.02(a) |
Liens | |
Schedule 8.04 |
Investments | |
Schedule 8.07 |
Transactions with Affiliates | |
Schedule 16.01 |
Notice Information |
i
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
INDENTURE, dated as of March 13, 2020, by and among The Fresh Market, Inc., a Delaware corporation (the Issuer), Pomegranate Holdings, Inc., a Delaware corporation (Holdings), the Subsidiary Guarantors (as defined below) party hereto from time to time and Wilmington Trust, National Association, a national banking association, not in its individual capacity but solely as the trustee hereunder (the Trustee).
WHEREAS, the Issuer wishes to issue hereunder (i) $135,000,000 aggregate principal amount of Super Senior Secured Notes due 2025 on the date hereof (the Initial Notes) and (ii) up to $40,000,000 aggregate principal amount of Additional Notes from time to time after the date hereof (together with the Initial Notes, the Notes);
WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Notes in the manner provided hereunder; and
WHEREAS, all things necessary to make this Indenture a legal, valid and binding agreement of the Issuer, in accordance with its terms, have been done, and the Issuer proposes to do all the things necessary to make the Notes, when executed by the Issuer and authenticated and delivered by the Trustee hereunder and duly issued by the Issuer, the legal, valid and binding obligations of the Issuer as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto covenant and agree as follows:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
ABR means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate in effect for such day plus 0.50%, (b) the Prime Rate in effect on such day and (c) Adjusted LIBO Rate for an Interest Period of one month beginning on such day (or if such day is not a Business Day, on the immediately preceding Business Day) plus 1.00%. Any change in such rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.
Account Control Agreement means a customary account control agreement which provides for the Collateral Agent to have control (as defined in Section 9-104 of the Uniform Commercial Code or Section 8-106 of the Uniform Commercial Code, as applicable) of Deposit Accounts or Securities Accounts, as applicable.
Additional Notes means the Notes issued under the terms of this Indenture subsequent to the Closing Date.
Additional Notes Issue Date means the issue date of any Additional Notes.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Additional Refinancing Amount means, in connection with the incurrence of any Permitted Refinancing Indebtedness, the aggregate principal amount of additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay accrued and unpaid interest, premiums (including tender premiums), expenses, defeasance costs and fees in respect thereof.
Adjusted LIBO Rate means, with respect to any Note for any Interest Period, an interest rate per annum equal to the LIBO Rate in effect for such Interest Period; provided that in no event shall the Adjusted LIBO Rate be less than 1.25% at any time.
Adjustment Cap means an amount equal to the lesser of $15,000,000 and 0.20 times the EBITDA of the Issuer for the then most recently ended Test Period (calculated prior to giving effect to any Capped Adjustments (but, for the avoidance of doubt, after giving effect to other uncapped adjustments)).
Adjustment Date has the meaning ascribed thereto in the definition of Pricing Grid.
Affiliate means, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.
Agents means the Trustee and the Collateral Agent.
Annualized EBITDA means the product of (x) EBITDA of the Issuer and its Subsidiaries for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 7.04(a) or 7.04(b) divided by (y) the Seasonality Factor set forth below opposite the applicable fiscal quarter.
Fiscal Quarter |
Seasonality Factor | |
First fiscal quarter of each fiscal year |
0.27× | |
Second fiscal quarter of each fiscal year |
0.22× | |
Third fiscal quarter of each fiscal year |
0.18× | |
Fourth fiscal quarter of each fiscal year |
0.33× |
Anti-Corruption Laws means any Requirement of Law related to bribery or anti-corruption, including the United States Foreign Corrupt Practices Act of 1977, as now and hereafter in effect, or any successor statute.
Anti-Terrorism Law means any Requirement of Law related to money laundering or financing terrorism, including the Patriot Act, The Currency and Foreign Transactions Reporting Act (also known as the Bank Secrecy Act, 31 U.S.C. §§5311-5330 and 12 U.S.C. §§1818(s), 1820(b) and 1951-1959), Trading With the Enemy Act (50 U.S.C. §1 et seq., as amended), Executive Order 13224 (effective September 24, 2001) and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended), in each case, as now and hereafter in effect, or any successor statutes.
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Applicable Margin means for any day, with respect to any Note, 9.50% per annum; provided, however, that on and after the first Adjustment Date occurring after delivery of the financial statements and certificates required by Section 7.04 upon the completion of one fiscal quarter of the Issuer after the Closing Date, the Applicable Margin with respect to a Note will be determined pursuant to the Pricing Grid.
Applicable Period means an Excess Cash Flow Period.
Applicable Premium means with respect to any Note on any applicable redemption date, an amount equal to (x) 3% of the then outstanding principal amount of the Notes so redeemed plus (y) the present value at such redemption date of all required interest payments due on the Notes so redeemed through the second anniversary of the Closing Date (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points. If the redemption is in connection with a satisfaction and discharge or defeasance of the Indenture, the applicable Treasury Rate shall be computed as of the date that funds are irrevocably deposited with the Trustee to pay the amounts related thereto, as set forth in this Indenture. For purposes of clause (y), required interest payments will be assumed to be at the rate in effect at the time of such determination. The Applicable Premium will be determined by the Issuer and delivered to the Trustee pursuant to an Officers Certificate with concurrent notice to the Holders; provided that the Required Noteholder Parties are provided reasonable opportunity to object to such determination. If there is no such objection, the Issuers determination of the Applicable Premium will be conclusive absent manifest error.
Applicable Reserve Requirement means, at any time, for any Note, the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against Eurocurrency liabilities (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted LIBO Rate or any other interest rate of a Note is to be determined, or (ii) any category of extensions of credit or other assets which include Notes. A Note shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Noteholder. The rate of interest on Notes shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement.
Approved Fund has the meaning ascribed thereto in Section 16.07(b).
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Asset Sale means any loss, damage, destruction or condemnation of, or any Disposition (including any sale and leaseback of assets and any mortgage or lease of Real Property) to any person of, any asset or assets of the Issuer or any Subsidiary.
Asset Sale Offer has the meaning ascribed thereto in Section 3.02(b).
Bankruptcy Code means Title 11 of the United States Code entitled Bankruptcy, as codified as 11 U.S.C. Section 101 et seq., as amended, and any successor statute of similar import, in each case as in effect from time to time.
Benchmark means, initially, LIBO Rate; provided that if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to LIBO Rate or the then-current Benchmark, then Benchmark means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to Section 2.17.
Benchmark Replacement means, for any Interest Period, the first alternative set forth in the order below that can be determined by the Issuer as of the Benchmark Replacement Date:
(1) the sum of: (a) Term SOFR or, if the Issuer determines that Term SOFR for the applicable Corresponding Tenor cannot be determined, Next Available Term SOFR and (b) the Benchmark Replacement Adjustment;
(2) the sum of: (a) Compounded SOFR and (b) the Benchmark Replacement Adjustment;
(3) the sum of: (a) the alternate rate of interest that has been selected by the Issuer as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement rate or mechanism for determining such rate by the Relevant Governmental Body at such time or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes or syndicated credit facilities at such time and (b) the Benchmark Replacement Adjustment;
provided that, in the case of clauses (1) and (2) above, such rate, or the underlying rates component thereof, is or are displayed on a screen or other information service that publishes such rate or rates from time to time as selected by the Issuer in its reasonable discretion).
Benchmark Replacement Adjustment means, for any Interest Period:
(1) for purposes of clauses (1) and (2) of the definition of Benchmark Replacement, the first alternative set forth in the order below that can be determined by the Issuer as of the Benchmark Replacement Date:
(a) 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 or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) the spread adjustment (which may be a positive or negative value or zero) that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to USD LIBOR for the Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of 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 Issuer for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate notes or syndicated credit facilities at such time;
provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Issuer.
Benchmark Replacement Conforming Changes means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters) that the Issuer decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Issuer decides that adoption of any portion of such market practice is not administratively feasible or if the Issuer determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Issuer determine is reasonably necessary).
Benchmark Replacement Date means the earliest to occur of the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of Benchmark Transition Event, the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark;
(2) in the case of clause (3) of the definition of Benchmark Transition Event, the date of the public statement or publication of information referenced therein; or
(3) in the case of an Early Opt-in Election, the first Business Day after the Rate Election Notice is provided to each of the other parties hereto.
5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.
Benchmark Transition Event means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
(2) a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.
Benchmark Unavailability Period means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the then-current Benchmark and solely to the extent that the then-current Benchmark has not been replaced with a Benchmark Replacement pursuant to clause (1) or (2) of the definition of Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder or under any Note Document in accordance with Section 2.17 and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder or any Note Document pursuant to Section 2.17.
Beneficial Ownership Certification means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
Beneficial Ownership Regulation means 31 C.F. R. § 1010.230.
Board means the Board of Governors of the Federal Reserve System of the United States of America.
6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Board of Directors means, as to any person, the board of directors or other governing body of such person, or if such person is owned or managed by a single entity, the board of directors or other governing body of such entity.
Business Day means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or other place of payment are authorized or required by law to remain closed; provided, that when used in connection with a Note, the term Business Day shall also exclude any day on which banks are not open for dealings in deposits in Dollars in the London interbank market.
Capital Expenditures means, for any person in respect of any period, the aggregate of all expenditures incurred by such person during such period that, in accordance with GAAP, are or should be included in additions to property, plant or equipment or similar items reflected in the statement of cash flows of such person; provided that the term Capital Expenditures shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) condemnation awards arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased substantially concurrently with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay Notes pursuant to Section 3.02, (iv) expenditures that are accounted for as capital expenditures by Holdings, Issuer or any Subsidiary and that actually are paid for by a person other than Holdings, Issuer or any Subsidiary and for which none of Holdings, Issuer or any Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such person or any other person (whether before, during or after such period) other than rent and similar or related obligations or (v) expenditures that constitute Permitted Business Acquisitions or other Investments permitted hereunder (but the term Capital Expenditures shall include all expenditures made with the proceeds of such Investments by the recipient thereof that would otherwise constitute Capital Expenditures).
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP; provided that obligations of the Issuer or its Subsidiaries, either existing on the Closing Date or created thereafter that (a) initially were not included on the consolidated balance sheet of the Issuer as capital lease obligations and were subsequently recharacterized as capital lease obligations or, in the case of such a special purpose or other entity becoming consolidated with the Issuer and its Subsidiaries were required to be characterized as capital lease obligations upon such consolidation, in either case, due to a change in accounting treatment or otherwise, or (b) did not exist on the Closing Date and were required to be characterized as capital lease obligations but would not have been required to be treated as capital lease obligations on the Closing Date had they existed at that time, shall for all purposes not be treated as Capitalized Lease Obligations or Indebtedness.
7
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Capitalized Software Expenditures means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a person during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in accordance with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such person and its subsidiaries.
Capped Adjustments means (i) the aggregate amount of adjustments made pursuant to clause (1) of the definition of Consolidated Net Income with respect to severance expenses, relocation expenses, restructuring expenses, curtailments or modifications to pension and post-retirement employee benefit plans, excess pension charges, expenses related to any New Project, reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternate uses, store rebranding costs, acquisition integration costs, facilities or store opening costs, project start-up costs, business optimization costs, litigation or arbitration costs, charges, fees and expenses (including settlements) and recruiting costs, signing, retention or completion bonuses, (ii) the aggregate amount of adjustments made pursuant to clause (14)(a)(iv) of the definition of Consolidated Net Income, (iii) the aggregate amount of adjustments made with respect to expenses or charges related to New Projects pursuant to clause (5) of the definition of EBITDA, (iv) the aggregate amount of adjustments made pursuant to clause (6) of the definition of EBITDA, (v) the aggregate amount of adjustments made with respect to synergies, operating expense reductions and improvements and cost savings pursuant to clause (7) of the definition of EBITDA and (vi) the aggregate amount of adjustments made pursuant to clause (11) of the definition of EBITDA.
Carryover Amounts has the meaning ascribed thereto in Section 3.02(c).
Cash Interest Expense means, with respect to the Issuer and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period to the extent such amounts are payable in cash for such period, excluding, without duplication, in any event (a) pay-in-kind Interest Expense or other non-cash Interest Expense (including as a result of the effects of purchase accounting), (b) to the extent included in Interest Expense, the amortization of any financing fees paid by, or on behalf of, the Issuer or any Subsidiary, and (c) the amortization of debt discounts, if any, or fees in respect of Hedging Agreements; provided, that Cash Interest Expense shall exclude any one time financing fees, including those paid in connection with the Transactions or any amendment of this Indenture.
Cash Management Agreement means any agreement to provide to Holdings, the Issuer or any Subsidiary cash management services for collections, treasury management services (including controlled disbursement, overdraft, automated clearing house fund transfer services, return items and interstate depository network services), any demand deposit, payroll, trust or operating account relationships, commercial credit cards, merchant card, purchase or debit cards, non-card e-payables services, and other cash management services, including electronic funds transfer services, lockbox services, stop payment services and wire transfer services.
Casualty Event means any event that gives rise to the receipt by the Issuer or any Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or Real Property (including any improvements thereon) to replace or repair such equipment, fixed assets or Real Property or as compensation for such condemnation event.
8
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
A Change in Control shall be deemed to occur if:
(a) the Permitted Holders in the aggregate shall at any time cease to beneficially own and control (whether by contract or otherwise) at least 51% of the economic and voting Equity Interests of Holdings;
(b) a Change of Control (or similar event) shall occur under (i) the First-Priority Senior Secured Notes Indenture, (ii) any indenture, credit agreement, or other relevant documentation in respect of Permitted Refinancing Indebtedness with respect to the First-Priority Senior Secured Notes or (iii) any indenture, credit agreement, or other relevant documentation in respect of any Indebtedness constituting Material Indebtedness; or
(c) Holdings shall fail to directly own 100% of the issued and outstanding Equity Interests of the Issuer.
Charges has the meaning assigned to such term in Section 2.15(e).
Closing Date means March 13, 2020.
Co-Investor Related Party means, with respect to any person, (1) any spouse, descendant or immediate family member of such person, (2) any estate, trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or owners of which consist solely of one or more Permitted Holders and/or such other persons referred to in the immediately preceding clause (1), or (3) any executor, administrator, trustee, manager, director or other similar fiduciary of such person referred to in the immediately preceding clause (2), acting solely in such capacity.
Co-Investors means each of (a) the Fund and the Fund Affiliates (excluding any of their portfolio companies), (b) Ray Berry, Bret Berry and George Golleher and any CoInvestor Related Party of any of the foregoing persons, (c) the respective Affiliates of the investors described in clause (b) (excluding any of their portfolio companies) and (d) the Management Group.
Code means the Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder.
Collateral means all the Collateral as defined in any Security Document and shall also include the Mortgaged Properties and all other property that is subject to any Lien in favor of the Trustee, the Collateral Agent or any Subagent for the benefit of the Noteholder Parties pursuant to any Security Document.
Collateral Agent means Wilmington Trust, National Association, together with its successors and permitted assigns in such capacity.
9
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Collateral Agreement means the Collateral Agreement (First Lien) dated as of April 27, 2016, as supplemented by the Other First Lien Secured Party Consent dated as of the date hereof, and as may be amended, restated, supplemented or otherwise modified from time to time, among the Issuer, each Subsidiary Guarantor and the Collateral Agent.
Collateral and Guarantee Requirement means the requirement that (in each case subject to Sections 7.10(d), (e) and (g) and Schedule 7.12):
(a) on the Closing Date, (x) the Collateral Agent shall have received (i) from the Issuer, the documents required to be executed by the Issuer pursuant to Section 5.19 of the Collateral Agreement in order to secure the Notes thereunder and (ii) from Holdings, a counterpart of the Holdings Guarantee and Pledge Agreement and (y) the Trustee shall have received from each Subsidiary Guarantor, a counterpart of the Subsidiary Guarantee Agreement, in each case duly executed and delivered on behalf of such person;
(b) on the Closing Date, (i)(x) all outstanding Equity Interests of the Issuer directly owned by Holdings and all other outstanding Equity Interests directly owned by the Issuer or any Subsidiary Guarantor, in each case, other than Excluded Securities, and (y) all Indebtedness owing to the Issuer or any Subsidiary Guarantor, other than Excluded Securities, shall have been pledged pursuant to the Collateral Agreement or the Holdings Guarantee and Pledge Agreement, as applicable, and (ii) the Collateral Agent shall have received certificates or other instruments (if any) representing such Equity Interests and any notes or other instruments required to be delivered pursuant to the applicable Security Documents, together with stock powers, note powers or other instruments of transfer with respect thereto endorsed in blank;
(c) in the case of any person that becomes a Subsidiary Guarantor after the Closing Date, the Collateral Agent or the Trustee, as applicable, shall have received (i) a supplement to the Collateral Agreement and the Subsidiary Guarantee Agreement and (ii) supplements to the other Security Documents, if applicable, substantially in the form specified therefor or otherwise reasonably acceptable to the Required Noteholder Parties, in each case, duly executed and delivered on behalf of such Subsidiary Guarantor;
(d) after the Closing Date, (x) all outstanding Equity Interests of any person that becomes a Subsidiary Guarantor after the Closing Date and (y) subject to Section 7.10(g), all Equity Interests directly acquired by a Subsidiary Guarantor after the Closing Date, other than Excluded Securities, shall have been pledged pursuant to the Collateral Agreement, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;
(e) except as otherwise contemplated by this Indenture or any Security Document, all documents and instruments, including Uniform Commercial Code financing statements, and filings with the United States Copyright Office and the United States Patent and Trademark Office, and all other actions reasonably requested by the Required Noteholder Parties (including those required by applicable Requirements of Law) to be delivered, filed, registered or recorded to create the Liens intended to be
10
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been delivered, filed, registered or recorded concurrently with, or promptly following, the execution and delivery of each such Security Document;
(f) within the time periods set forth in Section 7.10 with respect to Mortgaged Properties encumbered pursuant to said Section 7.10, the Collateral Agent shall have received (i) counterparts of each Mortgage to be entered into with respect to each such Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property and suitable for recording or filing in all filing or recording offices that may be necessary or reasonably desirable to create a valid and enforceable Lien subject to no other Liens except Permitted Liens, at the time of recordation thereof, (ii) with respect to the Mortgage encumbering each such Mortgaged Property, opinions of counsel regarding the enforceability, due authorization, execution and delivery of the Mortgages and such other matters customarily covered in real estate counsel opinions (as determined by the Issuer), (iii) with respect to each such Mortgaged Property, the Flood Documentation and (iv) such other documents as the Required Noteholder Parties may reasonably request that are available to the Issuer without material expense with respect to any such Mortgage or Mortgaged Property;
(g) within the time periods set forth in Section 7.10 with respect to Mortgaged Properties encumbered pursuant to said Section 7.10, the Collateral Agent shall have received (i) a policy or policies or marked up unconditional binder of title insurance with respect to properties located in the United States of America, or a date-down and modification endorsement, if available, paid for by the Issuer, issued by a nationally recognized title insurance company insuring the Lien of each Mortgage as a valid Lien on the Mortgaged Property described therein, free of any other Liens except Permitted Liens, together with such customary endorsements, coinsurance and reinsurance as may be necessary and as the Required Noteholder Parties may reasonably request and which are available at commercially reasonable rates in the jurisdiction where the applicable Mortgaged Property is located and (ii) a survey of each Mortgaged Property (including all improvements, easements and other customary matters thereon), as applicable, for which all necessary fees (where applicable) have been paid with respect to properties located in the United States of America, which is (A) complying in all material respects with the minimum detail requirements of the American Land Title Association and American Congress of Surveying and Mapping as such requirements are in effect on the date of preparation of such survey and (B) sufficient for such title insurance company to remove all standard survey exceptions from the title insurance policy relating to such Mortgaged Property;
(h) evidence of the insurance required by the terms of Section 7.02; and
(i) after the Closing Date, the Collateral Agent or the Trustee, as applicable, shall have received (i) such other Security Documents as may be required to be delivered pursuant to Section 7.10 or the Collateral Agreement, and (ii) upon reasonable request by the Required Noteholder Parties, evidence of compliance with any other requirements of Section 7.10.
11
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Compounded SOFR means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which will be compounded in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Interest Period) being established by the Issuer in accordance with:
(1) the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
(2) if, and to the extent that, the Issuer determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that the Issuer determines are substantially consistent with at least five currently outstanding U.S. dollar-denominated floating rate notes or syndicated credit facilities at such time (as a result of amendment or as originally executed) that are publicly available for review;
provided, further, that if the Issuer decides that any such rate, methodology or convention determined in accordance with clause (1) or clause (2) is not administratively feasible, then Compounded SOFR will be deemed unable to be determined for purposes of the definition of Benchmark Replacement.
Corresponding Tenor with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current Benchmark.
Consolidated Debt at any date means the sum of (without duplication) all Indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of Indebtedness for borrowed money and Disqualified Stock of the Issuer and the Subsidiaries determined on a consolidated basis on such date in accordance with GAAP.
Consolidated Depreciation and Amortization Expense means, with respect to any person for any period, the total amount of depreciation and amortization expense, including the amortization of intangible assets, deferred financing fees, Capitalized Software Expenditures and store development costs and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits, of such person and its subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
Consolidated Net Income means with respect to any person for any period, the aggregate of the Net Income of such person and its subsidiaries for such period, on a consolidated basis; provided, however, that:
(1) any net after-tax extraordinary, nonrecurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses or charges, any severance expenses, relocation expenses, restructuring expenses, curtailments or modifications to pension and post-retirement employee benefit plans, excess pension charges, any expenses related to any New Project or any reconstruction, decommissioning,
12
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
recommissioning or reconfiguration of fixed assets for alternate uses, store rebranding costs, acquisition integration costs, facilities or stores opening costs, project start-up costs, business optimization costs, recruiting costs, signing, retention or completion bonuses, litigation or arbitration costs, charges, fees and expenses (including settlements), expenses or charges related to any issuance of Equity Interests, Investment, acquisition, Disposition, recapitalization or incurrence, issuance, repayment, redemption, refinancing, amendment or modification of Indebtedness (in each case, whether or not successful), and any fees, expenses, charges or change in control payments related to the Transactions and the Transactions (as defined in the First-Priority Senior Secured Notes Indenture) (including any costs relating to auditing prior periods, any transition-related expenses, Transaction Expenses and Transaction Expenses (as defined in the First-Priority Senior Secured Notes Indenture) incurred before, on or after the Closing Date), in each case, shall be excluded; provided that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap;
(2) effects of purchase accounting adjustments (including the effects of such adjustments pushed down to such person and such subsidiaries and including, without limitation, the effects of adjustments to (A) deferred rent, (B) Capitalized Lease Obligations or other obligations or deferrals attributable to capital spending funds with suppliers or (C) any other deferrals of income) in amounts required or permitted by GAAP, resulting from the application of purchase accounting or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded;
(3) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period;
(4) any net after-tax income or loss or gains or losses from or on Dispositions of Disposed of, abandoned, transferred, closed or discontinued operations or fixed assets (including from store closures or sales from such store closures) shall be excluded;
(5) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business Dispositions or asset Dispositions other than in the ordinary course of business (as determined in good faith by management of the Issuer) shall be excluded;
(6) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness, Hedging Agreements or other derivative instruments shall be excluded;
(7) [reserved];
(8) [reserved];
(9) an amount equal to the amount of Tax Distributions actually made to any parent or equity holder of such person in respect of such period in accordance with Section 8.06(b)(iii) and Section 8.06(b)(v) shall be included as though such amounts had been paid as income taxes directly by such person for such period;
13
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(10) any impairment charges or asset write-offs, in each case pursuant to GAAP, and the amortization of intangibles and other fair value adjustments arising pursuant to GAAP shall be excluded;
(11) any non-cash expense realized or resulting from stock option plans, employee benefit plans or post-employment benefit plans, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or other rights shall be excluded;
(12) any (a) non-cash compensation charges, (b) costs and expenses after the Closing Date related to employment of terminated employees, or (c) costs or expenses realized in connection with or resulting from stock appreciation or similar rights, stock options or other rights existing on the Closing Date of officers, directors and employees, in each case of such person or any subsidiary, shall be excluded;
(13) accruals and reserves that are established or adjusted within 12 months after the Closing Date and that are so required to be established or adjusted in accordance with GAAP or as a result of adoption or modification of accounting policies shall be excluded;
(14) (a)(i) the non-cash portion of straight-line rent expense shall be excluded, (ii) the cash portion of straight-line rent expense which exceeds the amount expensed in respect of such rent expense shall be included, (iii) the non-cash amortization of tenant allowances shall be excluded, (iv) cash received from landlords for tenant allowances shall be included only to the extent these costs were expensed and (v) to the extent not already included in Net Income, the cash portion of sublease rentals received shall be included (for the avoidance of doubt, the net effect of the adjustments in this clause (14)(a) as well as any related adjustments pursuant to clause (2) above shall be to compute rent expense and rental income on a cash basis for purposes of determining Consolidated Net Income) and (b) non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretations shall be excluded; provided that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap;
(15) any currency translation gains and losses related to currency remeasurements of Indebtedness, and any net loss or gain resulting from hedging transactions for currency exchange risk, shall be excluded;
(16) (a) to the extent covered by insurance and actually reimbursed, or, so long as such person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (i) not denied by the applicable carrier in writing within 180 days and (ii) in fact reimbursed within 365 days of the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within 365 days), expenses with respect to liability or casualty events or business interruption shall be excluded and (b) amounts estimated in good faith to be received from insurance in respect of lost revenues or earnings in respect of liability or casualty events or business interruption shall be included (with a deduction for amounts actually received up to such estimated amount to the extent included in Net Income in a future period);
14
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(17) Capitalized Software Expenditures and store development costs shall be excluded;
(18) non-cash charges for deferred tax asset valuation allowances shall be excluded;
(19) [reserved];
(20) any other fees, costs, expenses or charges resulting from or associated with facilities or store closures shall be excluded;
(21) any deductions attributable to minority interests shall be excluded; and
(22) any gain, loss, income, expense or charge resulting from the application of any LIFO shall be excluded.
Consolidated Non-Cash Charges means, with respect to any person for any period, the non-cash expenses (other than Consolidated Depreciation and Amortization Expense) of such person and its subsidiaries reducing Consolidated Net Income of such person for such period on a consolidated basis and otherwise determined in accordance with GAAP, provided that if any such non-cash expenses represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA in such future period to the extent paid, but excluding from this proviso, for the avoidance of doubt, amortization of a prepaid cash item that was paid in a prior period.
Consolidated Taxes means, with respect to any person for any period, the provision for taxes based on income, profits or capital, including, without limitation, state, franchise, property and similar taxes, foreign withholding taxes (including penalties and interest related to such taxes or arising from tax examinations) and any Tax Distributions taken into account in calculating Consolidated Net Income.
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and Controlling and Controlled shall have meanings correlative thereto.
Control Triggering Event shall occur at any time that an Event of Default under Section 10.01(b), (c), (d), (h) or (i) shall have occurred and be continuing. Once occurred, a Control Triggering Event shall be deemed to be continuing until no Event of Default under Section 10.01(b), (c), (d), (h) or (i) shall be continuing.
Controlled Account means any Deposit Account or Securities Account of the Issuer or any Subsidiary Guarantor that is required to be subject to an Account Control Agreement pursuant to Section 7.14(a).
15
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Controlled Entity means any Note Partys Controlled Affiliates. As used in this definition, Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.
Corporate Trust Office means the designated office of the Trustee in the United States of America at which at any time its corporate trust business shall be administered, or such other address as the Trustee may designate from time to time or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time).
Current Assets means, with respect to the Issuer and the Subsidiaries on a consolidated basis at any date of determination, the sum of all assets (other than cash and Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Issuer and the Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits.
Current Liabilities means, with respect to the Issuer and the Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Issuer and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) accruals of Interest Expense (excluding Interest Expense that is due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals, if any, of transaction costs resulting from the Transactions, (e) accruals of any costs or expenses related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses, pension and other postretirement benefit obligations, and (f) accruals for add-backs to EBITDA included in clauses (4), (5) and (6) of the definition of such term.
Debt Service means, with respect to the Issuer and the Subsidiaries on a consolidated basis for any period, Cash Interest Expense for such period, plus scheduled principal amortization of Consolidated Debt for such period.
Default means any event or condition that upon notice, lapse of time or both would constitute an Event of Default.
Declined Amounts means, with respect to any Repurchase Offer, (a) the aggregate consideration offered for the repurchase of Notes pursuant to such Repurchase Offer minus (b) the aggregate purchase price (excluding accrued and unpaid interest) actually paid for the repurchase of Notes pursuant to such Repurchase Offer.
Deposit Account means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.
Disinterested Director means, with respect to any person and transaction, a member of the Board of Directors of such person who does not have any material direct or indirect financial interest in or with respect to such transaction.
16
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Dispose or Disposed of means to convey, sell, lease, sub-lease, license, sublicense, sell and leaseback, assign, farm-out, transfer or otherwise dispose of any property, business or asset, in one transaction or a series of transactions, including any Sale and LeaseBack Transaction and any sale or issuance of Equity Interests of a Subsidiary, and including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. The term Disposition shall have a correlative meaning to the foregoing.
Disqualified Stock means, with respect to any person, any Equity Interests of such person that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior redemption or repayment in full of the Notes and all other Note Obligations that are accrued and payable), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is ninety-one (91) days after the Maturity Date (provided, that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock). Notwithstanding the foregoing: (i) any Equity Interests issued to any employee or to any plan for the benefit of employees of the Issuer or the Subsidiaries or by any such plan to such employees shall not constitute Disqualified Stock solely because they may be required to be repurchased by the Issuer in order to satisfy applicable statutory or regulatory obligations or as a result of such employees termination, death or disability and (ii) any class of Equity Interests of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock.
Dollars or $ means lawful money of the United States of America.
Early Opt-in Election means the occurrence of:
(1) a notification by the Issuer to each of the Holders (with a copy to the Trustee) that at least five currently outstanding U.S. dollar-denominated floating rate notes or syndicated credit facilities at such time contain (as a result of amendment or as originally executed) as a benchmark interest rate, in lieu of LIBO Rate, Term SOFR plus a Benchmark Replacement Adjustment (and such floating rate notes or syndicated credit facilities are identified in such notice and are publicly available for review), and
(2) an election by the Issuer to declare that an Early Opt-in Election has occurred and the provision by the Issuer of written notice of such election to each Holder (with a copy to the Trustee) (the Rate Election Notice).
17
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EBITDA means, with respect to any person for any period, the Consolidated Net Income of such person and its subsidiaries for such period plus, without duplication, to the extent the same was deducted in calculating Consolidated Net Income:
(1) Consolidated Taxes; plus
(2) Fixed Charges and costs of surety bonds in connection with financing activities; plus
(3) Consolidated Depreciation and Amortization Expense; plus
(4) Consolidated Non-Cash Charges; plus
(5) any expenses or charges (other than Consolidated Depreciation and Amortization Expense) related to any issuance of Equity Interests, Investment, acquisition, New Project, Disposition, recapitalization or the incurrence, modification, redemption or repayment of Indebtedness permitted to be incurred by this Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the Transactions or the Notes and (ii) any amendment or other modification of the Notes or other Indebtedness; provided that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap; plus
(6) business optimization expenses and other restructuring charges, reserves or expenses (which, for the avoidance of doubt, shall include, without limitation, the effect of inventory optimization programs, facility or store consolidations, retention, severance, systems establishment costs, contract termination costs, future lease commitments and excess pension charges) and Pre-Opening Expenses; provided that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap; plus
(7) any run-rate synergies, operating expense reductions and improvements and cost savings resulting from acquisitions, investments, operational changes and operational initiatives expected to be realized within 12 months after the end of such period (calculated on a pro forma basis as though such acquisitions, investments, operational changes and operational initiatives and synergies, operating expense reductions and improvements and cost savings had been made or realized on the first day of such period for which EBITDA is being determined and as if such cost savings, operating expense reductions and improvements and synergies were realized during the entirety of such period), that are reasonably identifiable, factually supportable and certified by a Responsible Officer of the Issuer and determined in good faith by the Issuer to result from actions which have been taken (and excluding any run rate synergies, operating expense reductions and improvements and cost savings to result from actions not yet taken); provided, that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap; plus
(8) any costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Issuer or a Subsidiary Guarantor or net cash proceeds of an issuance of Equity Interests of the Issuer (other than Disqualified Stock); plus
18
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(9) fees, losses, expenses and charges in connection with facility or store closures; plus
(10) [reserved]; plus
(11) the amount of any management, monitoring, consulting, transaction, advisory and similar fees and related expenses paid to the Fund or any Fund Affiliate (or any accruals relating to such fees and related expenses) during such period to the extent otherwise permitted by Section 8.07, including, if applicable, the amount of termination fee paid pursuant to Section 8.07(b)(xiv); provided that the aggregate amount of Capped Adjustments shall not exceed the Adjustment Cap; plus
(12) [reserved]; plus
(13) one-time costs associated with commencing Public Company Compliance; and
less, without duplication, to the extent the same increased Consolidated Net Income;
(14) non-cash items increasing Consolidated Net Income for such period (excluding the recognition of deferred revenue or any items which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that reduced EBITDA in any prior period and any items for which cash was received in a prior period).
Notwithstanding anything to the contrary contained herein and subject to adjustments permitted hereunder with respect to acquisitions, Dispositions and other transactions occurring following the Closing Date, for purposes of determining EBITDA under this Indenture, EBITDA prior to giving effect to any Capped Adjustments for the fiscal quarter ended January 27, 2019 shall be deemed to be $33,009,000, EBITDA prior to giving effect to any Capped Adjustments for the fiscal quarter ended April 28, 2019 shall be deemed to be $31,032,000, EBITDA prior to giving effect to any Capped Adjustments for the fiscal quarter ended July 28, 2019 shall be deemed to be $24,125,000 and EBITDA prior to giving effect to any Capped Adjustments for the fiscal quarter ended October 27, 2019 shall be deemed to be $20,957,000, in each case as such calculations are set forth in further detail on Schedule 1.01(C).
Additionally, for purposes of determining Capped Adjustments under this Indenture, the Capped Adjustments prior to giving effect to the Adjustment Cap for the fiscal quarter ended January 27, 2019 shall be deemed to be $2,605,000, the Capped Adjustments prior to giving effect to the Adjustment Cap for the fiscal quarter ended April 28, 2019 shall be deemed to be $1,570,000, the Capped Adjustments prior to giving effect to the Adjustment Cap for the fiscal quarter ended July 28, 2019 shall be deemed to be $2,337,000 and the Capped Adjustments prior to giving effect to the Adjustment Cap for the fiscal quarter ended October 27, 2019 shall be deemed to be $982,000, in each case as such calculations are set forth in further detail on Schedule 1.01(C).
19
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
For the avoidance of doubt, when determining EBITDA, the Adjustment Cap shall be calculated for the applicable Test Period in accordance with the definition of Adjustment Cap.
Other than for purposes of calculating Excess Cash Flow, EBITDA shall be calculated on a pro forma basis (subject to the caps and limitations set forth above) to give effect to any acquisition, Investment or Disposition as if it occurred on the first day of the applicable Test Period.
ECF Builder Basket Amount shall mean, at any date of determination, the portion of Excess Cash Flow, determined on a cumulative basis for all completed Excess Cash Flow Periods ending after the Closing Date for which financial statements have been delivered pursuant to Section 7.04(a) (commencing with the Excess Cash Flow Period commencing January 27, 2020) that was not applied to prepay, redeem and/or repurchase the Notes pursuant to Section 3.02(c) less any amounts used to prepay, redeem and/or repurchase First-Priority Senior Secured Notes made in reliance on the ECF Builder Basket Amount as permitted under Section 8.09(b)(i)(B) less the Carryover Amounts, if any, as of such date of determination.
ECF Offer has the meaning assigned to such term in Section 3.02(c).
Environment means ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna, the workplace or as otherwise defined in any Environmental Law.
Environmental Laws means all applicable laws (including common law), rules, regulations, codes, ordinances, orders, binding agreements, decrees or judgments, promulgated or entered into by or with any Governmental Authority, relating in any way to the Environment, preservation or reclamation of natural resources, the generation, use, transport, management, Release or threatened Release of, or exposure to, any Hazardous Material or to public or employee health and safety matters (to the extent relating to the environment or Hazardous Materials).
Environmental Permits has the meaning assigned to such term in Section 4.16.
Equity Interests of any person means any and all shares, interests, rights to purchase or otherwise acquire, warrants, options, participations or other equivalents of or interests in (however designated) equity or ownership of such person, including any Preferred Stock, any limited or general partnership interest and any limited liability company membership interest, and any securities or other rights or interests convertible into or exchangeable for any of the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time and any final regulations promulgated and the rulings issued thereunder.
20
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with Holdings, the Issuer or a Subsidiary, is treated as a single employer under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.
ERISA Event means (a) any Reportable Event or the requirements of Section 4043(b) of ERISA apply with respect to a Plan; (b) the failure to make a required contribution to any Plan that would result in the imposition of a lien or other encumbrance or the provision of security under Section 430 of the Code or Section 303 or 4068 of ERISA, or the arising of such a lien or encumbrance, there being or arising any unpaid minimum required contribution or accumulated funding deficiency (as defined or otherwise set forth in Section 4971 of the Code or Part 3 of Subtitle B of Title 1 of ERISA), whether or not waived, or, with respect to any Plan or Multiemployer Plan, the failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived; (c) a determination that any Plan is, or is expected to be, in at-risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (d) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (e) the filing of a notice of intent to terminate any Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Plan, the termination of any Plan under Section 4041(c) of ERISA, or the incurrence by Holdings, the Issuer, a Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan; (f) the institution of proceedings, or the occurrence of an event or condition which would reasonably be expected to constitute grounds for the institution of proceedings by the PBGC, under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or the receipt by Holdings, the Issuer, a Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (g) the incurrence by Holdings, the Issuer, a Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by Holdings, the Issuer, a Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings, the Issuer, a Subsidiary or any ERISA Affiliate of any notice, concerning the impending imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent, within the meaning of Title IV of ERISA, or in endangered or critical status, within the meaning of Section 432 of the Code or Section 305 of ERISA; (i) the withdrawal of any of Holdings, the Issuer, a Subsidiary or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which such entity was a substantial employer as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (j) engaging in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA; or (k) Holdings, the Issuer, a Subsidiary or any ERISA Affiliate incurring any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA).
Event of Default has the meaning assigned to such term in Section 10.01.
21
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Excess Cash Flow means, with respect to the Issuer and its Subsidiaries on a consolidated basis for any Applicable Period, EBITDA of the Issuer on a consolidated basis for such Applicable Period, minus, without duplication, (A):
(a) Debt Service for such Applicable Period and, to the extent added to or not deducted from Net Income in calculating Consolidated Net Income or added to or not deducted from Consolidated Net Income in calculating EBITDA, the amount of any Net Proceeds or Extraordinary Receipts which have been used to redeem the Notes pursuant to Section 3.02(b); provided, that with respect to any such amounts to be paid after the close of such Applicable Period that are deducted in such Applicable Period, any amount so deducted shall not be deducted again in a subsequent Applicable Period,
(b) the amount of any voluntary redemption or repayment permitted hereunder of term Indebtedness during such Applicable Period (other than any voluntary redemption of the Notes, which shall be the subject of Section 3.02(c)(ii)) and the amount of any voluntary payments of revolving Indebtedness to the extent accompanied by permanent reductions of any revolving facility commitments during such Applicable Period to the extent an equal amount of loans thereunder was simultaneously repaid, so long as the amount of such redemption or repayment is not already reflected in Debt Service,
(c) (i) Capital Expenditures by the Issuer and the Subsidiaries on a consolidated basis during such Applicable Period that are paid in cash and (ii) the aggregate consideration paid in cash during the Applicable Period in respect of Permitted Business Acquisitions, New Project expenditures or other permitted Investments (excluding Permitted Investments and permitted intercompany Investments in Subsidiaries), or payments in respect of permitted planned restructuring activities; provided that, for the avoidance of doubt, any amount so deducted in such Applicable Period shall not be deducted again in a subsequent Applicable Period,
(d) [reserved],
(e) Taxes paid in cash by Holdings and its Subsidiaries on a consolidated basis during such Applicable Period or that will be paid within six months after the close of such Applicable Period,
(f) an amount equal to any increase in Working Capital (other than any increase arising from the recognition or de-recognition of any Current Assets or Current Liabilities upon an acquisition or disposition of a business) of the Issuer and its Subsidiaries for such Applicable Period, and any anticipated increase for the following Excess Cash Flow Period,
(g) cash expenditures made in respect of Hedging Agreements during such Applicable Period, to the extent not reflected in the computation of EBITDA or Interest Expense,
(h) permitted Restricted Payments paid in cash by the Issuer during such Applicable Period and permitted Restricted Payments paid by any Subsidiary to any person other than Holdings, the Issuer or any of the Subsidiaries during such Applicable Period, in each case in accordance with Section 8.06,
22
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(i) amounts paid in cash during such Applicable Period on account of (A) items that were accounted for as non-cash reductions of Net Income in determining Consolidated Net Income or as non-cash reductions of Consolidated Net Income in determining EBITDA of the Issuer in a prior Applicable Period and (B) reserves or accruals established in purchase accounting,
(j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, the amount of any mandatory prepayment of Indebtedness (other than Indebtedness created hereunder or under any other Note Document), together with any interest, premium or penalties required to be paid (and actually paid) in connection therewith, and
(k) the amount related to items that were added to or not deducted from Net Income in calculating Consolidated Net Income or were added to or not deducted from Consolidated Net Income in calculating EBITDA to the extent such items represented a cash payment (which had not reduced Excess Cash Flow upon the accrual thereof in a prior Applicable Period), or an accrual for a cash payment, by the Issuer and its Subsidiaries or did not represent cash received by the Issuer and its Subsidiaries, in each case on a consolidated basis during such Applicable Period,
plus, without duplication, (B):
(a) an amount equal to any decrease in Working Capital (other than any decrease arising from the recognition or de-recognition of any Current Assets or Current Liabilities upon an acquisition or disposition of a business) of the Issuer and its Subsidiaries for such Applicable Period,
(b) all amounts referred to in clauses (A)(b) and (A)(c) above to the extent funded with the proceeds of the issuance or the incurrence of Indebtedness (including Capitalized Lease Obligations and purchase money Indebtedness, but excluding proceeds of extensions of credit under any revolving credit facility), the sale or issuance of any Equity Interests (including any capital contributions) and any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any mortgage or lease of Real Property) to any person of any asset or assets, in each case to the extent there is a corresponding deduction from Excess Cash Flow above,
(c) [reserved],
(d) cash payments received in respect of Hedging Agreements during such Applicable Period to the extent (i) not included in the computation of EBITDA or (ii) such payments do not reduce Cash Interest Expense,
23
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(e) any extraordinary or nonrecurring gain realized in cash during such Applicable Period (except to the extent such gain consists of Net Proceeds or Extraordinary Receipts that are subject to Section 3.02(b)), and
(f) to the extent deducted in the computation of EBITDA, cash interest income, and
(g) the amount related to items that were deducted from or not added to Net Income in connection with calculating Consolidated Net Income or were deducted from or not added to Consolidated Net Income in calculating EBITDA to the extent either (i) such items represented cash received by the Issuer or any Subsidiary or (ii) such items do not represent cash paid by the Issuer or any Subsidiary, in each case on a consolidated basis during such Applicable Period.
Excess Cash Flow Period means each fiscal year of the Issuer, commencing with the fiscal year of the Issuer commencing on January 27, 2020.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Excluded Account means (i) any Deposit Account used solely for funding payroll or segregating payroll taxes or funding other employee wage or benefit for the then current payroll period, (ii) zero balance accounts the entire balance of which is swept each Business Day to a Deposit Account subject to an Account Control Agreement, (iii) trust, fiduciary or other escrow accounts established for the benefit of third parties in the ordinary course of business in connection with Permitted Business Acquisitions, Investments, Dispositions or other transactions permitted hereunder, (iv) any Deposit Account or Securities Account which is used as a cash collateral account subject to Liens permitted by Sections 8.02(a), (f), (g), (s), (u), (aa) or (ee) or (v) other Deposit Accounts and Securities Accounts that do not have a cash or Permitted Investments balance at any time exceeding $1,000,000 in the aggregate for all such accounts.
Excluded Indebtedness means all Indebtedness not incurred in violation of Section 8.01.
Excluded Property has the meaning assigned to such term in Section 7.10(g).
Excluded Securities means any of the following:
(a) any Equity Interests or Indebtedness with respect to which the Required Noteholder Parties reasonably agree that the cost or other consequences of pledging such Equity Interests or Indebtedness in favor of the Secured Parties under the Security Documents are likely to be excessive in relation to the value to be afforded thereby;
(b) [reserved];
(c) [reserved];
24
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(d) any Equity Interests or Indebtedness to the extent the pledge thereof would be prohibited by any Requirement of Law;
(e) any Equity Interests of any person that is not a Wholly Owned Subsidiary to the extent (A) that a pledge thereof to secure the Obligations is prohibited by (i) any applicable organizational documents or shareholder agreement or (ii) any other contractual obligation with an unaffiliated third party not in violation of Section 8.09(c) (other than, in this subclause (A)(ii), customary non-assignment provisions which are ineffective under Article 9 of the Uniform Commercial Code or other applicable Requirements of Law), (B) any organizational documents or shareholder agreement (or other contractual obligation referred to in subclause (A)(ii) above) prohibits such a pledge without the consent of any other party; provided, that this clause (B) shall not apply if (1) such other party is a Note Party or a Wholly Owned Subsidiary or (2) consent has been obtained to consummate such pledge (it being understood that the foregoing shall not be deemed to obligate the Issuer or any Subsidiary to obtain any such consent) and shall only apply for so long as such organizational documents or shareholder agreement or replacement or renewal thereof is in effect, or (C) a pledge thereof to secure the Obligations would give any other party (other than a Note Party or a Wholly Owned Subsidiary) to any organizational document or shareholder agreement governing such Equity Interests (or other contractual obligation referred to in subclause (A)(ii) above) the right to terminate its obligations thereunder (other than, in the case of other contractual obligations referred to in subclause (A)(ii), customary non-assignment provisions which are ineffective under Article 9 of the Uniform Commercial Code or other applicable Requirement of Law);
(f) any Equity Interests of any Immaterial Subsidiary;
(g) [reserved];
(h) any Equity Interests of any Subsidiary to the extent that the pledge of such Equity Interests could reasonably be expected to result in material adverse tax consequences to the Issuer or any Subsidiary as determined in good faith by the Issuer and the Required Noteholder Parties;
(i) any Equity Interests or Indebtedness that are set forth on Schedule 1.01(A) to this Indenture or that have been identified on or prior to the Closing Date in writing to the Required Noteholder Parties by a Responsible Officer of the Issuer and agreed to by the Required Noteholder Parties;
(j) (x) any Equity Interests owned by Holdings, other than Equity Interests in the Issuer and (y) any Indebtedness owned by Holdings; and
(k) any Margin Stock.
Excluded Subsidiary means any of the following (except as otherwise provided in clause (b) of the definition of Subsidiary Guarantor):
(a) each Immaterial Subsidiary,
25
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) [reserved],
(c) each Subsidiary that is prohibited from Guaranteeing or granting Liens to secure the Obligations by any Requirement of Law or that would require consent, approval, license or authorization of a Governmental Authority to Guarantee or grant Liens to secure the Obligations (unless such consent, approval, license or authorization has been received), and
(d) any other Subsidiary with respect to which, (x) the Issuer and the Required Noteholder Parties reasonably determine that the cost or other consequences of providing a Guarantee of or granting Liens to secure the Obligations are likely to be excessive in relation to the value to be afforded thereby or (y) providing such a Guarantee or granting such Liens could reasonably be expected to result in material adverse tax consequences as reasonably determined by the Issuer after five Business Days prior notice to the Holders.
Existing Indenture means the Indenture, dated as of March 15, 2018 and as amended, restated, supplemented or otherwise modified prior to the Closing Date, by and among Holdings, the Issuer, the Subsidiary Guarantors (as defined therein) party thereto from time to time, the Purchasers (as defined therein) party thereto from time to time and U.S. Bank, National Association, as trustee.
Existing Super Priority Notes means the Issuers Super Senior Secured Notes due 2022, issued pursuant to the Existing Indenture.
Extraordinary Receipts means 100% of the cash proceeds received by or paid to the Issuer or any Subsidiary not in the ordinary course of business consisting of federal, state or local Tax refunds (other than resulting from overpayment), judgments, proceeds of settlements, condemnation awards and indemnity payments, in each case, net of (i) such amounts that are required to be remitted to a third person, (ii) documented attorneys fees, accountants fees and other reasonable fees and expenses incurred or payable in connection therewith, (iii) Taxes paid or payable (in the good faith determination of the Issuer) as a result thereof (including Tax Distributions) and (iv) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to any liabilities related thereto (other than any taxes deducted pursuant to clause (ii) or (iii) above); provided, that, if no Default or Event of Default exists and the Issuer intends to use such proceeds, within 12 months of such receipt, to acquire, maintain, develop, construct, improve, upgrade or repair assets used or useful in the business of the Issuer and the Subsidiaries or to make Investments permitted hereunder (excluding Investments under Section 8.04(k), Permitted Investments or intercompany Investments in Subsidiaries), such portion of such proceeds shall not constitute Extraordinary Receipts except to the extent not, within 12 months of such receipt, so used or contractually committed with a third party that is not an Affiliate to be so used (it being understood that if any portion of such proceeds are not so used within such 12 month period but within such 12 month period are contractually committed with a third party that is not an Affiliate to be used, then upon the termination of such contract or if such Extraordinary Receipts are not so used within the later of such 12 month period and 6 months from the entry into such contractual commitment, such remaining portion shall constitute Extraordinary Receipts as of the date of such termination or expiry without giving effect to this
26
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
proviso); provided, further, that (x) no cash proceeds shall constitute Extraordinary Receipts if such cash proceeds constitute Net Proceeds and (y) no net cash proceeds calculated in accordance with the foregoing realized in a single transaction or series of related transactions shall constitute Extraordinary Receipts unless such net cash proceeds shall exceed $250,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Extraordinary Receipts).
Fees means the fees payable by the Issuer (i) to the Purchasers pursuant to the Note Purchase Agreement and (ii) to the Trustee for acting as trustee hereunder.
FDA means the United States Food and Drug Administration or its successor agency in the United States.
Federal Funds Effective Rate means, for any day, the rate calculated by the Federal Reserve Bank of New York based on such days federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate; provided, that if the Federal Funds Effective Rate for any day is less than zero, the Federal Funds Effective Rate for such day will be deemed to be zero.
Federal Reserve Bank of New Yorks Website means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
Financial Officer of any person means the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such person.
First-Priority Senior Secured Note Documents means the First-Priority Senior Secured Notes Indenture and the other Notes Documents under and as defined in the First- Priority Senior Secured Notes Indenture, as each such document may be amended, restated, supplemented or otherwise modified from time to time.
First-Priority Senior Secured Notes means the $800,000,000 in aggregate principal amount of the Issuers First-Priority Senior Secured Notes due 2023 issued pursuant to the First-Priority Senior Secured Notes Indenture.
First-Priority Senior Secured Notes Indenture means the First-Priority Senior Secured Notes Indenture dated as of April 27, 2016 among the Issuer, as issuer, and Wilmington Trust, National Association, as indenture trustee, as such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted hereunder.
First Lien/First Lien Intercreditor Agreement means the First Lien/First Lien Intercreditor Agreement dated as of April 27, 2016 by and among Wilmington Trust, National Association, as Collateral Agent, Wilmington Trust, National Association, as Authorized Representative under the Credit Agreement (as defined therein), Wilmington Trust, National Association as Initial Other Authorized Representative (as defined therein), and each additional Authorized Representative (as defined therein) from time to time party thereto, as such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted hereunder.
27
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Fixed Charges means, with respect to any person for any period, the sum, without duplication, of: (1) Interest Expense (excluding amortization or write-off of deferred financing costs) of such person for such period, and (2) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock or Disqualified Stock of such person and its subsidiaries.
Flood Documentation means, with respect to each Mortgaged Property located in the United States of America or any territory thereof, (i) a completed life-of-loan Federal Emergency Management Agency standard flood hazard determination (to the extent a Mortgaged Property is located in a Special Flood Hazard Area, together with a notice about Special Flood Hazard Area status and flood disaster assistance duly executed by the Issuer and the applicable Note Party relating thereto) and (ii) a copy of, or a certificate as to coverage under, and a declaration page relating to, the insurance policies required by Section 7.02(c) hereof and the applicable provisions of the Security Documents, each of which shall (A) be endorsed or otherwise amended to include a standard or New York lenders loss payable or mortgagee endorsement (as applicable), (B) name the Collateral Agent, on behalf of the Secured Parties, as additional insured and loss payee/mortgagee, (C) identify the address of each property located in a Special Flood Hazard Area, the applicable flood zone designation and the flood insurance coverage and deductible relating thereto and (D) be otherwise in customary form and substance (as reasonably determined by the Issuer).
Flood Insurance Laws means, collectively, (i) the National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973) as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto and (iii) the Biggert-Waters Flood Insurance Reform Act of 2012 as now or hereafter in effect or any successor statute thereto.
Food Laws means, collectively, to the extent applicable to the Issuer and its Subsidiaries, (i) the United States Federal Food, Drug, and Cosmetic Act, as amended; (ii) the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Egg Products Inspection Act, the Organic Foods Production Act of 1990, and the Perishable Agricultural Commodities Act, as amended; (iii) the Federal Trade Commission Act, as amended, and (iv) any other applicable federal, state and municipal, domestic and foreign law governing the import, export, procurement, holding, distribution, sale, manufacturing, processing, packing, packaging, safety, purity, labeling, and/or advertising of food and/or cosmetic products (including state or local food codes) as amended and in effect from time to time; and, in respect to all such laws, all rules, regulations, standards, guidelines, policies and orders administered by the FDA, USDA, FTC, and any other Governmental Authority.
FTC means the United States Federal Trade Commission or its successor agency in the United States.
28
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Fund means, collectively, investment funds managed by Affiliates of Apollo Global Management, Inc.
Fund Affiliate means each Affiliate of the Fund that is neither a portfolio company (which means a company actively engaged in providing goods or services to unaffiliated customers), whether or not controlled, nor a company controlled by a portfolio company.
GAAP means generally accepted accounting principles in effect in the United States of America on the Closing Date, applied on a consistent basis, subject to the provisions of Section 1.02.
Governmental Authority means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.
Guarantee of or by any person (the guarantor) means (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of the guarantor securing any Indebtedness or other obligation (or any existing right, contingent or otherwise, of the holder of Indebtedness or other obligation to be secured by such a Lien) of any other person, whether or not such Indebtedness or other obligation is assumed by the guarantor; provided, however, that the term Guarantee shall not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or Disposition of assets permitted by this Indenture (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such person in good faith.
guarantor has the meaning assigned to such term in the definition of the term Guarantee.
Guarantors means the Note Parties other than the Issuer.
Hazardous Materials means all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including, without limitation, explosive or radioactive substances or petroleum by products or petroleum distillates, asbestos or asbestos-containing
29
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
materials, polychlorinated biphenyls, radon gas or pesticides, fungicides, fertilizers or other agricultural chemicals, of any nature subject to regulation or which can give rise to liability under any Requirement of Law pertaining to the environment.
Hedging Agreement means any agreement entered into in the ordinary course of business with respect to any swap, forward, future or derivative transaction, or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value, or credit spread transaction, repurchase transaction, reserve repurchase transaction, securities lending transaction, weather index transaction, spot contracts, fixed price physical delivery contracts, or any similar transaction or any combination of these transactions, in each case of the foregoing, whether or not exchange traded; provided, that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings, the Issuer or any of the Subsidiaries shall be a Hedging Agreement.
Holder, holder or Noteholder means the person in whose name a Note is registered on the Registrars books.
Holdings has the meaning assigned to such term in the introductory paragraph of this Indenture.
Holdings Guarantee and Pledge Agreement means the Holdings Guarantee and Pledge Agreement (First Lien) dated as of the date hereof, as may be amended, restated, supplemented or otherwise modified from time to time, between Holdings, the Trustee and the Collateral Agent.
Immaterial Subsidiary means any Subsidiary that does not have total assets or annual revenues in excess of $1,000,000 individually; provided, that the aggregate amount of assets or annual revenues of subsidiaries constituting Immaterial Subsidiaries shall not at any time exceed $3,000,000; provided, that the Issuer may elect in its sole discretion to exclude as an Immaterial Subsidiary any Subsidiary that would otherwise meet the definition thereof. Each Immaterial Subsidiary as of the Closing Date shall be set forth in Schedule 1.01(B), and the Issuer shall update such Schedule from time to time after the Closing Date as necessary to reflect all Immaterial Subsidiaries at such time (the selection of Subsidiaries to be added to or removed from such Schedule to be made as the Issuer may determine).
Indebtedness of any person means, if and to the extent (other than with respect to clause (i)) the same would constitute indebtedness or a liability on a balance sheet prepared in accordance with GAAP, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than such obligations accrued in the ordinary course), (e) all Capitalized Lease Obligations of such person, (f) all net payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined in respect of outstanding Hedging
30
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Agreements, (g) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit, (h) the principal component of all obligations of such person in respect of bankers acceptances, (i) all Guarantees by such person of Indebtedness described in clauses (a) to (h) above and (j) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock); provided, that Indebtedness shall not include (A) trade and other ordinarycourse payables, accrued expenses, and intercompany liabilities arising in the ordinary course of business, (B) prepaid or deferred revenue, (C) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset, (D) earn-out obligations (to the extent permitted hereunder) until such obligations become a liability on the balance sheet of such person in accordance with GAAP, (E) obligations in respect of Third Party Funds incurred in the ordinary course of business or (F) in the case of the Issuer and its Subsidiaries, intercompany liabilities in connection with the cash management, tax and accounting operations of the Issuer and the Subsidiaries. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness limits the liability of such person in respect thereof.
Indemnitee has the meaning assigned to such term in Section 11.07(b).
Indenture means this Indenture as amended or supplemented from time to time.
Ineligible Institution means (i) the persons identified as Disqualified Holders in writing to the Required Noteholder Parties by Holdings or the Issuer on or prior to the date of the Note Purchase Agreement, and (ii) so long as no Default or Event of Default shall have occurred or be continuing, the persons as may be identified in writing to the Holders by the Issuer from time to time thereafter (in the case of this clause (ii)) in respect of bona fide business competitors of the Issuer (in the good faith determination of the Issuer), by delivery of a notice thereof to the Holders setting forth such person or persons (or the person or persons previously identified to the Holders that are to be no longer considered Ineligible Institutions).
Information has the meaning assigned to such term in Section 4.14(a).
Initial Notes has the meaning assigned to such term in the recitals to this Indenture.
Intellectual Property has the meaning assigned to such term in the Collateral Agreement.
Intercreditor Agreement has the meaning assigned to such term in Section 15.09.
Interest Expense means, with respect to any person for any period, the sum, without duplication, of:
(1) consolidated interest expense of such person and its subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income
31
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(including the interest component of Capitalized Lease Obligations and net payments and receipts (if any) pursuant to interest rate Hedging Agreements and excluding amortization of deferred financing fees and original issue discount, debt issuance costs, commissions, fees and expenses, expensing of any bridge, commitment or other financing fees and noncash interest expense attributable to movement in mark to market valuation of Hedging Agreements or other derivatives (in each case permitted hereunder) under GAAP); plus
(2) consolidated capitalized interest of such person and its subsidiaries for such period, whether paid or accrued; minus
(3) interest income for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Interest Payment Date has the meaning set forth in Exhibit A hereto.
Interest Period means, with respect to any Note, the period commencing on and including an Interest Payment Date and ending on and including the day immediately preceding the next succeeding Interest Payment Date, with the exception that the first Interest Period with respect to any Note shall commence on and include the Closing Date and end on and exclude March 31, 2020 (the Interest Payment Date for any Interest Period shall be the Interest Payment Date occurring on the date immediately following the last day of such Interest Period).
Interest Rate Determination Date means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.
Investment has the meaning assigned to such term in Section 8.04.
ISDA Definitions means 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.
Issuer has the meaning assigned to such term in the introductory paragraph of this Indenture.
Junior Financing means (i) any Indebtedness that is subordinated in right of payment to the Note Obligations (other than intercompany Indebtedness), (ii) Indebtedness in respect of the First-Priority Senior Secured Notes Indenture or (iii) any Indebtedness for borrowed money incurred pursuant to Section 8.01(b) in the form of term loans or bonds that, in each case in this clause (iii), is either unsecured or secured only by Liens on the Collateral that are junior to the Liens securing the Note Obligations and subject to a Permitted Junior Intercreditor Agreement.
Junior Liens means Liens on the Collateral that are junior to the Liens thereon securing the Notes (and other Note Obligations that are pari passu with the Notes) pursuant to a
32
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Permitted Junior Intercreditor Agreement (it being understood that Junior Liens are not required to be pari passu with other Junior Liens, and that Indebtedness secured by Junior Liens may have Liens that are senior in priority to, or pari passu with, or junior in priority to, other Liens constituting Junior Liens).
Leasehold Property means any leasehold interest of any Note Party as lessee under any lease of Real Property.
LIBO Rate means, for any Interest Rate Determination Date with respect to any Note, the rate per annum obtained by dividing (i) (a) the rate per annum equal to the rate determined by the Issuer to be the London interbank offered rate administered by the ICE Benchmark Administration (or any other person which takes over the administration of that rate) for deposits (for delivery on the first day of the relevant Interest Period) with a term equivalent to the relevant Interest Period in Dollars displayed on the ICE LIBOR USD page of the Reuters Screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date (the rate referenced in this clause (a), the LIBO Screen Rate), or (b) in the event the LIBO Screen Rate is not available, then the rate per annum equal to the offered quotation rate to first class banks in the London interbank market by the Issuer) for deposits (for delivery on the first day of the relevant Interest Period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Note of Noteholder Party for which the LIBO Rate is then being determined with maturities comparable to the relevant Interest Period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement. Notwithstanding any of the foregoing, the LIBO Rate with respect to the first Interest Period will be deemed to be 1.25%.
Lien means, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar monetary encumbrance in or on such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided, that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.
Local Time means New York City time (daylight or standard, as applicable).
Make-Whole Amount has the meaning assigned to such term in Section 3.02(e).
Make-Whole Event has the meaning assigned to such term in Section 3.02(e).
Management Group means the group consisting of the directors, executive officers and other management personnel of the Issuer, Holdings or any Parent Entity, as the case may be, on the Closing Date together with (a) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of the Issuer, Holdings or any Parent Entity, as the case may be, was approved by a vote of a majority of the directors of the Issuer, Holdings or any Parent Entity, as the case may be, then still in office who were either
33
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
directors on the Closing Date or whose election or nomination was previously so approved and (b) executive officers and other management personnel of the Issuer, Holdings or any Parent Entity, as the case may be, hired at a time when the directors on the Closing Date together with the directors so approved constituted a majority of the directors of the Issuer, Holdings or any Parent Entity, as the case may be.
Margin Stock has the meaning assigned to such term in Regulation U.
Material Adverse Effect means (a) a material adverse effect on the business, property, operations, assets, liabilities (actual or contingent), operating results or financial condition of the Issuer and its Subsidiaries, taken as a whole, (b) a material adverse effect on the ability of the Issuer and the Subsidiary Guarantors (taken as a whole) to fully and timely perform any of their payment obligations under any Note Document to which the Issuer or any of the Subsidiary Guarantors is a party or (c) the validity or enforceability of any of the Note Documents or the rights and remedies of the Trustee and the Noteholder Parties thereunder.
Material Indebtedness means Indebtedness (other than Notes) of any one or more of the Issuer or any Subsidiary in an aggregate principal amount exceeding $5,000,000.
Material Real Property means any parcel or parcels of Real Property located in the United States now or hereafter owned in fee by the Issuer or any Subsidiary Guarantor and having a fair market value (on a per-property basis) of at least $500,000 as of the date of acquisition of such Real Property, as determined by the Issuer in good faith; provided, that Material Real Property shall not include (i) any Real Property in respect of which the Issuer or a Subsidiary Guarantor does not own the land in fee simple or (ii) any Real Property which the Issuer or a Subsidiary Guarantor leases to a third party.
Maturity Date means March 13, 2025; provided that if on March 1, 2023 the aggregate principal amount of the First-Priority Senior Secured Notes outstanding equals or exceeds $120,000,000, the Maturity Date shall be March 1, 2023; provided, further that, for purposes of calculating the foregoing threshold, First-Priority Senior Secured Notes that are redeemed or otherwise repurchased with the proceeds of Indebtedness shall be deemed to still be outstanding unless such Indebtedness shall have a final maturity date of September 13, 2025 or later for so long as such Indebtedness remains outstanding with such earlier maturity date.
Maximum Rate has the meaning assigned to such term in Section 2.15(e).
Moodys means mean Moodys Investors Service, Inc.
Mortgaged Properties means each Material Real Property encumbered by a Mortgage pursuant to Section 7.10.
Mortgages means, collectively, the mortgages, trust deeds, deeds of trust, deeds to secure debt, assignments of leases and rents, and other security documents (including amendments to any of the foregoing) delivered with respect to Mortgaged Properties, each substantially in the form of Exhibit C (with such changes as may be necessary to account for local law matters) or in such other form as is reasonably satisfactory to the Required Noteholder Parties) and the Issuer, in each case, as amended, supplemented or otherwise modified from time to time.
34
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Issuer, Holdings or any Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions.
Net Income means, with respect to any person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.
Net Proceeds means:
(a) 100% of the cash proceeds actually received by the Issuer or any Subsidiary (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any Disposition (other than under Section 8.05(a), (b), (c), (e), (f), (i), (j), (k), (n) or (o)) or Casualty Event, net of (i) attorneys fees, accountants fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations that are secured by the applicable asset or property (including without limitation principal amount, premium or penalty, if any, interest and other amounts) (other than pursuant to the Note Documents), other expenses and brokerage, consultant and other fees actually incurred in connection therewith, (ii) [reserved], (iii) Taxes paid or reasonably estimated to be payable as a result thereof (including Tax Distributions) (provided, that if the amount of any such estimated Taxes exceeds the amount of Taxes actually required to be paid in respect of such Asset Sale or Casualty Event, the aggregate amount of such excess shall constitute Net Proceeds at the time such Taxes are actually paid) and (iv) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) above) (x) related to any of the applicable assets and (y) retained by the Issuer or any of the Subsidiaries including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations (however, the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Proceeds of such Asset Sale or Casualty Event occurring on the date of such reduction); provided, that (x) no cash proceeds shall constitute Net Proceeds if such cash proceeds constitute Extraordinary Receipts and (y) no net cash proceeds calculated in accordance with the foregoing shall constitute Net Proceeds unless such net cash proceeds shall exceed $5,000,000 in the aggregate after the Closing Date (or such greater amount as the Required Noteholder Parties may agree) and thereafter only net cash proceeds in excess of such amount (excluding any Declined Proceeds of any Asset Sale Offer) shall constitute Net Proceeds; and
35
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Issuer or any Subsidiary of any Indebtedness (other than Excluded Indebtedness), net of all taxes paid or reasonably estimated to be payable as a result thereof and fees (including investment banking fees and discounts), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale, provided that if the amount of any estimated Taxes exceeds the amount of Taxes actually required to be paid, the aggregate amount of such excess shall constitute Net Proceeds at the time such Taxes are actually paid.
Next Available Term SOFR means, at any time, for any Interest Period, Term SOFR for the longest tenor that can be determined by the Issuer that is shorter than the applicable Corresponding Tenor.
New Project means (x) each plant, facility, branch or store which is either a new plant, facility, branch or store or an expansion, relocation, remodeling or substantial modernization of an existing plant, facility, branch or store owned by the Issuer or the Subsidiaries which in fact commences operations and (y) each creation (in one or a series of related transactions) of a business unit (including, without limitation, individual stores) to the extent such business unit commences operations or each expansion (in one or a series of related transactions) of business into a new market.
Note Documents means (i) this Indenture, (ii) the Subsidiary Guarantee Agreement, (iii) the Security Documents, (iv) the First Lien/First Lien Intercreditor Agreement, (v) any other Intercreditor Agreement, (vi) the Note Purchase Agreement and (vii) all other documents, certificates, instruments or agreements executed and delivered by or on behalf of a Note Party for the benefit of any Agent in connection herewith on or after the date hereof.
Note Obligations means (a) the due and punctual payment by the Issuer of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Notes issued by the Issuer under this Indenture, when and as due, whether at maturity, by acceleration, upon one or more dates set for redemption or otherwise and (ii) all other monetary obligations of the Issuer owed under or pursuant to this Indenture and each other Note Document, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), and (b) the due and punctual payment of all obligations of each other Note Party under or pursuant to each of the Note Documents.
Note Parties means Holdings, the Issuer and the Subsidiary Guarantors.
Noteholder Party means the Holders and holders of a beneficial interest in the Global Notes.
Note Purchase Agreement means the Note Purchase Agreement, dated as of March 10, 2020, among the Issuer, Holdings, the Subsidiary Guarantors and the parties listed as purchasers on Schedule I thereto, as may be amended, supplemented or otherwise modified from time to time in accordance with its terms.
36
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Notes has the meaning assigned to such term in the recitals to this Indenture.
Notes Installment Date has the meaning assigned to such term in Section 3.01(a)(i).
Notes Minimum means $1,000,000.
Notes Multiple means $100,000.
Obligations means the Note Obligations.
OFAC shall have the meaning assigned to such term in the definition of Sanctions.
OFAC Listed Person shall have the meaning assigned to such term in Section 4.25(a).
Officers Certificate means a certificate signed on behalf of the Issuer by a Responsible Officer of the Issuer who is the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, which meets the requirements set forth in this Indenture.
Opinion of Counsel means a written opinion from legal counsel who is acceptable to the Trustee. The counsel that delivers an Opinion of Counsel on behalf of the Issuer or other person may be an employee of, or counsel, to the Issuer or such other person.
Other First Lien Debt means obligations secured by Other First Liens. For the avoidance of doubt, notwithstanding any other provision in any Note Document, neither the Issuer nor any of its Subsidiaries shall be permitted to incur any Other First Lien Debt that has priority under the Priority Waterfall except for the incurrence of Permitted Exchange Notes and Permitted Redemption Indebtedness (and Permitted Refinancing Indebtedness in respect thereof), in each case, to the extent expressly permitted hereunder and which shall, for the avoidance of doubt, rank junior in right of payment to the Obligations as contemplated by the definitions of Permitted Exchange Notes and Permitted Redemption Indebtedness, as applicable.
Other First Liens means Liens on the Collateral that are pari passu with the Liens thereon securing the Notes (and other Note Obligations that are pari passu with the Notes) pursuant to a Permitted Pari Passu Intercreditor Agreement. For the avoidance of doubt, for purposes of this Indenture and the other Note Documents, liens on the Collateral securing the Notes and the First-Priority Senior Secured Notes and any other Indebtedness secured by an equal and ratable lien on the Collateral (including any Permitted Redemption Indebtedness or Permitted Exchange Notes that are secured by Liens on the Collateral that rank pari passu with the Liens thereon securing the Notes) shall be deemed to rank pari passu notwithstanding that certain of such Indebtedness may have priority under the Priority Waterfall or any other superpriority waterfall.
37
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Other First Lien Secured Party Consent means the Other First Lien Secured Party Consent, dated as of the date hereof, by Wilmington Trust, National Association, as acknowledged by the Collateral Agent and the Issuer.
Parent Entity means any direct or indirect parent of the Issuer.
Paying Agent has the meaning assigned to such term in Section 2.04(a).
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Pension Plan has the meaning ascribed thereto in Section 4.15(b).
Perfection Certificate means the Perfection Certificate with respect to the Issuer and the other Note Parties delivered to the Purchasers and the Trustee on or prior to the Closing Date, as the same may be supplemented from time to time to the extent required by Section 7.04(g).
Permitted Business Acquisition means any acquisition of all or substantially all the assets of, or all or substantially all the Equity Interests (other than directors qualifying shares) not previously held by the Issuer and its Subsidiaries in, or merger, consolidation or amalgamation with, a person or division, line of business or individual store of a person (or any subsequent investment made in a person or division, line of business or individual store previously acquired in a Permitted Business Acquisition), if immediately after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom, provided, however, that with respect to a proposed acquisition pursuant to an executed acquisition agreement, at the option of the Issuer, the determination of whether a Default or an Event of Default shall exist shall be made solely at the time of the execution of the acquisition agreement related to such Permitted Business Acquisition; (ii) the Super Senior Secured Leverage Ratio shall be less than or equal to 3.00 to 1.00 on a pro forma basis; (iii) all transactions related thereto shall be consummated in accordance with applicable laws and be in compliance with all Governmental Authorities; (iv) [reserved]; (v) any acquired or newly formed Subsidiary shall not be liable for any Indebtedness except for Indebtedness permitted by Section 8.01; (vi) to the extent required by Section 7.10, any person acquired in such acquisition, if acquired by the Issuer or a Subsidiary Guarantor, shall be merged into the Issuer or a Subsidiary Guarantor or become upon consummation of such acquisition a Subsidiary Guarantor; (vii) such Permitted Business Acquisition shall have been approved by the board of directors (or other similar body) and/or the stockholders or other equityholders of the target, (viii) at least two Business Days prior to the consummation thereof (or such shorter period as the Required Noteholder Parties may reasonably agree), to the extent available, the Issuer shall make available on the Platform (x) a due diligence package (including a quality of earnings report), (y) notice of such Permitted Business Acquisition setting forth in reasonable detail the terms and conditions of such Permitted Business Acquisition and (z) pro forma financial statements of Issuer and its Subsidiaries after giving effect to the consummation of such Permitted Business
38
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Acquisition and the incurrence or assumption of any Indebtedness in connection therewith and (ix) the total consideration paid or payable (including all Indebtedness incurred or assumed in connection with such Permitted Business Acquisition and the maximum amount of all deferred payments, including contingent obligations and earn-out payments) for all Permitted Business Acquisitions after the Closing Date shall not exceed $15,000,000 in the aggregate.
Permitted Exchange Notes means any secured or unsecured notes issued by the Issuer or any Subsidiary Guarantor (whether under an indenture or otherwise) and the Indebtedness represented thereby; provided, that (a) such Permitted Exchange Notes are used solely to consummate an exchange of all or any portion of the First-Priority Senior Secured Notes; (b) substantially concurrently with the issuance of such Permitted Exchange Notes, the aggregate outstanding principal amount of the First-Priority Senior Secured Notes shall be reduced by an amount that is no less than the aggregate principal amount of such Permitted Exchange Notes; (c) the aggregate principal amount of such Permitted Exchange Notes issued or incurred (without giving effect to any redemptions or repayments thereof, other than in respect of any Permitted Refinancing Indebtedness in respect thereof) shall not exceed the Priority Indebtedness Cap at such time; (d) the maturity date of such Permitted Exchange Notes is no earlier than, and is not subject to mandatory redemption or prepayment obligations prior to, the date that is six months after the Maturity Date (other than mandatory redemption or prepayment obligations that are not more favorable to the holders of such notes than the mandatory redemption and prepayment obligations that are applicable to the Notes, and so long as such mandatory redemption and prepayment obligations in respect of the Notes are satisfied prior to application to such notes); (e) the other terms of such Permitted Exchange Notes (other than interest rates, fees, floors, funding discounts and redemption or prepayment premiums and other pricing terms) are substantially similar to, or not more restrictive to the Issuer and its Subsidiaries than, the terms applicable to the Notes (except for (1) covenants or other provisions applicable only to periods after the Maturity Date or (2) those that are otherwise reasonably acceptable to the Required Noteholder Parties (or, if more restrictive, the Note Documents are amended to contain such more restrictive terms to the extent required to satisfy the foregoing standard); (f) after giving pro forma effect to the issuance of such Permitted Exchange Notes, the Cash Interest Expense of the Issuer and its Subsidiaries shall be less than the Cash Interest Expense of the Issuer and its Subsidiaries in effect immediately prior to the issuance of such Permitted Exchange Notes; and (g) Permitted Exchange Notes that are secured by Collateral (i) shall be subject to the provisions of a Permitted Pari Passu Intercreditor Agreement or a Permitted Junior Intercreditor Agreement, as applicable, and (ii) shall rank junior in right of payment to the Notes pursuant to the Priority Waterfall or another super priority waterfall that is no less favorable to the Holders than the Priority Waterfall, as applicable.
Permitted Holders means (i) the Fund and the Fund Affiliates (excluding any of their portfolio companies) and (ii) any other holder, directly or indirectly, of Equity Interests in Holdings as of the Closing Date.
Permitted Investments means:
(a) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union, in each case with maturities not exceeding one year from the date of acquisition thereof;
39
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) time deposit accounts, certificates of deposit, money market deposits, bankers acceptances and other bank deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits in excess of $500,000,000 and whose long-term debt, or whose parent holding companys long-term debt, is rated A (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
(c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;
(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Issuer) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P 1 (or higher) according to Moodys, or A 1 (or higher) according to S&P (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
(e) securities with maturities of six months or less from the date of acquisition, issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by Moodys (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
(f) shares of mutual funds whose investment guidelines restrict 95% of such funds investments to those satisfying the provisions of clauses (a) through (e) above;
(g) money market funds that (i) comply with the criteria set forth in Rule 2a 7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moodys and (iii) have portfolio assets of at least $5,000,000,000;
(h) time deposit accounts, certificates of deposit, money market deposits, bankers acceptances and other bank deposits in an aggregate face amount not in excess of 0.5% of the total assets of the Issuer and the Subsidiaries, on a consolidated basis, as of the end of the Issuers most recently completed fiscal year;
(i) instruments equivalent to those referred to in clauses (a) through (h) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States of America to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction; and
40
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(j) credit card receivables to the extent included in cash and cash equivalents on the consolidated balance sheet of the Issuer.
Permitted Junior Intercreditor Agreement means, with respect to any Liens on Collateral that are intended to be junior to any Liens securing the Notes (and other Note Obligations that are pari passu with the Notes), an intercreditor agreement or subordination agreement in form and substance reasonably satisfactory to the Required Noteholder Parties.
Permitted Liens has the meaning assigned to such term in Section 8.02.
Permitted Pari Passu Intercreditor Agreement means, with respect to any Liens on Collateral that are intended to be pari passu with the Liens securing the Notes (and other Note Obligations that are pari passu with the Notes), either (as the Issuer shall elect) (x) the First Lien/First Lien Intercreditor Agreement, (y) another intercreditor agreement not materially less favorable to the Noteholder Parties vis-à-vis such pari passu Liens than the First Lien/First Lien Intercreditor Agreement (as determined by the Issuer in good faith) (it being understood that the Issuer shall use commercially reasonable efforts to provide that any such intercreditor agreement will include changes to the form of the First Lien/First Lien Intercreditor Agreement reasonably requested by the Required Noteholder Parties to be included in such other intercreditor agreement) or (z) another intercreditor agreement in form and substance reasonably satisfactory to the Issuer and the Required Noteholder Parties (but that, in any event, is subject to a superpriority waterfall on terms no less favorable to the Secured Parties than the terms of the Priority Waterfall).
Permitted Redemption Indebtedness means any secured or unsecured notes or loans issued or incurred by the Issuer or any Subsidiary Guarantor (whether under an indenture, a credit agreement or otherwise) and the Indebtedness represented thereby; provided, that (a) 100% of the net cash proceeds of such Permitted Redemption Indebtedness are used to purchase, redeem or retire all or any portion of the First-Priority Senior Secured Notes; (b) substantially concurrently with the issuance or incurrence of such Permitted Redemption Indebtedness, the aggregate outstanding principal amount of the First-Priority Senior Secured Notes shall be reduced by an amount that is no less than the aggregate principal amount of such Permitted Redemption Indebtedness or, to the extent there is no such substantially concurrent reduction in the aggregate outstanding principal amount of the First-Priority Senior Secured Notes, 100% of the net cash proceeds of the Permitted Redemption Indebtedness are deposited into a deposit or escrow account pending the closing of the purchase, redemption or retirement of the First- Priority Senior Secured Notes; (c) the aggregate principal amount of such Permitted Redemption Indebtedness issued or incurred (without giving effect to any redemptions or repayments thereof, other than in respect of any Permitted Refinancing Indebtedness in respect thereof) at any time shall not exceed the Priority Indebtedness Cap at such time; (d) the maturity date of such Permitted Redemption Indebtedness is no earlier than, and is not subject to mandatory redemption or prepayment obligations prior to, the date that is six months after the Maturity Date (other than mandatory redemption or prepayment obligations that are not more favorable to the
41
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
holders of such Indebtedness than the mandatory redemption and prepayment obligations that are applicable to the Notes, and so long as such mandatory redemption and prepayment obligations in respect of the Notes are satisfied prior to application to such Indebtedness); (e) the other terms of such Permitted Redemption Indebtedness (other than interest rates, fees, floors, funding discounts and redemption or prepayment premiums and other pricing terms) are substantially similar to, or not more restrictive to the Issuer and its Subsidiaries than, the terms applicable to the Notes (except for (1) covenants or other provisions applicable only to periods after the Maturity Date or (2) those that are otherwise reasonably acceptable to the Issuer and the Required Noteholder Parties (or, if more restrictive, the Note Documents are amended to contain such more restrictive terms to the extent required to satisfy the foregoing standard); (f) after giving pro forma effect to the issuance of such Permitted Redemption Indebtedness, the Cash Interest Expense of the Issuer and its Subsidiaries shall be less than the Cash Interest Expense of the Issuer and its Subsidiaries in effect immediately prior to the issuance of such Permitted Redemption Indebtedness; and (g) Permitted Redemption Indebtedness that is secured by Collateral (i) shall be subject to the provisions of a Permitted Pari Passu Intercreditor Agreement or a Permitted Junior Intercreditor Agreement, as applicable, and (ii) shall rank junior in right of payment to the Notes pursuant to the Priority Waterfall or another super priority waterfall that is no less favorable to the Holders than the Priority Waterfall, as applicable.
Permitted Refinancing Indebtedness means any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to Refinance), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided, that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions, expenses, plus an amount equal to any existing commitment unutilized thereunder and letters of credit undrawn thereunder), (b) except with respect to Section 8.01(i), (i) the final maturity date of such Permitted Refinancing Indebtedness is on or after the final maturity date of the Indebtedness being Refinanced and (ii) the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness (excluding customary amortization) is greater than or equal to the lesser of (i) the Weighted Average Life to Maturity of the Indebtedness being Refinanced and (ii) the Weighted Average Life to Maturity of the Notes then outstanding, (c) if the Indebtedness being Refinanced is subordinated in right of payment and/or in lien priority to the Note Obligations under this Indenture, such Permitted Refinancing Indebtedness shall be subordinated in right of payment and/or in lien priority, as applicable, to such Note Obligations on terms not materially less favorable to the Noteholder Parties as those contained in the documentation governing the Indebtedness being Refinanced (and, for the avoidance of doubt, to the extent the Indebtedness being Refinanced is subject to an intercreditor or subordination agreement, then such Permitted Refinancing Indebtedness (i) shall be subject to the provisions of a Permitted Pari Passu Intercreditor Agreement or a Permitted Junior Intercreditor Agreement, as applicable, and (ii) with respect to Indebtedness that is subordinated in right of payment, shall rank junior in right of payment to the Notes pursuant to the Priority Waterfall or another super priority waterfall that is no less favorable to the Holders than the Priority Waterfall, as applicable, (d) no Permitted Refinancing Indebtedness shall have obligors that are not (or would not have been) obligated with respect to the Indebtedness being so Refinanced, (e) the other terms of such Permitted Refinancing Indebtedness (other than interest
42
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
rates, fees, floors, funding discounts and redemption or prepayment premiums and other pricing terms) are substantially similar to, or not more restrictive to the Issuer and its Subsidiaries than, the terms applicable to the Notes (except for (1) covenants or other provisions applicable only to periods after the Maturity Date or (2) those that are otherwise reasonably acceptable to the Issuer and the Required Noteholder Parties (or, if more restrictive, the Note Documents are amended to contain such more restrictive terms to the extent required to satisfy the foregoing standard) and (f) at the time of such Refinancing, no Default or Event of Default shall have occurred or be continuing.
person means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, individual or family trusts, or any agency or political subdivision thereof.
Plan means any employee benefit plan as defined in Section 3 of ERISA (other than a Multiemployer Plan) maintained or contributed to by Holdings, the Issuer, any Subsidiary or any ERISA Affiliate or to which Holdings, the Issuer, any Subsidiary or any ERISA Affiliate has or may have an obligation to contribute, and each such plan for the five-year period immediately following the latest date on which Holdings, the Issuer, any Subsidiary or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to (or is deemed under Section 4069 of ERISA to have maintained or contributed to or to have had an obligation to contribute to, or otherwise to have liability with respect to) such plan.
Platform shall have the meaning assigned to such term in Section 7.04.
Pre-Opening Expenses means, with respect to any fiscal period, the amount of expenses (other than interest expense) incurred with respect to stores which are classified as pre-opening rent, pre-opening expenses or store-opening costs (or any similar or equivalent caption).
Preferred Stock means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up.
Pricing Grid means the table set forth below:
Annualized EBITDA |
Applicable Margin for Notes | |||
Annualized EBITDA of the Issuer as of the last day of the most recently ended fiscal quarter is less than $65,000,000 |
10.50 | % | ||
Annualized EBITDA of the Issuer as of the last day of the most recently ended fiscal quarter is greater than or equal to $65,000,000 but less than or equal to $155,000,000 |
9.50 | % | ||
Annualized EBITDA of the Issuer as of the last day of the most recently ended fiscal quarter is greater than $155,000,000 |
8.50 | % |
43
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
For the purposes of the Pricing Grid, changes in the Applicable Margin shall become effective on the date (the Adjustment Date) that is the first day of the month immediately following the date on which the relevant financial statements are delivered pursuant to Section 7.04 for each fiscal quarter beginning with the first fiscal quarter of the Issuer ending after the Closing Date, and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified in Section 7.04, then, until the date that is the first day of the month immediately following the date on which such financial statements are delivered, the highest pricing level shall apply as of the first Business Day after the date on which such financial statements were to have been delivered but were not delivered.
primary obligor has the meaning assigned to such term in the definition of the term Guarantee.
Prime Rate means the rate of interest last quoted by The Wall Street Journal as the Prime Rate in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the bank prime loan rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Issuer) or any similar release by the Federal Reserve Board (as determined by the Issuer).
Priority Indebtedness Cap means, at any time, $175,000,000 less the aggregate outstanding principal amount of any Notes (including any Additional Notes), Permitted Exchange Notes or Permitted Redemption Indebtedness issued or incurred at any time prior to the Maturity Date.
Priority Secured Obligations has the meaning assigned to such term in the First Lien/First Lien Intercreditor Agreement.
Priority Waterfall means the provisions of Section 2.01(a) of the First Lien/First Lien Intercreditor Agreement.
Private Side Contacts means the contacts listed on Schedule 16.01 hereto under Private Side, which may be updated from time to time by notice from the Required Noteholder Parties to the Issuer.
Product means any product, good, substance or material made, distributed, or sold by the Issuer or any Subsidiary.
pro forma effect means, as to any person, for any event that occurs subsequent to the commencement of a period for which the financial effect of such event is being calculated, and giving effect to the event for which such calculation is being made, such calculation as will give pro forma effect to such event as if such event occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event.
44
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Projections means projections and any forward-looking statements (including statements with respect to booked business) of the Issuer and the Subsidiaries furnished to the Purchasers by or on behalf of the Issuer or any of the Subsidiaries prior to the Closing Date.
Public Company Compliance means compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, the provisions of the Securities Act and the Exchange Act, and the rules of national securities exchange listed companies (in each case, as applicable to companies with equity or debt securities held by the public), including procuring directors and officers insurance, legal and other professional fees, and listing fees.
Public Side Portal means (i) any IntraLinks or other comparable password protected online data system or website that is accessible to the holders or prospective holders of the First-Priority Senior Secured Notes (or any Permitted Refinancing Indebtedness in respect thereof), or (ii) any publicly available website accessible without requiring a password (including the Issuers publicly available website or the EDGAR filing system of the SEC).
Purchasers means the parties identified as Purchasers on Schedule I of the Note Purchase Agreement.
Qualified Equity Interests means any Equity Interest other than Disqualified Stock.
Real Property means, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Note Party, whether by lease, license, or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, incidental to the ownership, lease or operation thereof.
Recall has the meaning assigned to such term in Section 4.27(viii).
Record Date has the meaning set forth in Exhibit A hereto.
Reference Time with respect to any determination of the Benchmark means (1) if the Benchmark is LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking days preceding the date of such determination, and (2) if the Benchmark is not LIBO Rate, the time determined by the Issuer in accordance with the Benchmark Replacement Conforming Changes.
Refinance has the meaning assigned to such term in the definition of the term Permitted Refinancing Indebtedness, and Refinanced shall have a meaning correlative thereto.
Register has the meaning assigned to such term in Section 2.04(a).
Registrar has the meaning assigned to such term in Section 2.04(a).
45
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Regulation D means Regulation D under the Securities Act, as such regulation may be amended, supplemented, replaced or otherwise modified from time to time.
Regulation T means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Fund means, with respect to any Noteholder Party that is a fund that invests in bank or commercial loans and similar extensions of credit, any other fund that invests in bank or commercial loans and similar extensions of credit and is advised or managed by (a) such Noteholder Party, (b) an Affiliate of such Noteholder Party or (c) an entity (or an Affiliate of such entity) that administers, advises or manages such Noteholder Party.
Related Parties means, with respect to any specified person, such persons Controlled or Controlling Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such persons Controlled or Controlling Affiliates.
Release means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, emanating or migrating in, into, onto or through the Environment.
Relevant Governmental Body means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
Reportable Event means any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder as to which the PBGC has not waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043 the requirement of Section 4043(a) of ERISA that it be notified of such event with respect to a Plan.
Repurchase Offer means an Asset Sale Offer or an ECF Offer.
Repurchase Offer Payment Date has the meaning assigned to such term in Section 3.02(c).
Required Noteholder Parties means, at any time, Noteholder Parties holding Notes that represent more than 50% of all Notes outstanding at such time.
Required Percentage means, with respect to an Applicable Period, 50%.
Requirement of Law means, as to any person, any law, treaty, rule, regulation, statute, order, ordinance, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority, in each case applicable to or binding upon such person or any of its property or assets or to which such person or any of its property or assets is subject.
46
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Responsible Officer means any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Indenture, or any other duly authorized employee or signatory of such person.
Restricted Payments has the meaning assigned to such term in Section 8.06. The amount of any Restricted Payment made other than in the form of cash or cash equivalents shall be the fair market value thereof (as determined by the Issuer in good faith).
S&P means S&P Global Ratings.
Sale and Lease-Back Transaction has the meaning assigned to such term in Section 8.03.
Sanctioned Country means at any time, a country, region or territory that is, or whose government is, the target of any comprehensive Sanctions, including, as of the Closing Date, the Crimea region of Ukraine, Cuba, Iran, North Korea and Syria.
Sanctioned Person means at any time, any person with whom dealings are restricted or prohibited under Sanctions, including (i) any person listed in any Sanctions-related list of designated persons maintained by the United States (including by the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC), or the U.S. Department of State), or equivalent lists maintained by the United Nations Security Council, the European Union or any EU member state, Her Majestys Treasury of the United Kingdom, Canada or any other relevant sanctions authority, (ii) any person located or organized in a Sanctioned Country or (iii) any person owned fifty (50) percent or more or controlled, directly or indirectly, by any such person described in clause (i) or (ii) of this definition.
Sanctions means sanctions or trade embargoes enacted, imposed, administered or enforced from time to time by (i) the U.S. government, including those administered by OFAC, the U.S. Department of State, or U.S. Department of Commerce, (ii) the United Nations Security Council, the European Union or any of its member states, Her Majestys Treasury of the United Kingdom or (iii) Canada (or any provincial government).
SEC means the Securities and Exchange Commission or any successor thereto.
Secured Parties means, collectively, the Trustee, the Collateral Agent, each Noteholder Party and each subagent appointed pursuant to Section 15.02 by the Trustee with respect to matters relating to the Note Documents or by the Collateral Agent with respect to matters relating to any Security Document.
Securities Account has the meaning assigned to such term in the Uniform Commercial Code.
47
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Security Documents means the Mortgages, the Collateral Agreement, the Holdings Guarantee and Pledge Agreement, each Notice of Grant of Security Interest in Intellectual Property (as defined in the Collateral Agreement), each Account Control Agreement and each of the security agreements, pledge agreements and other instruments and documents executed and delivered at any time pursuant to any of the foregoing or pursuant to Section 7.10.
SOFR with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New Yorks Website.
Special Flood Hazard Area has the meaning assigned to such term in Section 7.02(c).
Spot Rate has the meaning assigned to such term in Section 1.04.
Subagent has the meaning assigned to such term in Section 15.02.
subsidiary means, with respect to any person (herein referred to as the parent), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Subsidiary means, unless the context otherwise requires, a subsidiary of the Issuer.
Subsidiary Guarantee Agreement means the Subsidiary Guarantee Agreement (First Lien) dated as of the Closing Date as may be amended, restated, supplemented or otherwise modified from time to time, between each Subsidiary Guarantor and the Trustee.
Subsidiary Guarantor means (a) each Wholly Owned Subsidiary of the Issuer that is not an Excluded Subsidiary and (b) any other Subsidiary of the Issuer that may be designated by the Issuer (by way of delivering to the Trustee or the Collateral Agent, as applicable, a supplement to the Collateral Agreement and a supplement to the Subsidiary Guarantee Agreement, in each case, duly executed by such Subsidiary) in its sole discretion from time to time to be a guarantor in respect of the Obligations, whereupon such Subsidiary shall be obligated to comply with the other requirements of Section 7.10(d) as if it were newly acquired.
Super Senior Secured Leverage Ratio means, on any date, the ratio of (A) (i) the aggregate principal amount of the Notes outstanding as of the last day of the Test Period most recently ended as of such date less (ii) without duplication, the Unrestricted Cash and unrestricted Permitted Investments of the Issuer and its Subsidiaries as of the last day of such Test Period in an aggregate amount not exceeding $18,750,000, to (B) EBITDA for such Test Period, all determined on a consolidated basis in accordance with GAAP.
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Pursuant to 17 C.F.R. Section 200.83
Tax Distributions means distributions described in Section 8.06(b)(iii) and Section 8.06(b)(v).
Taxes means any and all present or future taxes, duties, levies, imposts, assessments, deductions, withholdings or other similar charges imposed by any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or other basis and any interest, fines, penalties or additions to tax with respect to the foregoing.
Termination Date means the date on which the principal of and interest on each Note, all fees and all other expenses or amounts payable under any Note Document shall have been paid in full (other than in respect of contingent indemnification and expense reimbursement claims not then due).
Term SOFR means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.
Test Period means, on any date of determination, the period of four consecutive fiscal quarters of the Issuer then most recently ended (taken as one accounting period) for which financial statements have been (or were required to be) delivered pursuant to Section 7.04(a) or 7.04(b); provided that prior to the first date financial statements have been delivered pursuant to Section 7.04(a) or 7.04(b), the Test Period in effect shall be the four fiscal quarter period ended October 27, 2019.
Third Party Funds means any accounts or funds, or any portion thereof, received by the Issuer or any of its Subsidiaries as agent on behalf of third parties in accordance with a written agreement that imposes a duty upon the Issuer or one or more of its Subsidiaries to collect and remit those funds to such third parties.
TIA means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
Transaction Expenses means any fees or expenses incurred or paid by the Issuer or any of its Subsidiaries or any of their Affiliates in connection with the Transactions, this Indenture and the other Note Documents and the transactions contemplated hereby and thereby.
Transactions means, collectively, the transactions to occur pursuant to the Note Documents, including (a) the execution, delivery and performance of the Note Documents, the creation of the Liens pursuant to the Security Documents, and the purchase and sale of the Initial Notes hereunder and the use of proceeds thereof; (b) the redemption in full of the Existing Super Priority Notes, and the termination and release of all obligations, security interests and commitments under, the Existing Indenture; and (c) the payment of all fees and expenses to be paid and owing in connection with the foregoing.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Treasury Rate means, as of the applicable redemption date, a rate per annum (computed on the basis of actual days elapsed over a year of 360 days) equal to the rate determined by the Issuer on the date five Business Days prior to the date of redemption, to be the yield expressed as a rate listed in The Wall Street Journal for United States Treasury securities having a term most nearly equal to the period from such redemption date to the second anniversary of the Closing Date. If the redemption is in connection with a satisfaction and discharge or defeasance of the Indenture, the applicable Treasury Rate shall be computed as of the date five Business Days prior to the date that funds are irrevocably deposited with the Trustee to pay the amounts related thereto, as set forth in this Indenture.
Trust Officer means any officer:
(1) within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such persons knowledge of and familiarity with the particular subject, and
(2) who shall have direct responsibility for the administration of this Indenture.
Trustee means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.
Unadjusted Benchmark Replacement means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
Unfunded Pension Liability of any Plan means the amount, if any, by which the value of the accumulated plan benefits under the Plan, determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).
Uniform Commercial Code or UCC means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
Unrestricted Cash means cash or cash equivalents of the Issuer or any of its Subsidiaries that would not appear as restricted on a consolidated balance sheet of the Issuer or any of its Subsidiaries.
USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107 56 (signed into law October 26, 2001)), as amended.
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Pursuant to 17 C.F.R. Section 200.83
USDA means the United States Department of Agriculture or its successor agency in the United States.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.
Wholly Owned Subsidiary of any person means a subsidiary of such person, all of the Equity Interests of which (other than directors qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person or another Wholly Owned Subsidiary of such person. Unless the context otherwise requires, Wholly Owned Subsidiary means a Subsidiary of the Issuer that is a Wholly Owned Subsidiary of the Issuer.
Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Working Capital means, with respect to the Issuer and the Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided, that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting.
SECTION 1.02 Terms Generally. The definitions set forth or referred to in Sections 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Indenture unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Indenture to any Note Document or other agreement or document shall mean such document as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. Except as otherwise expressly provided herein, any reference herein to any Requirement of Law means such Requirement of Law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect on the Closing Date.
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SECTION 1.03 Effectuation of Transactions. Each of the representations and warranties of the Issuer contained in this Indenture (and all corresponding definitions) are made after giving effect to the Transactions, unless the context otherwise requires.
SECTION 1.04 Exchange Rates; Currency Equivalents. Any amount specified in this Indenture or any of the other Note Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount thereof in the applicable currency to be reasonably determined by the Issuer at such time on the basis of the Spot Rate for the purchase of such currency with Dollars. The Spot Rate for a currency means the rate of exchange quoted by the Reuters Currencies Page (available at www.reuters.com/markets/currencies as of the Issue Date) for the applicable currency at 11:00 a.m. (New York time) on the date two Business Days prior to the date of such determination (or, in the event such rate does not appear on any Reuters Currencies Page, by reference to such other publicly available service for displaying exchange rates as the Issuer may determine to use in its reasonable discretion). No Default or Event of Default shall arise as a result of any limitation or threshold set forth in Dollars in Article VIII or clause (f) or (j) of Section 10.01 being exceeded solely as a result of changes in currency exchange rates from those rates applicable on the first day of the fiscal quarter in which such determination occurs or in respect of which such determination is being made.
SECTION 1.05 Times of Day. Unless otherwise specified herein, all references herein to times of day shall be references to New York City time (daylight or standard, as applicable).
SECTION 1.06 No Incorporation by Reference of Trust Indenture Act. This Indenture is not qualified under the TIA, and the TIA shall not apply to or in any way govern the terms of this Indenture. As a result, no provisions of the TIA are incorporated into this Indenture unless expressly incorporated pursuant to this Indenture.
SECTION 1.07 Accounting Terms. All accounting terms not specifically defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Indenture shall be prepared in conformity with, GAAP applied on a consistent basis, applied in a manner consistent with that used in preparing the Historical Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Issuer and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 on financial liabilities shall be disregarded.
ARTICLE II.
THE NOTES
SECTION 2.01 Amount of Notes. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture on the Closing Date is $135,000,000.
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The Issuer may from time to time after the Closing Date issue up to $40,000,000 of Additional Notes under this Indenture, so long as such Additional Notes are issued to the Purchasers pursuant to the Note Purchase Agreement and in compliance with the other provisions of this Indenture. With respect to any Additional Notes issued after the Closing Date (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.09, 3.01(f), 3.01(a), 3.02(b), 3.02(c) or Appendix A), there shall be (a) established in or pursuant to a resolution of the Board of Directors of the Issuer and (b) set forth or determined in the manner provided in an Officers Certificate prior to the issuance of such Additional Notes:
(A) the aggregate principal amount of such Additional Notes which may be authenticated and delivered under this Indenture;
(B) the issue price and issuance date of such Additional Notes, including the date from which interest on such Additional Notes shall accrue;
(C) if applicable, that such Additional Notes shall be issuable in whole or in part in the form of one or more Global Notes and, in such case, the respective depositaries for such Global Notes, the form of any legend or legends which shall be borne by such Global Notes in addition to or in lieu of those set forth in Exhibit A hereto and any circumstances in addition to or in lieu of those set forth in Section 2.2 of Appendix A in which any such Global Note may be exchanged in whole or in part for Additional Notes registered, or any transfer of such Global Note in whole or in part may be registered, in the name or names of persons other than the depositary for such Global Note or a nominee thereof; and
(D) a revised installments schedule.
If any of the terms of any Additional Notes are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by a Responsible Officer of the Issuer and delivered to the Trustee at or prior to the delivery of the Officers Certificate setting forth the terms of the Additional Notes.
The Initial Notes and any Additional Notes will be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.
SECTION 2.02 Form and Dating. Provisions relating to the Notes are set forth in Appendix A, which is hereby incorporated in and expressly made a part of this Indenture. The (i) Initial Notes and the Trustees certificate of authentication and (ii) any Additional Notes and the Trustees certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer or any Subsidiary Guarantor is subject, if any, or usage (provided, that any such notation, legend or endorsement is in a form acceptable to the Issuer). Each Note shall be dated the date of its authentication. The Notes shall be issued in registered form without interest coupons and in minimum denominations of $2,000 and integral multiples of $1,000 in excess
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thereof; provided that Notes may be issued in denominations of less than $2,000 solely to accommodate book-entry positions that have been created by participants of the Depository in denominations of less than $2,000.
SECTION 2.03 Execution and Authentication. The Trustee shall authenticate and make available for delivery upon a written order of the Issuer signed by one Responsible Officer of the Issuer (i) the Initial Notes for original issue on the Closing Date in an aggregate principal amount of $135,000,000 and (ii) subject to the terms of this Indenture, the Additional Notes from time to time after the Closing Date in an aggregate principal amount not to exceed $40,000,000. Such written order shall specify the amount of separate Note certificates to be authenticated, the principal amount of each of the Notes to be authenticated, the date on which the original issue of Notes is to be authenticated, whether the Notes are to be Initial Notes or Additional Notes, the registered holder of each of the Notes and delivery instructions. Notwithstanding anything to the contrary in this Indenture or Appendix A, any issuance of Additional Notes after the Closing Date shall be in a principal amount of at least $2,000 and integral multiples of $1,000 in excess thereof.
One Responsible Officer shall sign each of the Notes for the Issuer by manual or facsimile signature.
If a Responsible Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid nor shall it be entitled to any benefit under this Indenture until an authorized signatory of the Trustee signs the certificate of authentication on the Note by manual signature. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee may appoint one or more authenticating agents reasonably acceptable to the Issuer to authenticate the Notes on behalf of the Trustee by manual signature. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Issuer. Unless limited by the terms of such appointment, an authenticating agent may authenticate the Notes whenever the Trustee may do so by manual signature. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.04 Registrar and Paying Agent.
(a) The Issuer shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange (the Registrar) and (ii) an office or agency where Notes may be presented for payment (the Paying Agent). The Registrar shall keep a register of the Notes and of their transfer and exchange (the Register). The Issuer may have one or more co-registrars and one or more additional paying agents. The term Registrar includes any co-registrars. The term Paying Agent includes the Paying Agent and any additional paying agents. The Issuer initially appoints the Trustee as Registrar, Paying Agent and the Notes Custodian with respect to the Global Notes.
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(b) The Issuer may enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuer shall notify the Trustee in writing of the name and address of any such agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 11.07. The Issuer or any of its domestically organized Subsidiaries may act as Paying Agent or Registrar.
(c) The Issuer may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) if applicable, acceptance of an appointment by a successor Registrar or Paying Agent, as the case may be, as evidenced by an appropriate agreement entered into by the Issuer and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Issuer and the Trustee; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 11.08.
SECTION 2.05 Paying Agent to Hold Money in Trust. On or prior to each due date of the principal of and interest on any Note, the Issuer shall deposit with each Paying Agent (or if the Issuer or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Issuer shall require each Paying Agent (other than the Trustee) to agree in writing that a Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by a Paying Agent for the payment of principal of and interest on the Notes, and shall notify the Trustee of any default by the Issuer in making any such payment. If the Issuer or a Subsidiary of the Issuer acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it in trust for the benefit of the persons entitled thereto. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section 2.05, a Paying Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.06 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuer shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.
SECTION 2.07 Transfer and Exchange.
The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with Appendix A. When a Note is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements therefor are met. When Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other
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denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, subject to Section 16.07, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrars request. The Issuer may require payment of a sum sufficient to pay all transfer taxes, assessments or other similar governmental charges in connection with any transfer or exchange pursuant to this Section. The Issuer shall not be required to make, and the Registrar need not register, transfer or exchange the Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes for a period of 5 Business Days before a selection of Notes to be redeemed or between a Record Date and the relevant Interest Payment Date, but only to the extent such registration, transfer or exchange is not permitted by, or is administratively impractical in accordance with, the Applicable Procedures.
Prior to the due presentation for registration of transfer of any Note, the Issuer, the Subsidiary Guarantors, Holdings, the Trustee, the Paying Agent and the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Subsidiary Guarantors, Holdings, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.
Any holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by (a) the holder of such Global Note (or its agent) or (b) any holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
None of the Trustee, Registrar or Paying Agent shall have any responsibility for any actions taken or not taken by the Depository.
SECTION 2.08 Replacement Notes. If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost or destroyed, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) satisfies the Issuer and the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking
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and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Issuer and the Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a protected purchaser) and (c) satisfies any other reasonable requirements of the Issuer and the Trustee. If required by the Trustee or the Issuer, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee, with respect to the Trustee, and the Issuer, with respect to the Issuer, to protect the Issuer, the Trustee, the Paying Agent and the Registrar, as applicable, from any loss or liability that any of them may suffer if a Note is replaced and subsequently presented or claimed for payment. The Issuer and the Trustee may charge the Holders for their expenses in replacing a Note (including without limitation, attorneys fees and disbursements in replacing such Note). In the event any such mutilated, lost or destroyed Note has become or is about to become due and payable, the Issuer in its discretion may pay such Note instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the Issuer.
The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost or destroyed or Notes.
SECTION 2.09 Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 16.04, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.08 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.08.
If a Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and no Paying Agent is prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10 Cancellation. The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and each Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and shall dispose of canceled Notes in accordance with its customary procedures. The Issuer may not issue new Notes to replace Notes they have redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Notes in place of canceled Notes other than pursuant to the terms of this Indenture.
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SECTION 2.11 Defaulted Interest. If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 2.15(b) hereof. The Issuer shall notify the Trustee and the Holders in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.11. The Issuer shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. The Issuer shall promptly notify the Trustee in writing of such special record date. At least 15 days before the special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall mail or cause to be mailed, first-class postage prepaid, to each Holder a notice at his or her address as it appears in the Register that states the special record date, the related payment date and the amount of such interest to be paid.
Subject to the foregoing provisions of this Section 2.11 and for greater certainty, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 2.12 CUSIP Numbers, ISINs, Etc. The Issuer in issuing the Notes may use CUSIP numbers, ISINs and Common Code numbers (if then generally in use), and the Trustee shall use any such CUSIP numbers, ISINs and Common Code numbers in notices of redemption as a convenience to holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Notes or as contained in any notice of a redemption that reliance may be placed only on the other identification numbers printed on the Notes and that any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall advise the Trustee of any change in any such CUSIP numbers, ISINs and Common Code numbers.
SECTION 2.13 Calculation of Principal Amount of Notes. The aggregate principal amount of the Notes, at any date of determination, shall be the principal amount of the Notes at such date of determination. With respect to any matter requiring consent, waiver, approval or other action of the Holders of a specified percentage of the principal amount of all the Notes, such percentage shall be calculated, on the relevant date of determination, by dividing (a) the principal amount, as of such date of determination, of Notes, the Holders of which have so consented, by (b) the aggregate principal amount, as of such date of determination, of the Notes then outstanding, in each case, as determined in accordance with the preceding sentence, Section 2.09 and Section 16.04 of this Indenture.
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SECTION 2.14 [Reserved].
SECTION 2.15 Interest.
(a) The Notes shall bear interest at the Adjusted LIBO Rate plus the Applicable Margin.
(b) Notwithstanding the foregoing, during the continuance of an Event of Default, at the option of the Required Noteholder Parties (and automatically upon an Event of Default under Sections 10.01(b), (c), (h) or (i)), the principal amount of all Notes outstanding and, to the extent permitted by applicable law, any interest payments on the Notes or any fees or other amounts owed hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand, at a rate per annum equal to 2.00% plus the rate otherwise applicable to such Note as provided in the preceding clauses of this Section 2.15; provided, that this clause (b) shall not apply to any Event of Default that has been waived by the Required Noteholder Parties pursuant to Section 13.01.
(c) Accrued interest on each Note shall be payable in arrears (i) on each Interest Payment Date for such Note or, if any such date is not a Business Day, on the next succeeding Business Day and (ii) on the Maturity Date; provided, that (A) interest accrued pursuant to clause (b) of this Section 2.15 shall be payable on demand and (B) in the event of any redemption of any Note, accrued interest on the principal amount redeemed shall be payable on the date of such redemption through, but excluding, the date of such redemption.
(d) All interest hereunder shall be computed on the basis of a year of 360 days and twelve-30 day months. The applicable interest rate (including, as applicable, the calculation of the Adjusted LIBO Rate, the LIBO Rate, the Prime Rate and the Applicable Margin, and the amount of any defaulted interest pursuant to Section 2.11) shall be determined by the Issuer, which shall promptly provide notice to each Holder of such determination in writing (with a copy to the Trustee), and unless the Required Noteholder Parties object by written notice to the Issuer not less than 5 Business Days prior to the applicable Interest Payment Date, such determination shall be conclusive absent manifest error. Receipt of such written notice of objection from the Required Noteholder Parties will not relieve the Issuer from its obligation to make the applicable payment as and when due.
(e) Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the Charges), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Noteholder Party, shall exceed the maximum lawful rate (the Maximum Rate) that may be contracted for, charged, taken, received or reserved by such Noteholder Party in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Noteholder Party, shall be limited to the Maximum Rate; provided, that such excess amount shall be paid to such Noteholder Party on subsequent payment dates to the extent not exceeding the legal limitation.
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SECTION 2.16 [Reserved].
SECTION 2.17 Benchmark Replacement.
(a) Notwithstanding anything to the contrary herein or in any other Note Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder or under any Note Document in respect of such determination on such date and all determinations on all subsequent dates. If the Benchmark Replacement is determined in accordance with clause (1) or (2) of the definition of Benchmark Replacement, such Benchmark Replacement will become effective as of the Reference Time on the applicable Benchmark Replacement Date without any amendment to, or further action or consent of any other party to, this Indenture. If the Benchmark Replacement is determined in accordance with clause (3) of the definition of Benchmark Replacement, such Benchmark Replacement will become effective at 5:00 p.m. on the fifth Business Day after the date notice of such Benchmark Replacement is provided to the Noteholders and the Trustee without any amendment to, or further action or consent of any other party to, this Indenture.
(b) In connection with the implementation of a Benchmark Replacement, the Issuer will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Note Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Indenture; provided that the Issuer shall give the Holders at least fifteen (15) Business Days advance written notice (with a copy to the Trustee) of any pending Benchmark Replacement Conforming Changes and the proposed date of the implementation thereof (the Implementation Date), and if the Required Noteholder Parties notify the Issuer in writing prior to the Implementation Date that they object to such Benchmark Replacement Conforming Changes, such Benchmark Replacement Conforming Changes shall not take effect, and the Required Noteholder Parties acting reasonably and the Issuer shall endeavor to identify alternative Benchmark Replacement Conforming Changes, which alternate Benchmark Replacement Conforming Changes shall take effect in accordance with this Section 2.17(b).
(c) The Issuer will promptly notify in writing the Holders (with a copy to the Trustee) of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes, (iv) the removal or reinstatement of any tenor of Term SOFR pursuant to clause (d) below and (v) the commencement or conclusion of any Benchmark Unavailability Period. If the Required Noteholder Parties notify the Issuer in writing that they object to any determination or calculation relating to the foregoing, the Required Noteholder Parties acting reasonably may make such determination or calculation.
(d) Any determination, decision or election that may be made by the Required Noteholder Parties pursuant to this Section 2.17 including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their reasonable discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.17.
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(e) Notwithstanding anything to the contrary herein or in any other Note Document, at any time and with respect to any Interest Period, if the Benchmark at such time is Term SOFR and Term SOFR for the applicable tenor is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Issuer, the Issuer may (i) modify the definition of Interest Period for all determinations of interest at or after such time to remove such unavailable tenor and (ii) if Term SOFR, as applicable, for the applicable tenor is displayed on such screen or information service after its removal pursuant to clause (i) above, modify the definition of Interest Period for all determinations of interest at or after such time to reinstate such previously removed tenor.
(f) Upon the Holders and the Trustees receipt of notice of the commencement of a Benchmark Unavailability Period, interest on the Notes shall accrue at the ABR plus the Applicable Margin. During any Benchmark Unavailability Period, the component of ABR based upon the LIBO Rate will not be used in any determination of ABR.
ARTICLE III.
REDEMPTION
SECTION 3.01 Amortization; Redemption of Notes.
(a) Subject to the other clauses of this Section 3.01:
(i) the Issuer shall issue a notice of redemption in accordance with Section 3.05 at least 10 days prior to the last day of each March, June, September and December of each year (commencing on the last day of the first March, June, September or December ending after the first full fiscal quarter of the Issuer ending after the Closing Date) or, if any such date is not a Business Day, on the next succeeding Business Day (each such date of redemption being referred to as a Notes Installment Date), to redeem the Notes at par in an aggregate principal amount of such Notes equal to an amount equal to 0.25% of the aggregate principal amount of such Notes outstanding immediately after the Closing Date (rounded down to the nearest $1,000); provided that the aggregate amount of Notes to be redeemed pursuant to this Section 3.01(a)(i) on each Notes Installment Date shall be set forth in an Officers Certificate delivered to the Trustee subject to the dates stated in Section 3.03, as may be supplemented or modified pursuant to Section 3.01(c) or Section 3.01(d); provided, further, that on and after any Additional Notes Issue Date, the quarterly redemption payments pursuant to this Section 3.01(a)(i) shall be equal to an amount equal to 0.25% of the aggregate principal amount of all Notes outstanding immediately after giving effect to such Additional Notes Issue Date (rounded down to the nearest $1,000);
(ii) to the extent not previously redeemed, outstanding Notes shall be due and payable on the Maturity Date.
(b) Repurchases of the Notes from:
(i) all Net Proceeds or Extraordinary Receipts pursuant to Section 3.02(b) and Excess Cash Flow pursuant to Section 3.02(c) shall be allocated to
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the Notes pursuant to Section 3.01(c), with the application thereof to reduce in direct order amounts due on the succeeding Notes Installment Dates under such Notes as provided in the remaining scheduled amortization payments under such Notes, and
(ii) any optional redemptions of the Notes pursuant to Section 3.02(a) shall be applied to the remaining installments of the Notes as the Issuer may in each case direct.
(c) On each Additional Notes Issue Date, the Issuer shall deliver a revised installments schedule to the Holders (with a copy to the Trustee).
(d) On each redemption or repurchase date (other than a redemption pursuant to Section 3.01(a)), the Issuer shall deliver a revised installments schedule to the Holders (with a copy to the Trustee).
(e) All redemptions or repurchases of Notes shall be accompanied by accrued interest on the amount repaid to the extent required by Section 2.15(c) and (other than in connection with a redemption pursuant to Section 3.01(a)) the Issuer shall deliver to the Trustee an Officers Certificate that such redemption shall comply with the conditions contained in this Indenture and the Note.
(f) If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. Upon surrender and cancellation of a Note that is redeemed in part, the Issuer shall execute and the Trustee shall authenticate for the holder (at the Issuers expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered and cancelled (or if the Note is a Global Note, an adjustment shall be made to the Schedule of Increases or Decreases in Global Note attached thereto in accordance with the applicable procedures of the Depository).
(g) If the redemption date is on or after an interest Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest up to but excluding the redemption date will be paid to the person in whose name a Note is registered at the close of business on such interest Record Date, and no additional interest will be payable to Holders who redeem their Notes.
(h) Notwithstanding anything to the contrary in this Indenture, other than in connection with a redemption of the full outstanding principal amount of the Notes, each redemption of the Notes shall be in an aggregate principal amount that is at least $2,000 and an integral multiple of $1,000 in excess thereof and if any provision of this Indenture would otherwise require the Issuer to redeem Notes in an aggregate principal amount that does not comply with the foregoing, the aggregate principal amount that the Issuer shall be required to redeem shall be rounded down to the nearest $1,000 integral.
SECTION 3.02 Voluntary and Mandatory Redemption and Repurchase of Notes.
(a) The Issuer shall have the right at any time and from time to time to redeem the Notes in whole or in part, without premium or penalty (except as otherwise provided in this Section 3.02(a), Section 3.02(b) or Section 3.02(e)), in an aggregate principal amount that is an integral multiple of $1,000 and not less than 2,000 or, if less, the amount outstanding, subject to prior notice in accordance with Section 3.05; provided that:
(i) in the event of any optional redemption of the Notes made pursuant to this Section 3.02(a) prior to the second anniversary of the Closing Date, the Issuer shall pay to the Paying Agent for the account of the applicable Holders with respect to the Notes the Applicable Premium as of the applicable redemption date;
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(ii) in the event of any optional redemption of the Notes made pursuant to this Section 3.02(a) on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, the Issuer shall pay to the Paying Agent for the account of the applicable Holders with respect to the Notes a premium equal to 3.00% of the aggregate principal amount of the Notes so redeemed;
(iii) in the event of any optional redemption of the Notes made pursuant to this Section 3.02(a) on or after the third anniversary of the Closing Date and prior to the fourth anniversary of the Closing Date, the Issuer shall pay to the Paying Agent for the account of the applicable Holders with respect to the Notes a premium equal to 1.00% of the aggregate principal amount of the Notes so redeemed; and
(iv) on or after the fourth anniversary of the Closing Date, no premium shall be due in respect of the redemption of any Notes.
(b) The Issuer shall apply all Net Proceeds and Extraordinary Receipts after the date of the realization or receipt by the Issuer or any Subsidiaries thereof to make an offer to repurchase the Notes for cash at par (an Asset Sale Offer) in accordance with the procedures set forth in Section 3.02(d); provided that, solely with respect to any repurchase of the Notes with Net Proceeds of the type specified in clause (a) of the definition of Net Proceeds:
(i) in the event of any repurchase of the Notes made pursuant to this Section 3.02(b) prior to the second anniversary of the Closing Date, the Issuer shall make an Asset Sale Offer at par plus a premium equal to 5.00% of the aggregate principal amount of the Notes so repurchased;
(ii) in the event of any repurchase of the Notes made pursuant to this Section 3.02(b) on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, the Issuer shall make an Asset Sale Offer at par plus a premium equal to 3.00% of the aggregate principal amount of the Notes so repurchased;
(iii) in the event of any repurchase of the Notes made pursuant to this Section 3.02(b) on or after the third anniversary of the Closing Date and prior to the fourth anniversary of the Closing Date, the Issuer shall make an Asset Sale Offer at par plus a premium equal to 1.00% of the aggregate principal amount of the Notes so repurchased; and
(iv) on or after the fourth anniversary of the Closing Date, no premium above par shall be included in any Asset Sale Offer;
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provided, further, that no premium shall be due in respect of any Asset Sale Offer with Net Proceeds of the type specified in clause (a) of the definition of Net Proceeds unless such Net Proceeds shall exceed $5,000,000 in the aggregate after the Closing Date (and thereafter only Net Proceeds in excess of such amount shall be subject to the foregoing premiums); provided, further, that no Asset Sale Offer will be required to be made until the amount of Net Proceeds and/or Extraordinary Receipts required to be applied to repurchase the Notes pursuant to such offer is at least $1,000,000.
(c) Not later than five (5) Business Days after the date on which the annual financial statements are, or are required to be, delivered under Section 7.04(a) with respect to each Excess Cash Flow Period, the Issuer shall calculate Excess Cash Flow for such Excess Cash Flow Period and such calculation will be set forth in an Officers Certificate delivered to the Trustee setting forth the amount, if any, of Excess Cash Flow for such fiscal year, the amount required to be applied to make an ECF Offer as provided below and the calculation thereof in reasonable detail. The Issuer shall apply an amount equal to (i) the Required Percentage of such Excess Cash Flow, (ii) plus any Carryover Amounts, minus (iii) the amount of any optional redemptions of Notes during such Excess Cash Flow Period (plus, without duplication of any amounts previously deducted under this clause (iii), the amount of any optional redemptions of Notes after the end of such Excess Cash Flow Period but before the repurchase of Notes pursuant to an offer under this clause (c)) to make a an offer to purchase the Notes for cash at par (an ECF Offer) in accordance with the procedures set forth in Section 3.02(d); provided, that no ECF Offer will be required to be made unless the amount required to be applied to repurchase the Notes pursuant to such offer in accordance with this Section 3.02(c) is at least $2,000,000. Any amount not applied to make an ECF Offer pursuant to the proviso to the immediately preceding sentence will be Carryover Amounts until such amounts are applied to make an ECF Offer (and once so applied, including if such amounts become Declined Amounts following such ECF Offer, such amounts will cease to be Carryover Amounts).
(d) If the Issuer is required to make a Repurchase Offer pursuant to Section 3.02(b) or Section 3.02(c), as applicable, the Issuer will apply cash in the amount required to be applied pursuant to such Section to offer to repurchase the Notes at the applicable purchase price pursuant to such Section, plus accrued and unpaid interest, if any, on the Notes repurchased to, but excluding, the date of purchase (the Repurchase Offer Payment Date), subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant Interest Payment Date. Within five Business Day following (i) the realization or receipt of Net Proceeds or Extraordinary Receipts, in the case of an Asset Sale Offer, or (ii) delivery of the Officers Certificate setting forth the calculation of Excess Cash Flow, in the case of an ECF Offer, the Issuer will deliver a notice to each Holder (with a copy to the Trustee) stating:
(1) a Repurchase Offer is being made pursuant to Section 3.02(b) or 3.02(c) of this Indenture, as applicable;
(2) the purchase price and the purchase date, which shall be a date not less than 20 nor more than 30 Business Days from the date such notice is delivered to the Holders; provided that, at the Issuers option, the Issuer may provide for an early settlement date for Notes tendered on or prior to the 10th Business Day after the date of the notice, and a late settlement date for Notes tendered after the 10th Business Day after the date of the notice;
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(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Issuer defaults in the payment of the applicable purchase price, all Notes accepted for payment pursuant to the Repurchase Offer will cease to accrue interest after the Repurchase Offer Payment Date;
(5) that Holders may rescind their tender at any time on or prior to the 20th Business Day following the date of the notice (or the 10th Business Day, if the Issuer has provided for an early settlement date); and
(6) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof.
On the Repurchase Offer Payment Date, the Issuer will, to the extent lawful, (i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Repurchase Offer; (ii) deposit with the Paying Agent an amount equal to the applicable aggregate purchase price (including accrued and unpaid interest on the Notes to be repurchased) in respect of all Notes or portions of Notes properly tendered; (iii) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer and (iv) deliver a revised installments schedule to the Holders (with a copy to the Trustee). The Paying Agent will promptly deliver (but in any case not later than five days after the Repurchase Date) to each Holder of Notes properly tendered the applicable purchase price (including accrued and unpaid interest to the date of repurchase) for such Notes.
If at the end of the Repurchase Offer more Notes are tendered than the Issuer is required to purchase, selection of such Notes for purchase shall be made by the Issuer in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed (and the Issuer shall notify the Trustee of any such listing), or if such Notes are not so listed, on a pro rata basis to the extent practicable, by lot or by such other method as the Issuer deems appropriate (and in such manner as complies with the requirements of the Depository, if applicable); provided that no Notes of a minimum $2,000 or less shall be purchased in part.
The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Repurchase Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 3.02(d), the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 3.02(d) by virtue of such compliance.
(e) In the event of any mandatory redemption required to be made pursuant to clause (b) of the definition of Net Proceeds, or if the Notes are accelerated or otherwise
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become due prior to their stated maturity pursuant to Section 10.01 following the occurrence of any Event of Default, in each case, prior to March 1, 2023, the Issuer shall pay to the Paying Agent for the account of the applicable Holders with respect to such Notes the prepayment premium specified in Section 3.02(a) applicable to such Notes on such date. It is understood and agreed that if, prior to March 1, 2023, the Obligations are accelerated or otherwise become due, in each case, in respect of any Event of Default (including, but not limited to, upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law) (a Make-Whole Event)), the prepayment premium that would have applied (the Make-Whole Amount) if, at the time of such acceleration, the Issuer had voluntarily redeemed, prepaid, refinanced, substituted or replaced any or all of the Notes as contemplated in Section 3.02(a) above, will also be due and payable on such date and such Make-Whole Amount shall constitute part of the Obligations, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of the Noteholders lost profits as a result thereof. Any Make-Whole Amount payable above shall be presumed to be the liquidated damages sustained by the Noteholders as the result of the early termination and the Issuer agrees that it is reasonable under the circumstances currently existing. The Make-Whole Amount shall also be payable in the event the Obligations (and/or this Indenture) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure or by any other means following the occurrence of a Make-Whole Event. THE ISSUER, HOLDINGS AND EACH SUBSIDIARY GUARANTOR EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING MAKE-WHOLE AMOUNT IN CONNECTION WITH ANY SUCH ACCELERATION. The Issuer, Holdings and each Subsidiary Guarantor expressly agrees (to the fullest extent that it may lawfully do so) that: (A) the Make-Whole Amount is reasonable and is the product of an arms length transaction between sophisticated business people, ably represented by counsel; (B) the Make-Whole Amount shall be payable notwithstanding the then prevailing market rates at the time payment is made; (C) there has been a course of conduct between the Noteholders and the Issuer, Holdings and each Subsidiary Guarantor giving specific consideration in this transaction for such agreement to pay the Make-Whole Amount; and (D) the Issuer, Holdings and each Subsidiary Guarantor shall be estopped hereafter from claiming differently than as agreed to in this paragraph. Each of the Issuer, Holdings and Subsidiary Guarantors expressly acknowledges that its agreement to pay the Make-Whole Amount to the Noteholders as herein described is a material inducement to the Noteholders to purchase the Notes.
(f) In connection with any redemption or repurchase of Notes under this Indenture, the Holders must deliver to the Trustee their Notes and any certifications, notices and other documents and information as may be required by this Indenture and the Trustee.
SECTION 3.03 Notices to Trustee. In connection with any redemption of Notes, the Issuer shall notify the Trustee in an Officers Certificate of (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. The Issuer shall give notice to the Trustee provided for in this paragraph at least 10 days but not more than 60 days before a redemption date (or in the case of any partial redemption, notice to the Trustee will be provided at least 15 days but not more than 60 days before a redemption date), except that notice may be
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given to the Trustee more than 60 days prior to the redemption date if the notice is given in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Article XII or if the redemption date is delayed. The Issuer may also include a request in such Officers Certificate that the Trustee give the notice of redemption in the Issuers name and at its expense and setting forth the information to be stated in such notice as provided in Section 3.05. Any such notice may be canceled if written notice from the Issuer of such cancellation is received by the Trustee on the Business Day immediately prior to notice of such redemption being mailed to any holder or otherwise delivered in accordance with the applicable procedures of the Depository and shall thereby be void and of no effect. The Issuer shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 3.04.
SECTION 3.04 Selection of Notes to be Redeemed. In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee at least 15 days but not more than 60 days before a redemption date in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed (and the Issuer shall notify the Trustee of any such listing), or if the Notes are not so listed, on a pro rata basis to the extent practicable or by lot or by such other method as the Trustee shall deem fair and appropriate (and, in such manner that complies with the requirements of the Depository, if applicable); provided that no Notes of a minimum of $2,000 or less shall be redeemed in part. The Trustee shall make the selection from outstanding Notes not previously called for redemption. The Trustee may select for redemption portions of the principal of Notes that have denominations larger than $2,000. Notes and portions of them the Trustee selects shall be in minimum amounts of $2,000 and integral multiples of $1,000 in excess thereof. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Issuer promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.05 Notice of Redemption.
(a) At least 10 days (or 15 days in the case of any partial redemption) but not more than 60 days before a redemption date, the Issuer shall mail or cause to be mailed by first-class mail at its registered address, or otherwise deliver in accordance with the procedures of the Depository, a notice of redemption to each holder whose Notes are to be redeemed (with a copy to the Trustee), except that redemption notices may be mailed or otherwise delivered more than 60 days prior to the redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Article XII or if the redemption date is delayed.
Any such notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price and the amount of accrued interest to, but excluding, the redemption date (provided that in the case of any redemption pursuant to Section 3.02(a)(i), the redemption price may be stated as a formula so long as it includes sufficient detail to enable a holder to verify the calculation of such redemption price);
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(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price, plus accrued and unpaid interest, if any;
(v) if fewer than all the outstanding Notes are to be redeemed, the certificate numbers and principal amounts of the particular Notes to be redeemed, the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption;
(vi) that, unless the Issuer defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date;
(vii) the CUSIP number, ISIN and/or Common Code number, if any, printed on the Notes being redeemed;
(viii) that no representation is made as to the correctness or accuracy of the CUSIP number or ISIN and/or Common Code number, if any, listed in such notice or printed on the Notes;
(ix) if the redemption is subject to the satisfaction of one or more conditions precedent, the notice thereof shall describe each such condition and, if applicable, shall state that, in the Issuers discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied (or waived by the Issuer in its sole discretion), and/or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Issuer in its sole discretion) by the redemption date, or by the redemption date as so delayed, and/or that such notice may be rescinded at any time by the Issuer if the Issuer determines in its sole discretion that any or all of such conditions will not be satisfied (or waived), provided, however, that for the avoidance of doubt, if any redemption date shall be delayed as contemplated by this paragraph and the terms of the applicable notice of redemption, such redemption date as so delayed may occur, subject to the applicable procedures of the Depository, at any time after the original redemption date set forth in the applicable notice of redemption and after the satisfaction (or waiver) of any applicable conditions precedent, including, without limitation, on a date that is less than 10 days after the original redemption date or more than 60 days after the applicable notice of redemption;
(x) at the Issuers option, that the payment of the redemption price and performance of the Issuers obligations with respect to such redemption may be performed by another person; and
(xi) the revised installments schedule.
Notice of any voluntary redemption upon any corporate transaction or other event (including any incurrence of Indebtedness, Change in Control or other transaction) may be given
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prior to the completion thereof. In addition, any voluntary redemption or notice thereof may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event. For the avoidance of doubt, if any voluntary redemption date shall be delayed as contemplated by this Section 3.05 and the terms of the applicable notice of redemption, such redemption date as so delayed may occur at any time after the original redemption date set forth in the applicable notice of redemption and after the satisfaction (or waiver) of any applicable conditions precedent, including, without limitation, on a date that is less than 10 days after the original redemption date or more than 60 days after the date of the applicable notice of redemption. To the extent that the voluntary redemption date will occur on a date other than the original redemption date set forth in the applicable notice of redemption, the Issuer shall notify the holders and the Trustee of the final redemption date prior to such date; provided that the failure to give such notice, or any defect therein, shall not impair or affect the validity of any redemption under this Article III.
(b) Subject to Section 3.03 and Section 3.04, at the Issuers written request, the Trustee shall deliver the notice of redemption in the Issuers name and at the Issuers expense. In such event, the Issuer shall notify the Trustee of such request at least three Business Days (or such shorter period as is acceptable to the Trustee) prior to the date such notice is to be provided to holders.
SECTION 3.06 Effect of Notice of Redemption. Once notice of redemption is mailed or otherwise delivered in accordance with Section 3.05, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice, except as provided in the final paragraph of Section 3.05(a). Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest, if any, to, but excluding, the redemption date; provided, however, that if the redemption date is after a regular Record Date and on or prior to the next Interest Payment Date, the accrued interest shall be payable to the holder of the redeemed Notes registered on the relevant Record Date. Failure to give notice or any defect in the notice to any holder shall not affect the validity of the notice to any other holder.
SECTION 3.07 Deposit of Redemption Price. With respect to any Notes, prior to 10:00 a.m., New York City time, on the redemption date, the Issuer shall deposit, or cause to be deposited, with the Paying Agent (or, if the Issuer or a Subsidiary of the Issuer is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of, plus accrued and unpaid interest, if any, on all Notes or portions thereof to be redeemed on that date other than Notes or portions of Notes called for redemption that have been delivered by the Issuer to the Trustee for cancellation. On and after the redemption date, interest shall cease to accrue on Notes or portions thereof called for redemption so long as the Issuer has deposited with the Paying Agent funds sufficient to pay the principal of, plus, accrued and unpaid interest, if any, on, the Notes or portions thereof to be redeemed, unless the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture.
SECTION 3.08 Applicability of Article. Redemption of Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article III.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
On the Closing Date and each Additional Notes Issue Date, the Issuer represents and warrants to each of the Noteholder Parties that:
SECTION 4.01 Organization; Powers. Each of Holdings, the Issuer and each of its Subsidiaries (a) is a partnership, limited liability company or corporation duly organized, validly existing and in good standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States of America) under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own or lease its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not reasonably be expected to have a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Note Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Issuer, to issue the Notes hereunder.
SECTION 4.02 Authorization. The execution, delivery and performance by the Issuer and each of the Subsidiary Guarantors and, in the case of Section 4.02(a) and 4.02(b)(i)(B), Holdings, of each of the Note Documents to which it is a party and the borrowings hereunder (a) have been duly authorized by all corporate, stockholder, partnership or limited liability company action required to be obtained by Holdings, the Issuer and such Subsidiary Guarantors and (b) will not (i) violate (A) any provision of law, statute, rule or regulation applicable to Holdings, the Issuer or any such Subsidiary Guarantor, (B) the certificate or articles of incorporation or other constitutive documents (including any partnership, limited liability company or operating agreements) or by-laws of Holdings, the Issuer, or any such Subsidiary Guarantor, (C) any applicable order of any court or any rule, regulation or order of any Governmental Authority applicable to the Issuer or any such Subsidiary Guarantor or (D) any provision of any indenture, certificate of designation for Preferred Stock, agreement or other instrument to which the Issuer or any such Subsidiary Guarantor is a party or by which any of them or any of their property is or may be bound, (ii) result in a breach of or constitute (alone or with due notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) under any such indenture, certificate of designation for Preferred Stock, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 4.02(b), would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to (x) any property or assets now owned or hereafter acquired by the Issuer or any such Subsidiary Guarantor, other than the Liens created by the Note Documents and Permitted Liens, or (y) any Equity Interests of the Issuer now owned or hereafter acquired by Holdings, other than Liens created by the Note Documents or Liens permitted by Article IX.
SECTION 4.03 Enforceability. This Indenture has been duly executed and delivered by Holdings and the Issuer and constitutes, and each other Note Document in effect on or prior to the date hereof and each other Note Document when executed and delivered by the Issuer and
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each Subsidiary Guarantor that is party thereto will constitute, a legal, valid and binding obligation of such Note Party enforceable against the Issuer and each such Subsidiary Guarantor in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.
SECTION 4.04 Governmental Approvals. No action, consent, exemption or other action or approval of, registration or filing with or any other action by any Governmental Authority is or will be required for the execution, delivery, enforcement against or performance by each Note Document to which the Issuer or any Subsidiary Guarantor is a party, except for (a) the filing of Uniform Commercial Code financing statements, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions, (c) recordation of the Mortgages, (d) such as have been made or obtained and are in full force and effect, (e) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect and (f) filings or other actions listed on Schedule 4.04 and any other filings or registrations required by the Security Documents.
SECTION 4.05 Financial Statements. (a) The audited consolidated balance sheets and the consolidated statements of income, stockholders equity, and cash flows as of and for the fiscal years ended January 27, 2019, January 28, 2018 and January 29, 2017 for the Issuer and its consolidated subsidiaries, including the notes thereto (the Historical Audited Financial Statements), present fairly in all material respects the consolidated financial position of the Issuer and its consolidated subsidiaries as of the dates and for the periods referred to therein and the results of operations and, if applicable, cash flows for the periods then ended, and, except as set forth on Schedule 4.05, were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby; and (b) the unaudited consolidated balance sheet and the consolidated statements of income, stockholders equity and cash flows as of and for the fiscal quarters ended April 28, 2019, July 28, 2019 and October 27, 2019 for the Issuer and its consolidated subsidiaries, including the notes thereto, if applicable, present fairly in all material respects the consolidated financial position of the Issuer and its consolidated subsidiaries as of the dates and for the periods referred to therein and the results of operations and, if applicable, cash flows for the periods then ended, and, except as set forth on Schedule 4.05, were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby.
SECTION 4.06 No Material Adverse Effect. Since the Closing Date, there has been no event or circumstance that, individually or in the aggregate with other events or circumstances, has had or would reasonably be expected to have a Material Adverse Effect.
SECTION 4.07 Title to Properties; Possession Under Leases.
(a) Each of the Issuer and the Subsidiaries has valid title in fee simple or equivalent to, or valid leasehold interests in, or easements or other limited property interests in, all its Real Properties (including any Mortgaged Properties) and has valid title to its personal property and assets, in each case, except for Permitted Liens and except for defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to
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utilize such properties and assets for their intended purposes and except where the failure to have such title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens or Liens arising by operation of law. The Equity Interests of the Issuer owned by Holdings are free and clear of Liens, other than Liens permitted by Article IX.
(b) The Issuer and each of the Subsidiaries has complied with all obligations under all leases to which it is a party, except where the failure to comply would not reasonably be expected to have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect.
(c) As of the Closing Date, none of the Issuer and the Subsidiaries has received any written notice of any pending or contemplated condemnation proceeding or Casualty Event affecting all or any portion of any Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Closing Date.
(d) As of the Closing Date, none of the Issuer and its Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein, except as permitted under Section 8.02 or 8.05 or as would not reasonably be expected to have a Material Adverse Effect.
(e) There is no Material Real Property owned by any Note Party as of the Closing Date.
SECTION 4.08 Subsidiaries.
(a) Schedule 4.08(a) sets forth as of the Closing Date the name and jurisdiction of incorporation, formation or organization of each subsidiary of the Issuer and, as to each such subsidiary, the percentage of each class of Equity Interests owned by the Issuer or by any such subsidiary.
(b) As of the Closing Date, after giving effect to the Transactions, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors (or entities controlled by directors) and shares held by directors (or entities controlled by directors)) relating to any Equity Interests of the Issuer or any of the Subsidiaries, except as set forth on Schedule 4.08(b).
SECTION 4.09 Litigation; Compliance with Laws.
(a) There are no actions, suits, claims or disputes pending or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of the Issuer, threatened in writing against the Issuer or any of the Subsidiaries or any business, revenues, property or rights of any such person (A) that involve any Note Document or (B) that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, except (in the case of this clause (B) only) for any action, suit or proceeding at law or in equity or by or on behalf of any Governmental Authority or in arbitration which has been disclosed to the holders of the First-Priority Senior Secured Notes or
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in any of the Issuers public filings with the SEC, in each case, prior to the Closing Date or which arises out of the same facts and circumstances, and alleges substantially the same complaints and damages, as any action, suit or proceeding so disclosed and in which there has been no material adverse change since the date of such disclosure.
(b) None of the Issuer, the Subsidiaries and their respective properties, revenues or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval or any building permit, but excluding any Environmental Laws, which are the subject of Section 4.16) or any restriction of record or agreement affecting any Mortgaged Property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 4.10 Federal Reserve Regulations. Neither the purchase of any Note hereunder nor the use of the proceeds thereof will violate the provisions of Regulation T, Regulation U or Regulation X of the Board.
SECTION 4.11 Investment Company Act. None of Holdings, the Issuer or the Subsidiaries is required to be registered as an investment company within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.12 Use of Proceeds. The Issuer will use the proceeds of the Notes solely for general corporate purposes (including for working capital and the consummation of the Transactions); provided, that, unless otherwise agreed in writing by the Required Noteholder Parties, no proceeds of any Notes shall be permitted to be used: (i) to repay, prepay or refinance any Indebtedness of the Issuer and its Subsidiaries to the extent such repayment or refinancing of such Indebtedness is not permitted under this Indenture, (ii) to redeem or repurchase the First- Priority Senior Secured Notes, (iii) to finance any Permitted Business Acquisitions or (iv) to make Investments under Section 8.04(k).
SECTION 4.13 Tax Returns. Except as set forth on Schedule 4.13:
(a) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Issuer and each of the Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it (including in its capacity as withholding agent) and each such Tax return is true and correct;
(b) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Issuer and each of the Subsidiaries has timely paid or caused to be timely paid all Taxes shown to be due and payable by it on the returns referred to in clause (a) and all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due), except Taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 7.03 and for which the Issuer or any of the Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP; and
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(c) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, as of the Closing Date, with respect to the Issuer and each of the Subsidiaries, there are no claims being asserted in writing with respect to any Taxes.
SECTION 4.14 No Material Misstatements.
(a) Each representation, warranty and statement of fact of any Note Party contained in any Note Document or in any other documents, certificates or written statements (other than the Projections, forward looking information and information of a general economic nature or general industry nature) (the Information) concerning the Issuer, the Subsidiaries, the Transactions and any other transactions contemplated hereby prepared by or on behalf of the foregoing or their representatives and made available to the Trustee or the Purchasers in connection with the Transactions or the other transactions contemplated hereby, was true and correct in all material respects, as of the date such Information was furnished to the Required Noteholder Parties and as of the Closing Date and did not, contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein, not materially misleading in light of the circumstances under which such statements were made (giving effect to all supplements and updates provided thereto prior to the Closing Date).
(b) The Projections, pro forma financial information and other forward looking information and information of a general economic nature prepared by or on behalf of the Issuer or any of its representatives and that have been made available to the Purchasers in connection with the Transactions or the other transactions contemplated hereby have been prepared in good faith based upon assumptions believed by the Issuer to be reasonable as of the date thereof and as of the date such Projections and information were furnished to the Purchasers (it being understood that such Projections, pro forma financial information and other forward looking information are as to future events and are not to be viewed as facts, such Projections, pro forma financial information and other forward looking information are subject to significant uncertainties and contingencies and that actual results during the period or periods covered by any such Projections, pro forma financial information and other forward looking information may differ significantly from the projected results, and that no assurance can be given that the projected results will be realized).
(c) As of the Closing Date, to the knowledge of the Issuer, the information included in the Beneficial Ownership Certification is true and correct in all material respects.
SECTION 4.15 Employee Benefit Plans.
(a) Schedule 4.15 sets forth each material Plan as of the Closing Date. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each Plan is in compliance in form and operation with its terms and with ERISA and the Code (including without limitation the Code provisions compliance with which is necessary for any intended favorable tax treatment) and all other applicable laws and regulations, (ii) each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS to the effect that it
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meets the requirements of Sections 401(a) and 501(a) of the Code covering all applicable tax law changes, or is comprised of a master or prototype plan that has received a favorable opinion letter from the IRS, and, nothing has occurred since the date of such determination that would adversely affect such determination (or, in the case of a Plan with no determination, nothing has occurred that would adversely affect the issuance of a favorable determination letter or otherwise adversely affect such qualification), (iii) no ERISA Event has occurred, (iv) there exists no Unfunded Pension Liability with respect to any Pension Plan, (v) there are no actions, suits or claims pending against or involving a Plan (other than routine claims for benefits) or, to the knowledge of Holdings, the Issuer, any Subsidiary or any ERISA Affiliate, threatened, which would reasonably be expected to be asserted successfully against any Plan or (vi) Holdings, the Issuer, any Subsidiary and each ERISA Affiliate have made all contributions to or under each Plan and Multiemployer Plan required by law within the applicable time limits prescribed thereby, the terms of such Plan or Multiemployer Plan, respectively, or any contract or agreement requiring contributions to a Plan or Multiemployer Plan.
(b) None of Holdings, the Issuer, any Subsidiary or any ERISA Affiliate maintains or contributes to, or has any obligation to contribute to, or has ever maintained or contributed to, or has ever had any obligation to contribute to, any employee pension benefit plan as defined in Section 3(2) of ERISA subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA (Pension Plan).
SECTION 4.16 Environmental Matters. Except as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) no written notice, request for information, order, complaint or penalty has been received by the Issuer or any of its Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or, to the Issuers knowledge, threatened which allege a violation or potential violation of or liability under any Environmental Laws, in each case relating to the Issuer or any of its Subsidiaries, (ii) each of the Issuer and its Subsidiaries has all environmental permits, licenses and other approvals necessary for its operations to comply with all Environmental Laws (Environmental Permits) and is, and has been for the past five (5) years, in compliance with the terms of such Environmental Permits and with all Environmental Laws, (iii) except as set forth on Schedule 4.16, no Hazardous Material is located at, on or under any property currently or, to the Issuers knowledge, formerly owned, operated or leased by the Issuer or any of its Subsidiaries that would reasonably be expected to give rise to any cost, liability or obligation of the Issuer or any of its Subsidiaries under any Environmental Laws or Environmental Permits, and no Hazardous Material has been generated, used, treated, stored, handled, disposed of or controlled, transported or Released at any location in a manner that would reasonably be expected to require an environmental investigation or give rise to any cost, liability or obligation of the Issuer or any of its Subsidiaries under any Environmental Laws or Environmental Permits, (iv) there are no agreements in which the Issuer or any of its Subsidiaries has expressly assumed or undertaken responsibility for any known or reasonably likely liability or obligation of any other person arising under or relating to Environmental Laws, which in any such case has not been made available to the Trustee or the Purchasers prior to the Closing Date, (v) there has been no material written environmental assessment or audit conducted (other than customary assessments not revealing anything that would reasonably be expected to result in a Material Adverse Effect), by or on behalf of the Issuer or any of the Subsidiaries of any property currently or, to the Issuers knowledge, formerly owned or leased by the Issuer or any of the
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Subsidiaries that has not been made available to the Trustee or the Purchasers prior to the Closing Date and (vi) there are no facts, circumstances or conditions arising out of or relating to the operations of the Issuer or its Subsidiaries or any Real Property or facilities currently or previously owned or leased by the Issuer or any Subsidiary that would reasonably be expected to require environmental investigation, remedial activity or corrective action or cleanup or would reasonably be expected to result in the Issuer or any other Subsidiary incurring any liability pursuant to Environmental Law.
SECTION 4.17 Security Documents.
(a) The Collateral Agreement is effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties), in each case, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. As of the Closing Date, the Collateral Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Note Parties in the Collateral and, subject to Section 9-315 of the New York Uniform Commercial Code, the proceeds thereof, as security for the Obligations to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, in each case prior and superior in right to the Lien of any other person (except Permitted Liens).
(b) The Collateral Agent (for the benefit of the Secured Parties) shall have a fully perfected (subject to exceptions arising from defects in the chain of title, which defects in the aggregate do not constitute a Material Adverse Effect hereunder) Lien on, and security interest in, all right, title and interest of the Note Parties under the Collateral Agreement or any ancillary document thereunder in the material domestic Intellectual Property included in the Collateral (but, in the case of the United States registered copyrights included in the Collateral, only to the extent such United States registered copyrights are listed in such ancillary document filed with the United States Copyright Office) listed in such ancillary document, in each case prior and superior in right to the Lien of any other person, except for Permitted Liens (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on material registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Note Parties after the Closing Date).
(c) Mortgages, if any, executed and delivered after the Closing Date pursuant to Section 7.10 shall be, effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) legal, valid and enforceable Liens on all of the Note Parties rights, titles and interests in and to the Mortgaged Property thereunder and the proceeds thereof, and when such Mortgages are filed or recorded in the proper real estate filing or recording offices, and all relevant mortgage taxes and recording charges are duly paid, the Collateral Agent (for the benefit of the Secured Parties) shall have valid Liens with record notice to third parties on, and security interests in, all rights, titles and interests of the Note Parties in such Mortgaged Property and, to the extent applicable, subject to Section 9-315 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to the Lien of any other person, except for Permitted Liens.
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SECTION 4.18 Location of Real Property. The Perfection Certificate lists correctly, in all material respects, as of the Closing Date all Material Real Property owned by the Issuer and the Subsidiary Guarantors and the addresses thereof. As of the Closing Date, the Issuer and the Subsidiary Guarantors own in fee all the Real Property set forth as being owned by them in the Perfection Certificate except to the extent set forth therein.
SECTION 4.19 [Reserved].
SECTION 4.20 Labor Matters. Except as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) the Issuer and its Subsidiaries are and at all times during the last five (5) years have been in compliance with all applicable laws, contracts, policies, plans and programs relating to employment and employment practices; (ii) neither the Issuer nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or legally binding commitment to any labor union or employee organization or group in respect of or affecting employees; (iii) neither the Issuer nor any of its Subsidiaries is currently engaged in, or has any legal duty to engage in, any negotiation with any labor union or employee organization; (iv) there is no pending or, to the knowledge of the Issuer, threatened strike, labor dispute, complaint, grievance, or arbitration proceeding against the Issuer or any of its Subsidiaries regarding any alleged unfair labor practices within the meaning of the National Labor Relations Act; (v) the hours worked and payments made to employees of the Issuer and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (vi) all payments due from the Issuer or any of the Subsidiaries or for which any claim may be made against the Issuer or any of the Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of the Issuer or such Subsidiary to the extent required by GAAP.
SECTION 4.21 Insurance. Schedule 4.21 sets forth a true, complete and correct description, in all material respects, of all material insurance (excluding any title insurance) maintained by or on behalf of the Issuer or the Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect.
SECTION 4.22 No Default. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Indenture or any other Note Document.
SECTION 4.23 Intellectual Property; Licenses, Etc. Except as would not reasonably be expected to have a Material Adverse Effect or as set forth in Schedule 4.23, (a) the Issuer and each of its Subsidiaries owns, or possesses the right to use, all Intellectual Property_that are used or held for use in or are otherwise reasonably necessary for the present conduct of their respective businesses, (b) to the knowledge of the Issuer, the Issuer and its Subsidiaries are not interfering with, infringing upon, misappropriating or otherwise violating Intellectual Property of any person, and (c) (i) no claim or litigation regarding any of the Intellectual Property owned by the Issuer and its Subsidiaries is pending or, to the knowledge of the Issuer, threatened and (ii) to the knowledge of the Issuer, no claim or litigation regarding any other Intellectual Property described in the foregoing clauses (a) and (b) is pending or threatened.
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SECTION 4.24 Senior Debt; First Priority Obligations. The Note Obligations will constitute Senior Debt (or the equivalent thereof) under the documentation governing any Indebtedness of any Note Party permitted to be incurred hereunder constituting Indebtedness that is subordinated in right of payment to the Note Obligations. The Notes are and shall be deemed issued under Section 4.03(b)(i) of the First-Priority Senior Secured Notes Indenture, and shall be treated for all purposes thereunder as Secured Bank Indebtedness and First-Priority Obligations (in each case, as such term is defined in the First-Priority Senior Secured Notes Indenture) and the Note Documents shall constitute, collectively, the Credit Agreement and Credit Agreement Documents under and as defined in the First Lien/First Lien Intercreditor Agreement.
SECTION 4.25 USA PATRIOT Act; Sanctions; Anti-Terrorism and Anti-Corruption Laws.
(a) None of Issuer or Holdings nor any of their respective officers, directors, or to the knowledge of Issuer or Holdings, any of their brokers or agents (i) has violated any Anti-Terrorism Laws or Sanction, (ii) has engaged in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designed by the Organization for Economic Co-operation and Developments Financial Action Task Force on Money Laundering or specified unlawful activities under 18 U.S.C. §1956, (iii) is a person whose name appears on the list of Specially Designated Nationals and Sanctioned Persons published by OFAC (an OFAC Listed Person) or is otherwise a Sanctioned Person, (iv) is majority owned by or controlled by or acting on behalf of, directly or indirectly, (A) any OFAC Listed Person or (B) any other Sanctioned Person or Sanctioned Country, or (v) is otherwise blocked, the subject or target of Sanctions or engaged in any activity in violation of Sanctions or Anti-Terrorism Laws. Neither Issuer nor Holdings nor any Controlled Entity has been notified that its name appears on a list of persons that engage in investment or other commercial activities in Iran or any other Sanctioned Country. No part of the proceeds from the Notes made hereunder constitutes or will constitute funds obtained on behalf of any Sanctioned Person or in any Sanctioned Country or will otherwise be used by the Issuer, directly or indirectly, or lent, contributed or otherwise made available to any person (x) in connection with any investment in, or any transactions or dealings with, any Sanctioned Person or in any Sanctioned Country, (y) to fund any activities or business of or with any Sanctioned Person, or in any Sanctioned Country or (z) otherwise in any manner that would result in a material violation of Sanctions by any person (including any person participating in the Notes, whether as underwriter, advisor, investor or otherwise).
(b) None of Issuer or Holdings nor to Issuers or Holdings knowledge, their respective officers, directors, brokers or agents acting or benefiting in any capacity in connection with the Notes (i) deals in or otherwise engages, or has dealt or otherwise engaged, in any transaction related to, any property or interests in property blocked pursuant to any AntiTerrorism Law or Sanction, (ii) engages in or conspires to, or engaged or conspired to, engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law or Sanction, (iii) has been found in violation of, charged with, or convicted under any Anti-Terrorism Law, (iv) to Issuers or Holdings knowledge is under investigation by any Governmental Authority for possible violation of Anti-Terrorism Laws or any Sanctions, (v) has been assessed civil penalties under any Anti-Terrorism Laws or any Sanctions, or (vi) has had any of its funds seized or forfeited in an action under
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Pursuant to 17 C.F.R. Section 200.83
any Anti-Terrorism Law or Sanction. The Issuer and Holdings have established policies, procedures and controls which are reasonably designed (and otherwise comply with applicable law) to ensure that each of the Issuer, Holdings, and each Controlled Entity, and each of their respective directors, officers, employees and agents, is and will continue to be in compliance with all applicable current and future Anti-Terrorism Laws and Sanctions.
(c) Neither Issuer nor Holdings (i) has been charged with, or convicted of bribery or any other anti-corruption related activity under any applicable Anti-Corruption Laws, (ii) to Issuers or Holdings knowledge is under investigation by any Governmental Authority for possible violation of Anti-Corruption Laws, or (iii) has been assessed civil or criminal penalties under any Anti-Corruption Laws. No part of the proceeds of the Notes 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 Anti-Corruption Laws. The Issuer, Holdings, and their respective directors, officers and employees and, to the knowledge of Issuer and Holdings, their agents are in compliance with all Anti-Corruption Laws, and the Issuer and Holdings have established policies, procedures and controls which are reasonably designed (and otherwise comply with applicable law) to ensure that Issuer, Holdings, and each Controlled Entity, and each of their respective directors, officers, employees and agents, is and will continue to be in compliance with all applicable current and future Anti-Corruption Laws.
SECTION 4.26 [Reserved].
SECTION 4.27 Food Laws. Except as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) the operations of the Issuer and each Subsidiary are and have been in compliance in all material respects with all applicable Food Laws, including obtaining, maintaining and complying with all permits, licenses, or other approvals required by any Food Law; (ii) no written notice, request for information, order, complaint or penalty has been received by the Issuer or any of the Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or, to the Issuers knowledge, threatened which allege a violation of or liability under any Foods Laws, in each case relating to the Issuer or any of its Subsidiaries; (iii) the Issuer and each of the Subsidiaries recordkeeping practices comply in all material respects with the requirements of the Food Laws, including FDA regulations implementing the Public Health Security and Bioterrorism Preparedness and Response Act of 2002; (iv) the Issuer and each of the Subsidiaries have practices in place to ensure continuing compliance with the food safety and labeling requirements of applicable Food Laws, including, to the extent applicable to the Issuer and its Subsidiaries, requirements related to sanitary transportation, supplier verification, hazard analysis and critical control points, food safety plans, food defense, current good manufacturing practices, sanitation standard operating procedures, temperature control, environmental monitoring, and menu labeling; (v) to the knowledge of the Issuer, all of the Products of the Issuer and each of their Subsidiaries (a) have been processed in the presence of an inspector if and to the extent required by the USDA, (b) have been properly handled and stored and are properly manufactured, packaged and labeled and fit for human consumption or other intended use, (c) are not adulterated, misbranded or otherwise violative within the meaning of the United
79
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
States Federal Food, Drug, and Cosmetic Act as amended, any regulations promulgated thereunder, or under any other Food Laws, and (d) bear all required warning statements and allergen declarations; (vi) the Issuer and each of their Subsidiaries have, in a timely manner, filed with the FDA and each other applicable Governmental Authority all required reports, including reports involving serious injury related by a reasonable probability to the consumption of any Product; (vii) neither the Issuer nor any Subsidiary has received notice from the FDA or any other Governmental Authority, or has knowledge, that there are any circumstances existing which would be reasonably likely to lead to any enforcement action or loss of, or refusal to renew, any permit, license, or approval related to the making of or sale of any Product; and (viii) there is not currently, and has not been during the past three (3) years preceding the Closing Date, nor is there under consideration or investigation by the Issuer or any of the Subsidiaries, any seizure, withdrawal, recall, suspension or detention of any Product manufactured by the Issuer or any of the Subsidiaries (a Recall) nor, to the knowledge of the Issuer, is there any investigation or proceeding by the FDA, USDA, or any other Governmental Authority seeking any such Recall.
ARTICLE V.
[RESERVED]
ARTICLE VI.
[RESERVED]
ARTICLE VII.
AFFIRMATIVE COVENANTS
The Issuer covenants and agrees with each Noteholder Party that, until the Termination Date, unless the Required Noteholder Parties shall otherwise consent in writing, the Issuer will, and will cause each of the Subsidiaries to:
SECTION 7.01 Existence; Business and Properties.
(a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, and all rights and franchises, licenses and permits, except, in the case of a Subsidiary of the Issuer, where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and except as otherwise permitted under Section 8.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities are acquired by the Issuer or a Wholly Owned Subsidiary of the Issuer in such liquidation or dissolution; provided, that Subsidiary Guarantors may not be liquidated into Subsidiaries that are not Note Parties (except as permitted under Section 8.05).
(b) Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to (i) lawfully obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Intellectual Property, licenses and rights with respect thereto necessary to the normal conduct of its business, and (ii) at all times maintain, protect and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition (ordinary wear and tear excepted), from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as permitted by this Indenture).
SECTION 7.02 Insurance.
(a) Maintain, with financially sound and reputable insurance companies, insurance (subject to customary deductibles and retentions) in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations and consistent with past practice or industry practice, cause the Collateral Agent to be listed as a co-loss payee on property and casualty policies and as an additional insured on liability policies. Notwithstanding the foregoing, the Issuer and the Subsidiaries may self-insure with respect to such risks with respect to which companies of established reputation engaged in the same general line of business in the same general area usually self-insure.
(b) Except as the Required Noteholder Parties may agree in their discretion, cause all such property and casualty insurance policies to be endorsed or otherwise amended to include a standard or New York lenders loss payable endorsement, in form and substance reasonably satisfactory to the Required Noteholder Parties, deliver a certificate of an insurance broker to the Collateral Agent; cause each such policy covered by this clause (b) to provide that it shall not be cancelled or not renewed upon less than 30 days prior written notice thereof by the insurer to the Collateral Agent; deliver to the Collateral Agent, prior to or concurrently with the cancellation or nonrenewal of any such policy of insurance covered by this clause (b), a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent), or insurance certificate with respect thereto, together with evidence satisfactory to the Required Noteholder Parties of payment of the premium therefor, in each case of the foregoing, to the extent customarily maintained, purchased or provided to, or at the request of, lenders by similarly situated companies in connection with credit facilities of this nature.
(c) If any portion of any Mortgaged Property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area (each a Special Flood Hazard Area) with respect to which flood insurance has been made available under the National Flood Insurance Act of 1968 (as now or hereafter in effect or successor act thereto), (i) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (ii) deliver to the Collateral Agent evidence of such compliance in form and substance reasonably acceptable to the Required Noteholder Parties.
81
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(d) In connection with the covenants set forth in this Section 7.02, it is understood and agreed that:
(i) the Trustee, the Collateral Agent, the Noteholder Parties and their respective agents or employees shall not be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 7.02, it being understood that (A) the Note Parties shall look solely to their insurance companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Trustee, the Collateral Agent, the Noteholder Parties or their agents or employees. If, however, the insurance policies, as a matter of the internal policy of such insurer, do not provide waiver of subrogation rights against such parties, as required above, then each of Holdings and the Issuer, on behalf of itself and behalf of each of its Subsidiaries, hereby agrees, to the extent permitted by law, to waive, and further agrees to cause each of their Subsidiaries to waive, its right of recovery, if any, against the Trustee, the Collateral Agent, the Noteholder Parties and their agents and employees;
(ii) the designation of any form, type or amount of insurance coverage by the Collateral Agent (including acting in the capacity as the Collateral Agent) under this Section 7.02 shall in no event be deemed a representation, warranty or advice by the Collateral Agent or the Noteholder Parties that such insurance is adequate for the purposes of the business of Holdings, the Issuer and the Subsidiaries or the protection of their properties; and
(iii) the amount and type of insurance that the Issuer and its Subsidiaries has in effect as of the Closing Date satisfies for all purposes the requirements of this Section 7.02.
SECTION 7.03 Taxes. Pay its obligations in respect of all Tax liabilities, assessments and governmental charges, before the same shall become delinquent or in default, except where (i) the amount or validity thereof is being contested in good faith by appropriate proceedings and the Issuer or a Subsidiary thereof has set aside on its books adequate reserves therefor in accordance with GAAP or (ii) the failure to make payment could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
SECTION 7.04 Financial Statements, Reports, etc. Furnish as provided below and deliver to the Trustee:
(a) within 105 days after the end of each fiscal year, a consolidated balance sheet and related statements of comprehensive income, cash flows and stockholders equity showing the financial position of the Issuer and its Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet and related statements of comprehensive income, cash flows and stockholders equity shall be accompanied by customary managements discussion and analysis and audited by independent public accountants of recognized national standing and accompanied by an opinion of such accountants to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Issuer and its Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery by the Issuer of annual reports on Form 10-K of the Issuer and its consolidated Subsidiaries shall satisfy the requirements of this Section 7.04(a) to the extent such annual reports include the information specified herein), which information will be posted to the Public Side Portal;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and related statements of comprehensive income, cash flows and stockholders equity showing the financial position of the Issuer and its Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all of which shall be in reasonable detail, which consolidated balance sheet and related statements of operations, cash flows and stockholders equity shall be accompanied by customary managements discussion and analysis and which consolidated balance sheet and related statements of comprehensive income, cash flows and stockholders equity shall be certified by a Financial Officer of the Issuer on behalf of the Issuer as fairly presenting, in all material respects, the financial position and results of operations of the Issuer and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) (it being understood that the delivery by the Issuer of quarterly reports on Form 10-Q of the Issuer and its consolidated Subsidiaries shall satisfy the requirements of this Section 7.04(b) to the extent such quarterly reports include the information specified herein), which information will be posted to the Public Side Portal;
(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Issuer (i) certifying that no Event of Default or Default has occurred since the date of the last certificate delivered pursuant to this Section 7.04(c) or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) certifying the Annualized EBITDA as of the last day of the most recently ended fiscal quarter and the resulting Applicable Margin (which Applicable Margin shall be effective from the date set forth in the definition of Pricing Grid), which certificate will be furnished to the Private Side Contacts concurrently with any delivery of such financial statements;
(d) not less than 10 or more than 30 days prior to March 1, 2023, the Issuer shall provide written notice to the Trustee as to whether or not it reasonably expects the Maturity Date will be March 1, 2023, and on March 1, 2023 will provide written notice to the Trustee specifying the Maturity Date (unless the Notes and all Obligations are paid on such date), which written notice will be furnished to the Private Side Contacts concurrent with the provision of such notice to the Trustee.
(e) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Required Noteholder Parties, other materials filed by Holdings, the Issuer or any of the Subsidiaries with the SEC, or after an initial public offering, distributed to its stockholders generally, as applicable; provided, however, that such reports, proxy statements, filings and other materials required to be delivered pursuant to this clause (e) shall be deemed delivered for purposes of this Indenture when posted to the Public Side Portal;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(f) to the extent not satisfied by another section of this Section 7.04, the Issuer shall furnish to Noteholders and prospective investors, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act, which information will be posted to the Public Side Portal;
(g) upon the written request of the Required Noteholder Parties to the Issuer, not more frequently than once a year, an updated Perfection Certificate (or, to the extent such request relates to specified information contained in the Perfection Certificate, such information) reflecting all changes since the date of the information most recently received pursuant to this clause (g) or Section 7.10(f) with a copy to the Trustee and the Collateral Agent, which Perfection Certificate will be furnished to the Private Side Contacts;
(h) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, the Issuer or any of the Subsidiaries, or compliance with the terms of any Note Document (including any information regarding the accounts subject to Section 7.14) as in each case the Required Noteholder Parties may reasonably request, which information will be furnished to the Private Side Contacts (or, if the Required Noteholder Parties request, provided separately pursuant to the instructions specified by the Required Noteholder Parties);;
(i) at a time determined by the Issuer after delivery of the financial statements required pursuant to Section 7.04(a) or 7.04(b) (but not later than 10 Business Days after such delivery), the Issuer shall cause appropriate Financial Officers or other officers with reasonably equivalent duties of the Issuer to participate in one conference call for the Noteholder Parties to discuss the financial condition and results of operations of the Issuer and its Subsidiaries for the most recently ended fiscal period and, prior to the date of each such conference call, will announce the time and date of such conference call and either include all information necessary to access the call or inform Noteholder Parties how they can obtain such information, including, without limitation, the applicable password or login information (if applicable); provided that to the extent the Issuer hosts a quarterly conference call for the holders of the First-Priority Senior Secured Notes (or any Permitted Refinancing Indebtedness in respect thereof), the Issuer shall provide reasonable advance notice and access information for such call to the Noteholder Parties, in which case the Issuers participation in such conference call shall satisfy the requirements of this Section 7.04(i);
(j) in the event that Holdings or any Parent Entity reports on a consolidated basis, such consolidated reporting at Holdings or such Parent Entitys level in a manner consistent with that described in clauses (a), (b) and (c) of this Section 7.04 for the Issuer (together with a reconciliation showing the adjustments necessary to determine Annualized EBITDA) will satisfy the requirements of such paragraphs; and
(k) for avoidance of doubt, in addition to providing such information reports to the Trustee, the Issuer will provide the Noteholder Parties with access to the Public Side Portal.
84
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Delivery of reports, information and documents to the Trustee pursuant to this Section 7.04, Section 7.05, Section 7.14, Section 7.16, Section 8.05 and Section 8.07 is for informational purposes only, and the Trustees receipt thereof shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuers compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely conclusively on an Officers Certificate). The Trustee is under no duty to examine such reports, information or documents to ensure compliance with the provision of this Indenture or to ascertain the correctness or otherwise of the information or the statements contained therein.
SECTION 7.05 Litigation and Other Notices. Furnish to the Private Side Contacts (with notice to the Trustee) written notice of the following promptly after any Responsible Officer of Holdings or the Issuer obtains actual knowledge thereof:
(a) of any condition or event that constitutes any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings, the Issuer or any of the Subsidiaries which if adversely determined would reasonably be expected to have a Material Adverse Effect;
(c) any other event, development or change specific to Holdings, the Issuer or any of the Subsidiaries that has had, or would reasonably be expected to have, a Material Adverse Effect; and
(d) the occurrence of any change in the board of directors (or similar governing body) of Holdings or the Issuer.
SECTION 7.06 Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including applicable Food 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; provided, that this Section 7.06 shall not apply to Environmental Laws, which are the subject of Section 7.09, to laws related to Taxes, which are the subject of Section 7.03, or to Anti-Terrorism Laws, USA PATRIOT Act, Anti- Corruption Laws and Sanctions, which are the subject of Section 7.13.
SECTION 7.07 Maintaining Records; Access to Properties and Inspections. Maintain all financial records in accordance with GAAP and permit any persons designated by the Required Noteholder Parties or, upon the occurrence and during the continuance of an Event of Default, any Noteholder Party to visit and inspect the financial records and the properties of Holdings, the Issuer or any of the Subsidiaries at reasonable times, upon reasonable prior notice to Holdings or the Issuer, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any persons designated by the Required Noteholder Parties or, upon the occurrence and during the continuance of an Event of Default, any
85
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Noteholder Party upon reasonable prior notice to Holdings or the Issuer to discuss the affairs, finances and condition of Holdings, the Issuer or any of the Subsidiaries with the officers thereof and independent accountants therefor (so long as the Issuer has the opportunity to participate in any such discussions with such accountants), in each case, subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract.
SECTION 7.08 Use of Proceeds. Use the proceeds of the Notes issued hereunder in the manner contemplated by Section 4.12.
SECTION 7.09 Compliance with Environmental Laws. (i) Comply, and make reasonable efforts to cause all lessees and other persons occupying its properties to comply, with all Environmental Laws applicable to its operations and properties; and obtain and renew all authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, and (ii) in each case to the extent the Note Parties or their Subsidiaries are required by Environmental Laws, conduct any investigation, remedial or other corrective action necessary to address Hazardous Materials at any property or facility in accordance with applicable Environmental Laws, except, in each case with respect to this Section 7.09, to the extent the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 7.10 Further Assurances; Additional Security.
(a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents), that the Required Noteholder Parties may reasonably request (including, without limitation, those required by applicable law), to satisfy the Collateral and Guarantee Requirement and to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Note Parties and provide to the Required Noteholder Parties, from time to time only upon reasonable request, evidence reasonably satisfactory to the Required Noteholder Parties as to the perfection and priority of the Liens created or intended to be created by the Security Documents.
(b) If any asset (other than Real Property) that has an individual fair market value (as determined in good faith by the Issuer and after 5 Business Days notice to the Holders) in an amount greater than $500,000 is acquired by the Issuer or any Subsidiary Guarantor after the Closing Date or owned by an entity at the time it becomes a Subsidiary Guarantor (in each case other than (x) assets constituting Collateral under a Security Document that become subject to the Lien of such Security Document upon acquisition thereof and (y) assets constituting Excluded Property), the Issuer or such Subsidiary Guarantor, as applicable, will (i) notify the Collateral Agent of such acquisition or ownership and (ii) cause such asset to be subjected to a Lien (subject to any Permitted Liens) securing the Obligations by, and take, and cause the Subsidiary Guarantors to take, such actions as shall be reasonably necessary or desirable to grant and perfect such Liens, including actions described in clause (a) of this Section 7.10, all at the expense of the Note Parties, subject to clause (g) below.
(c) (i) Grant and cause each of the Subsidiary Guarantors to grant to the Collateral Agent security interests in, and mortgages on, any Material Real Property of the Issuer
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
or such Subsidiary Guarantors, as applicable, to the extent acquired after the Closing Date, within 90 days after such acquisition (or such later date as the Required Noteholder Parties may agree in their discretion) pursuant to documentation substantially in the form of Exhibit E (with such changes as are reasonably consented to by the Required Noteholder Parties) to account for local law matters) or in such other form as is reasonably satisfactory to each of the Required Noteholder Parties and the Issuer, which security interest and mortgage shall constitute valid and enforceable Liens subject to no other Liens except Permitted Liens and (ii) record or file, and cause each such Subsidiary Guarantor to record or file, the Mortgage or instruments related thereto in such manner and in such places as is required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent (for the benefit of the Secured Parties) required to be granted pursuant to the Mortgages and pay, and cause each such Subsidiary Guarantor to pay, in full, all Taxes, fees and other charges required to be paid in connection with such recording or filing, in each case subject to clause (g) below. Unless otherwise waived by the Required Noteholder Parties, with respect to each such Mortgage, the Issuer shall cause the requirements set forth in clauses (f) and (g) of the definition of Collateral and Guarantee Requirement to be satisfied with respect to such Material Real Property.
(d) If any additional direct or indirect Subsidiary of the Issuer is formed or acquired after the Closing Date and if such Subsidiary is a Subsidiary Guarantor (with any Immaterial Subsidiary ceasing to be an Immaterial Subsidiary being deemed to constitute the acquisition of a Subsidiary), within 15 Business Days after the date such Subsidiary is formed or acquired (or such longer period as the Required Noteholder Parties may agree in the Required Noteholder Parties discretion), notify the Collateral Agent and Trustee thereof and, within 20 Business Days after the date such Subsidiary is formed or acquired or such longer period as the Required Noteholder Parties may agree in the Required Noteholder Parties discretion (or, with respect to clauses (f), (g) and (h) of the definition of Collateral and Guarantee Requirement, within 90 days after such formation or acquisition or such longer period as set forth therein or as the Required Noteholder Parties may agree in the Required Noteholder Parties discretion), cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Note Party, subject to clause (g) below.
(e) [Reserved].
(f) Furnish to the Collateral Agent and Trustee prompt written notice of any change (A) in any Note Partys corporate or organization name, (B) in any Note Partys identity or organizational structure, (C) in any Note Partys organizational identification number, (D) in any Note Partys jurisdiction of organization or (E) in the location of the chief executive office of any Note Party that is not a registered organization; provided, that the Issuer shall not effect or permit any such change unless all filings have been made, or will have been made within 30 days following such change (or such longer period as the Required Noteholder Parties may agree in the Required Noteholder Parties discretion), under the Uniform Commercial Code that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral in which a security interest may be perfected by such filing, for the benefit of the Secured Parties.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(g) The Collateral and Guarantee Requirement and the other provisions of this Section 7.10 and the other Note Documents with respect to Collateral need not be satisfied with respect to any of the following (collectively, the Excluded Property): (i) any Real Property other than Material Real Property, (ii) motor vehicles and other assets subject to certificates of title and letter of credit rights (in each case, other than to the extent a Lien on such assets or such rights can be perfected by filing a UCC-1) and commercial tort claims with a value of less than $2,500,000, (iii) pledges and security interests prohibited by applicable law, rule, regulation or contractual obligation (with respect to any such contractual obligation, only to the extent such restriction is permitted under Section 8.09(c) and such restriction is binding on such assets on the Closing Date or on the date of acquisition thereof and not entered into in contemplation thereof (other than in connection with the incurrence of Indebtedness of the type contemplated by Section 8.01(i))) (in each case, except to the extent such prohibition is unenforceable after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code) or which could require governmental (including regulatory) consent, approval, license or authorization to be pledged (unless such consent, approval, license or authorization has been received), (iv) assets to the extent a security interest in such assets could reasonably be expected to result in material adverse tax consequences as determined in good faith by the Issuer and the Required Noteholder Parties, (v) any lease, license or other agreement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or create a right of termination in favor of any other party thereto (other than the Issuer or any Guarantor) after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code, (vi) those assets as to which the Issuer and the Required Noteholder Parties reasonably agree that the cost or other consequence of obtaining such a security interest or perfection thereof are excessive in relation to the value afforded thereby, (vii) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code, (viii) pending intent-to-use trademark applications for which an Amendment to Allege Use or a Statement of Use under Section 1(c) or 1(d) of the Lanham Act has not been filed with or accepted by the United States Trademark Office, (ix) other customary exclusions under applicable local law or in applicable local jurisdictions, (x) cash and Permitted Investments maintained in an Excluded Account, (xi) any Excluded Securities, (xii) any Third Party Funds, (xiii) any equipment or other asset that is subject to a Lien permitted by any of clauses (i) or (j) of Section 8.02 or is otherwise subject to a purchase money debt or a Capitalized Lease Obligation, in each case, as permitted by Section 8.01, if the contract or other agreement providing for such debt or Capitalized Lease Obligation prohibits or requires the consent of any person (other than the Issuer or any Guarantor) as a condition to the creation of any other security interest on such equipment or asset and, in each case, such prohibition or requirement is permitted hereunder after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code, (xiv) all assets of Holdings other than Equity Interests in the Issuer directly held by Holdings and pledged pursuant to the Holdings Guarantee and Pledge Agreement and (xv) any other exceptions mutually agreed upon between the Issuer and the Required Noteholder Parties; provided, that the Issuer may in its sole discretion elect to exclude any property from the definition of Excluded Property. Notwithstanding anything herein to the contrary, (A) the Required Noteholder Parties may grant extensions of time or waiver of requirement for the creation or perfection of security interests in or the obtaining of insurance
88
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(including title insurance) or surveys with respect to particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of the Note Parties on such date) where they reasonably determine, in consultation with the Issuer that perfection or obtaining of such items cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Indenture or the other Note Documents, (B) other than to the extent required by Section 7.14, no control agreement or control, lockbox or similar arrangement shall be required with respect to any deposit accounts, securities accounts or commodities accounts, (C) no landlord, mortgagee or bailee waivers shall be required, (D) no foreign-law governed security documents or perfection under foreign law shall be required, (E) no notice shall be required to be sent to account debtors or other contractual third parties, (F) Liens required to be granted from time to time pursuant to, or any other requirements of, the Collateral and Guarantee Requirement and the Security Documents shall be subject to exceptions and limitations set forth in the Security Documents and (G) to the extent any Mortgaged Property is located in a jurisdiction with mortgage recording or similar tax, the amount secured by the Security Document with respect to such Mortgaged Property shall be limited to the fair market value of such Mortgaged Property as determined in good faith by the Issuer (subject to any applicable laws in the relevant jurisdiction or such lesser amount agreed to by the Required Noteholder Parties).
SECTION 7.11 [Reserved].
SECTION 7.12 Post-Closing. Take all necessary actions to satisfy the items described on Schedule 7.12 within the applicable period of time specified in such Schedule (or such longer period as the Required Noteholder Parties may agree in their reasonable discretion).
SECTION 7.13 Compliance with the USA PATRIOT Act, Anti-Terrorism Laws, Anti- Corruption Laws and Sanctions. Comply in all material respects with the USA PATRIOT Act and all applicable Anti-Terrorism Laws, Anti-Corruption Laws and Sanctions. The Note Parties shall, and shall cause each of their Subsidiaries to, maintain in effect policies, procedures and controls reasonably designed to ensure compliance by the Note Parties, the Controlled Entities and their respective directors, officers, employees and agents with applicable Sanctions, Anti- Corruption Laws and Anti-Terrorism Laws. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as it may reasonably request in order for the Trustee to satisfy the requirements of the USA Patriot Act.
SECTION 7.14 Cash Management Systems.
(a) Within 60 days after (x) the Closing Date or (y) in the case of any person that becomes a Subsidiary Guarantor after the Closing Date, the date such person becomes a Subsidiary Guarantor (in each case, or such longer period as the Required Noteholder Parties may agree in their reasonable discretion), the Issuer and each applicable Subsidiary Guarantor shall enter into Account Control Agreements with respect to all cash and Permitted Investments maintained in Deposit Accounts and Securities Accounts of the Issuer and each Subsidiary Guarantor, in each case, other than cash and Permitted Investments maintained in Excluded Accounts.
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Pursuant to 17 C.F.R. Section 200.83
(b) At any time after the occurrence and during the continuance of a Control Triggering Event, the Collateral Agent shall have the right to deliver an Activation Notice (or similar term, as defined in each Account Control Agreement) with respect to each Controlled Account.
(c) The Issuer and Subsidiary Guarantors may close and/or open any account (including any Controlled Account) maintained at any bank or other financial institution subject to the applicable requirements of Section 7.14(a).
(d) So long as no Control Triggering Event has occurred and is continuing, the Issuer and Subsidiary Guarantors may direct the manner of disposition of funds in all Controlled Accounts.
(e) The Collateral Agent shall promptly (but in any event within one Business Day of obtaining knowledge thereof) (a) furnish written notice to each person with whom a Controlled Account is maintained of any termination of a Control Triggering Event or (b) take such other action and execute such other documents as may be reasonably requested by the Issuer or the applicable Subsidiary Guarantor in connection with any termination of a Control Triggering Event.
(f) The Issuer shall deliver (or cause to be delivered) to the Private Side Contacts (with a copy to the Trustee) a statement as of the close of business of the first Business Day of each calendar week evidencing the total cash balance held in the master concentration account of the Issuer at such time (to be provided on the next Business Day thereafter).
SECTION 7.15 Employee Benefit Plans. Maintain each material Plan in compliance with all applicable requirements of law and regulations, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 7.16 ERISA-Related Information. The Issuer shall supply (or shall cause each of the Subsidiaries to supply) to the Private Side Contacts (with a copy to the Trustee) the following if such information relates to any event, development or change that has had, or would reasonably be expected to have, a Material Adverse Effect:
(a) promptly and in any event within 15 days after Holdings, the Issuer, any Subsidiary or any ERISA Affiliate files a Schedule B (or such other schedule as contains actuarial information) to IRS Form 5500 in respect of a Plan with Unfunded Pension Liabilities, a copy of such IRS Form 5500 (including the Schedule B);
(b) promptly and in any event within 30 days after Holdings, the Issuer, any Subsidiary or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a certificate of the chief financial officer of the Issuer describing such ERISA Event and the action, if any, proposed to be taken with respect to such ERISA Event and a copy of any notice filed with the PBGC or the IRS pertaining to such ERISA Event and any notices received by such Holdings, Issuer, Subsidiary or ERISA Affiliate from the PBGC or any other
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
governmental agency with respect thereto; provided that, in the case of ERISA Events under clause (b) of the definition thereof, the 30-day period set forth above shall be a 10-day period, and, in the case of ERISA Events under clause (e) of the definition thereof, in no event shall notice be given later than the occurrence of the ERISA Event;
(c) promptly and in any event within 30 days after becoming aware that there has been (i) a material increase in Unfunded Pension Liabilities (taking into account only Plans with positive Unfunded Pension Liabilities) since the date the representations hereunder are deemed given, or from any prior notice, as applicable; (ii) the existence of any material Withdrawal Liability under Section 4201 of ERISA, if Holdings, the Issuer, any Subsidiary or any ERISA Affiliate were to withdraw completely from any and all Multiemployer Plans, (iii) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by Holdings, the Issuer, any Subsidiary or any ERISA Affiliate, or (iv) the adoption of any amendment to a Plan subject to Section 412 of the Code which results in a material increase in contribution obligations of Holdings, the Issuer, any Subsidiary or any ERISA Affiliate, a detailed written description thereof from the chief financial officer of the Issuer;
(d) if, at any time after the Closing Date, Holdings, the Issuer, any Subsidiary or any ERISA Affiliate maintains, or contributes to (or incurs an obligation to contribute to), a Pension Plan or Multiemployer Plan which is not set forth in Schedule 4.15, then the Issuer shall deliver (or shall cause each of the Subsidiaries to deliver) to the Trustee an updated Schedule 4.15 as soon as practicable, and in any event within 10 days after Holdings, the Issuer, any Subsidiary or any ERISA Affiliate first maintains, or contributes to (or incurs an obligation to contribute to), thereto; and
(e) promptly following receipt thereof, copies of (i) any documents described in Section 101(k) of ERISA that Holdings, the Issuer, any Subsidiary or any ERISA Affiliate requests with respect to any Multiemployer Plan to which such Holdings, Issuer, Subsidiary or ERISA Affiliate is obligated to contribute and (ii) any notices described in Section 101(l) of ERISA that Holdings, the Issuer, any Subsidiary or any ERISA Affiliate requests with respect to any Multiemployer Plan to which such Holdings, Issuer, Subsidiary or ERISA Affiliate is obligated to contribute; provided that if such Holdings, Issuer, Subsidiary or ERISA Affiliate, as applicable, has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Required Noteholder Parties, such Holdings, Issuer, Subsidiary or ERISA Affiliate shall promptly make a request for such documents or notices from such administrator or sponsor, and the Issuer shall (or shall cause each of the Subsidiaries to) provide copies of such documents and notices promptly after receipt thereof.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ARTICLE VIII.
NEGATIVE COVENANTS
The Issuer covenants and agrees with each Noteholder Party that, until the Termination Date, unless the Required Noteholder Parties shall otherwise consent in writing, the Issuer will not, and will not permit any of the Subsidiaries to:
SECTION 8.01 Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing or committed on the Closing Date (provided, that any such Indebtedness that is not intercompany Indebtedness shall be set forth on Schedule 8.01) and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany indebtedness Refinanced with Indebtedness owed to a person not affiliated with the Issuer or any Subsidiary);
(b) Indebtedness created hereunder (including any Additional Notes; provided such Additional Notes are issued to the Purchasers pursuant to the Note Purchase Agreement) and under the other Note Documents;
(c) Indebtedness of the Issuer or any Subsidiary pursuant to Hedging Agreements entered into for non-speculative purposes;
(d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any person providing workers compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Issuer or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person, in each case in the ordinary course of business and consistent with past practice or industry practices;
(e) Indebtedness of the Issuer to Holdings or any Subsidiary Guarantor and of any Subsidiary Guarantor to Holdings, the Issuer or any other Subsidiary Guarantor;
(f) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case provided in the ordinary course of business and consistent with past practice or industry practices, including those incurred to secure health, safety and environmental obligations in the ordinary course of business and consistent with past practice or industry practices;
(g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds or other cash management services, in each case incurred in the ordinary course of business and consistent with past practice or industry practices;
(h) [Reserved];
(i) (x) Capitalized Lease Obligations, mortgage financings and other Indebtedness incurred by the Issuer or any Subsidiary prior to or within 30 days after the acquisition, lease, construction, repair, replacement or improvement of the respective property (real or personal, and whether through the direct purchase of property or the Equity Interest of any person owning such property) permitted under this Indenture in order to finance such acquisition, lease, construction, repair, replacement or improvement, in an aggregate principal amount that immediately after giving effect to the incurrence of such Indebtedness and the use of proceeds thereof, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 8.01(i)(x), together with any Permitted Refinancing
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Indebtedness in respect thereof, would not exceed $35,000,000 at any time outstanding (plus, in the case of any Permitted Refinancing Indebtedness, any Additional Refinancing Amount) and (y) any Permitted Refinancing Indebtedness in respect thereof;
(j) (i) Capitalized Lease Obligations and any other Indebtedness incurred by the Issuer or any Subsidiary arising from any Sale and Lease-Back Transaction that is permitted under Section 8.03 and any Permitted Refinancing Indebtedness in respect thereof and (ii) Capitalized Lease Obligations or other obligations or deferrals attributable to capital spending, in each case in connection with store leases;
(k) (x) other Indebtedness of the Issuer or any Subsidiary, in an aggregate principal amount that, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 8.01(k) and any Permitted Refinancing Indebtedness in respect thereof, would not exceed $50,000,000 (plus, in the case of any Permitted Refinancing Indebtedness, any Additional Refinancing Amount) and (y) any Permitted Refinancing Indebtedness in respect thereof;
(l) Indebtedness of the Issuer or any Subsidiary in an aggregate outstanding principal amount not greater than 100% of the net amount of cash proceeds received by the Issuer after the Closing Date from (x) the issuance or sale of its Qualified Equity Interests or (y) a contribution to its common equity with the net cash proceeds from the issuance and sale by Holdings or a Parent Entity of its Qualified Equity Interests or a contribution to its common equity (in each case of (x) and (y), other than proceeds from the sale of Equity Interests to, or contributions from, the Issuer or any of its Subsidiaries);
(m) Guarantees (i) by Holdings, the Issuer or any Subsidiary Guarantor of any Indebtedness of the Issuer or any Subsidiary Guarantor permitted to be incurred under this Indenture and (ii) by the Issuer or any Subsidiary Guarantor of Indebtedness otherwise permitted hereunder of any Subsidiary that is not a Subsidiary Guarantor to the extent such Guarantees are permitted by Section 8.04 (other than Section 8.04(v)); provided that Guarantees by the Issuer or any Subsidiary Guarantor under this Section 8.01(m) of any other Indebtedness of a person that is subordinated to other Indebtedness of such person shall be expressly subordinate to the Note Obligations to at least the same extent as such underlying Indebtedness is subordinated;
(n) Indebtedness arising from agreements of the Issuer or any Subsidiary providing for indemnification, adjustment of purchase or acquisition price or similar obligations (including earn-outs), in each case, incurred or assumed in connection with any Permitted Business Acquisition, other Investments or the disposition of any business, assets or a Subsidiary expressly permitted by this Indenture;
(o) Indebtedness in respect of letters of credit, bank guarantees, warehouse receipts or similar instruments issued to support performance obligations and trade letters of credit (other than obligations in respect of other Indebtedness) in the ordinary course of business;
(p) Indebtedness in respect of cash collateralized letters of credit in an aggregate face amount not to exceed $40,000,000;
(q) [Reserved];
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(r) [Reserved];
(s) [Reserved];
(t) [Reserved];
(u) Indebtedness incurred in the ordinary course of business in respect of obligations of the Issuer or any Subsidiary to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided, that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and consistent with past practice or industry practices and not in connection with the borrowing of money or any Hedging Agreements;
(v) Indebtedness representing deferred compensation to employees, consultants or independent contractors of the Issuer (or, to the extent such work is done for the Issuer or its Subsidiaries, any direct or indirect parent thereof) or any Subsidiary incurred in the ordinary course of business and consistent with past practice, excluding any management or comparable fees paid to any Permitted Holders and without duplication of any other amounts payable under Section 8.06;
(w) (i) Permitted Exchange Notes and any Permitted Refinancing Indebtedness incurred in respect thereof and (ii) Permitted Redemption Indebtedness and any Permitted Refinancing Indebtedness in respect thereof;
(x) obligations in respect of Cash Management Agreements;
(y) [Reserved];
(z) [Reserved];
(aa) Guarantees of Indebtedness under customer financing lines of credit entered into in the ordinary course of business and consistent with past practice;
(bb) [Reserved];
(cc) Indebtedness issued by the Issuer or any Subsidiary to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings or any Parent Entity to the extent permitted by Section 8.06;
(dd) Indebtedness consisting of obligations of the Issuer or any Subsidiary under deferred compensation or other similar arrangements incurred by such person in connection with the Transactions and Permitted Business Acquisitions or any other Investment permitted hereunder;
(ee) [Reserved];
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ff) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business and consistent with past practice or industry practice;
(gg) [Reserved];
(hh) Indebtedness, including in respect of the First-Priority Senior Secured Notes, in an aggregate principal amount outstanding pursuant to this Section 8.01(hh), together with any Permitted Refinancing Indebtedness in respect thereof, not to exceed $800,000,000 (plus, in the case of any Permitted Refinancing Indebtedness, the Additional Refinancing Amount); and
(ii) all premium (if any, including tender premiums) expenses, defeasance costs, interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (hh) above or refinancings thereof.
For the avoidance of doubt, no Indebtedness of the Issuer shall have priority under the Priority Waterfall or another super priority waterfall with respect to Priority Secured Obligations except for (i) the Notes and (ii) Indebtedness incurred under Section 8.01(w), it being understood that the priority of any such Indebtedness incurred under Section 8.01(w) shall rank junior in right of payment to the Obligations pursuant to the Priority Waterfall or another super priority waterfall that is no less favorable to the Holders than the Priority Waterfall, as applicable.
SECTION 8.02 Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person) of the Issuer or any Subsidiary at the time owned by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, Permitted Liens):
(a) Liens on property or assets of the Issuer and the Subsidiaries existing on the Closing Date and set forth on Schedule 8.02(a) and any modifications, replacements, renewals or extensions thereof; provided, that such Liens shall secure only those obligations that they secure on the Closing Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 8.01) and shall not subsequently apply to any other property or assets of the Issuer or any Subsidiary other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien, and (B) proceeds and products thereof;
(b) any Lien created under the Note Documents or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage;
(c) [Reserved];
(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent by more than 30 days or that are being contested in compliance with Section 7.03;
(e) Liens imposed by law, such as landlords, carriers, warehousemens, mechanics, materialmens, repairmens, suppliers, construction or other like Liens, securing
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Issuer or any Subsidiary shall have set aside on its books reserves in accordance with GAAP;
(f) (i) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Issuer or any Subsidiary;
(g) deposits and other Liens to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capitalized Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(h) zoning restrictions, easements, survey exceptions, trackage rights, leases (other than Capitalized Lease Obligations), licenses, special assessments, rights-of-way, covenants, conditions, restrictions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the Issuer or any Subsidiary;
(i) Liens securing Indebtedness incurred under Section 8.01(i) or (j)(ii); provided, that such Liens do not apply to any property or assets of the Issuer or any Subsidiary other than the property or assets acquired, leased, constructed, replaced, repaired or improved with such Indebtedness (or the Indebtedness Refinanced thereby) or sold in the applicable Sale and Lease-Back Transaction, and accessions and additions thereto, proceeds and products thereof, customary security deposits and related property; provided, further, that individual financings provided by one lender may be cross-collateralized to other financings provided by such lender (and its Affiliates) (it being understood that with respect to any Liens on the Collateral being incurred under this clause (i) to secure Permitted Refinancing Indebtedness, if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were Junior Liens, then any Liens on such Collateral being incurred under this clause (i) to secure Permitted Refinancing Indebtedness shall also be Junior Liens);
(j) Liens arising out of Sale and Lease-Back Transactions permitted under Section 8.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions and additions thereto or proceeds and products thereof and related property;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(k) Liens securing judgments that do not constitute an Event of Default under Section 10.01(j);
(l) Liens disclosed by the title insurance policies delivered on or subsequent to the Closing Date and pursuant to the Collateral and Guarantee Requirement, Section 7.10 or Schedule 7.12 and any replacement, extension or renewal of any such Lien; provided, that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal; provided, further, that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Indenture;
(m) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Issuer or any Subsidiary in the ordinary course of business;
(n) Liens in the ordinary course of business and consistent with past practice that are contractual rights of set-off (and related pledges) (i) relating to the establishment of depository relations with banks and other financial institutions not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposits, sweep accounts, reserve accounts or similar accounts of the Issuer or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business and consistent with past practice, including with respect to credit card charge-backs and similar obligations, or (iii) relating to purchase orders and other agreements entered into with customers, suppliers or service providers of the Issuer or any Subsidiary;
(o) Liens incurred in the ordinary course of business and consistent with past practice or industry practice (i) arising solely by virtue of any statutory or common law provision relating to bankers liens, rights of set-off or similar rights, (ii) attaching to commodity trading accounts or other commodity brokerage accounts, (iii) encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to brokerage accounts incurred and not for speculative purposes, (iv) in respect of Third Party Funds or (v) in favor of credit card companies pursuant to agreements therewith;
(p) Liens securing obligations in respect of trade-related letters of credit, bankers acceptances or similar obligations permitted under Section 8.01(f), (k), (o) or (p) and covering the property (or the documents of title in respect of such property) financed by such letters of credit, bankers acceptances or similar obligations and the proceeds and products thereof;
(q) Subject to compliance with Section 10.01(n), leases or subleases, non-exclusive licenses or sublicenses (including with respect to Intellectual Property) granted to others in the ordinary course of business;
(r) Liens in favor of customs and revenue authorities arising as a matter of applicable law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and consistent with past practice or industry practice;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(s) Liens solely on any cash earnest money deposits made by the Issuer or any of the Subsidiaries in connection with any letter of intent or purchase agreement in respect of any Investment permitted to be made hereunder;
(t) Liens with respect to property or assets of any Subsidiary that is not a Note Party securing obligations of a Subsidiary that is not a Note Party permitted under Section 8.01;
(u) Liens on any amounts held by a trustee or agent under any indenture or other debt agreement issued in escrow pursuant to customary escrow arrangements pending the release thereof, or under any indenture or other debt agreement pursuant to customary discharge, redemption or defeasance provisions to the extent the relevant Indebtedness is permitted to be incurred and discharged, redeemed or defeased, as applicable, hereunder;
(v) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;
(w) agreements to subordinate any interest of the Issuer or any Subsidiary in any accounts receivable or other proceeds arising from inventory consigned by the Issuer or any of its Subsidiaries pursuant to an agreement entered into in the ordinary course of business and consistent with past practice;
(x) Liens arising from precautionary Uniform Commercial Code financing statements regarding operating leases or other obligations not constituting Indebtedness;
(y) [Reserved];
(z) Liens on securities that are the subject of repurchase agreements constituting Permitted Investments under clause (c) of the definition thereof;
(aa) Liens on cash or Permitted Investments securing letters of credit permitted by Section 8.01(o) or (p); provided that such cash and Permitted Investments do not exceed 110% of the stated face amount of such letters of credit secured thereby;
(bb) Liens securing insurance premiums financing arrangements; provided, that such Liens are limited to the applicable unearned insurance premiums;
(cc) in the case of Real Property that constitutes a leasehold interest, any Lien to which the fee simple interest (or any superior leasehold interest) is subject;
(dd) Liens securing Indebtedness or other obligation (i) of the Issuer or a Subsidiary Guarantor in favor of the Issuer or any Subsidiary Guarantor and (ii) of any Subsidiary that is not Note Party in favor of any Subsidiary that is not a Note Party; provided that, in the case of this clause (ii), such Liens are on property that does not constitute Collateral;
(ee) Liens on not more than $10,000,000 of deposits securing Hedging Agreements entered into for non-speculative purposes;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ff) Liens on goods or inventory the purchase, shipment or storage price of which is financed by a documentary letter of credit, bank guarantee or bankers acceptance issued or created for the account of the Issuer or any Subsidiary in the ordinary course of business and consistent with past practice or industry practices; provided, that such Lien secures only the obligations of the Issuer or such Subsidiaries in respect of such letter of credit, bank guarantee or bankers acceptance to the extent permitted under Section 8.01;
(gg) Liens on Collateral that are Junior Liens securing obligations in an aggregate outstanding principal amount that, immediately after giving effect to the incurrence of such obligations, would not exceed $40,000,000;
(hh) [Reserved];
(ii) Liens on Collateral that are Other First Liens or Junior Liens, so long as such Other First Liens or Junior Liens secure Indebtedness permitted by Section 8.01(w) or (hh) subject to, in the case of Other First Liens that constitute Priority Secured Obligations, the last sentence of Section 8.01;
(jj) Liens arising out of conditional sale, title retention or similar arrangements for the sale or purchase of goods by the Issuer or any of the Subsidiaries in the ordinary course of business;
(kk) Liens to secure any Indebtedness issued or incurred to Refinance (or successive Indebtedness issued or incurred for subsequent Refinancings) as a whole, or in part, any Indebtedness secured by any Lien permitted by this Section 8.02; provided, however, that (v) with respect to any Liens on the Collateral being incurred under this clause (kk), if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were Junior Liens, then such Liens on such Collateral being incurred under this clause (kk) shall also be Junior Liens, (w) with respect to any Liens on the Collateral being incurred under this clause (kk), if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were Other First Liens, then such Liens on such Collateral being incurred under this clause (kk) may also be Other First Liens or Junior Liens, (x) (other than Liens contemplated by the foregoing clauses (v) and (w)) such new Lien shall be limited to all or part of the same type of property that secured the original Lien (plus improvements on and accessions to such property, proceeds and products thereof, customary security deposits and any other assets pursuant to after-acquired property clauses to the extent such assets secured (or would have secured) the Indebtedness being Refinanced), (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount (or accreted value, if applicable) or, if greater, committed amount of the applicable Indebtedness at the time the original Lien became a Lien permitted hereunder, (B) unpaid accrued interest and premium (including tender premiums) and (C) an amount necessary to pay any associated underwriting discounts, defeasance costs, fees, commissions and expenses, and (z) on the date of the incurrence of the Indebtedness secured by such Liens, the grantors of any such Liens shall be no different from the grantors of the Liens securing the Indebtedness being Refinanced or grantors that would have been obligated to secure such Indebtedness or a Note Party;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ll) other Liens with respect to property or assets of the Issuer or any Subsidiary securing obligations in an aggregate outstanding principal amount that, immediately after giving effect to the incurrence of the obligations secured by such Liens, would not exceed $10,000,000; provided that the priority of any Liens on Collateral incurred under this Section 8.02(ll) shall constitute Junior Liens or shall rank junior in right of payment to the Notes pursuant to the Priority Waterfall or another super priority waterfall that is no less favorable to the Holders than the Priority Waterfall pursuant to a Permitted Junior Intercreditor Agreement or Permitted Pari Passu Intercreditor Agreement; and
(mm) Liens on property of, or on Equity Interests or Indebtedness of, any person existing at the time (A) such person becomes a Subsidiary of the Issuer or (B) such person or such property is acquired by the Issuer or any Subsidiary; provided, that (i) such Liens do not extend to any other assets of the Issuer or any Subsidiary (other than accessions and additions thereto and proceeds or products thereof and other than after-acquired property), (ii) such Liens secure only those obligations which they secure on the date such person becomes a Subsidiary or the date of such acquisition (and any extensions, renewals, replacements or refinancings thereof); (iii) such Liens were not incurred in contemplation of such person becoming a Subsidiary; and (iv) such Liens secure Indebtedness otherwise permitted to be incurred under Section 8.01.
SECTION 8.03 Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter, as part of such transaction, rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a Sale and Lease-Back Transaction); provided, that a Sale and Lease-Back Transaction shall be permitted with respect to (i) Excluded Property or (ii) any other property owned by the Issuer or any Subsidiary to the extent that aggregate Net Proceeds from all Sale and Lease-Back Transactions consummated prior to the Maturity Date does not exceed $2,000,000; provided, further, that with respect to any Sale and Lease-Back Transaction, (x) the Net Proceeds therefrom shall be used to redeem the Notes to the extent required by Section 3.02(b) and (y) with respect to any Sale and Lease-Back Transaction pursuant to clause (ii), the requirements of the last paragraph of Section 8.05 shall apply to such Sale and Lease-Back Transaction to the extent provided therein.
SECTION 8.04 Investments, Loans and Advances. (i) Purchase or acquire (including pursuant to any merger with a person that is not a Wholly Owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of any other person, (ii) make any loans or advances to or Guarantees of the Indebtedness of any other person (other than in respect of intercompany liabilities incurred in connection with the cash management, tax and accounting operations of the Issuer and the Subsidiaries) or (iii) purchase or otherwise acquire, in one transaction or a series of related transactions, (x) all or substantially all of the property and assets or business of another person or (y) assets constituting a business unit, line of business or division of such person (each of the foregoing, an Investment), except:
(a) the Transactions;
(b) (i) Investments by the Issuer or any Subsidiary Guarantor in the Equity Interests of the Issuer or any Subsidiary Guarantor; (ii) intercompany loans from the Issuer or
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
any Subsidiary Guarantor to the Issuer or any Subsidiary Guarantor; and (iii) Guarantees by the Issuer or any Subsidiary Guarantor of Indebtedness otherwise permitted hereunder of the Issuer or any Subsidiary Guarantor;
(c) Permitted Investments;
(d) Investments arising out of the receipt by the Issuer or any Subsidiary of non-cash consideration for the Disposition of assets permitted under Section 8.05;
(e) loans and advances to officers, directors, employees or consultants of the Issuer or any Subsidiary (i) in the ordinary course of business in an aggregate outstanding amount (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not to exceed $2,000,000, (ii) in respect of payroll payments and expenses in the ordinary course of business and consistent with past practice or industry practice and (iii) in connection with such persons purchase of Equity Interests of Holdings (or any Parent Entity) solely to the extent that the amount of such loans and advances shall be contributed to the Issuer in cash as common equity;
(f) accounts receivable, security deposits and prepayments arising and trade credit granted in the ordinary course of business and consistent with past practice or industry practices and any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;
(g) Hedging Agreements entered into for non-speculative purposes in the ordinary course of business;
(h) Investments existing on, or contractually committed as of, the Closing Date and set forth on Schedule 8.04 and any extensions, renewals, replacements or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (h) is not increased at any time above the amount of such Investment existing or committed on the Closing Date;
(i) Investments resulting from pledges and deposits under Sections 8.02(f), (g), (o), (r), (s), (aa), (ee) and (ll);
(j) [Reserved];
(k) Investments constituting Permitted Business Acquisitions;
(l) [Reserved];
(m) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business and consistent with past practice or industry practices or Investments acquired by the Issuer or a Subsidiary as a result of a foreclosure by the Issuer or any of the Subsidiaries with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(n) Investments of a Subsidiary acquired after the Closing Date or of a person merged into the Issuer or merged into or consolidated with a Subsidiary after the Closing Date, in each case, (i) to the extent such acquisition, merger or consolidation is permitted under this Section 8.04, (ii) in the case of any acquisition, merger or consolidation, in accordance with Section 8.05 and (iii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(o) acquisitions by the Issuer of obligations of one or more officers or other employees of Holdings, any Parent Entity, the Issuer or its Subsidiaries in connection with such officers or employees acquisition of Equity Interests of Holdings or any Parent Entity, so long as no cash is actually advanced by the Issuer or any of the Subsidiaries to such officers or employees in connection with the acquisition of any such obligations, in each case to the extent permitted by Section 8.06(c);
(p) Guarantees by the Issuer or any Subsidiary of operating leases (other than Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by the Issuer or any Subsidiary in the ordinary course of business and consistent with past practice or industry practices;
(q) Investments to the extent that payment for such Investments is made with Equity Interests of the Issuer, Holdings or any Parent Entity;
(r) [Reserved];
(s) Investments consisting of Restricted Payments permitted under Section 8.06 (and without duplication of any baskets thereunder);
(t) Investments in the ordinary course of business and consistent with past practice or industry practice consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers;
(u) [Reserved];
(v) Guarantees permitted under Section 8.01 (except to the extent such Guarantee is expressly subject to this Section 8.04);
(w) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Issuer or such Subsidiary;
(x) Investments by the Issuer and its Subsidiaries, including loans to any direct or indirect parent of the Issuer, if the Issuer or any other Subsidiary would otherwise be permitted to make a Restricted Payment in such amount (provided, that the amount of any such Investment shall also be deemed to be a Restricted Payment under the appropriate clause of Section 8.06 and counted against the amount permitted under such clause for all purposes of this Indenture);
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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(y) [Reserved];
(z) [Reserved];
(aa) to the extent constituting Investments, purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or non-exclusive licenses or leases of Intellectual Property in each case in the ordinary course of business and consistent with past practice and not constituting all or substantially all of the assets of another person; and
(bb) Investments received substantially contemporaneously in exchange for Equity Interests of the Issuer, Holdings or any Parent Entity.
SECTION 8.05 Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or Dispose of (in one transaction or in a series of related transactions) all or any part of its assets (whether now owned or hereafter acquired), or Dispose of any Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all of the assets of any other person or division or line of business of a person, except that this Section 8.05 shall not prohibit:
(a) (i) the purchase and Disposition of inventory in the ordinary course of business by the Issuer or any Subsidiary, (ii) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business by the Issuer or any Subsidiary or, with respect to operating leases, otherwise for fair market value on market terms (as determined in good faith by the Issuer), (iii) the Disposition of surplus, obsolete, damaged or worn out equipment or other property in the ordinary course of business by the Issuer or any Subsidiary or (iv) the Disposition of Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger or consolidation of any Subsidiary with or into the Issuer in a transaction in which the Issuer is the survivor, (ii) the merger or consolidation of any Subsidiary with or into any Subsidiary Guarantor in a transaction in which the surviving or resulting entity is or becomes a Subsidiary Guarantor and, in the case of each of clauses (i) and (ii), no person other than the Issuer or a Subsidiary Guarantor receives any consideration (unless otherwise permitted by Section 8.04), (iii) the merger or consolidation of any Subsidiary that is not a Subsidiary Guarantor with or into any other Subsidiary that is not a Subsidiary Guarantor, (iv) the liquidation or dissolution or change in form of entity of any Subsidiary if the Issuer determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Issuer and is not materially disadvantageous to the Noteholder Parties, (v) any Subsidiary may merge or consolidate with any other person (other than the Issuer) in order to effect an Investment permitted pursuant to Section 8.04 so long as the continuing or surviving person shall be a Subsidiary Guarantor (unless otherwise permitted by Section 8.04), which shall be a Note Party if the merging or consolidating Subsidiary was a Note Party (unless otherwise permitted by Section 8.04) and which together with each of its Subsidiaries shall have complied with any applicable requirements of Section 7.10 or (vi) any Subsidiary may merge or consolidate with any other person in order to effect an Asset Sale otherwise permitted pursuant to this Section 8.05;
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Dispositions to the Issuer or a Subsidiary Guarantor (upon voluntary liquidation or otherwise);
(d) so long as no Event of Default exists or would result therefrom, Sale and Lease-Back Transactions permitted by Section 8.03; provided that if such Sale and Lease-Back Transaction results in a Capitalized Lease Obligation, such Capitalized Lease Obligation is permitted by Section 8.01 and any Lien made the subject of such Capitalized Lease Obligation is permitted by Section 8.02;
(e) Investments permitted by Section 8.04, Permitted Liens, and Restricted Payments permitted by Section 8.06;
(f) Dispositions of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;
(g) other Dispositions of assets to a person that is not an Affiliate of any Note Party; provided, that (i) at the time of such Disposition, no Event of Default shall exist or would result from such Disposition, (ii) the requirements of the last paragraph of this Section 8.05 shall apply to such Disposition and (iii) the Net Proceeds thereof, if any, are applied in accordance with Section 3.02(b);
(h) Permitted Business Acquisitions (including any merger, consolidation or amalgamation in order to effect a Permitted Business Acquisition); provided, that following any such merger, consolidation or amalgamation involving the Issuer, the Issuer is the surviving entity;
(i) leases, licenses or subleases or sublicenses of any real or personal property in the ordinary course of business and consistent with past practice or industry practices;
(j) Dispositions of inventory or Dispositions or abandonment of Intellectual Property of the Issuer and its Subsidiaries determined in good faith by the management of the Issuer to be no longer useful or necessary in the operation of the business of the Issuer or any of the Subsidiaries;
(k) [Reserved];
(l) [Reserved];
(m) [Reserved];
(n) to the extent constituting an Asset Sale, any termination, settlement or extinguishment of Hedging Agreements.
Notwithstanding anything to the contrary contained in Section 8.05 above, no Disposition of assets under Section 8.05(g) or, solely with respect to Sale and Lease-Back
104
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Transactions referred to in clause (ii) of Section 8.03, under Section 8.05(d), shall be permitted unless (i) such Disposition is for fair market value (as determined in good faith by the Issuer), or if not for fair market value, the shortfall is permitted as an Investment under Section 8.04, and (ii) at least 75% of the proceeds of such Disposition (except to Note Parties) consist of cash or Permitted Investments.
SECTION 8.06 Dividends and Distributions. Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock) of the person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any of the Issuers Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the person redeeming, purchasing, retiring or acquiring such shares) (all of the foregoing, Restricted Payments); provided, however, that:
(a) Restricted Payments may be made to the Issuer or any Wholly Owned Subsidiary of the Issuer;
(b) Restricted Payments may be made in respect of (i) overhead, legal, accounting and other professional fees and expenses of Holdings or any Parent Entity, (ii) [reserved], (iii) franchise and similar taxes and other fees and expenses in connection with the maintenance of its (or any Parent Entitys) existence and its (or any Parent Entitys indirect) ownership of the Issuer, (iv) payments permitted by Section 8.07(b) (other than Section 8.07(b)(vii)), (v) in respect of any taxable period for which the Issuer and/or any of its Subsidiaries are members of a consolidated, combined, affiliated, unitary or similar tax group for U.S. federal and/or applicable state, local or non-U.S. tax purposes of which a direct or indirect parent of the Issuer is the common parent, or for which the Issuer is a disregarded entity for U.S. federal income tax purposes that is wholly owned (directly or indirectly) by a C corporation for U.S. federal and/or applicable state or local income tax purposes, distributions to any direct or indirect parent of the Issuer in an amount not to exceed the amount of any U.S. federal, state, local or non-U.S. taxes that the Issuer and/or its Subsidiaries, as applicable, would have paid for such taxable period had the Issuer and/or its Subsidiaries, as applicable, been a stand-alone corporate taxpayer or a stand-alone corporate group, and (vi) customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers, directors and employees of Holdings or any Parent Entity, in each case in order to permit Holdings or any Parent Entity to make such payments; provided, that in the case of subclauses (i) and (iii), the amount of such Restricted Payments shall not exceed the portion of any amounts referred to in such subclauses (i) and (iii) that are allocable to the Issuer and its Subsidiaries (which (x) shall be 100% at any time that, as the case may be, (1) Holdings owns no material assets other than the Equity Interests in the Issuer and assets incidental to such equity ownership or (2) any Parent Entity owns directly or indirectly no material assets other than Equity Interests in Holdings and any other Parent Entity and assets incidental to such equity ownership and (y) in all other cases shall be as determined in good faith by the Issuer);
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Restricted Payments may be made to Holdings, the proceeds of which are used to purchase or redeem the Equity Interests of Holdings or any Parent Entity (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of any Parent Entity, Holdings, the Issuer or any of the Subsidiaries or by any Plan or any shareholders agreement then in effect upon such persons death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued; provided, that the aggregate amount of such purchases or redemptions under this clause (c) shall not exceed in any fiscal year $2,000,000 (plus (x) the amount of net proceeds contributed to the Issuer that were (x) received by Holdings or any Parent Entity during such calendar year from sales of Equity Interests of Holdings or any Parent Entity to directors, consultants, officers or employees of Holdings, any Parent Entity, the Issuer or any Subsidiary in connection with permitted employee compensation and incentive arrangements and (y) the amount of net proceeds of any key-man life insurance policies received during such calendar year), which, if not used in any year, may be carried forward to any subsequent calendar year; and provided, further, that cancellation of Indebtedness owing to the Issuer or any Subsidiary from members of management of Holdings, any Parent Entity, the Issuer or its Subsidiaries in connection with a repurchase of Equity Interests of Holdings or any Parent Entity will not be deemed to constitute a Restricted Payment for purposes of this Section 8.06;
(d) any person may make non-cash repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options;
(e) [Reserved];
(f) [Reserved];
(g) Restricted Payments may be made to pay, or to allow Holdings or any Parent Entity to make payments, in cash, in lieu of the issuance of fractional shares, upon the exercise of warrants or upon the conversion or exchange of Equity Interests of any such person;
(h) [Reserved]; and
(i) Restricted Payments may be made to Holdings or any Parent Entity to finance any Investment that if made by the Issuer or any Subsidiary directly would be permitted to be made pursuant to Section 8.04; provided, that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) such parent shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Issuer or a Subsidiary or (2) the merger, consolidation or amalgamation (to the extent permitted in Section 8.05) of the person formed or acquired into the Issuer or a Subsidiary in order to consummate such Permitted Business Acquisition or Investment, in each case, in accordance with the requirements of Section 7.10.
SECTION 8.07 Transactions with Affiliates.
(a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(other than the Issuer, Holdings, and the Subsidiary Guarantors or any person that becomes a Subsidiary Guarantor as a result of such transaction), unless such transaction is upon terms that are substantially no less favorable to the Issuer or such Subsidiary, as applicable, than would be obtained in a comparable arms-length transaction with a person that is not an Affiliate, as determined by the Board of Directors of the Issuer or such Subsidiary in good faith.
(b) The foregoing clause (a) shall not prohibit, to the extent otherwise permitted under this Indenture,
(i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the Board of Directors of Holdings (or any Parent Entity) or of the Issuer,
(ii) loans or advances to employees or consultants of Holdings (or any Parent Entity), the Issuer or any of the Subsidiaries in accordance with Section 8.04(e),
(iii) transactions among the Issuer or any Subsidiary Guarantor or any entity that becomes a Subsidiary Guarantor as a result of such transaction (including via merger, consolidation or amalgamation in which the Issuer or a Subsidiary Guarantor is the surviving entity),
(iv) the payment of fees, reasonable out-of-pocket costs and indemnities to directors, officers, consultants and employees of Holdings, any Parent Entity, the Issuer and the Subsidiaries in the ordinary course of business (limited, in the case of any Parent Entity, to the portion of such fees and expenses that are allocable to the Issuer and its Subsidiaries (which (x) shall be 100% for so long as Holdings or such Parent Entity, as the case may be, owns no assets other than the Equity Interests in the Issuer, Holdings or any Parent Entity and assets incidental to the ownership of the Issuer and its Subsidiaries and (y) in all other cases shall be as determined in good faith by management of the Issuer)),
(v) subject to the limitations set forth in Section 8.07(b)(xiv), if applicable, the Transactions and permitted transactions, agreements and arrangements in existence on the Closing Date and set forth on Schedule 8.07 or any amendment thereto or replacement thereof or similar arrangement to the extent such amendment, replacement or arrangement is not adverse to the Noteholder Parties when taken as a whole in any material respect (as determined by the Issuer in good faith),
(vi) (A) any employment agreements entered into by the Issuer or any of the Subsidiaries in the ordinary course of business, (B) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors, and (C) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(vii) Restricted Payments permitted under Section 8.06, including payments to Holdings (and any Parent Entity), and Investments permitted under Section 8.04,
(viii) any purchase by Holdings of the Equity Interests of the Issuer; provided, that any Equity Interests of the Issuer purchased by Holdings shall be pledged to the Collateral Agent (and deliver the relevant certificates or other instruments (if any) representing such Equity Interests to the Collateral Agent) on behalf of the Noteholder Parties to the extent required by the Holdings Guarantee and Pledge Agreement,
(ix) [Reserved],
(x) transactions for the purchase or sale of goods, equipment, products, parts and services entered into in the ordinary course of business and consistent with past practice or industry practice,
(xi) any transaction in respect of which the Issuer delivers to the Trustee a letter addressed to the Board of Directors of the Issuer from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is in the good faith determination of the Issuer qualified to render such letter, which letter states that (i) such transaction is on terms that are substantially no less favorable to the Issuer or such Subsidiary, as applicable, than would be obtained in a comparable arms-length transaction with a person that is not an Affiliate or (ii) such transaction is fair to the Issuer or such Subsidiary, as applicable, from a financial point of view,
(xii) [Reserved],
(xiii) transactions with joint ventures for the purchase or sale of goods, equipment, products, parts and services entered into in the ordinary course of business and consistent with past practice,
(xiv) so long as (x) no Default or Event of Default shall have occurred and be continuing and (y) the Super Senior Secured Leverage Ratio is less than or equal to 3.00 to 1.00 on a pro forma basis, any agreement to pay, and the payment of, monitoring, consulting, management, transaction, advisory or similar fees payable to the Co-Investors (A) in an aggregate amount in any fiscal year not to exceed $2,000,000 for any such fiscal year, plus reasonable out of pocket costs and expenses in connection therewith in any fiscal year and unpaid amounts for any prior periods from and including the fiscal year in which the Closing Date occurs; plus (2) any deferred, accrued or other fees in respect of any fiscal years from and including the fiscal year in which the Closing Date occurs (to the extent such fees in the aggregate do not exceed the amounts described in clause (A)(1) above in respect of such fiscal years), plus (B) 1% of the value of transactions with respect to which the Co-Investors provide any transaction, advisory or other services (including in connection with the Transactions) plus (C) the present value of all future amounts payable pursuant to any agreement referred to in clause (A)(1) above in connection with the termination of such agreement with the Co-Investors; provided, that if any such payment pursuant to clause (C) is not permitted to be paid as a result of a Default or Event of Default or the failure of the Issuer to be in pro forma
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
compliance with clause (y) above, such payment shall accrue and may be payable when no Default or Events of Default are continuing to the extent that no further Default or Event of Default would result therefrom or the Issuer shall be in pro forma compliance with clause (y) above, as applicable,
(xv) the issuance, sale or transfer of Equity Interests of the Issuer or any Subsidiary to Holdings (or any Parent Entity) and capital contributions by Holdings (or any Parent Entity) to the Issuer or any Subsidiary,
(xvi) [Reserved],
(xvii) payments by Holdings (and any Parent Entity), the Issuer and the Subsidiaries pursuant to a tax sharing agreement or arrangement (whether written or as a matter of practice) that complies with clause (v) of Section 8.06(b),
(xviii) [Reserved],
(xix) so long as no Default or Event of Default shall have occurred and be continuing, payments, loans (or cancellation of loans) or advances to employees or consultants that are (i) approved by a majority of the Disinterested Directors of Holdings (or any Parent Entity) or the Issuer in good faith, (ii) made in compliance with applicable law and (iii) otherwise permitted under this Indenture, in an aggregate amount not to exceed $1,000,000 at any time outstanding,
(xx) transactions with customers, clients or suppliers, or purchasers or sellers of goods and services, in each case, in the ordinary course of business or otherwise in compliance with the terms of this Indenture on terms substantially as favorable to the Issuer or such Subsidiary as would be obtainable by the Issuer or such Subsidiary at the time in a comparable arms-length transaction with a person other than an Affiliate,
(xxi) transactions between the Issuer or any of the Subsidiaries and any person, a director of which is also a director of the Issuer or any direct or indirect parent company of the Issuer; provided, however, that (A) such director abstains from voting as a director of the Issuer or such direct or indirect parent company, as the case may be, on any matter involving such other person and (B) such person is not an Affiliate of the Issuer for any reason other than such directors acting in such capacity,
(xxii) transactions permitted by, and complying with, the provisions of Section 8.05, and
(xxiii) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Issuer) for the purpose of improving the consolidated tax efficiency of the Issuer and the Subsidiaries which do not circumvent any covenant set forth herein.
SECTION 8.08 Business of the Issuer and the Subsidiaries. Notwithstanding any other provisions hereof, engage at any time in any material business or business activity materially different from any business or business activity conducted by any of them on the Closing Date.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8.09 Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc.
(a) Amend or modify in any manner materially adverse to the Noteholder Parties (as reasonably determined by the Issuer and the Required Noteholder Parties), or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Noteholder Parties (as reasonably determined by the Issuer and the Required Noteholder Parties)), the articles or certificate of incorporation, by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Issuer or any Subsidiary.
(b) (i) Make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of, or in respect of, principal of or interest on any Junior Financing, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of any Junior Financing, except for:
(A) Permitted Refinancings expressly permitted under Section 8.01;
(B) payments of regularly-scheduled interest and fees due thereunder, other scheduled or required non-principal payments thereunder, any mandatory prepayments of principal, interest and fees thereunder, scheduled payments thereon necessary to avoid the Junior Financing from constituting applicable high yield discount obligations within the meaning of Section 163(i)(l) of the Code, and, to the extent this Indenture is then in effect, principal on the scheduled maturity date of any Junior Financing (or, except in the case of the First-Priority Senior Secured Notes, within twelve months thereof; provided that principal in respect of the First-Priority Senior Secured Notes may be prepaid, redeemed and/or repurchased during such twelve month period prior to the stated maturity thereof (but not prior to the date that is twelve months prior to the stated maturity date thereof) solely to the extent the payment, redemption and/or repurchase thereof is made in reliance on the ECF Builder Basket Amount);
(C) payments or distributions in respect of all or any portion of the Junior Financing with the proceeds contributed to the Issuer by Holdings from the issuance, sale or exchange by Holdings (or any Parent Entity) of Equity Interests that are not Disqualified Stock made within eighteen months prior thereto; provided that such payments or distributions are accompanied by permanent reductions of any commitments, if any, with respect to such Junior Financing to the extent of such payment or distribution, to the extent applicable;
(D) the conversion of any Junior Financing to Equity Interests of the Issuer, Holdings or any Parent Entity; provided that such conversion is accompanied by permanent reductions of any commitments, if any, with respect to such Junior Financing to the extent of such conversion, to the extent applicable; and
110
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(E) payments or distributions in respect of any Junior Financing made with any Declined Amounts (other than Declined Amounts with respect to an ECF Offer); or
(ii) (x) Amend or modify, or permit the amendment or modification of, any provision of any Junior Financing, or any agreement, document or instrument evidencing or relating thereto, other than amendments or modifications that (A) are not materially adverse to Noteholder Parties and that do not affect the lien subordination or payment subordination provisions thereof (if any) in a manner adverse to the Noteholder Parties or (B) otherwise comply with the definition of Permitted Refinancing Indebtedness or (y) amend or modify, or permit the amendment or modification of, the First-Priority Senior Secured Notes Indenture, or any agreement, document or instrument evidencing or relating thereto (including, for the avoidance of doubt, the First Lien/First Lien Intercreditor Agreement), if such amendment or modification affects the lien subordination or payment subordination provisions thereof (if any) in a manner adverse to the Noteholder Parties;
provided that, for the avoidance of doubt, the foregoing shall not prohibit the incurrence of Permitted Exchange Notes or Permitted Redemption Indebtedness to the extent otherwise permitted by Section 8.01(w) and the exchange and/or purchase, redemption or retirement of First-Priority Senior Secured Notes in connection therewith.
(c) Permit any Subsidiary to enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances to the Issuer or any Subsidiary that is a direct or indirect parent of such Subsidiary or (ii) the granting of Liens by the Issuer or such Subsidiary that is a Note Party pursuant to the Security Documents, in each case other than those arising under any Note Document, except, in each case, restrictions existing by reason of:
(A) restrictions imposed by applicable law;
(B) contractual encumbrances or restrictions in effect on the Closing Date, including under Indebtedness existing on the Closing Date and set forth on Schedule 8.01, the First-Priority Senior Secured Note Documents, any agreements related to any Permitted Exchange Notes or Permitted Redemption Indebtedness or any agreements related to any Permitted Refinancing Indebtedness in respect of any such Indebtedness and, in each case, any similar contractual encumbrances or restrictions and any amendment, modification, supplement, replacement or refinancing of such agreements or instruments that does not materially expand the scope of any such encumbrance or restriction (as determined in good faith by the Issuer);
(C) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition;
(D) [Reserved];
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(E) [Reserved];
(F) any restrictions imposed by any agreement relating to Indebtedness incurred pursuant to Section 8.01 or Permitted Refinancing Indebtedness in respect thereof, to the extent such restrictions are not materially more restrictive than the restrictions contained in this Indenture or are market terms at the time of issuance (as determined by the Required Noteholder Parties);
(G) customary provisions contained in leases or licenses of Intellectual Property and other similar agreements entered into in the ordinary course of business and consistent with past practice or industry practice;
(H) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;
(I) customary provisions restricting assignment of any agreement entered into in the ordinary course of business and consistent with past practice or industry practice;
(J) customary restrictions and conditions contained in any agreement relating to the sale, transfer, lease or other disposition of any asset permitted under Section 8.05 pending the consummation of such sale, transfer, lease or other disposition;
(K) customary restrictions and conditions contained in the document relating to any Lien (including any secured Indebtedness), so long as (1) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific property or assets subject to such Lien, and (2) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this Section 8.09;
(L) customary net worth provisions contained in Real Property leases entered into by Subsidiaries, so long as the Issuer has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the Issuer and its Subsidiaries to meet their ongoing obligations;
(M) any agreement in effect at the time such subsidiary becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary;
(N) [Reserved];
(O) customary restrictions contained in leases, subleases, licenses or Equity Interests or asset sale agreements otherwise permitted hereby as long as such restrictions relate to the Equity Interests and assets subject thereto;
(P) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;
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(Q) [Reserved]; and
(R) any encumbrances or restrictions of the type referred to in Section 8.09(c)(i) and 8.09(c)(ii) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of or similar arrangements to the contracts, instruments or obligations referred to in clauses (A) through (Q) above; provided, that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements, refinancings or similar arrangements are, in the good faith judgment of the Issuer, not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions as contemplated by such provisions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement, refinancing or similar arrangement.
SECTION 8.10 Fiscal Year. In the case of the Issuer or any Subsidiary, permit any change to its fiscal year without the prior written consent of the Required Noteholder Parties, in which case, the Issuer and the Required Noteholder Parties will, and are hereby authorized by the Noteholder Parties to, make any adjustments to this Indenture that are necessary to reflect such change in fiscal year.
SECTION 8.11 Financial Covenant. Permit the Unrestricted Cash and unrestricted Permitted Investments of the Issuer and its Subsidiaries as of the end of any day to be less than $7,500,000 in the aggregate; provided that, for purposes of determining compliance with this Section 8.11, to the extent any Additional Notes are issued during any fiscal quarter, the Net Proceeds of such Additional Notes shall not be included in such calculation for any day in such fiscal quarter.
SECTION 8.12 Compliance with ERISA. Cause or suffer to exist (a) any event that could result in the imposition of a Lien on any asset of Holdings, the Issuer or any Subsidiary with respect to any Pension Plan or Multiemployer Plan or (b) any other ERISA Event, that would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 8.13 Compliance with Anti-Terrorism and Anti-Corruption Laws and Sanctions. No Note Party shall:
(a) (i) violate any Anti-Terrorism Laws or Anti-Corruption Laws, (ii) engage in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Developments Financial Action Task Force on Money Laundering or specified unlawful activities under 18 U.S.C. §1956, (iii) become (including by virtue of being majority owned by or controlled by a Sanctioned Person), own or control a Sanctioned Person or any other Sanctioned Person or (iv) knowingly permit any of their respective Affiliates to violate these laws or engage in these actions.
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(b) use, directly or indirectly, the proceeds of the Notes, or lend, contribute or otherwise make available such proceeds to any person, (x) to fund any activities or business of or with any Sanctioned Person or Sanctioned Country in violation of Sanctions, or (y) in any other manner that would result in a violation of Sanctions or any Anti-Terrorism Laws or Anti- Corruption Laws by any person (including any person participating in the Notes, whether as underwriter, advisor, investor, or otherwise).
(c) (i) deal in, or otherwise engage in any transaction related to, any property or interests in property blocked pursuant to any Anti-Terrorism Law or Sanctions, or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempt to violate, any of the prohibitions set forth in any Anti-Terrorism Law or Sanctions or (iii) knowingly permit any of their respective Affiliates to do any of the foregoing.
SECTION 8.14 Negative Pledge. Neither Holdings nor the Issuer shall, nor shall they permit any Subsidiary to, create or permit to subsist any Lien over any of its assets, including without limitation, any Leasehold Property of the Note Parties, other than the Liens permitted by Section 8.02.
ARTICLE IX.
HOLDINGS NEGATIVE COVENANTS
Holdings hereby covenants and agrees with the Trustee and each Noteholder Party that, from and after the Closing Date and until the Termination Date, unless the Required Noteholder Parties shall otherwise in their sole discretion consent in writing, (a) Holdings will not create, incur, assume or permit to exist any Lien other than (i) Liens created under the Note Documents and (ii) Liens not prohibited by Section 8.02 on any of the Equity Interests issued by the Issuer held by Holdings, (b) Holdings shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence; provided, that so long as no Default has occurred and is continuing or would result therefrom, Holdings may merge with any other person (and if it is not the survivor of such merger, the survivor shall assume Holdings obligations, as applicable, under the Note Documents) and (c) Holdings shall not (x) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than (i) activities relating to the preservation of its legal existence, (ii) activities relating to its ownership of the Equity Interests of the Issuer and its Subsidiaries, (iii) activities relating to the performance of obligations under the Note Documents, (iv) the making of Restricted Payments not prohibited by Section 8.06, (v) the receipt of Restricted Payments permitted to be made to Holdings under Section 8.06 and (vi) activities related to the Transactions or (y) take any action that will prevent or terminate its ownership of the Equity Interests of the Issuer and its Subsidiaries.
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ARTICLE X.
DEFAULTS AND REMEDIES
SECTION 10.01 Events of Default. In case of the happening of any of the following events (each, an Event of Default):
(a) any representation or warranty made or deemed made by the Issuer or any Subsidiary herein or in any other Note Document or any certificate or document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect (without duplication of any materiality qualifier therein) when so made or deemed made;
(b) default shall be made in the payment of any principal of any Note when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for redemption thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Note or in the payment of any Fee or any other amount (other than an amount referred to in clause (b) above) due under any Note Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the Issuer of any covenant, condition or agreement contained in, Section 7.01(a), 7.05(a), 7.08 or 7.14(f) or in Article VIII and, in the case of a default in the due performance or observance by the Issuer of the covenant contained in (i) Section 7.14(f), such default shall continue unremedied for a period of 3 Business Days and (ii) Section 8.11, such default shall continue unremedied for a period of 5 Business Days after the Issuer is required to deliver the statement to the Trustee required pursuant to Section 7.14(f);
(e) default shall be made in the due observance or performance by Holdings of Article IX or by the Issuer or any of the Subsidiary Guarantors of any covenant, condition or agreement contained in any Note Document (other than those specified in clauses (b), (c) and (d) above) and such default shall continue unremedied for a period of 30 days after the earlier of (i) any Responsible Officer of a Noteholder Party shall become aware of such default and (ii) notice thereof from the Trustee to the Issuer;
(f) (i) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity; or (ii) the Issuer or any Subsidiary fails to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided, that this clause (f) shall not apply to any secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness;
(g) there shall have occurred a Change in Control;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Issuer or any of the Subsidiaries, or of a substantial part of the property or assets of Holdings, the Issuer or any Subsidiary, under the Bankruptcy Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Issuer or any of the Subsidiaries or for a substantial part of the property or assets of Holdings, the Issuer or any of the Subsidiaries or (iii) the winding-up or liquidation of Holdings, the Issuer or any Subsidiary (except in a transaction permitted hereunder); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
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(i) Holdings, the Issuer or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (h) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Issuer or any of the Subsidiaries or for a substantial part of the property or assets of Holdings, the Issuer or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable or admit in writing its inability or fail generally to pay its debts as they become due;
(j) the failure by the Issuer or any Subsidiary to pay one or more final judgments aggregating in excess of $5,000,000 (to the extent not covered by insurance), which judgments are not discharged or effectively waived or stayed for a period of 45 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Issuer or any Subsidiary to enforce any such judgment;
(k) (i) one or more ERISA Events shall have occurred, or (ii) there is or arises an Unfunded Pension Liability (taking into account only Plans with positive Unfunded Pension Liability); or (iii) there is or arises any potential Withdrawal Liability if Holdings, the Issuer, any Subsidiary or any ERISA Affiliate were to withdraw completely from one or more Multiemployer Plans; and the liability of Holdings, the Issuer, any Subsidiary and any ERISA Affiliates contemplated by the foregoing clauses (i), (ii) and (iii), either individually or in the aggregate, has had, or would be reasonably expected to have, a Material Adverse Effect; or
(l) any Note Document shall for any reason be asserted in writing by Holdings, the Issuer or any Subsidiary not to be a legal, valid and binding obligation of any party thereto (other than in accordance with its terms), (ii) any security interest purported to be created by any Security Document and to extend to assets that constitute a material portion of the Collateral shall cease to be, or shall be asserted in writing by the Issuer or any other Note Party not to be (other than, in each case, in accordance with its terms), a valid and perfected security interest (perfected as or having the priority required by this Indenture or the relevant Security Document and subject to such limitations and restrictions as are set forth herein and therein) in the securities, assets or properties covered thereby, except from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Agreement, (iii) (A) any of the Obligations of the Note Parties under the Note Documents for any reason shall cease to be, or shall be asserted in writing by the Issuer or any other Note Party not to be, Senior Indebtedness (or any comparable term) or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing documentation or (B) the subordination provisions set forth in any Junior Financing documentation shall, in whole or in part, cease to be, or shall be asserted in writing by the Issuer or any other Note Party not to be, effective or legally valid, binding and enforceable against the holders of any Junior Financing, if applicable or (iv) a material portion
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of the Guarantees pursuant to the Security Documents by Holdings or the Subsidiary Guarantors guaranteeing the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof), or shall be asserted in writing by Holdings or any Subsidiary Guarantor not to be in effect or not to be legal, valid and binding obligations (other than in accordance with the terms thereof); provided, that no Event of Default shall occur under this Section 10.01(l) if the Note Parties cooperate with the Collateral Agent to replace and perfect such security interest and Lien, such security interest and Lien is replaced and the rights, powers and privileges of the Secured Parties are not materially adversely affected by such replacement;
(m) any provisions of the First Lien/First Lien Intercreditor Agreement or any agreement or instrument governing any Indebtedness thereunder shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or the Obligations or the Liens securing the Obligations, for any reason, shall not have the priority contemplated by this Indenture or the First Lien/First Lien Intercreditor Agreement; or
(n) the Note Parties shall determine, whether by vote of the Note Parties Board of Directors or otherwise, to suspend the operation of more than 50% of the Note Parties stores, liquidate, or enter into leases, subleases, non-exclusive licenses or sublicenses pursuant to Section 8.02(q) constituting more than 50% of the Note Parties assets or store locations, and/or employ an agent or other third party to conduct any store closing, store liquidation of going out of business sales for more than 50% of the Note Parties stores.
then, and in every such event (other than an event with respect to the Issuer described in clause (h) or (i) above), and at any time thereafter during the continuance of such event, the Trustee, at the written request of the Required Noteholder Parties, shall, by notice to the Issuer, take any or all of the following actions, at the same or different times: declare the Notes then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Notes so declared to be due and payable, together with accrued interest thereon and all other liabilities of the Issuer accrued hereunder and under any other Note Document (including any applicable Make-Whole Amount), shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Issuer, anything contained herein or in any other Note Document to the contrary notwithstanding; and in any event with respect to the Issuer described in clause (h) or (i) above, the principal of the Notes then outstanding, together with accrued interest thereon and all other liabilities of the Issuer accrued hereunder and under any other Note Document (including any applicable Make-Whole Amount), shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Issuer, anything contained herein or in any other Note Document to the contrary notwithstanding.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, or premium, if any, and interest of the Note (including liquidated damages) on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder.
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In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This paragraph does not apply to a suit by the Trustee, a suit by a Holder pursuant to the immediately preceding paragraph, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.
If an Event of Default in payment of principal, premium or interest specified in Section 10.01(b) or (c) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any Guarantor (or any other obligor on the Notes) for the whole amount of unpaid principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate set forth in the Notes, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 11.07) and the Holders allowed in any judicial proceedings relative to the Issuer or any Guarantor (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses to the extent that any such charges and expenses are not paid out of the estate in any such proceedings and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under this Indenture. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceedings.
SECTION 10.02 Recission. At any time after any action is taken by the Trustee following the occurrence and continuation of an Event of Default pursuant to Section 10.01 and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Required Noteholder Parties, by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if:
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(i) the Issuer has paid or deposited with the Trustee a sum sufficient to pay:
(A) all of the installments of interest and premium on and, if the Maturity Date with respect to the Notes has occurred, the then unpaid principal balance of all such Notes which were overdue prior to the date of such acceleration;
(B) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate of interest applicable to the Notes;
(C) all sums paid or advanced by the Trustee and the Collateral Agent pursuant to the terms of the Transaction Documents and the reasonable compensation, out-of-pocket expenses, disbursements and advances of the Trustee and the Collateral Agent and their agents and counsel incurred in connection with the enforcement of this Indenture;
(D) all scheduled payments, early termination amounts, taxes, indemnities and interest on overdue interest; and
(ii) all Events of Default, other than the nonpayment of the principal of or interest on Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided herein.
No such rescission with respect to any Event of Default shall affect any subsequent Event of Default or impair any right consequent thereon.
SECTION 10.03 Treatment of Certain Payments. Subject to the terms of any applicable Intercreditor Agreement, any amount received by the Trustee or the Collateral Agent from any Note Party (or from proceeds of any Collateral) following any Event of Default that is continuing or any acceleration of the Obligations under this Indenture or any Event of Default with respect to the Issuer under Section 10.01(h) or (i), in each case that is continuing, shall be applied: (i) first, ratably, to pay any fees, indemnities or expense reimbursements then due to the Trustee or the Collateral Agent from the Issuer, including those set forth in Section 11.07 of this Indenture, (ii) second, towards payment of interest and fees then due from the Issuer hereunder with respect to Obligations that have priority under the Priority Waterfall, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (iii) third, towards payment of other Obligations then due from the Issuer hereunder with respect to Obligations that have priority under the Priority Waterfall, ratably among the parties entitled thereto in accordance with the amounts of such Obligations then due to such parties, and (iv) last, the balance, if any, after all of the Obligations have been paid in full, to the Issuer or as otherwise required by Requirements of Law.
SECTION 10.04 [Reserved].
SECTION 10.05 Control by Majority. The Required Noteholder Parties may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, if the Trustee, being advised by counsel, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the
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Trustee in personal liability or expense for which it is not adequately indemnified, or subject to Section 11.01, that the Trustee determines is unduly prejudicial to the rights of any other holder or that would involve the Trustee in personal liability. Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification, security and prefunding satisfactory to it against all losses and expenses caused by taking or not taking such action.
ARTICLE XI.
TRUSTEE
SECTION 11.01 Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default with respect to the Notes and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such persons own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee (it being agreed that the permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty); and
(ii) the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee shall be under no duty to make any investigation as to any statement contained in any such instance, but may accept the same as conclusive evidence of the truth and accuracy of such statement or the correctness of such opinions. However, in the case of certificates or opinions required by any provision hereof to be provided to it, the Trustee shall examine the form of certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own gross negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts;
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(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 10.05; and
(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.
(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 11.01.
(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 11.01.
SECTION 11.02 Rights of Trustee.
(a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or decree of a court or competent jurisdiction, bond, debenture, not, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties, not only as to due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein. The Trustee need not investigate any fact or matter stated in the document.
(b) Other than in connection with actions specifically required under this Indenture, before the Trustee acts or refrains from acting, it may require an Officers Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers Certificate or Opinion of Counsel.
(c) The Trustee may act through attorneys or agents and shall not be responsible for the misconduct or negligence of any such attorney or agent appointed with due care.
(d) The Trustee shall not be responsible or liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustees conduct does not constitute willful misconduct or gross negligence.
(e) The Trustee may consult with counsel of its own selection and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
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(f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Notes at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney, at the expense of the Issuer and shall incur no liability of any kind by reason of such inquiry or investigation.
(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or the Security Documents at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.
(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other person employed to act hereunder, including the Collateral Agent.
(i) The Trustee shall not be responsible or liable for any action taken or omitted by it in good faith at the written direction of the Required Noteholder Parties or the Holders of not less than a majority in principal amount of the Notes as to the time, method and place of conducting any proceedings for any remedy available to the Trustee or the exercising of any power conferred by this Indenture.
(j) Any action taken, or omitted to be taken, by the Trustee in good faith pursuant to this Indenture upon the request or authority or consent of any person who, at the time of making such request or giving such authority or consent, is the Holder of any Note shall be conclusive and binding upon future Holders of Notes and upon Notes executed and delivered in exchange therefor or in place thereof.
(k) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by a Trust Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(l) The Trustee may request that the Issuer delivers an Officers Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers Certificate may be signed by any person authorized to sign an Officers Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
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(m) The Trustee shall not be responsible or liable for punitive, special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of actions.
(n) The Trustee shall not be required to give any bond or surety in respect of the execution of the trusts and powers under this Indenture.
(o) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunction of utilities, computer (hardware or software) or communication services; accidents; labor disputes; and acts of civil or military authorities and governmental action.
(p) The Trustee shall have no obligation to give, execute, deliver, file, record, authorize or obtain any financing statements, notices, instruments, documents, agreements, consents or other papers as shall be necessary to (i) create, preserve, perfect or validate the security interest granted pursuant to this Indenture and the other Note Documents or (ii) enable the Trustee to exercise and enforce its rights under the Indenture and the other Note Documents with respect to such pledge and security interest. In addition, the Trustee shall have no responsibility or liability (i) in connection with the acts or omissions of the Issuer in respect of the foregoing or (ii) for or with respect to the legality, validity and enforceability of any security interest created in the Collateral or the perfection and priority of such security interest.
SECTION 11.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Registrar may do the same with like rights. However, the Trustee must comply with Sections 11.10 and 11.11.
SECTION 11.04 Trustees Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer or any Subsidiary Guarantor in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustees certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default under Sections 10.01(a), (d), (e), (g), (j), (k), (l), (m) or (n) unless either (a) a Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have received written notice thereof in accordance with Section 16.01 hereof from the Issuer, any Subsidiary Guarantor or any Holder. In accepting the trust hereby created, the Trustee acts solely as Trustee under this Indenture and not in its individual capacity and all persons, including without limitation the Holders of Notes and the Issuer having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein. If the Trustee is directed by the Required Noteholder Parties to deliver any information, determination or any other matter to the Issuer, the Trustee will have no
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liability relating thereto nor will it be deemed to have any notice or knowledge of any information contained therein. The Trustee will have no obligation to monitor or record any information contained therein.
SECTION 11.05 Notice of Defaults. If a Default occurs and is continuing and is actually known to a Trust Officer of the Trustee or the Trustee has received written notice thereof pursuant to Section 11.02(k), the Trustee shall mail, or deliver electronically if held by the Depository, to each holder of the Notes notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or a Trust Officer of the Trustee has received written notice thereof pursuant to Section 11.02(k). Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note, the Trustee may withhold notice if it in good faith determines that withholding notice is in the interests of the noteholders.
SECTION 11.06 [Reserved].
SECTION 11.07 Expenses; Indemnity.
(a) The Issuer agrees to pay (i) all out-of-pocket expenses incurred by the Trustee or the Collateral Agent in connection with the preparation of this Indenture and the other Note Documents, or by the Trustee or the Collateral Agent in connection with the administration of this Indenture and any amendments, modifications or waivers of the provisions hereof or thereof, including the reasonable fees, charges and disbursements of legal counsel for the Trustee and Collateral Agent, and, if necessary, the reasonable fees, charges and disbursements of one local counsel per jurisdiction, and (ii) all out-of-pocket expenses incurred by the Trustee, the Collateral Agent or any Noteholder Party in connection with the enforcement of their rights in connection with this Indenture and the other Note Documents, in connection with the Notes purchased hereunder, including the fees, charges and disbursements of a single counsel for the Noteholder Parties and separate counsel for the Trustee and Collateral Agent, and, if necessary, a single local counsel in each appropriate jurisdiction (and, in the case of an actual or perceived conflict of interest where such person affected by such conflict informs the Issuer of such conflict and thereafter retains its own counsel with the Issuers prior written consent (not to be unreasonably withheld), of another firm of such for such affected person).
(b) The Issuer agrees to indemnify the Trustee, the Collateral Agent, each Noteholder Party, each of their respective Affiliates, successors and assignors, and each of their respective directors, officers, employees, agents, trustees, advisors and members (each such person being called an Indemnitee) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements (excluding the allocated costs of in house counsel and limited to not more than one counsel for all such Indemnitees, taken as a whole, and, if necessary, a single local counsel in each appropriate jurisdiction for all such Indemnitees, taken as a whole (and, in the case of an actual or perceived conflict of interest where the Indemnitee affected by such conflict informs the Issuer of such conflict and thereafter retains its own counsel with the Issuers prior written consent (not to be unreasonably withheld), of another firm of counsel for such affected Indemnitee)), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Indenture or any other
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Note Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby and in the case of the Trustee and its related Indemnitees, the acceptance and administration of the trust or trusts hereunder, (ii) any violation of or liability under Environmental Laws by the Issuer or any Subsidiary, (iii) any actual or alleged presence, Release or threatened Release of or exposure to Hazardous Materials at, under, on, from or to any property owned, leased or operated by the Issuer or any Subsidiary or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by Holdings, the Issuer or any of their subsidiaries or Affiliates including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of its powers or duties hereunder or in connection with the enforcement of these provisions; provided, that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties or (y) arose from any claim, actions, suits, inquiries, litigation, investigation or proceeding that does not involve an act or omission of the Issuer or any of its Affiliates and is brought by an Indemnitee against another Indemnitee (other than any claim, actions, suits, inquiries, litigation, investigation or proceeding against the Trustee or the Collateral Agent in its capacity as such). None of the Indemnitees (or any of their respective affiliates) shall be responsible or liable to the Fund, Holdings, the Issuer or any of their respective subsidiaries, Affiliates or stockholders or any other person or entity for any special, indirect, consequential or punitive damages, which may be alleged as a result of the Transactions. The provisions of this Section 11.07 shall remain operative and in full force and effect regardless of the expiration of the term of this Indenture, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Indenture or any other Note Document, or any investigation made by or on behalf of the Trustee or any Noteholder Party. All amounts due under this Section 11.07 shall be payable within 15 days after written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
(c) To the fullest extent permitted by applicable law, Holdings and the Issuer shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Indenture, any other Note Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Notes or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Indenture or the other Note Documents or the transactions contemplated hereby or thereby.
(d) To secure the Issuers and the Guarantors payment obligations in this Section 11.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that such Lien shall not apply to money and property held in
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trust to pay principal of, premium on, if any, and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture, rejection or termination under the Bankruptcy Code, and resignation or removal of the Trustee.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified in clause (h) or (i) of Section 10.01 hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under the Bankruptcy Code.
(f) The agreements in this Section 11.07 shall survive the resignation of the Trustee, the Collateral Agent, the replacement of any Noteholder Party and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Indenture.
SECTION 11.08 Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying the Issuer. The Required Noteholder Parties may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Issuer shall remove the Trustee if:
(i) the Trustee fails to comply with Section 11.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns, is removed by the Issuer or by the Required Noteholder Parties and such Noteholder Parties do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
(c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail (or otherwise deliver in accordance with the procedures of the Depository) a notice of its succession to the Noteholder Parties. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 11.07.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Notes may petition at the expense of the Issuer any court of competent jurisdiction for the appointment of a successor Trustee.
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(e) If the Trustee fails to comply with Section 11.10, any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuers obligations under Section 11.07 shall continue for the benefit of the retiring Trustee.
SECTION 11.09 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture that the certificate of the Trustee shall have.
SECTION 11.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder which shall (i) be a bank or trust company organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee power, (ii) be subject to supervision or examination by federal or state authority, (iii) have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and (iv) have a long-term unsecured debt rating of at least BBB+ by S&P. If the Trustee shall cease to satisfy the eligibility requirements of this Section 11.10, the Trustee shall resign promptly after written request to do so by the Issuer; provided, that the resignation of the Trustee shall not be effective until the substitution and replacement of the Trustee by a successor Trustee meeting the eligibility requirements set forth in this Section 11.10.
SECTION 11.11 Limitation on Duty of Trustee in Respect of Collateral; Indemnification.
(a) Beyond the exercise of reasonable care in the custody thereof, the Trustee shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Trustee shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any lossor diminution in the value of any of the Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Trustee in good faith.
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(b) The Trustee shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of the Issuer to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. Subject to Section 11.01 of this Indenture, the Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture, the First Lien/First Lien Intercreditor Agreement, the Collateral Agreement or any other Security Document by the Issuer, the Subsidiary Guarantors or the Collateral Agent. The Trustee may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any counsel, accountant, appraiser or other expert or adviser, whether retained or employed by the Issuer or by the Trustee, in relation to any matter arising in the administration of this Indenture or the Security Documents.
ARTICLE XII.
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 12.01 Discharge of Liability on Notes; Defeasance.
(a) This Indenture shall be discharged and shall cease to be of further effect (except as to surviving rights, protections and immunities of the Trustee and rights of registration or transfer or exchange of Notes, as expressly provided for in this Indenture) as to all outstanding Notes when:
(i) either (A) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust) have been delivered to the Trustee for cancellation or (B) all of the Notes (1) have become due and payable, (2) will become due and payable at their stated maturity within one year or (3) if redeemable at the option of the Issuer, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Issuer directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; provided that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal
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to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of the redemption only required to be deposited with the Trustee on or prior to the date of the redemption;
(ii) the Issuer and/or the Subsidiary Guarantors have paid all other sums payable under this Indenture; and
(iii) the Issuer has delivered to the Trustee an Officers Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with.
(b) Subject to Sections 12.01(c) and 12.02, the Issuer at any time may terminate:
(i) all of its obligations under the Notes and this Indenture with respect to the Noteholder Parties (legal defeasance option), and (ii) its obligations under Article VII, Article VIII, Article IX, and Sections 10.01(a), 10.01(d), 10.01(e), 10.01(f), 10.01(g), 10.01(h), 10.01(i), 10.01(j), 10.01(k), 10.01(l), 10.01(m) and 10.01(n) (covenant defeasance option). The Issuer may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event that the Issuer terminates all of its obligations under the Notes and this Indenture (with respect to such Notes) by exercising its legal defeasance option or its covenant defeasance option, the obligations of each Subsidiary Guarantor with respect to the Security Documents shall be terminated simultaneously with the termination of such obligation.
If the Issuer exercises its legal defeasance option, payment of the Notes so defeased may not be accelerated because of an Event of Default. If the Issuer exercises its covenant defeasance option, payment of the Notes so defeased may not be accelerated because of an Event of Default specified in Sections 10.01(a), 10.01(d), 10.01(e), 10.01(f), 10.01(g), 10.01(h), 10.01(i), 10.01(j), 10.01(k), 10.01(l), 10.01(m) or 10.01(n).
Upon satisfaction of the conditions set forth herein and upon request of the Issuer, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuer terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08 and 2.09 and Article XI, including, without limitation, Sections 11.07 and 11.08 and in this Article XII and the rights and immunities of the Trustee under this Indenture shall survive until the Notes have been paid in full. Thereafter, the Issuers obligations in Sections 11.07, 11.08 and 12.05 and the rights and immunities of the Trustee under this Indenture shall survive such satisfaction and discharge.
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SECTION 12.02 Conditions to Defeasance.
(a) The Issuer may exercise its legal defeasance option or its covenant defeasance option only if:
(i) the Issuer irrevocably deposits in trust with the Trustee cash in U.S. Dollars sufficient to pay the principal of and premium (if any) and interest on the Notes when due at maturity or redemption, as the case may be;
(ii) the Issuer delivers to the Trustee a certificate from a nationally recognized firm of independent accountants, investment bank or financial advisory firm expressing their opinion that the payments of principal and interest when due and without reinvestment on any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium, if any, and interest when due on all the Notes to maturity or redemption, as the case may be;
(iii) no Default specified in Section 10.01(h) or (i) with respect to the Issuer shall have occurred or is continuing on the date of such deposit;
(iv) the deposit does not constitute a default under any other material agreement or instrument binding on the Issuer;
(v) in the case of the legal defeasance option, the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that (1) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling, or (2) since the date of this Indenture there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; provided that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the date of the redemption only required to be deposited with the Trustee on or prior to the date of the redemption. Notwithstanding the foregoing, the Opinion of Counsel required by the immediately preceding sentence with respect to a legal defeasance need not be delivered if all of the Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable at their Maturity Date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer;
(vi) such exercise does not impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holders Notes on or after the due dates therefore or to institute suit for the enforcement of any payment on or with respect to such Holders Notes;
(vii) in the case of the covenant defeasance option, the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and
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(viii) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Notes to be so defeased and discharged as contemplated by this Article XII have been complied with.
(b) Before or after a deposit, the Issuer may make arrangements satisfactory to the Trustee for the redemption of such Notes at a future date in accordance with Article III.
SECTION 12.03 Application of Trust Money. The Trustee shall hold in trust money (including proceeds thereof) deposited with it pursuant to this Article XII. The Trustee shall apply the deposited money through each Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Notes so discharged or defeased.
SECTION 12.04 Repayment to Issuer. Each of the Trustee and each Paying Agent shall promptly turn over to the Issuer upon request any money held by it as provided in this Article XII that, in the written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent discharge or defeasance in accordance with this Article XII.
Subject to any applicable abandoned property law, the Trustee and each Paying Agent shall pay to the Issuer upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Noteholder Parties entitled to the money must look to the Issuer for payment as general creditors, and the Trustee and each Paying Agent shall have no further liability with respect to such monies.
SECTION 12 .05 Reinstatement. If the Trustee or any Paying Agent is unable to apply any money in accordance with this Article XII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers obligations under this Indenture and the Notes so discharged or defeased shall be revived and reinstated as though no deposit had occurred pursuant to this Article XII until such time as the Trustee or any Paying Agent is permitted to apply all such money in accordance with this Article XII; provided, however, that, if the Issuer has made any payment of principal of, or interest on, any such Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or any Paying Agent.
ARTICLE XIII.
AMENDMENTS AND WAIVERS
SECTION 13.01 Amendments and Waivers.
(a) No failure or delay of the Trustee, the Collateral Agent or any Noteholder Party in exercising any right or power hereunder or under any Note Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any
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abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Trustee, the Collateral Agent and the Noteholder Parties hereunder and under the other Note Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Indenture or any other Note Document or consent to any departure by Holdings, the Issuer or any other Note Party therefrom shall in any event be effective unless the same shall be permitted by clause (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, the Issuer or any other Note Party in any case shall entitle such person to any other or further notice or demand in similar or other circumstances.
(b) Neither the Indenture nor any other Note Document nor any provision hereof or thereof may be waived, amended or modified except (x) in the case of the Indenture, pursuant to a supplemental indenture entered into by Holdings, the Issuer and the Trustee (with the consent of the Required Noteholder Parties voting as a single class, and (y) in the case of any other Note Document, pursuant to an agreement or agreements in writing entered into by each Note Party thereto and the Trustee (with the consent of the Required Noteholder Parties voting as a single class); provided, however, that no such agreement shall:
(i) reduce the principal amount of, or extend the Maturity Date of, or decrease the rate of interest on, any Note, without the prior written consent of each Holder of a Note directly adversely affected thereby (which, notwithstanding the foregoing, such consent of such Holder of a Note directly adversely affected thereby shall be the only consent required hereunder to make such modification); provided, that any amendment to the financial definitions in this Indenture shall not constitute a reduction in the rate of interest for purposes of this clause (i),
(ii) [reserved],
(iii) extend any date on which payment of interest on any Note is due, without the prior written consent of each Holder of a Note directly adversely affected thereby (which, notwithstanding the foregoing, such consent of such Holder of a Note directly adversely affected thereby shall be the only consent required hereunder to make such modification),
(iv) amend the provisions of Section 10.02 with respect to the pro rata application or sharing of payments required thereby in a manner that by its terms modifies the application or sharing of such payments required thereby to be on a less than pro rata basis, without the prior written consent of each Noteholder Party adversely affected thereby (which, notwithstanding the foregoing, such consent of such Noteholder Party directly adversely affected thereby shall be the only consent required hereunder to make such modification),
(v) amend or modify the provisions of this Section 13.01 or the definition of the terms Required Noteholder Parties, or any other provision hereof specifying the number or percentage of Noteholder Parties required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder,
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without the prior written consent of each Noteholder Party adversely affected thereby, in each case except, for the avoidance of doubt, as otherwise provided in Section 13.01(d) and (e) (it being understood that, with the consent of the Required Noteholder Parties, additional issuances of Additional Notes pursuant to this Indenture may be included in the determination of the Required Noteholder Parties on substantially the same basis as the Initial Notes are included on the Closing Date);
(vi) release all or substantially all of the Collateral or all or substantially all of the Subsidiary Guarantors from their respective Guarantees under the Subsidiary Guarantee Agreement, unless, in the case of a Subsidiary Guarantor, all or substantially all the Equity Interests of such Subsidiary Guarantor is sold or otherwise disposed of in a transaction permitted by this Indenture, without the prior written consent of each Noteholder Party; or
(vii) amend (A) the definition of Priority Indebtedness Cap without the consent of the Required Noteholder Parties or (B) the order of payments required by, or the scope of the Obligations receiving the benefit of or the scope of the proceeds or other amounts subject to the Priority Waterfall in a manner that by its terms adversely affects Notes and Obligations that have priority under the Priority Waterfall without the consent of each Noteholder Party holding such adversely affected Notes and Obligations (except, for the avoidance of doubt, as otherwise permitted by Section 13.01(d) and (e)) (it being understood that, with the consent of the Required Noteholder Parties, additional issuances of Additional Notes pursuant to this Indenture may be included in the Priority Waterfall on substantially the same basis as the Initial Notes are included on the Closing Date);
provided, further, that no such agreement shall amend, modify or otherwise affect the rights, duties, benefits, privileges, protections, indemnities or immunities of the Trustee or the Collateral Agent without the prior written consent of the Trustee or the Collateral Agent acting as such at the effective date of such agreement, as applicable. Each Noteholder Party shall be bound by any waiver, amendment or modification authorized by this Section 13.01.
(c) Without the consent of any Noteholder Party, the Issuer, the Trustee and the Collateral Agent may (or shall, to the extent required by any Note Document) enter into any amendment, modification or waiver of any Note Document, or enter into any new agreement or instrument, (i) to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, to include holders of Other First Liens in the benefit of the Security Documents in connection with the incurrence of any Other First Lien Debt, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law or this Indenture, (ii) to add more restrictive terms in respect of the Notes as contemplated by clause (e) of each of the definitions of Permitted Exchange Notes, Permitted Redemption Indebtedness and Permitted Refinancing Indebtedness or (iii) to otherwise enhance the rights or benefits of any Noteholder Party under any Note Document.
(d) Notwithstanding the foregoing, this Indenture may be amended (or amended and restated) with the written consent of the Required Noteholder Parties, the Trustee,
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Holdings and the Issuer (a) to permit additional issuances of Additional Notes from time to time (including, for the avoidance of doubt, issuances of Additional Notes that may have priority under the Priority Waterfall to the extent otherwise permitted hereunder (which shall be subject to the Priority Indebtedness Cap)) and the accrued interest and fees and other obligations in respect thereof to share ratably in the benefits of this Indenture and the other Note Documents with the Notes and the accrued interest and fees and other obligations in respect thereof and (b) to include appropriately the holders of such extensions of credit in any determination of the requisite parties required hereunder, including Required Noteholder Parties.
(e) Notwithstanding the foregoing, technical and conforming modifications to the Note Documents may be made without the consent of the Trustee or any Noteholder Party (i) to the extent necessary (A) to integrate any Other First Lien Debt or (B) to cure any ambiguity, omission, defect or inconsistency or (ii) as required by the Depository or to facilitate the trading or transfers of the Notes with the Depository and/or in connection with the issuance of any Additional Notes.
(f) With respect to the incurrence of any secured or unsecured Indebtedness (including any intercreditor agreement relating thereto), the Issuer may elect (in its discretion, but shall not be obligated) to deliver to the Trustee an Officers Certificate at least three Business Days prior to the incurrence thereof (or such shorter time as the Trustee may agree), together with either drafts of the material documentation relating to such Indebtedness or a description of such Indebtedness (including a description of the Liens intended to secure the same or the subordination provisions thereof, as applicable) in reasonably sufficient detail to be able to make the determinations referred to in this paragraph, which certificate shall either, at the Issuers election, state that the Issuer has determined in good faith that such Indebtedness satisfies the requirements of the applicable provisions of Section 8.01 and 8.02 (taking into account any other applicable provisions of this Section 13.01), in which case such certificate shall be conclusive evidence thereof.
(g) Notwithstanding anything to the contrary in this Indenture, this Indenture may be amended as provided in Section 2.17 without the consent of any Noteholder.
(h) Notwithstanding anything to the contrary in this Indenture, without the consent of the Trustee or any Noteholder Party, this Indenture and any other Note Documents may be amended (i) on any Additional Notes Issue Date, to make changes of a technical or conforming nature to provide for the issuance of Additional Notes, which shall have terms substantially identical in all material respects to the Initial Notes, and which shall be treated, together with any outstanding Initial Notes, as a single issue of securities, (ii) to provide for uncertificated Notes in addition to or in place of certificated Notes; provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code, or (iii) to make other changes of a technical or conforming nature in order to implement any requirement of this Indenture.
After an amendment under this Section 13.01 becomes effective, the Issuer shall mail, or otherwise deliver in accordance with the procedures of the Depository, to the holders a notice briefly describing such amendment. The failure to give such notice to all holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 13.01.
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SECTION 13.02 Revocation and Effect of Consents and Waivers.
(a) A consent to an amendment or a waiver by a Noteholder Party shall bind the Noteholder Party and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Noteholder Partys Note, even if notation of the consent or waiver is not made on the Note. However, any such Noteholder Party or subsequent Holder may revoke the consent or waiver as to such Noteholder Partys Note or portion of the Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers Certificate from the Issuer certifying that the requisite amount of Noteholder Parties have consented. After an amendment or waiver becomes effective, it shall bind every Noteholder Party. An amendment or waiver becomes effective upon the (i) receipt by the Issuer or the Trustee of consents by the Required Noteholder Parties, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any indenture supplemental hereto containing such amendment or waiver and (iii) execution of such amendment or waiver (or supplemental indenture) by the Issuer, the Subsidiary Guarantors and the Trustee.
(b) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.
SECTION 13.03 Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Issuer or the Trustee so determine, the Issuer in exchange for the Note shall issue and, upon written order of the Issuer signed by a Responsible Officer, the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment, supplement or waiver.
SECTION 13.04 Trustee to Sign Amendments. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article XIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment, the Trustee shall be entitled to receive indemnity, security and/or prefunding satisfactory to the Trustee and shall be provided with, and (subject to Section 11.01) shall be fully protected in relying upon, (i) an Officers Certificate, (ii) an Opinion of Counsel stating that such amendment, supplement or waiver is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Subsidiary Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions
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hereof, (iii) a copy of the resolution of the Board of Directors, certified by the Secretary or Assistant Secretary of the Issuer, authorizing the execution of such amendment, supplement or waiver and (iv) if such amendment, supplement or waiver is executed pursuant to Section 13.01, evidence satisfactory to the Trustee of the consent of Noteholder Parties required to consent thereto.
SECTION 13.05 Calculation of Principal Amount. Determinations as to whether the requisite Noteholder Parties have concurred in any direction, waiver or consent shall be made in accordance with this Article XIII and Section 2.13.
ARTICLE XIV.
RANKING OF NOTE LIENS
SECTION 14.01 Relative Rights. The First Lien/First Lien Intercreditor Agreement governs the relative rights and remedies, as lienholders, among holders of Liens securing Note Obligations. Nothing in this Indenture or the First Lien/First Lien Intercreditor Agreement will:
(a) impair, as between the Issuer and Noteholder Parties, the obligation of the Issuer which is absolute and unconditional, to pay principal of, premium and interest on Notes in accordance with their terms or to perform any other obligation of the Issuer or any other obligor under this Indenture, the Notes and the Security Documents;
(b) restrict the right of any holder to sue for payments that are then due and owing, in a manner not inconsistent with the provisions of the First Lien/First Lien Intercreditor Agreement;
(c) prevent the Trustee, the Collateral Agent or any holder from exercising against the Issuer or any other obligor any of its other available remedies upon a Default or Event of Default (other than its rights as a secured party, which are subject to the First Lien/First Lien Intercreditor Agreement); or
(d) restrict the right of the Trustee, the Collateral Agent or any holder:
(1) to file and prosecute a petition seeking an order for relief in an involuntary bankruptcy case as to any obligor or otherwise to commence, or seek relief commencing, any insolvency or liquidation proceeding involuntarily against any obligor;
(2) to make, support or oppose any request for an order for dismissal, abstention or conversion in any insolvency or liquidation proceeding;
(3) to make, support or oppose, in any insolvency or liquidation proceeding, any request for an order extending or terminating any period during which the debtor (or any other person) has the exclusive right to propose a plan of reorganization or other dispositive restructuring or liquidation plan therein;
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(4) to seek the creation of, or appointment to, any official committee representing creditors (or certain of the creditors) in any insolvency or liquidation proceedings and, if appointed, to serve and act as a member of such committee without being in any respect restricted or bound by, or liable for, any of the obligations under this Article XIV;
(5) to seek or object to the appointment of any professional person to serve in any capacity in any insolvency or liquidation proceeding or to support or object to any request for compensation made by any professional person or others therein;
(6) to make, support or oppose any request for order appointing a trustee or examiner in any insolvency or liquidation proceedings; or
(7) otherwise to make, support or oppose any request for relief in any insolvency or liquidation proceeding that it is permitted by law to make, support or oppose if it were a holder of unsecured claims, or as to any matter relating to (x) any plan of reorganization or other restructuring or liquidation plan or (y) the administration of the estate or the disposition of the case or proceeding (in each case except as set forth in the First Lien/First Lien Intercreditor Agreement).
SECTION 14.02 Trustee Not Fiduciary for Noteholders or Other First Lien Holders. The Trustee shall not be deemed to owe any fiduciary duty to the Noteholders or the Other First Lien Holders and shall not be liable to any such Noteholders or the Other First Lien Holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Notes or to the Issuer or to any other person cash, property or securities to which any Noteholder Parties shall be entitled by virtue of this Article or otherwise. With respect to the Noteholder Parties, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to the Noteholder Parties shall be read into this Indenture against the Trustee.
ARTICLE XV.
COLLATERAL
SECTION 15.01 Appointment.
(a) Each Noteholder Party (in its capacities as a Noteholder Party) hereby irrevocably designates and appoints the Trustee as the agent of such Noteholder Party under this Indenture and the other Note Documents, and the Collateral Agent as the agent for such Noteholder Party and the other Secured Parties under the Security Documents, and each such Noteholder Party irrevocably authorizes the Trustee and the Collateral Agent, in such capacities, to take such action on its behalf under the provisions of this Indenture and the other Note Documents and to exercise such powers and perform such duties as are expressly delegated to the Trustee and the Collateral Agent by the terms of this Indenture and the other Note Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States of America,
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each of the Noteholder Parties hereby grants to the Trustee and Collateral Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Noteholder Partys behalf. Notwithstanding any provision to the contrary elsewhere in this Indenture, the Agents shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Noteholder Party, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Indenture or any other Note Document or otherwise exist against the Agents.
(b) In furtherance of the foregoing, each Noteholder Party (in its capacities as a Noteholder Party) hereby appoints and authorizes the Collateral Agent to act as the agent of such Noteholder Party for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Note Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any Subagents appointed by the Collateral Agent pursuant to Section 15.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Collateral Agent) shall be entitled to the benefits of this Article XV (including, without limitation, Section 15.07) and Article XI (including, without limitation, Section 11.07) as though the Collateral Agent (and any such Subagents) were a Trustee under the Note Documents, as if set forth in full herein with respect thereto.
SECTION 15.02 Delegation of Duties. The Trustee and the Collateral Agent may execute any of their respective duties under this Indenture and the other Note Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with due care. Each Agent may also from time to time, when it deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a Subagent) with respect to all or any part of the Collateral; provided, that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Trustee or the Collateral Agent. Should any instrument in writing from the Issuer or any other Note Party be required by any Subagent so appointed by an Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Issuer shall, or shall cause such Note Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by such Agent. If any Subagent, or successor thereto, shall become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Trustee or the Collateral Agent until the appointment of a new Subagent. No Agent shall be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects with due care.
SECTION 15.03 Exculpatory Provisions. None of the Agents, or their respective Affiliates or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Indenture or any other Note Document (except to the
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extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such persons own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Noteholder Parties for any recitals, statements, representations or warranties made by any Note Party or any officer thereof contained in this Indenture or any other Note Document or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Indenture or any other Note Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Indenture or any other Note Document or for any failure of any Note Party a party thereto to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Noteholder Party to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Indenture or any other Note Document, or to inspect the properties, books or records of any Note Party. No Agent shall have any duties or obligations except those expressly set forth herein and in the other Note Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (b) no Agent shall, except as expressly set forth herein and in the other Note Documents, have any duty to disclose, and shall be liable for the failure to disclose, any information relating to the Issuer or any of its Affiliates that is communicated to or obtained by such Agent or any of its Affiliates in any capacity. The Agents shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice describing such Default or Event of Default is given to the Trustee by the Issuer, a Noteholder Party. No Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Indenture or any other Note Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Indenture, any other Note Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents or (v) the value or the sufficiency of any Collateral.
SECTION 15.04 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. Each Agent may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each Agent may deem and treat the Noteholder Party specified in the Register with respect to any amount owing hereunder as the owner thereof for all purposes and each Agent shall not be affected by any notice or knowledge to the contrary. Each Agent shall be fully justified in failing or refusing to take any action under this Indenture or any other Note Document unless it shall first receive such advice or concurrence of the Required Noteholder Parties (or, if so specified by this Indenture, all or other Noteholder Parties) as it deems appropriate or it shall first be indemnified to its satisfaction by the Noteholder Parties against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Indenture and the other Note Documents in accordance with a request of the
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Required Noteholder Parties (or, if so specified by this Indenture, all or other Noteholder Parties), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Noteholder Parties.
SECTION 15.05 Notice of Default. Neither Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has received written notice from a Noteholder Party, Holdings or the Issuer referring to this Indenture, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that the Trustee receives such a notice, the Trustee shall give notice thereof to the Noteholder Party. The Trustee shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Noteholder Parties (or, if so specified by this Indenture, all or other Noteholder Parties); provided, that unless and until the Trustee shall have received such directions, the Trustee may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Noteholder Parties.
SECTION 15.06 Non-Reliance on Agents and other Noteholder Parties.Each Noteholder Party expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Note Party or any affiliate of a Note Party, shall be deemed to constitute any representation or warranty by any Agent to any Noteholder Party. Each Noteholder Party represents to the Agents that it has, independently and without reliance upon any Agent or any other Noteholder Party, and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into the business, operations, property, financial and other condition and creditworthiness of, the Note Parties and their affiliates and made its own decision to purchase or hold the Notes issued hereunder and enter into this Indenture. Each Noteholder Party also represents that it will, independently and without reliance upon any Agent or any other Noteholder Party, 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 Indenture and the other Note Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Note Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Noteholder Parties by the Trustee hereunder, the Trustee shall not have any duty or responsibility to provide any Noteholder Party with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Note Party or any affiliate of a Note Party that may come into the possession of the Trustee or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 15.07 Indemnification. The Noteholder Parties agree to indemnify each Agent, in its capacity as such (to the extent not reimbursed by Holdings or the Issuer and without limiting the obligation of Holdings or the Issuer to do so), in the amount of its pro rata share (based on its aggregate outstanding Notes hereunder from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment
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of the Notes) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Indenture, any of the other Note Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided, that no Noteholder Party shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agents gross negligence or willful misconduct. The failure of any Noteholder Party to reimburse any Agent promptly upon demand for its ratable share of any amount required to be paid by the Noteholder Parties to such Agent as provided herein shall not relieve any other Noteholder Party of its obligation hereunder to reimburse such Agent for its ratable share of such amount, but no Noteholder Party shall be responsible for the failure of any other Noteholder Party to reimburse such Agent for such other Noteholder Partys ratable share of such amount. The agreements in this Section shall survive the payment of the Notes and all other amounts payable hereunder.
SECTION 15.08 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Note Party as though such Agent were not an Agent. With respect to its Notes purchased or held by it, each Agent shall have the same rights and powers under this Indenture and the other Note Documents as any Holder and may exercise the same as though it were not an Agent, and the terms Holder and Holders, as applicable, shall include each Agent in its individual capacity.
SECTION 15.09 Security Documents. The Noteholder Parties and the other Secured Parties authorize the Collateral Agent and the Trustee to release any Collateral or Guarantors in accordance with Section 15.12 or if approved, authorized or ratified in accordance with Section 13.01.
The Noteholder Parties and the other Secured Parties hereby irrevocably authorize and instruct the Trustee and the Collateral Agent to, without any further consent of any Noteholder Party or any other Secured Party, enter into (or acknowledge and consent to) or amend, renew, extend, supplement, restate, replace, waive or otherwise modify the First Lien/First Lien Intercreditor Agreement, any Permitted Junior Intercreditor Agreement, any other Permitted Pari Passu Intercreditor Agreement or any other intercreditor agreement with the collateral agent or other representatives of the holders of Indebtedness that is to be secured by a Lien on the Collateral that is not prohibited (including with respect to priority or in respect of the Priority Waterfall) under this Indenture and to subject the Liens on the Collateral securing the Obligations to the provisions thereof (any of the foregoing, an Intercreditor Agreement). The Noteholder Parties and the other Secured Parties irrevocably agree that (x) the Trustee and the Collateral Agent may rely exclusively on an Officers Certificate of the Issuer and Opinion of Counsel as to whether any such other Liens are not prohibited and (y) any Intercreditor Agreement entered into by the Trustee or the Collateral Agent shall be binding on the Secured Parties, and each Noteholder Party and the other Secured Parties hereby agrees that it will take no actions contrary to the provisions of, if entered into and if applicable, any Intercreditor Agreement. The foregoing provisions are intended as an inducement to any provider of any Indebtedness not prohibited by Section 8.01 hereof to extend credit to the Note Parties and such persons are intended third-party beneficiaries of such provisions. Furthermore, the Noteholder
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Parties and the other Secured Parties hereby authorize the Trustee and the Collateral Agent to release any Lien on any property granted to or held by the Trustee or the Collateral Agent under any Note Document (i) to the holder of any Lien on such property that is permitted by clauses (i) and (j) of Section 8.02 or Section 8.02(a) (if the Liens thereunder are of a type that is contemplated by any of the foregoing clauses) in each case to the extent the contract or agreement pursuant to which such Lien is granted prohibits any other Liens on such property or (ii) that is or becomes Excluded Property; and the Trustee and the Collateral Agent shall do so upon request of the Issuer; provided, that prior to any such request, the Issuer shall have in each case delivered to the Trustee and the Collateral Agent an Officers Certificate of the Issuer certifying (x) that such Lien is permitted under this Indenture, (y) in the case of a request pursuant to clause (i) of this sentence, that the contract or agreement pursuant to which such Lien is granted prohibits any other Lien on such property and (z) in the case of a request pursuant to clause (ii) of this sentence, that (A) such property is or has become Excluded Property and (B) if such property has become Excluded Property as a result of a contractual restriction, such restriction does not violate Section 8.09(c) and an Opinion of Counsel.
SECTION 15.10 [Reserved].
SECTION 15.11 Authorization of Actions to Be Taken. (a) Each Noteholder Party, by its acceptance of Notes, consents and agrees to the terms of each Security Document and the First Lien/First Lien Intercreditor Agreement as originally in effect and as amended, supplemented or replaced from time to time in accordance with its terms or the terms of this Indenture, authorizes and directs the Trustee and/or the Collateral Agent to enter into the First Lien/First Lien Intercreditor Agreement and the Security Documents to which it is a party, authorizes and empowers the Trustee to direct the Collateral Agent to enter into, and the Collateral Agent to execute and deliver, the Security Documents and Intercreditor Agreement and authorizes and empowers the Trustee and the Collateral Agent to bind the holders of Notes and other holders of Obligations as set forth in the Security Documents to which it is a party and the First Lien/First Lien Intercreditor Agreement and to perform its obligations and exercise its rights and powers thereunder.
(b) Subject to the provisions of the First Lien/First Lien Intercreditor Agreement and the Security Documents, the Trustee and the Collateral Agent are authorized and empowered to receive for the benefit of the holders of Notes any funds collected or distributed under the Security Documents to which the Collateral Agent or Trustee is a party and to make further distributions of such funds to the holders of Notes according to the provisions of this Indenture.
(c) Subject to the provisions of Article X, Section 11.01 and Section 11.02 hereof, the First Lien/First Lien Intercreditor Agreement and the Security Documents, upon the occurrence and continuance of an Event of Default, the Trustee may, in its sole discretion and without the consent of the Noteholder Parties, direct, on behalf of the Noteholder Parties, the Collateral Agent to take all actions it deems necessary or appropriate in order to:
(1) foreclose upon or otherwise enforce any or all of the Liens securing the Note Obligations;
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(2) enforce any of the terms of the Security Documents to which the Collateral Agent or Trustee is a party; or
(3) collect and receive payment of any and all Obligations.
Subject to the First Lien/First Lien Intercreditor Agreement, the Trustee is authorized and empowered to institute and maintain, or direct the Collateral Agent to institute and maintain, such suits and proceedings as it may deem expedient to protect or enforce the Liens securing Note Obligations or the Security Documents to which the Collateral Agent or Trustee is a party or to prevent any impairment of Collateral by any acts that may be unlawful or in violation of the Security Documents to which the Collateral Agent or Trustee is a party or this Indenture, and such suits and proceedings as the Trustee or the Collateral Agent may deem expedient to preserve or protect its interests and the interests of the Noteholder Parties in the Collateral, including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of Noteholder Parties, the Trustee or the Collateral Agent.
SECTION 15.12 Release of Liens.
(a) The Noteholder Parties and the other Secured Parties hereby irrevocably agree that the Liens granted to the Collateral Agent by the Note Parties on any Collateral (including any Controlled Accounts) shall be automatically released: (i) in full upon the occurrence of the Termination Date as set forth in Section 15.12(d) below; (ii) upon the Disposition of such Collateral by any Note Party to a person that is not (and is not required to become) a Note Party in a transaction not prohibited by this Indenture (and the Collateral Agent and the Trustee may rely conclusively on an Officers Certificate to that effect provided to it by any Note Party upon its reasonable request without further inquiry), (iii) to the extent that such Collateral comprises property leased to a Note Party, upon termination or expiration of such lease (and the Collateral Agent may rely conclusively on an Officers Certificate to that effect provided to it by any Note Party upon its reasonable request without further inquiry), (iv) if the release of such Lien is approved, authorized or ratified in writing by the Required Noteholder Parties (or such other percentage of the Noteholder Parties whose consent may be required in accordance with Section 13.01), (v) to the extent that the property constituting such Collateral is owned by any Guarantor, upon the release of such Guarantor from its obligations under the Guarantee in accordance with the Holdings Guarantee and Pledge Agreement, the Subsidiary Guarantee Agreement or clause (b) below (and the Collateral Agent and the Trustee may rely conclusively on an Officers Certificate to that effect provided to it by any Note Party upon its reasonable request without further inquiry), (vi) as provided in Section 14.17 (and the Collateral Agent and the Trustee may rely conclusively on an Officers Certificate to that effect provided to it by any Note Party upon its reasonable request without further inquiry), and (vii) as required by the Trustee to effect any Disposition of Collateral in connection with any exercise of remedies of the Collateral Agent or the Trustee pursuant to the Security Documents. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those being released) upon (or obligations (other than those being released) of the Note Parties in respect of) all interests retained by the Note Parties, including the proceeds of any Disposition, all of which shall continue to constitute part of the Collateral except to the extent otherwise released in accordance with the provisions of the Note Documents.
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(b) In addition, the Noteholder Parties and the other Secured Parties hereby irrevocably agree that the Guarantors shall be automatically released from the Guarantees upon consummation of any transaction not prohibited hereunder resulting in such Subsidiary ceasing to exist or constitute a Subsidiary Guarantor or otherwise becoming an Excluded Subsidiary (and the Trustee may rely conclusively on an Officers Certificate to that effect provided to it by any Note Party upon its reasonable request without further inquiry); provided, that, no Subsidiary that is (or is required to be) a Subsidiary Guarantor on the Closing Date shall become an Excluded Subsidiary by virtue of a transfer or issuance of its Equity Interests after then Closing Date rendering it a non-Wholly Owned Subsidiary.
(c) The Noteholder Parties and the other Secured Parties hereby authorize the Trustee and the Collateral Agent, as applicable, to execute and deliver any instruments, documents, and agreements necessary or desirable to evidence and confirm the release of any Guarantor or Collateral pursuant to the foregoing provisions of this Section 15.12 and to return to Holdings or any Issuer all title documents (including share certificates (if any)) held by it in respect of any Collateral, all without the further consent or joinder of any Noteholder Party or any other Secured Party. Any representation, warranty or covenant contained in any Note Document relating to any such Collateral or Guarantor shall no longer be deemed to be made. In connection with any release hereunder, the Trustee and the Collateral Agent shall promptly (and the Secured Parties hereby authorize the Trustee and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Issuer and at the Issuers expense in connection with the release of any Liens or Guarantees created by any Note Document in respect of such Subsidiary, property or asset; provided, that the Trustee shall have received an Officers Certificate of the Issuer. Notwithstanding anything to the contrary contained herein or any other Note Document, on the Termination Date, upon request of the Issuer, the Trustee and/or the Collateral Agent, as applicable, shall (without notice to, or vote or consent of, any Secured Party) take such actions as shall be required to release its security interest in all Collateral (including returning to Holdings or the Issuer all share certificates (if any) held by it in respect of any Collateral and terminating any control agreements in respect of Controlled Accounts), and to release all obligations under any Note Document, whether or not on the date of such release there may be any contingent indemnification obligations or expense reimburse claims not then due; provided, that the Trustee shall have received an Officers Certificate of the Issuer; provided, further that upon the request of the Trustee, Issuer shall provide to Trustee in such form satisfactory to the Trustee, the release and discharge of the Trustee, and each of its officers, directors, attorneys, agents and employees, and each of their respective heirs, representatives, successors and assigns (each a Releasing Person) from any and all claims, demands, debts, accounts, contracts, torts, liabilities, actions and causes of actions, whether in law or in equity, that any Releasing Person or the successors or assigns of any Releasing Person hereafter has or may have against any Releasing Person.
(d) Any such release of obligations shall be deemed subject to the provision that such obligations shall be reinstated if after such release any portion of any payment in respect of the obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Issuer
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or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Issuer or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made. The Issuer agrees to pay all out-of-pocket expenses incurred by the Trustee or the Collateral Agent (and their respective representatives) in connection with taking such actions to release security interest in all Collateral and all obligations under the Note Documents as contemplated by this Section 15.12(d).
SECTION 15.13 Powers Exercisable by Receiver or Trustee. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XV upon the Issuer or the Subsidiary Guarantors with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or the Subsidiary Guarantors or of any officer or officers thereof required by the provisions of this Article XV; and if the Trustee, the Collateral Agent or a nominee of the Trustee or Collateral Agent shall be in the possession of the Collateral under any provision of this Indenture, then such powers may be exercised by the Trustee, Collateral Agent or a nominee of the Trustee or Collateral Agent.
SECTION 15.14 Release Upon Termination of the Issuers Obligations. In the event (i) that the Issuer delivers to the Trustee an Officers Certificate and Opinion of Counsel certifying that all the obligations under this Indenture, the Notes and the Security Documents have been satisfied and discharged by the payment in full of the Issuers obligations under the Notes, this Indenture and the Security Documents, and all such obligations have been so satisfied, or (ii) a discharge, legal defeasance or covenant defeasance of this Indenture occurs under Article XII, the Trustee shall deliver to the Issuer and the Collateral Agent a notice stating that the Trustee, on behalf of the Noteholder Parties, disclaims and gives up any and all rights it has in or to the Collateral, and any rights it has under the Security Documents, and upon receipt by the Collateral Agent of such notice, the Collateral Agent shall be deemed not to hold a Lien in the Collateral on behalf of the Trustee and shall do or cause to be done all acts reasonably necessary at the request and expense of the Issuer to release such Lien as soon as is reasonably practicable.
SECTION 15.15 Designations. Except as provided in the next sentence, for purposes of the provisions hereof and the First Lien/First Lien Intercreditor Agreement requiring the Issuer to designate Indebtedness for the purposes of the terms Other First Lien Debt or any other such designations hereunder or under the First Lien/First Lien Intercreditor Agreement, any such designation shall be sufficient if the relevant designation provides in writing in the form of an Officers Certificate, that such Other First Lien Debt is permitted under this Indenture and is signed on behalf of the Issuer by a Responsible Officer and delivered to the Trustee and the Collateral Agent. For all purposes hereof and the First Lien/First Lien Intercreditor Agreement, the Issuer hereby designates the obligations pursuant to the First-Priority Notes Indenture as in effect on the Closing Date as Other First Lien Debt.
SECTION 15.16 Right to Realize on Collateral and Enforce Guarantees. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Note Party, (i) the Trustee (irrespective of whether the principal of any Obligation shall then be due and payable as herein
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expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer) shall be entitled and empowered, by intervention in such proceeding or otherwise (A) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Noteholder Parties and the Trustee and any Subagents allowed in such judicial proceeding, and (B) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (ii) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Noteholder Party to make such payments to the Trustee and, if the Trustee shall consent to the making of such payments directly to the Noteholder Parties, to pay to the Trustee any amount due for the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, and any other amounts due the Trustee under the Note Documents. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder Party any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Noteholder Party or to authorize the Trustee to vote in respect of the claim of any Noteholder Party in any such proceeding.
Anything contained in any of the Note Documents to the contrary notwithstanding, the Issuer, the Trustee, the Collateral Agent and each Secured Party hereby agree that (a) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guarantee, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by the Trustee, on behalf of the Secured Parties in accordance with the terms hereof and all powers, rights and remedies under the Security Documents may be exercised solely by the Collateral Agent, and (b) in the event of a foreclosure by the Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Collateral Agent or any Noteholder Party may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Collateral Agent, as agent for and representative of the Secured Parties (but not any Noteholder Party or Noteholder Parties in its or their respective individual capacities unless the Required Noteholder Parties shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Collateral Agent at such sale or other Disposition.
ARTICLE XVI.
MISCELLANEOUS
SECTION 16.01 Notices; Communications. (a) Except as provided in Section 16.01(b) below, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier or other electronic means as follows:
(i) if to any Note Party or the Trustee, the Collateral Agent or the Required Noteholder Parties on the Closing Date, to the address, telecopier number or electronic mail address specified for such person on Schedule 16.01; and
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(ii) if to any Holder of the Notes, in accordance with the procedures of the Depository.
(b) Notices and other communications to the Noteholder Parties hereunder may be delivered or furnished by electronic communication (including e-mail and the Platform). The Issuer may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
(c) Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 16.01(b) above shall be effective as provided in such Section 16.01(b).
(d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.
(e) Documents required to be delivered pursuant to Section 7.04 may be delivered electronically (including through the Platform), except for documents required to be delivered to the Trustee, and if so delivered, shall be deemed to have been delivered on the date (i) on which the Issuer files such documents with the SEC or posts such documents, or provides a link thereto on the Issuers website on the Internet at the website address listed on Schedule 16.01, or (ii) on which such documents are posted on the Issuers behalf on an Internet or intranet website, if any, to which each Noteholder Party has access.
The Trustee may, in its sole discretion, agree to accept and act upon instructions or directions pursuant to this Indenture sent by e-mail, facsimile transmission or other similar electronic methods. If the party elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustees understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustees reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The party providing electronic instructions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.
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Notwithstanding anything to the contrary contained herein, as long as the Notes are in the form of a Global Note, notice to the holders may be made electronically in accordance with procedures of the Depository.
SECTION 16.02 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee:
(a) an Officers Certificate in form satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
SECTION 16.03 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(a) a statement that the individual making such certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers Certificate or certificates of public officials.
SECTION 16.04 When Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, the Subsidiary Guarantors or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or the Subsidiary Guarantors shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.
SECTION 16.05 Survival of Indenture.
All covenants, agreements, representations and warranties made by the Note Parties herein, in the other Note Documents and in the certificates or other instruments prepared
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or delivered in connection with or pursuant to this Indenture or any other Note Document shall be considered to have been relied upon by the Noteholder Parties and shall survive the purchasing of the Notes and the execution and delivery of the Note Documents, regardless of any investigation made by such persons or on their behalf, and shall continue in full force and effect until the Termination Date.
SECTION 16.06 Binding Effect. This Indenture shall become effective when it shall have been executed by Holdings, the Issuer and the Trustee and when the Trustee shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of Holdings, the Issuer, the Trustee and each Noteholder Party and their respective permitted successors and assigns.
SECTION 16.07 Successors and Assigns; Assignments and Transfers.
(a) The provisions of this Indenture shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) except as permitted by Section 8.05, the Issuer may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Noteholder Party (and any attempted assignment or transfer by the Issuer without such consent shall be null and void) and (ii) no Noteholder Party may transfer its Notes except in accordance with Section 2.07 and this Section 16.07. Nothing in this Indenture, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Trustee, the Collateral Agent and the Noteholder Parties) any legal or equitable right, remedy or claim under or by reason of this Indenture or the other Note Documents.
(b) (i) Subject to the conditions set forth in subclause (ii) below, any Noteholder Party may transfer all or a portion of its Notes or any beneficial interest therein, in each case, with the prior written consent of the Issuer (such consent, in the case of any transfer of a Note, not to be unreasonably withheld or delayed), which consent will be deemed to have been given (x) with respect to assignments to any of the persons identified by the Noteholder Parties to the Issuer on or prior to the date of the Note Purchase Agreement and (y) with respect to any Notes if the Issuer has not responded within three (3) Business Days after the delivery of any notice of transfer; provided, that no consent of the Issuer shall be required (i) for a transfer of a Noteholder Partys Notes to such Noteholder Partys Affiliates or Approved Funds or (ii) to any other person who is not an Ineligible Institution so long as an Event of Default has occurred and is continuing.
(i) Transfers shall be subject to the following additional conditions:
(A) except in the case of a transfer of the entire remaining amount of the transferring Noteholder Partys Notes, the amount of the Notes of the transferring Noteholder Party subject to each such transfer (determined as of the date the notice of transfer with respect to such transfer is delivered to the Trustee) shall not be less than the Notes Minimum or an integral multiple of the Notes Multiple in excess thereof, unless the Issuer otherwise consents; provided, that
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such amounts shall be aggregated in respect of each Noteholder Party and its Affiliates (with simultaneous transfers to or by two or more Related Funds shall be treated as one transfer), if any, and provided, further that the Trustee shall have no responsibility or obligation to monitor or determine whether any transfer by a Noteholder Party is in an amount equal to the Notes Minimum or an integral multiple of the Notes Multiple in excess thereof; and
(B) the parties to each transfer shall comply with the requirements set forth in Section 2.07.
For the purposes of this Section 16.07, Approved Fund means, as to any Noteholder Party, any person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) such Noteholder Party, (b) an Affiliate of such Noteholder Party or (c) an entity or an Affiliate of an entity that administers or manages such Noteholder Party. Notwithstanding anything to the contrary herein, no Noteholder Party shall be permitted to assign or transfer any Notes or any portion of its rights and obligations under this Indenture to (A) any Ineligible Institution or (B) a natural person and, in each case, any attempted assignment or transfer shall be null and void. Notwithstanding the foregoing, each Note Party and the Noteholder Parties acknowledge and agree that the Trustee shall not have any responsibility or obligation to determine whether any Noteholder Party or potential Noteholder Party is an Ineligible Institution and the Trustee (in its capacity as such) shall have no liability with respect to any assignment or transfer made to an Ineligible Institution. Any assigning or transferring Noteholder Party shall, in connection with any potential assignment or transfer, provide to the Issuer a copy of its request (including the name of the prospective assignee or transferee) concurrently with its delivery of the same request to the Trustee irrespective of whether Issuer consent is required pursuant to subclause (i) above.
SECTION 16.08 No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Noteholder Parties in exercising any right, power or privilege under this Article XVI shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Noteholder Parties herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XVI at law, in equity, by statute or otherwise.
SECTION 16.09 Modification. No modification, amendment or waiver of any provision of this Article XVI, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle any Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances.
SECTION 16.10 [Reserved].
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SECTION 16.11 Rules by Trustee, Paying Agent and Registrar. The Trustee may make rules for action by or a meeting of the Noteholder Parties. The Registrar and a Paying Agent may make rules for their functions.
SECTION 16.12 Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue on any amount that would have been otherwise payable on such payment date if it were a Business Day for the intervening period. If a regular Record Date is not a Business Day, the Record Date shall not be affected. If performance of any covenant, duty or obligation is required on a date which is not a Business Day, performance shall not be required until the next succeeding Business Day.
SECTION 16.13 GOVERNING LAW. THIS INDENTURE AND THE OTHER NOTE DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS INDENTURE OR ANY OTHER NOTE DOCUMENT (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER NOTE DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF CONFLICTS OF LAW THAT COULD REQUIRE THE APPLICATION OF ANY OTHER LAW.
SECTION 16.14 Entire Agreement. This Indenture and the other Note Documents referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Indenture and the other Note Documents. Nothing in this Indenture or in the other Note Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Indenture or the other Note Documents.
SECTION 16.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INDENTURE OR ANY OF THE OTHER NOTE DOCUMENTS (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS INDENTURE AND THE OTHER NOTE DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.15.
SECTION 16.16 Severability. In the event any one or more of the provisions contained in this Indenture or in any other Note Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Indenture or in any other Note Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained
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herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 16.17 No Recourse Against Others. No director, officer, employee, manager, incorporator or holder of any Equity Interests in the Issuer or any direct or indirect parent companies, as such, shall have any liability for any obligations of the Issuer or any Subsidiary Guarantor under the Notes, the Subsidiary Guarantees or this Indenture, as applicable, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Noteholder Party, by its signature hereto or by accepting a Note, waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
SECTION 16.18 Successors. All agreements of the Issuer and the Subsidiary Guarantors in this Indenture and the Notes shall bind such persons successors. All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 16.19 Counterparts. This Indenture may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 16.06. Delivery of an executed counterpart to this Indenture by facsimile transmission (or other electronic transmission) shall be as effective as delivery of a manually signed original.
SECTION 16.20 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Indenture and are not to affect the construction of, or to be taken into consideration in interpreting, this Indenture.
SECTION 16.21 Jurisdiction; Consent to Service of Process. (a) The Issuer and each other Note Party irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Trustee, the Collateral Agent, any Noteholder Party, or any Affiliate of the foregoing in any way relating to this Indenture or any other Note Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Indenture or in any other Note Document shall affect any right that the Trustee or any Noteholder Party may otherwise have to bring any action or proceeding relating to this Indenture or any other Note Document against the Issuer or any other Note Party or its properties in the courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or
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hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Indenture or the other Note Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Indenture irrevocably consents to service of process in the manner provided for notices in Section 16.01. Nothing in this Indenture will affect the right of any party to this Indenture or any other Note Document to serve process in any other manner permitted by law.
SECTION 16.22 Confidentiality. Each of the Noteholder Parties (other than DTC or its nominee), by their acceptance of the Notes or a beneficial interest therein, and the Agents agree that it shall maintain in confidence any information relating to Holdings, any Parent Entity, the Issuer and any Subsidiary furnished to it by or on behalf of Holdings, any Parent Entity, the Issuer or any Subsidiary, but only to the extent such information is provided upon request pursuant to Section 7.04(h) or is only provided to the Private Side Contacts (and other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Noteholder Party or such Agent without violating this Section 16.22 or (c) was available to such Noteholder Party or such Agent from a third party having, to such persons knowledge, no obligations of confidentiality to Holdings, any Parent Entity, the Issuer or any other Note Party) and shall not reveal the same other than to its directors, partners, members, legal counsel, independent auditors, trustees, officers, employees and advisors with a need to know and any numbering, administration or settlement service providers or to any person that approves or administers the Notes on behalf of such Noteholder Party (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 16.22), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or self-regulatory authorities, including the National Association of Insurance Commissioners or the Financial Industry Regulatory Authority, Inc., (C) to its parent companies, Affiliates or auditors and to their respective directors, partners, members, legal counsel, independent auditors, trustees, officers, employees and advisors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 16.22), (D) in order to enforce its rights under any Note Document in a legal proceeding, (E) disclosures made upon the request or demand of any regulatory or quasi-regulatory authority purporting to have jurisdiction over such person or any of its Affiliates, (F) to any prospective assignee or transferee of any of its rights under this Indenture (so long as such person shall have agreed with the Issuer to keep the same confidential in accordance with this Section 16.22, including pursuant to a click through agreement on the Platform), (G) disclosures with the consent of the relevant Note Party and (H) to any direct or indirect contractual counterparty in Hedging Agreements or such contractual counterpartys professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees with the Issuer to be bound by the provisions of this Section 16.22, including pursuant to a click through agreement on the Platform); provided, that in the case of clauses (F) and (H), no information may be provided to any Ineligible Institution or person who is known to be acting for an Ineligible Institution, in each case, to the
153
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
extent that the list of Ineligible Institutions has been made available to the disclosing Noteholder Party. Notwithstanding anything to the contrary set forth herein, each party (and each of their respective employees, representatives or other agents) may disclose to any and all persons, without limitations of any kind, the tax treatment and tax structure of the transactions contemplated by this Indenture and all materials of any kind (including opinions and other tax analyses) that are provided to any such party relating to such tax treatment and tax structure. However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof (and the foregoing sentence shall apply) to the extent reasonably necessary to enable the parties hereto, their respective Affiliates, and all of their respective directors and employees to comply with applicable securities laws. For this purpose, tax structure means any facts relevant to the federal income tax treatment of the transactions contemplated by this Indenture but does not include information relating to the identity of any of the parties hereto or any of their respective Affiliates.
SECTION 16.23 Tax Treatment. For all U.S. federal and relevant state or local tax purposes, except as otherwise required by a tax authority or change in applicable law, the parties hereto shall not treat the Notes as contingent payment debt instruments, shall treat the accrual of any and all interest with respect to the Notes as not constituting contingent interest within the meaning of Sections 871(h) and 881(c) of the Code, and shall file all relevant Tax returns consistently with the foregoing.
SECTION 16.24 USA Patriot Act Notice. Each Noteholder Party that is subject to the USA PATRIOT Act and the Trustee (for itself and not on behalf of any Noteholder Party) hereby notifies the Issuer that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Note Party, which information includes the name and address of each Note Party and other information that will allow such Noteholder Party or the Trustee, as applicable, to identify each Note Party in accordance with the USA PATRIOT Act.
SECTION 16.25 Indenture Controls. If and to the extent that any provision of the Notes limits, qualifies or conflicts with a provision of this Indenture, such provision of this Indenture shall control.
SECTION 16.26 Intercreditor Agreement. The terms of this Indenture are subject to the terms of the First Lien/First Lien Intercreditor Agreement.
[Remainder of page intentionally left blank.]
154
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective authorized officers as of the date first written above.
THE FRESH MARKET, INC., as the Issuer | ||||
By: |
| |||
Name: | Jason Potter | |||
Title: | Chief Executive Officer | |||
POMEGRANATE HOLDINGS, INC., as Holdings | ||||
By: |
| |||
Name: | Jason Potter | |||
Title: | Chief Executive Officer | |||
THE FRESH MARKET GIFT COMPANY, LLC, as a Subsidlary Guarantor | ||||
By: |
| |||
Name: | Oded Shein | |||
Title: | Chief Financial Officer |
[Signature Page to Indenture]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
THE FRESH MARKET OF MASSACHUSETTS, INC, as a Subsidiary Guarantor | ||||
By: |
| |||
Name: Jason Potter | ||||
Title: President |
[Signature Page to Indenture]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity, but solely as the Trustee | ||||
By: |
| |||
Name: Sarah Vilhauer Title: Banking Officer |
[Signature Page to Indenture]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES AND ADDITIONAL NOTES
1. Definitions.
1.1 Definitions.
For the purposes of this Appendix A the following terms shall have the meanings indicated below:
Applicable Procedures means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
Definitive Note means a certificated Initial Note or Additional Note (bearing the Restricted Notes Legend if the transfer of such Note is restricted by applicable law) that does not include the Global Notes Legend.
Depository means The Depository Trust Company, its nominees and their respective successors.
Global Notes Legend means the legend set forth under that caption in Exhibit A to this Indenture.
IAI means an institutional accredited investor as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Notes Custodian means the custodian with respect to a Global Note (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee.
QIB means a qualified institutional buyer as defined in Rule 144A.
Regulation S means Regulation S under the Securities Act.
Regulation S Notes means all Initial Notes offered and sold outside the United States in reliance on Regulation S.
Restricted Notes Legend means the legend set forth in Section 2.2(f)(i) herein.
Restricted Period, with respect to any Notes, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Notes are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Issuer to the Trustee, and (b) the Closing Date, and with respect to any Additional Notes that are Transfer Restricted Notes, it means the comparable period of 40 consecutive days.
Rule 144A means Rule 144A under the Securities Act.
Appendix A-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Rule 144A Notes means all Initial Notes initially offered and sold to QIBs in reliance on Rule 144A.
Rule 501 means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Transfer Restricted Definitive Notes means Definitive Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
Transfer Restricted Global Notes means Global Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
Transfer Restricted Notes means the Transfer Restricted Definitive Notes and Transfer Restricted Global Notes.
Unrestricted Definitive Notes means Definitive Notes that are not required to bear, or are not subject to, the Restricted Notes Legend.
Unrestricted Global Notes means Global Notes that are not required to bear, or are not subject to, the Restricted Notes Legend.
1.2 Other Definitions.
Term: | Defined in Section: | |
Agent Members |
2.1(b) | |
Global Notes |
2.1(b) | |
Regulation S Global Notes |
2.1(b) | |
Regulation S Permanent Global Note |
2.1(b) | |
Regulation S Temporary Global Note |
2.1(b) | |
Rule 144A Global Notes |
2.1(b) |
2. The Notes.
2.1 Form and Dating; Global Notes.
(a) The Initial Notes issued on the date hereof will be (i) privately placed by the Issuer pursuant to an offering memorandum and (ii) sold, initially only to (1) QIBs in reliance on Rule 144A and (2) persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such Initial Notes may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs in accordance with Rule 501. One or more Rule 144A Notes may be issued with a separate CUSIP number for purposes of transfers of Notes to IAIs. Additional Notes offered after the date hereof may be offered and sold by the Issuer from time to time pursuant to one or more agreements in accordance with applicable law.
(b) Global Notes. (i) Except as provided in clause (d) of Section 2.2 below, Rule 144A Notes initially shall be represented by one or more Notes in definitive, fully registered, global form without interest coupons (collectively, the Rule 144A Global Notes).
Appendix A-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Regulation S Notes initially shall be represented by one or more Notes in fully registered, global form without interest coupons (collectively, the Regulation S Temporary Global Note and, together with the Regulation S Permanent Global Note (defined below), the Regulation S Global Notes), which shall be registered in the name of the Depository or the nominee of the Depository for the accounts of designated agents holding on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear system (Euroclear) or Clearstream Banking, Société Anonyme (Clearstream).
Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in a permanent Global Note (the Regulation S Permanent Global Note) pursuant to the applicable procedures of the Depository. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
The provisions of the Operating Procedures of the Euroclear System and Terms and Conditions Governing Use of Euroclear and the General Terms and Conditions of Clearstream Banking and Customer Handbook of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by participants through Euroclear or Clearstream. With respect to any Global Notes, in the event of a conflict between the Applicable Procedures and the terms of this Indenture relating to transfer, exchange or administration of Global Notes or any beneficial interest therein, the Applicable Procedures shall control.
The term Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. The Global Notes shall bear the Global Note Legend. The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, in each case for credit to an account of an Agent Member, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear the Restricted Notes Legend.
Members of, or direct or indirect participants in, the Depository (collectively, the Agent Members) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes. The Depository may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository, or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note.
(ii) Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Definitive Notes only in accordance with the applicable rules and procedures of the Depository and the provisions
Appendix A-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
of Section 2.2. In addition, a Global Note shall be exchangeable for Definitive Notes if (x) the Depository (1) notifies the Issuer that it is unwilling or unable to continue as depository for such Global Note and the Issuer thereupon fails to appoint a successor depository or (2) has ceased to be a clearing agency registered under the Exchange Act or (y) there shall have occurred and be continuing an Event of Default with respect to such Global Note and a request has been made for such exchange; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Issuer for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. In all cases, Definitive Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository in accordance with its customary procedures.
(iii) In connection with the transfer of a Global Note as an entirety to beneficial owners pursuant to subsection (i) of this Section 2.1(b), such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and, upon written order of the Issuer signed by an Officer, the Trustee shall authenticate and make available for delivery, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations.
(iv) Any Transfer Restricted Note delivered in exchange for an interest in a Global Note pursuant to Section 2.2 shall, except as otherwise provided in Section 2.2, bear the Restricted Notes Legend.
(v) Notwithstanding the foregoing, through the Restricted Period, a beneficial interest in a Regulation S Global Note may be held only through Euroclear or Clearstream unless delivery is made in accordance with the applicable provisions of Section 2.2.
(vi) The holder of any Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Notes.
2.2 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except as set forth in Section 2.1(b). Global Notes will not be exchanged by the Issuer for Definitive Notes except under the circumstances described in Section 2.1(b)(ii). Global Notes also may be exchanged or replaced, in whole or in part, as provided in Section 2.08 of this Indenture. Beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.2(b).
(b) Transfer and Exchange of Beneficial Interests in Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the
Appendix A-4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Depository, in accordance with the provisions of this Indenture and the applicable rules and procedures of the Depository. Beneficial interests in Transfer Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in Global Notes shall be transferred or exchanged only for beneficial interests in Global Notes. Transfers and exchanges of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Transfer Restricted Global Note may be transferred to persons who take delivery thereof in the form of a beneficial interest in the same Transfer Restricted Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in a Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person. A beneficial interest in an Unrestricted Global Note may be transferred to persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.2(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests in any Global Note that is not subject to Section 2.2(b)(i), the transferor of such beneficial interest must deliver to the Registrar (1) a written order from an Agent Member given to the Depository in accordance with the applicable rules and procedures of the Depository directing the Depository to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the applicable rules and procedures of the Depository containing information regarding the Agent Member account to be credited with such increase. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note pursuant to Section 2.2(g).
(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in a Transfer Restricted Global Note may be transferred to a person who takes delivery thereof in the form of a beneficial interest in another Transfer Restricted Global Note if the transfer complies with the requirements of Section 2.2(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in a Rule 144A Global Note, then the transferor must deliver a certificate in the form attached to the applicable Note; and
(B) if the transferee will take delivery in the form of a beneficial interest in a Regulation S Global Note, then the transferor must deliver a certificate in the form attached to the applicable Note.
Appendix A-5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(iv) Transfer and Exchange of Beneficial Interests in a Transfer Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in a Transfer Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.2(b)(ii) above and the Registrar receives the following:
(A) if the holder of such beneficial interest in a Transfer Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such beneficial interest in a Transfer Restricted Global Note proposes to transfer such beneficial interest to a person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note,
and, in each such case, if the Issuer or the Registrar so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer or exchange is effected pursuant to this subparagraph (iv) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of a written order of the Issuer in the form of an Officers Certificate in accordance with Section 2.01 of this Indenture, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred or exchanged pursuant to this subparagraph (iv).
(v) Transfer and Exchange of Beneficial Interests in an Unrestricted Global Note for Beneficial Interests in a Transfer Restricted Global Note. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to persons who take delivery thereof in the form of, a beneficial interest in a Transfer Restricted Global Note.
(c) Transfer and Exchange of Beneficial Interests in Global Notes for Definitive Notes. A beneficial interest in a Global Note may not be exchanged for a Definitive Note except under the circumstances described in Section 2.1(b)(ii) or as otherwise permitted pursuant to the Applicable Procedures. A beneficial interest in a Global Note may not be transferred to a person who takes delivery thereof in the form of a Definitive Note except under the circumstances described in Section 2.1(b)(ii). In any case, beneficial interests in Global Notes shall be transferred or exchanged only for Definitive Notes.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes. Transfers and exchanges of Definitive Notes for beneficial interests in the Global Notes also shall require compliance with either subparagraph (i), (ii) or (iii) below, as applicable:
Appendix A-6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(i) Transfer Restricted Definitive Notes to Beneficial Interests in Transfer Restricted Global Notes. If any holder of a Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for a beneficial interest in a Transfer Restricted Global Note or to transfer such Transfer Restricted Definitive Note to a person who takes delivery thereof in the form of a beneficial interest in a Transfer Restricted Global Note, then, upon receipt by the Registrar of the following documentation:
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Note for a beneficial interest in a Transfer Restricted Global Note, a certificate from such holder in the form attached to the applicable Note;
(B) if such Transfer Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(C) if such Transfer Restricted Definitive Note is being transferred to a non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(D) if such Transfer Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate from such holder in the form attached to the applicable Note;
(E) if such Transfer Restricted Definitive Note is being transferred to an IAI in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate from such holder in the form attached to the applicable Note, including the certifications, certificates and Opinion of Counsel, if applicable; or
(F) if such Transfer Restricted Definitive Note is being transferred to the Issuer or a Subsidiary thereof, a certificate from such holder in the form attached to the applicable Note;
the Trustee shall cancel the Transfer Restricted Definitive Note, and increase or cause to be increased the aggregate principal amount of the appropriate Transfer Restricted Global Note.
(ii) Transfer Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of a Transfer Restricted Definitive Note may exchange such Transfer Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Transfer Restricted Definitive Note to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:
Appendix A-7
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such Transfer Restricted Definitive Note proposes to transfer such Transfer Restricted Definitive Note to a person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form attached to the applicable Note,
and, in each such case, if the Issuer or the Registrar so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of this subparagraph (ii), the Trustee shall cancel the Transfer Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. If any such transfer or exchange is effected pursuant to this subparagraph (ii) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of a written order of the Issuer in the form of an Officers Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Note transferred or exchanged pursuant to this subparagraph (ii).
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A holder of an Unrestricted Definitive Note may exchange such Unrestricted Definitive Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such transfer or exchange is effected pursuant to this subparagraph (iii) at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of a written order of the Issuer in the form of an Officers Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of the Unrestricted Definitive Note transferred or exchanged pursuant to this subparagraph (iii).
(iv) Unrestricted Definitive Notes to Beneficial Interests in Transfer Restricted Global Notes. An Unrestricted Definitive Note cannot be exchanged for, or transferred to a person who takes delivery thereof in the form of, a beneficial interest in a Transfer Restricted Global Note.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a holder of Definitive Notes and such holders compliance with the provisions of this
Appendix A-8
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 2.2(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such holder or by its attorney, duly authorized in writing. In addition, the requesting holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.2(e).
(i) Transfer Restricted Definitive Notes to Transfer Restricted Definitive Notes. A Transfer Restricted Note may be transferred to and registered in the name of a person who takes delivery thereof in the form of a Transfer Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Note;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904 under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Note;
(C) if the transfer will be made pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate in the form attached to the applicable Note;
(D) if the transfer will be made to an IAI in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) through (C) above, a certificate in the form attached to the applicable Note; and
(E) if such transfer will be made to the Issuer or a Subsidiary thereof, a certificate in the form attached to the applicable Note.
(ii) Transfer Restricted Definitive Notes to Unrestricted Definitive Notes. Any Transfer Restricted Definitive Note may be exchanged by the holder thereof for an Unrestricted Definitive Note or transferred to a person who takes delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:
(A) if the holder of such Transfer Restricted Definitive Note proposes to exchange such Transfer Restricted Definitive Note for an Unrestricted Definitive Note, a certificate from such holder in the form attached to the applicable Note; or
(B) if the holder of such Transfer Restricted Definitive Note proposes to transfer such Notes to a person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form attached to the applicable Note,
Appendix A-9
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
and, in each such case, if the Issuer or the Registrar so request, an Opinion of Counsel in form reasonably acceptable to the Issuer and the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Notes Legend are no longer required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A holder of an Unrestricted Definitive Note may transfer such Unrestricted Definitive Notes to a person who takes delivery thereof in the form of an Unrestricted Definitive Note at any time. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the holder thereof.
(iv) Unrestricted Definitive Notes to Transfer Restricted Definitive Notes. An Unrestricted Definitive Note cannot be exchanged for, or transferred to a person who takes delivery thereof in the form of, a Transfer Restricted Definitive Note.
At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 of this Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.
(f) Legend.
(i) Except as permitted by the following paragraph (iii) or (iv), each Note certificate evidencing the Global Notes and any Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
Appendix A-10
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR FOR THE BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE FIRST LIEN INTERCREDITOR AGREEMENT AMONG WILMINGTON TRUST, NATIONAL ASSOCIATION, AS COLLATERAL AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS INITIAL OTHER AUTHORIZED REPRESENTATIVE, AND THE OTHER PARTIES FROM TIME TO TIME PARTY THERETO, ENTERED INTO ON APRIL 27, 2016, AS IT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH THE INDENTURE.
Appendix A-11
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Each Regulation S Note shall bear the following additional legend:
BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
Each Definitive Note shall bear the following additional legend:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted Definitive Note, the Registrar shall permit the holder thereof to exchange such Transfer Restricted Note for a Definitive Note that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Definitive Note if the holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).
(iii) Upon a sale or transfer after the expiration of the Restricted Period of any Initial Note or Additional Note acquired pursuant to Regulation S, all requirements that such Initial Note or Additional Note bear the Restricted Notes Legend shall cease to apply and the requirements requiring any such Initial Note or Additional Note be issued in global form shall continue to apply.
(g) Cancellation or Adjustment of Global Note. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.10 of this Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.
Appendix A-12
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(h) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate, Definitive Notes and Global Notes at the Registrars request.
(ii) No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 3.06, 4.06, 4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of transfer of any Note, the Issuer, the Trustee, a Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.
(iv) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.
(i) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or any other person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the holders and all payments to be made to the holders under the Notes shall be given or made only to the registered holders (which shall be the Depository or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other
Appendix A-13
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
Appendix A-14
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT A
[FORM OF FACE OF [INITIAL NOTE][ADDITIONAL NOTE]]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (DTC), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSORS NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend for Notes Offered in Reliance on Regulation S]
BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON, NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON, AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR FOR THE BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY
Exhibit A-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
PREDECESSOR OF SUCH SECURITY) RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE TERMS OF THIS SECURITY ARE SUBJECT TO THE TERMS OF THE FIRST LIEN INTERCREDITOR AGREEMENT AMONG WILMINGTON TRUST, NATIONAL ASSOCIATION, AS COLLATERAL AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT, WILMINGTON TRUST, NATIONAL ASSOCIATION, AS INITIAL OTHER AUTHORIZED REPRESENTATIVE, AND THE OTHER PARTIES FROM TIME TO TIME PARTY THERETO, ENTERED INTO ON APRIL 27, 2016, AS IT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH THE INDENTURE.
[Definitive Notes Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Exhibit A-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[FORM OF [INITIAL NOTE][ADDITIONAL NOTE]]
THE FRESH MARKET, INC.
No. [ ] | 144A CUSIP No. 35804H AD8 | |
144A ISIN No. US35804HAD89 | ||
REG S CUSIP No. U3144H AB6 | ||
REG S ISIN No. USU3144HAB60 | ||
$[ ] |
Super Senior Secured Notes due 2025
The Fresh Market, Inc., a Delaware corporation (together with its successors and assigns under the Indenture), promises to pay to Cede & Co., or registered assigns, the principal sum set forth on the Schedule of Increases or Decreases in Global Note attached hereto on the Maturity Date.
Interest Payment Dates: March 31, June 30, September 30 and December 31, commencing [ ]1
Record Dates: March 15, June 15, September 15 and December 15
Additional provisions of this Note are set forth on the other side of this Note.
The Issuer issued the Notes under an Indenture dated as of March 13, 2020 (the Indenture), among the Issuer, the Guarantors party thereto from time to time and the Trustee. Capitalized terms used herein are used as defined in the Indenture, unless otherwise indicated. The terms of the Notes include those stated in the Indenture.
1 | To be March 31, 2020 for Initial Notes. |
Exhibit A-3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.
THE FRESH MARKET, INC., as the Issuer | ||
By: |
| |
Name: | ||
Title: |
Dated:
Exhibit A-4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TRUSTEES CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST, NATIONAL ASSOCIATION
as Trustee, certifies that this is
one of the Notes
referred to in the Indenture.
By: |
| |
Authorized Signatory |
Dated:
*/ | If the Note is to be issued in global form, add the Global Notes Legend and the attachment from Exhibit A captioned TO BE ATTACHED TO GLOBAL NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE. |
Exhibit A-5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[FORM OF REVERSE SIDE OF [INITIAL NOTE][ADDITIONAL NOTE]]
Super Senior Secured Notes due 2025
1. | Interest |
The Fresh Market, Inc., a Delaware corporation (such entity, and its successors and assigns under the Indenture, hereinafter referred to, being herein called, the Issuer), promises to pay interest on the principal amount of this Note at the rates set forth in the Indenture.
The Issuer shall pay interest quarterly on March 31, June 30, September 30 and December 31 of each year (each an Interest Payment Date), commencing [ ]2. Interest on the Notes shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from[ ]3, until the principal hereof is due. All interest hereunder shall be computed on the basis of a year of 360 days and twelve 30-day months. The Issuer shall pay interest on overdue amounts in accordance with Section 2.15(b) of the Indenture.
2. | Method of Payment |
The Issuer shall pay interest on the Notes (except defaulted interest) to the persons who are registered holders at the close of business on March 15, June 15, September 15 and December 15 (each a Record Date) immediately preceding the Interest Payment Date even if Notes are canceled after the Record Date and on or before the Interest Payment Date (whether or not a Business Day). Holders must surrender Notes to the Paying Agent to collect principal payments. The Issuer shall pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company or any successor depositary. The Issuer shall make all payments in respect of a certificated Note (including principal, premium, if any, and interest) at the office of the Paying Agent, except that, at the option of the Issuer, payment of interest may be made by mailing a check to the registered address of each holder thereof; provided, however, that payments on the Notes may also be made, in the case of a holder of at least $1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States of America if such holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).
2 | To be March 31, 2020 for Initial Notes. |
3 | To be March 13, 2020 for Initial Notes. |
Exhibit A-6
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
3. | Paying Agent and Registrar |
Initially, Wilmington Trust, National Association, as trustee under the Indenture (the Trustee), will act as Paying Agent and Registrar. The Issuer may appoint and change any Paying Agent or Registrar upon written notice to such Paying Agent or registrar and to the Trustee. The Issuer or any of its domestically incorporated Subsidiaries may act as Paying Agent or Registrar.
4. | Indenture |
The Issuer issued the Notes under an Indenture dated as of March 13, 2020 (the Indenture), among the Issuer, the Guarantors party thereto from time to time and the Trustee. Capitalized terms used herein are used as defined in the Indenture, unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all terms and provisions of the Indenture, and the holders (as defined in the Indenture) are referred to the Indenture for a statement of such terms and provisions. If and to the extent that any provision of the Note limits, qualifies or conflicts with a provision of the Indenture, such provision of the Indenture shall control.
The Notes are senior secured obligations of the Issuer. The Notes include the Initial Notes and any Additional Notes. The Initial Notes and any Additional Notes are treated as a single class of securities under the Indenture.
To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Issuer under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have unconditionally guaranteed the Obligations on a senior secured basis pursuant to the terms of the Holdings Guarantee and Pledge Agreement or the Subsidiary Guarantee Agreement, as applicable, and any Subsidiary Guarantor that executes a Subsidiary Guarantee after the date hereof will unconditionally guarantee the Obligations on a senior secured basis pursuant to the terms of the Indenture.
5. | Redemption |
The Issuer may redeem the Notes at its option, in whole at any time or in part from time to time, at the prices set forth in the Indenture.
6. | Mandatory Redemption |
The Issuer will be required to mandatorily redeem the Notes as set forth in the Indenture.
7. | Notice of Redemption |
Notices of redemption will be mailed by first-class mail at least 10 days (or 15 days in the case of any partial redemption) before the redemption date, to each holder of Notes to be redeemed at its registered address (with a copy to the Trustee) or otherwise delivered in accordance with the procedures of The Depository Trust Company (DTC).
Exhibit A-7
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
If money sufficient to pay the redemption price of, plus accrued and unpaid interest, if any, on all Notes (or portions thereof) to be redeemed on the redemption date is deposited with a Paying Agent on or before the redemption date and certain other conditions are satisfied, then on and after such redemption date, interest shall cease to accrue on such Notes (or such portions thereof) called for redemption.
8. | [Reserved] |
9. | Ranking and Collateral |
The Notes will be secured by first-priority security interests (subject to the Permitted Liens) in the Collateral pursuant to the Security Documents (but subject to the terms and conditions of the Security Documents and the First Lien/First Lien Intercreditor Agreement (including the Priority Waterfall)). The Liens upon any and all Collateral are, to the extent and in the manner provided in the First Lien/First Lien Intercreditor Agreement, equal in ranking with all present and future Liens securing First-Priority Obligations and will be senior in ranking to all present and future Liens securing Junior Lien Obligations.
10. | Denominations; Transfer; Exchange |
The Notes are in registered form, without interest coupons, in minimum denominations of $2,000 principal amount and integral multiples of $1,000 in excess thereof, provided that Notes may be issued in denominations of less than $2,000 solely to accommodate book-entry positions that have been created by participants of the DTC in denominations of less than $2,000. The Registrar shall register the transfer of or exchange of the Notes in accordance with the Indenture. Upon any registration of transfer or exchange, the Registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or to transfer or exchange any Notes for a period of 5 Business Days prior to a selection of Notes to be redeemed or between a Record Date and the relevant Interest Payment Date.
Transfers of the Notes are also subject to the restrictions set forth in Section 16.07 of the Indenture.
11. | Persons Deemed Owners |
The registered holder of this Note shall be treated as the owner of it for all purposes.
12. | Unclaimed Money |
If money for the payment of principal or interest remains unclaimed for two years, the Trustee and each Paying Agent shall pay the money back to the Issuer at its written request unless an applicable abandoned property law designates another person. After any such payment, the holders entitled to the money must look to the Issuer for payment as general creditors and the Trustee and each Paying Agent shall have no further liability with respect to such monies.
Exhibit A-8
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
13. | Discharge and Defeasance |
The Notes are subject to discharge and defeasance as provided in the Indenture.
14. | Amendment; Waiver |
The Notes and the other Note Documents may be amended as provided in the Indenture.
15. | Defaults and Remedies |
The Notes will be subject to the Defaults, Events of Default and remedies therefor as provided in the Indenture.
16. | Trustee Dealings with the Issuer |
Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee.
17. | No Recourse Against Others |
No director, officer, employee, manager, incorporator or holder of any Equity Interests in the Issuer, Holdings or any Subsidiary Guarantor or any direct or indirect parent companies, as such, will have any liability for any obligations of the Issuer, Holdings or any Subsidiary Guarantor under the Notes, the Indenture, the Security Documents or the other Loan Documents, as applicable, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability.
18. | Authentication |
This Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Note.
19. | Abbreviations |
Customary abbreviations may be used in the name of a holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
Exhibit A-9
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
20. | Governing Law |
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
21. | CUSIP Numbers; ISINs |
The Issuer has caused CUSIP numbers and ISINs to be printed on the Notes and have directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as a convenience to the holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
Exhibit A-10
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
(Print or type assignees name, address and zip code)
(Insert assignees soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him. I or we confirm that the transfer of this Note complies with Section 16.07 of the Indenture.
Date: | Your Signature: |
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:
Date:
|
| |
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee | Signature of Signature Guarantee |
Exhibit A-11
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER RESTRICTED NOTES
This certificate relates to $ principal amount of Notes held in (check applicable space) book-entry or definitive form by the undersigned.
The undersigned (check one box below):
☐ | has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depository a Note or Notes in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above); |
☐ | has requested the Trustee by written order to exchange or register the transfer of a Note or Notes. |
In connection with any transfer of any of the Notes evidenced by this certificate occurring while this Note is still a Transfer Restricted Definitive Note or a Transfer Restricted Global Note, the undersigned confirms that such Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) | ☐ | to the Issuer; or | ||
(2) | ☐ | to the Registrar for registration in the name of the holder, without transfer; or | ||
(3) | ☐ | pursuant to an effective registration statement under the Securities Act of 1933; or | ||
(4) | ☐ | to a qualified institutional buyer (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or | ||
(5) | ☐ | outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933 and such Note shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in the Indenture); or | ||
(6) | ☐ | to an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or | ||
(7) | ☐ | pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. |
Exhibit A-12
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Issuer or the Trustee have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
Date: | Your Signature: |
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:
Date:
|
| |
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee | Signature of Signature Guarantee |
Exhibit A-13
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigneds foregoing representations in order to claim the exemption from registration provided by Rule 144A.
Date: |
|
| ||||
NOTICE: To be executed by an executive officer |
Exhibit A-14
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of this Global Note is $ . The following increases or decreases in this Global Note have been made:
Date of Exchange |
Amount of decrease in Principal Amount of this Global Note |
Amount of increase in Principal Amount of this Global Note |
Principal amount of this Global Note following such decrease or increase |
Signature of authorized signatory of Trustee or Notes Custodian |
||||||||||||
Exhibit A-15
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT B
[FORM OF TRANSFEREE LETTER OF REPRESENTATION]
TRANSFEREE LETTER OF REPRESENTATION
THE FRESH MARKET, INC
c/o Wilmington Trust, National Association
Global Capital Markets
50 South Sixth Street, Suite 1290
Minneapolis, MN 55402
Attention: The Fresh Market Notes Administrator
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $[ ] principal amount of the Super Senior Secured Notes due 2025 (the Notes) of The Fresh Market, Inc. (collectively with its successors and assigns, the Issuer).
Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
Name: |
Address: |
Taxpayer ID Number: |
The undersigned represents and warrants to you that:
1. We are an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the Securities Act)), purchasing for our own account or for the account of such an institutional accredited investor at least $1,000,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date that is one year after the later of the date of original issue and the last date on which either of the Issuer or any affiliate of the Issuer was the owner of such Notes (or any predecessor thereto) (the Resale Restriction Termination Date) only (a) in the United States to a person whom we reasonably believe is a qualified institutional buyer (as defined in rule 144A under the Securities Act) in a
Exhibit B-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
transaction meeting the requirements of Rule 144A, (b) outside the United States in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if applicable) or (d) pursuant to an effective registration statement under the Securities Act, in each of cases (a) through (d) in accordance with any applicable securities laws of any state of the United States. In addition, we will, and each subsequent holder is required to, notify any purchaser of the Note evidenced hereby of the resale restrictions set forth above. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made to an institutional accredited investor prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause 1(b), 1(c) or 1(d) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Issuer and the Trustee.
Dated: | ||||||
TRANSFEREE: | , | |||||
By: |
Exhibit B-2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
FORM OF MORTGAGE
CONFIDENTIAL
EXHIBIT C
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND FIXTURE FILING
by and from
[ ],
Mortgagor
to
WILMINGTON TRUST, NATIONAL ASSOCIATION, in its capacity as Collateral Agent,
Mortgagee
Dated as of , 20
Location: |
[ | ] | ||
Municipality: |
[ | ] | ||
County: |
[ | ] | ||
State: |
[ | ] |
RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
[ ]
Prepared by [ ]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES AND FIXTURE FILING (this Mortgage) is dated as of , 20 by and from [ ], a [ ], as mortgagor, assignor and debtor (in such capacities and, together with any successors and assigns in such capacities, Mortgagor), whose address is [ ], to WILMINGTON TRUST, NATIONAL ASSOCIATION, as Collateral Agent for the Secured Parties, as mortgagee, assignee and secured party (in such capacities and, together with its successors and assigns in such capacities, Mortgagee), having an address at [●].
WHEREAS, reference is made to (a) that certain Indenture dated as of March 13, 2020 (as amended, renewed, extended, restated, replaced, supplemented or otherwise modified from time to time, the Indenture), among Pomegranate Holdings, Inc., a Delaware corporation (Holdings), The Fresh Market, Inc., a Delaware corporation (the Issuer), the subsidiary guarantors from time to time party thereto, Wilmington Trust, National Association, as trustee (together with its successors and assigns in such capacity, the Trustee), and the other parties party thereto (b) that certain Collateral Agreement (First Lien) dated as of April 27, 2016 (as supplemented by that certain Other First Lien Secured Party Consent dated as of March 13, 2020, and as may be further amended, renewed, extended, restated, replaced, supplemented or otherwise modified from time to time, Collateral Agreement), among Issuer, each Subsidiary Loan Party (as defined therein) party thereto and the Collateral Agent, (c) that certain Indenture, dated as of April 27, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the Notes Indenture), among the Issuer, as issuer, Wilmington Trust, National Association, as trustee (together with its successors and assigns in such capacity, the Notes Trustee) and the other parties thereto and (d) that certain First Lien/First Lien Intercreditor Agreement, dated as of April 27, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the First Lien/First Lien Intercreditor Agreement); and
WHEREAS, the Noteholder Parties and other Secured Parties have agreed to extend credit to the Issuer subject to the terms and conditions set forth in the Indenture and Notes Indenture. The obligations of the Noteholder Parties and such other Secured Parties to extend and maintain such credit are conditioned upon, among other things, the execution and delivery of this Mortgage.
Accordingly, the parties hereto agree as follows:
ARTICLE I DEFINITIONS
Section 1.1 Definitions. All capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Indenture. The rules of construction specified in Section 1.02 of the Indenture also apply to this Mortgage. As used herein, the following terms shall have the following meanings:
(a) Bankruptcy Code has the meaning assigned to such term in Section 5.2.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) Charges means any and all present and future real estate, property and other taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges imposed upon or assessed against, and all claims (including, without limitation, claims for landlords, carriers, mechanics, workmens, repairmens, laborers, materialmens, suppliers and warehousemens liens and other claims arising by operation of law), judgments or demands against, all or any portion of the Mortgaged Property or other amounts of any nature which, if unpaid, might result in or permit the creation of, a Lien on the Mortgaged Property or which might result in foreclosure of all or any portion of the Mortgaged Property except, in each case, Permitted Liens.
(c) Collateral Agent means Mortgagee acting as the collateral agent for the Secured Parties, together with its successors in such capacity.
(d) Collateral Agreement has the meaning assigned to such term in the recitals of this Mortgage.
(e) Event of Default has the meaning assigned to such term in the Collateral Agreement.
(f) Excluded Other First Lien Obligations means any Other First Lien Obligations that have been excluded from the Secured Obligations for purposes of this Mortgage pursuant to (and in accordance with) Section 7.21.
(g) Excluded Property has the meaning assigned to such term in the Collateral Agreement.
(h) First Lien/First Lien Intercreditor Agreement has the meaning assigned to such term in the recitals of this Mortgage.
(i) Holdings has the meaning assigned to such term in the recitals of this Mortgage.
(j) Indenture has the meaning assigned to such term in the recitals of this Mortgage.
(k) Intercreditor Agreements means the First Lien/First Lien Intercreditor Agreement and any other intercreditor agreement entered into in compliance with the Indenture, the Notes Indenture and any Other First Lien Agreement.
(l) Issuer has the meaning assigned to such term in the recitals hereof.
(m) Mortgage has the meaning assigned to such term in the preamble hereof.
(n) Mortgaged Property means the fee interest in the real property described in Exhibit A attached hereto and incorporated herein by this reference, together with any greater estate therein as hereafter may be acquired by Mortgagor and all of Mortgagors right, title and interest in, to and under all rights, privileges, tenements, hereditaments, rights-of-way, easements, appendages and appurtenances appertaining to the foregoing in each case whether now owned or
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
hereinafter acquired, including without limitation all water rights, mineral, oil and gas rights, easements and rights of way (collectively, the Land), and all of Mortgagors right, title and interest now or hereafter acquired in, to and under the following (in each case other than Excluded Property): (1) all buildings, structures and other improvements now owned or hereafter acquired by Mortgagor, now or at any time situated, placed or constructed upon the Land (the Improvements; the Land and Improvements are collectively referred to as the Premises), (2) all materials, supplies, equipment, apparatus and other items of personal property now owned or hereafter acquired by Mortgagor and now or hereafter attached to, installed in or used in connection with any of the Improvements or the Land, and water, gas, electrical, telephone, storm and sanitary sewer facilities and all other utilities whether or not situated in easements, and all equipment, inventory and other goods in which Mortgagor now has or hereafter acquires any rights or any power to transfer rights and (in each case in this clause (2)) that are or are to become fixtures (as defined in the UCC, defined below) related to the Land (the Fixtures), (3) all reserves, escrows or impounds required under the Indenture or any of the other Note Documents, Notes Indenture or any of the Notes Indenture Documents and all of Mortgagors right, title and interest in all reserves, deferred payments, deposits, refunds and claims of any nature that (in each case in this clause (3)) are specifically related to the Mortgaged Property (the Deposit Accounts), (4) all leases, licenses, concessions, occupancy agreements or other agreements (written or oral, now or at any time in effect) which grant to any person a possessory interest in, or the right to use, all or any part of the Mortgaged Property, together with all related security and other deposits (the Leases), (5) all of the rents, revenues, royalties, income, proceeds, profits, accounts receivable, security and other types of deposits, and other benefits paid or payable by parties to the Leases for using, leasing, licensing, possessing, operating from, residing in, selling or otherwise enjoying the Mortgaged Property (the Rents), (6) all other agreements, such as construction contracts, architects agreements, engineers contracts, utility contracts, maintenance agreements, management agreements, service contracts, listing agreements, guaranties, indemnities, warranties, permits, licenses, certificates and entitlements in any way relating specifically to the construction, use, occupancy, operation, maintenance, enjoyment or ownership of the Mortgaged Property (the Property Agreements), (7) all property tax refunds payable with respect to the Mortgaged Property (the Tax Refunds), (8) all accessions, replacements and substitutions for any of the foregoing and all proceeds thereof (the Proceeds), (9) all insurance policies, unearned premiums therefor and proceeds from such policies covering any of the above property now or hereafter acquired by Mortgagor (the Insurance), (10) all awards, damages, remunerations, reimbursements, settlements or compensation heretofore made or hereafter to be made by any governmental authority pertaining to any condemnation or other taking (or any purchase in lieu thereof) of all or any portion of the Land, Improvements or Fixtures (the Condemnation Awards) and (11) any and all right, title and interest of Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating specifically to the Mortgaged Property or the construction of any alteration relating to the Premises or the maintenance of any Property Agreement (the Records). As used in this Mortgage, the term Mortgaged Property shall mean all or, where the context permits or requires, any portion of the above or any interest therein.
(o) Mortgagee has the meaning assigned to such term in the preamble hereof.
(p) Mortgagor has the meaning assigned to such term in the preamble hereof.
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(q) Note Documents means (a) the Note Documents as defined in the Indenture and (b) any other related documents or instruments executed and delivered pursuant to the documents referred to in the foregoing clause (a), in each case, as such documents or instruments may be amended, restated, supplemented or otherwise modified from time to time.
(r) Notes has the meaning assigned to such term in the Notes Indenture.
(s) Notes Indenture has the meaning assigned to such term in the recitals of this Mortgage.
(t) Notes Indenture Documents means (a) the Notes Indenture, the Notes, the Indenture Guarantees, this Mortgage and the other Security Documents in respect of the Notes and (b) any instruments executed and delivered pursuant to the Notes Indenture or any such Security Document, in each case, as such documents or instruments may be amended, restated, supplemented or otherwise modified from time to time.
(u) Notes Indenture Guarantees means the Guarantees as defined in the Notes Indenture.
(v) Other First Lien Agreement means Other First Lien Agreement as defined in the Collateral Agreement, excluding any such Other First Lien Agreement relating to any Excluded Other First Lien Obligations and, for purposes of this Mortgage, excluding the Indenture.
(w) Other First Lien Obligations means Other First Lien Obligations as defined in the Collateral Agreement, excluding any Excluded Other First Lien Obligations and, for purposes of this Mortgage, excluding the Note Obligations (as defined in the Indenture).
(x) Permitted Liens means Liens that are not prohibited by the Indenture, the Notes Indenture or any Other First Lien Agreement. Without limiting the generality of the foregoing, the matters that are set forth on Exhibit B attached hereto are Permitted Liens.
(y) Secured Amount has the meaning assigned to such term in Section 2.4.
(z) Secured Obligations means Secured Obligations as defined in the Collateral Agreement, excluding any Excluded Other First Lien Obligations.
(aa) Secured Parties means the persons holding any Secured Obligations and in any event including all Secured Parties as defined in the Collateral Agreement (other than any person constituting a Secured Party under (and as defined in) the Collateral Agreement solely because such person holds, or acts as the agent, trustee or representative of the holders of, any Excluded Other First Lien Obligations).
(bb) Security Documents has the meaning assigned to such term in the Indenture and the Notes Indenture and any analogous term in any Other First Lien Agreement (but, with respect to the Secured Obligations of any Series, the term Security Documents shall not include any document which by its terms is solely for the benefit of the holders of one or more other Series of Secured Obligations and not such Series of Secured Obligations).
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(cc) Series has the meaning assigned to such term in the Collateral Agreement.
(dd) UCC means the Uniform Commercial Code of [ ] or, if the creation, perfection and enforcement of any security interest herein granted is governed by the laws of a state other than [ ], then, as to the matter in question, the Uniform Commercial Code in effect in that state.
ARTICLE II GRANT
Section 2.1 Grant. To secure the payment or performance, as the case may be, in full of the Secured Obligations, Mortgagor MORTGAGES, GRANTS, BARGAINS, ASSIGNS, SELLS, CONVEYS and CONFIRMS, to Mortgagee, for the benefit of the Secured Parties, and hereby grants to Mortgagee, for the benefit of the Secured Parties, a mortgage lien upon and a security interest in all of Mortgagors estate, right, title and interest in and to the Mortgaged Property, subject, however, to Permitted Liens, TO HAVE AND TO HOLD the Mortgaged Property to Mortgagee, for the benefit of the Secured Parties, and Mortgagor does hereby bind itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee.
Section 2.2 Secured Obligations. This Mortgage secures, and the Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations.
Section 2.3 Future Advances. This Mortgage shall secure all Secured Obligations including, without limitation, future advances whenever hereafter made with respect to or under any Note Document, any Notes Indenture Document or any Other First Lien Agreement and shall secure not only Secured Obligations with respect to presently existing indebtedness under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement, but also any and all other indebtedness which may hereafter be owing to the Secured Parties under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and re-advances, pursuant to the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement, whether such advances are obligatory or to be made at the option of the Secured Parties, or otherwise, and any extensions, modifications or renewals of all such Secured Obligations whether or not Mortgagor executes any extension agreement or renewal instrument and, in each case, to the same extent as if such future advances were made on the date of the execution of this Mortgage.
Section 2.4 Maximum Amount of Indebtedness. The maximum aggregate amount of all indebtedness that is, or under any contingency may be secured at the date hereof or at any time hereafter by this Mortgage is $[ ]1 (the Secured Amount), plus, to the extent permitted by applicable law, collection costs, sums advanced for the payment of taxes, assessments, maintenance and repair charges, insurance premiums and any other costs incurred to protect the security encumbered hereby or the lien hereof, expenses incurred by Mortgagee by reason of any default by Mortgagor under the terms hereof, together with interest thereon, all of which amount shall be secured hereby.
1 | In a jurisdiction where the recording of this instrument would be subject to a tax, the amount secured shall be limited to the value of the real estate so encumbered, if such limitation shall reduce the tax owed. |
5
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 2.5 [Last Dollar Secured. So long as the aggregate amount of the Secured Obligations exceeds the Secured Amount, any payments and repayments of the Secured Obligations shall not be deemed to be applied against or to reduce the Secured Amount.]2
Section 2.6 No Release. Nothing set forth in this Mortgage shall relieve Mortgagor from the performance of any term, covenant, condition or agreement on Mortgagors part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any person under or in respect of any of the Mortgaged Property or shall impose any obligation on Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on Mortgagors part to be so performed or observed or shall impose any liability on Mortgagee or any other Secured Party for any act or omission on the part of Mortgagor relating thereto or for any breach of any representation or warranty on the part of Mortgagor contained in this Mortgage or any other Note Document, any Notes Indenture Document or any Other First Lien Agreement or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of Mortgagor contained in this Section 2.6 shall survive the termination hereof and the discharge of Mortgagors other obligations under this Mortgage, the other Note Documents and any Other First Lien Agreement.
ARTICLE III WARRANTIES, REPRESENTATIONS AND COVENANTS
Mortgagor warrants, represents and covenants to Mortgagee as follows:
Section 3.1 Title to Mortgaged Property and Lien of this Instrument. Mortgagor has valid fee simple title to the Mortgaged Property free and clear of any liens, claims or interests, except Permitted Liens. Upon recordation in the official real estate records in the county (or other applicable jurisdiction) in which the Premises are located, this Mortgage will constitute a valid and enforceable mortgage lien, with record notice to third parties, on the Mortgaged Property in favor of Mortgagee for the benefit of the Secured Parties subject only to Permitted Liens.
Section 3.2 Priority. Mortgagor shall preserve and protect the priority of the lien and security interest of this Mortgage. If any lien or security interest other than a Permitted Lien is asserted against the Mortgaged Property, Mortgagor shall promptly, and at its expense, pay the underlying claim in full or take such other commercially reasonable action so as to cause it to be released or contest the same in compliance with the requirements of the Indenture, the Notes Indenture and any Other First Lien Agreement.
Section 3.3 Replacement of Fixtures. Mortgagor shall not, without the prior written consent of Mortgagee, permit any of the Fixtures owned or leased by Mortgagor to be removed at any time from the Land or Improvements, unless the removed item is (a) removed temporarily for its protection, maintenance or repair, (b) replaced by an item of similar functionality and quality, (c) obsolete or unnecessary for the then-current operation of the Premises, or (d) not prohibited from being removed by the Indenture, the Notes Indenture, the Collateral Agreement or any Other First Lien Agreement.
2 | Add this provision if recovery is limited for mortgage tax purpose (see footnote 1). |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Section 3.4 Inspection. Mortgagor shall permit Mortgagee and its agents, representatives and employees, upon reasonable prior notice to Mortgagor and at reasonable times during regular business hours, to inspect the Mortgaged Property and all books and records of Mortgagor located thereon, and to conduct such environmental and engineering studies as Mortgagee may reasonably require, provided that such inspections and studies shall not materially or unreasonably interfere with the use and operation of the Mortgaged Property. The expense of any inspection shall be borne by the Mortgagee unless an Event of Default shall have occurred and be continuing at the time of such inspection, in which case the Mortgagor shall pay, or reimburse the Mortgagee for, such expense.
Section 3.5 Insurance; Condemnation Awards and Insurance Proceeds.
(a) Insurance. Mortgagor shall maintain or cause to be maintained the insurance required by Section 7.02 of the Indenture and any applicable provision of any Other First Lien Agreement.
(b) Condemnation Awards. Mortgagor shall cause all condemnation awards that constitute Net Proceeds (or any equivalent term) in accordance with the Indenture, the Notes Indenture or any Other First Lien Agreement to be applied in accordance with Section 3.02(b) of the Indenture or any applicable provisions of the Notes Indenture or any Other First Lien Agreement.
(c) Insurance Proceeds. Mortgagor shall cause all proceeds of any insurance policies insuring against loss or damage to the Mortgaged Property that constitute Net Proceeds (or any equivalent term) in accordance with the Indenture, the Notes Indenture or any Other First Lien Agreement to be applied in accordance with Section 3.02(b) of the Indenture or any applicable provisions of the Notes Indenture or any Other First Lien Agreement.
(d) Payment of Charges. Unless and to the extent not prohibited by the terms of the Indenture, the Notes Indenture or any Other First Lien Agreement, Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time prior to same becoming delinquent, all Charges. Mortgagor shall deliver to Mortgagee, upon Trustees reasonable written request, to the extent reasonably available to Mortgagor, receipts evidencing the payment of all such Charges.
ARTICLE IV DEFAULT AND FORECLOSURE
Section 4.1 Remedies. Subject to the Intercreditor Agreements, upon the occurrence and during the continuance of an Event of Default, Mortgagee may, at Mortgagees election, exercise any or all of the following rights, remedies and recourses:
(a) Entry on Mortgaged Property. Enter the Mortgaged Property and take exclusive possession thereof and of all books, records and accounts relating thereto or located thereon. If Mortgagor remains in possession of the Mortgaged Property following the occurrence and during the continuance of an Event of Default and without Mortgagees prior written consent, Mortgagee may invoke any legal remedies to dispossess Mortgagor.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) Operation of Mortgaged Property. Hold, lease, develop, manage, operate, carry on the business thereof or otherwise use the Mortgaged Property upon such terms and conditions as the Trustee may deem reasonable under the circumstances (making such repairs, alterations, additions and improvements and taking other actions, from time to time, as Mortgagee deems necessary or desirable), and apply all Rents and other amounts collected by Mortgagee in connection therewith in accordance with the provisions of Section 4.7.
(c) Foreclosure and Sale. Institute proceedings for the complete foreclosure of this Mortgage by judicial action or by power of sale, in which case the Mortgaged Property may be sold for cash or credit in one or more parcels. With respect to any notices required or permitted under the UCC, Mortgagor agrees that ten (10) Business Days prior written notice shall be deemed commercially reasonable. At any such sale by virtue of any judicial proceedings, power of sale, or any other legal right, remedy or recourse, the title to and right of possession of any such property shall pass to the purchaser thereof, and to the fullest extent permitted by law, Mortgagor shall be completely and irrevocably divested of all of its right, title, interest, claim, equity, equity of redemption, and demand whatsoever, either at law or in equity, in and to the property sold and such sale shall be a perpetual bar both at law and in equity against Mortgagor, and against all other persons claiming or to claim the property sold or any part thereof, by, through or under Mortgagor. Mortgagee or any of the other Secured Parties may be a purchaser at such sale. If Mortgagee or such other Secured Party is the highest bidder, Mortgagee or such other Secured Party may credit the portion of the purchase price that would be distributed to Mortgagee or such other Secured Party against the Secured Obligations in lieu of paying cash. In the event this Mortgage is foreclosed by judicial action, appraisement of the Mortgaged Property is waived. Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.
(d) Receiver. Make application to a court of competent jurisdiction for, and obtain from such court as a matter of strict right and without notice to Mortgagor or regard to the adequacy of the Mortgaged Property for the repayment of the Secured Obligations, the appointment of a receiver of the Mortgaged Property, and Mortgagor irrevocably consents to such appointment. Any such receiver shall have all the usual powers and duties of receivers in similar cases, including the full power to rent, maintain and otherwise operate the Mortgaged Property upon such terms as may be approved by the court, and shall apply such Rents in accordance with the provisions of Section 4.7; provided, however, notwithstanding the appointment of any receiver, Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture, the Notes Indenture or any Other First Lien Agreement to Mortgagee.
(e) Other. Exercise all other rights, remedies and recourses granted under the Note Documents, the Notes Indenture Documents and any Other First Lien Agreement or otherwise available at law or in equity.
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Section 4.2 Separate Sales. The Mortgaged Property may be sold in one or more parcels and in such manner and order as Mortgagee in its sole discretion may elect. The right of sale arising out of any Event of Default shall not be exhausted by any one or more sales.
Section 4.3 Remedies Cumulative, Concurrent and Nonexclusive. Subject to the Intercreditor Agreements and Section 5.18 of the Collateral Agreement, Mortgagee and the other Secured Parties shall have all rights, remedies and recourses granted in the Note Documents, the Notes Indenture Documents and any Other First Lien Agreement and available at law or equity (including the UCC), which rights (a) shall be cumulative and concurrent, (b) may be pursued separately, successively or concurrently against Mortgagor or others obligated under the Note Documents, the Notes Indenture Documents and any Other First Lien Agreement, or against the Mortgaged Property, or against any one or more of them, at the sole discretion of Mortgagee or such other Secured Party, as the case may be, (c) may be exercised as often as occasion therefor shall arise, and the exercise or failure to exercise any of them shall not be construed as a waiver or release thereof or of any other right, remedy or recourse, and (d) are intended to be, and shall be, nonexclusive. No action by Mortgagee or any other Secured Party in the enforcement of any rights, remedies or recourses under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement or otherwise at law or equity shall be deemed to cure any Event of Default.
Section 4.4 Release of and Resort to Collateral. Mortgagee may release, regardless of consideration and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Property, any part of the Mortgaged Property without, as to the remainder, in any way impairing, affecting, subordinating or releasing the lien or security interest created in or evidenced by the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement or the lien priority and security interest in and to the Mortgaged Property. For payment of the Secured Obligations, Mortgagee may resort to any other security in such order and manner as Mortgagee may elect.
Section 4.5 Appearance, Waivers, Notice and Marshalling of Assets. After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the payment or performance of the Secured Obligations or any part thereof, or of any proceedings to foreclose the lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. To the fullest extent permitted by law, Mortgagor hereby irrevocably and unconditionally waives and releases (a) all benefit that might accrue to Mortgagor by virtue of any present or future statute of limitations or law or judicial decision exempting the Mortgaged Property from attachment, levy or sale on execution or providing for any stay of execution, exemption from civil process, redemption or extension of time for payment, (b) all notices of any Event of Default or of Mortgagees election to exercise or the actual exercise of any right, remedy or recourse provided for under the Note Documents, the Notes Indenture Documents and any Other First Lien Agreement, and (c) any right to a marshalling of assets or a sale in inverse order of alienation. Mortgagor shall not claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court
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of competent jurisdiction. Mortgagor covenants not to hinder, delay or impede the execution of any power granted or delegated to Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted.
Section 4.6 Discontinuance of Proceedings. If Mortgagee or any other Secured Party shall have proceeded to invoke any right, remedy or recourse permitted under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement and shall thereafter elect to discontinue or abandon it for any reason, Mortgagee or such other Secured Party, as the case may be, shall have the unqualified right to do so and, in such an event, Mortgagor, Mortgagee and the other Secured Parties shall be restored to their former positions with respect to the Secured Obligations, the Note Documents, the Notes Indenture Documents, any Other First Lien Agreement, the Mortgaged Property and otherwise, and the rights, remedies, recourses and powers of Mortgagee and the other Secured Parties shall continue as if the right, remedy or recourse had never been invoked, but no such discontinuance or abandonment shall waive any Event of Default which may then exist or the right of Mortgagee or any other Secured Party thereafter to exercise any right, remedy or recourse under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement for such Event of Default.
Section 4.7 Application of Proceeds. Subject to the Intercreditor Agreements, upon the occurrence and during the continuance of an Event of Default, Mortgagee shall promptly apply the proceeds of any sale of the Mortgaged Property, in accordance with Section 4.02 of the Collateral Agreement.
Mortgagee shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Mortgage. Upon any sale of Mortgaged Property by Mortgagee (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by Mortgagee or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Mortgaged Property so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to Mortgagee or such officer or be answerable in any way for the misapplication thereof.
Section 4.8 Occupancy After Foreclosure. Any sale of the Mortgaged Property or any part thereof in accordance with Section 4.1(c) will divest all right, title and interest of Mortgagor in and to the property sold. Subject to applicable law, any purchaser at a foreclosure sale will receive immediate possession of the property purchased. If Mortgagor retains possession of such property or any part thereof subsequent to such sale, Mortgagor will be considered a tenant at sufferance of the purchaser, and will, if Mortgagor remains in possession after demand to remove, be subject to eviction and removal, forcible or otherwise, with or without process of law.
Section 4.9 Additional Advances and Disbursements; Costs of Enforcement.
(a) Upon the occurrence and during the continuance of any Event of Default, Mortgagee shall have the right, but not the obligation, to cure such Event of Default in the name and on behalf of Mortgagor. All sums advanced and out-of-pocket expenses incurred at any time by Mortgagee under this Section 4.9, or otherwise under this Mortgage or applicable law, that is
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payable under Section 4.9(b) shall, if not paid when due, bear interest at the rate provided therefor in Section 2.15(b) of the Indenture and all such sums, together with interest thereon, shall be secured by this Mortgage.
(b) To the extent contemplated by Section 11.07 of the Indenture or any equivalent provision of any Notes Indenture Document or Other First Lien Agreement, Mortgagor shall pay all out-of-pocket expenses (including reasonable attorneys fees and expenses) of or incidental to the perfection and enforcement of this Mortgage or the enforcement, compromise or settlement of the Secured Obligations or any claim under this Mortgage, and for the curing thereof, or for defending or asserting the rights and claims of Mortgagee in respect thereof, by litigation or otherwise.
Section 4.10 No Mortgagee in Possession. Neither the enforcement of any of the remedies under this Article 4, the assignment of the Rents and Leases under Article 5, the security interests under Article 6, nor any other remedies afforded to Mortgagee under the Note Documents, the Notes Indenture Documents or any Other First Lien Agreement, at law or in equity shall cause Mortgagee or any other Secured Party to be deemed or construed to be a mortgagee in possession of the Mortgaged Property, to obligate Mortgagee or any other Secured Party to lease the Mortgaged Property or attempt to do so, or to take any action, incur any expense, or perform or discharge any obligation, duty or liability whatsoever under any of the Leases or otherwise.
ARTICLE V ASSIGNMENT OF RENTS AND LEASES
Section 5.1 Assignment. In furtherance of and in addition to the assignment made by Mortgagor in Section 2.1 of this Mortgage, Mortgagor hereby absolutely and unconditionally assigns, sells, transfers and conveys to Mortgagee all of its right, title and interest in and to all Leases (but only to the extent permitted under the existing Leases), whether now existing or hereafter entered into, and all of its right, title and interest in and to all Rents. This assignment is an absolute assignment and not an assignment for additional security only. So long as no Event of Default shall have occurred and be continuing and Mortgagee shall not have made the election below, Mortgagor shall have a revocable license from Mortgagee to exercise all rights extended to the landlord under the Leases, including the right to receive and collect all Rents and to otherwise use the same. The foregoing license is granted subject to the conditional limitation that no Event of Default shall have occurred and be continuing. Upon the occurrence and during the continuance of an Event of Default, whether or not legal proceedings have commenced, and without regard to waste, adequacy of security for the Secured Obligations or solvency of Mortgagor, the license herein granted shall, at the election of Mortgagee, expire and terminate, upon written notice to Mortgagor by Mortgagee.
Section 5.2 Perfection Upon Recordation. Mortgagor acknowledges that upon recordation of this Mortgage Mortgagee shall have, to the extent permitted under applicable law and by the terms of the Leases, a valid and fully perfected, present assignment of the Rents arising out of the Leases and all security for such Leases. Mortgagor acknowledges and agrees that upon recordation of this Mortgage, Mortgagees interest in the Rents shall be deemed to be fully perfected, choate and enforced as to Mortgagor and to the extent permitted under applicable law, all third parties, including, without limitation, any subsequently appointed trustee in any case under Title 11 of the United States Code (the Bankruptcy Code), without the necessity of commencing a foreclosure action with respect to this Mortgage, making formal demand for the Rents, obtaining the appointment of a receiver or taking any other affirmative action.
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Section 5.3 Bankruptcy Provisions. Without limitation of the absolute nature of the assignment of the Rents hereunder, Mortgagor and Mortgagee agree that (a) this Mortgage shall constitute a security agreement for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest created by this Mortgage extends to property of Mortgagor acquired before the commencement of a case in bankruptcy and to all amounts paid as Rents and (c) such security interest shall extend to all Rents acquired by the estate after the commencement of any case in bankruptcy.
ARTICLE VI SECURITY AGREEMENT
Section 6.1 Security Interest. This Mortgage constitutes a security agreement on personal property within the meaning of the UCC and other applicable law with respect to the Fixtures, Leases, Rents, Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation Awards and Records. To this end, Mortgagor grants to Mortgagee a security interest in the Fixtures, Leases, Rents, Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation Awards, Records and all other Mortgaged Property which is personal property to secure the payment and performance of the Secured Obligations, and agrees that Mortgagee shall have all the rights and remedies of a secured party under the UCC with respect to such property. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Fixtures, Leases, Rents, Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation Awards and Records sent to Mortgagor at least ten (10) Business Days prior to any action under the UCC shall constitute reasonable notice to Mortgagor. In the event of any conflict or inconsistency whatsoever between the terms of this Mortgage and the terms of the Collateral Agreement with respect to the collateral covered both therein and herein, including, but not limited to, with respect to whether any such Mortgaged Property is to be subject to a security interest or the use, maintenance or transfer of any such Mortgaged Property, or the exercise or applicability of any remedies in respect thereof, the Collateral Agreement shall control, govern, and prevail, to the extent of any such conflict or inconsistency. For the avoidance of doubt, no personal property of Mortgagor that constitutes Excluded Property under the Collateral Agreement shall be subject to any security interest of Mortgagee or any Secured Party or constitute collateral hereunder.
Section 6.2 Financing Statements. Mortgagor shall prepare and deliver to Mortgagee such financing statements, and shall execute and deliver to Mortgagee such other documents, instruments and further assurances, in each case in form and substance as may be necessary to create, perfect and preserve Mortgagees security interest hereunder. Mortgagor hereby irrevocably authorizes Mortgagee to cause financing statements (and amendments thereto and continuations thereof) and any such documents, instruments and assurances to be recorded and filed, at such times and places as may be required or permitted by law to so create, perfect and preserve such security interest.
Section 6.3 Fixture Filing. This Mortgage shall also constitute a fixture filing for the purposes of the UCC against all of the Mortgaged Property which is or is to become fixtures. The information provided in this Section 6.3 is provided so that this Mortgage shall
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comply with the requirements of the UCC for a mortgage instrument to be filed as a financing statement. Mortgagor is the Debtor and its name and mailing address are set forth in the preamble of this Mortgage. Mortgagee is the Secured Party and its name and mailing address from which information concerning the security interest granted herein may be obtained are also set forth in the preamble of this Mortgage. A statement describing the portion of the Mortgaged Property comprising the fixtures hereby secured is set forth in the definition of Mortgaged Property in Section 1.1 of this Mortgage. Mortgagor represents and warrants to Mortgagee that Mortgagor is the record owner of the Mortgaged Property.
ARTICLE VII MISCELLANEOUS
Section 7.1 Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 16.01 of the Indenture, as such address may be changed by written notice to the Mortgagee and the Issuer. All communications and notices hereunder to Mortgagor shall be given to it in care of the Issuer, with such notice to be given as provided in Section 16.01 of the Indenture.
Section 7.2 Covenants Running with the Land. All grants, covenants, terms, provisions and conditions contained in this Mortgage are intended by Mortgagor and Mortgagee to be, and shall be construed as, covenants running with the Land. As used herein, Mortgagor shall refer to the party named in the first paragraph of this Mortgage and to any subsequent owner of all or any portion of the Mortgaged Property. All persons who may have or acquire an interest in the Mortgaged Property shall be deemed to have notice of, and be bound by, the terms of the Indenture, the other Note Documents, the Notes Indenture, the other Notes Indenture Documents and any Other First Lien Agreements; provided, however, that no such party shall be entitled to any rights thereunder without the prior written consent of Mortgagee.
Section 7.3 Attorney-in-Fact. Subject to the Intercreditor Agreements, Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-fact, which agency is coupled with an interest and with full power of substitution, with full authority in the place and stead of Mortgagor and in the name of Mortgagor or otherwise (a) to execute and/or record any notices of completion, cessation of labor or any other notices that the Trustee deems appropriate to protect Mortgagees interest, if Mortgagor shall fail to do so within ten (10) days (or such longer period as the Trustee may agree) after written request by Mortgagee, (b) upon the issuance of a deed pursuant to the foreclosure of this Mortgage or the delivery of a deed in lieu of foreclosure, to execute all instruments of assignment, conveyance or further assurance with respect to the Leases, Rents, Deposit Accounts, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation Awards and Records in favor of the grantee of any such deed and as may be necessary or desirable for such purpose, (c) to prepare and file or record financing statements and continuation statements, and to prepare, execute and file or record applications for registration and like papers necessary to create, perfect or preserve Mortgagees security interests and rights in or to any of the Mortgaged Property, and (d) after the occurrence and during the continuance of any Event of Default, to perform any obligation of Mortgagor hereunder; provided, however, that (1) Mortgagee shall not under any circumstances be obligated to perform any obligation of Mortgagor; (2) any sums advanced by Mortgagee in such performance that are payable under Section 4.9(b) shall be added to and included in the Secured Obligations and, if not paid when due, shall bear interest at the rate provided therefor in Section 2.15(b) of the Indenture; (3) Mortgagee as such attorney-in-fact shall
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only be accountable for such funds as are actually received by Mortgagee; and (4) Mortgagee shall not be liable to Mortgagor or any other person or entity for any failure to take any action which it is empowered to take under this Section 7.3. Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.
Section 7.4 Successors and Assigns. Whenever in this Mortgage any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of Mortgagor or Mortgagee that are contained in this Mortgage shall bind and inure to the benefit of their respective permitted successors and assigns. Mortgagee hereunder shall at all times be the same person that is the Collateral Agent under the Collateral Agreement. Written notice of resignation by the Collateral Agent pursuant to the Collateral Agreement shall also constitute notice of resignation as Mortgagee under this Mortgage. Upon the acceptance of any appointment as the Collateral Agent under the Collateral Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee pursuant hereto.
Section 7.5 Waivers; Amendment.
(a) No failure or delay by Mortgagee or any other Secured Party in exercising any right, power or remedy hereunder or under any other Note Document, Notes Indenture Document or Other First Lien Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of Mortgagee or any other Secured Party hereunder and under the other Note Documents, Notes Indenture Documents and any Other First Lien Agreement are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Mortgage or consent to any departure by Mortgagor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.5, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Mortgagor in any case shall entitle any Note Party to any other or further notice or demand in similar or other circumstances.
(b) Neither this Mortgage nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Mortgagee and Mortgagor, subject to any consent required in accordance with the Notes Indenture, Section 13.01 of the Indenture, and the consent of each other Authorized Representative (as defined in the Collateral Agreement) if and to the extent required by (and in accordance with) the applicable Other First Lien Agreement, and except as otherwise provided in the Intercreditor Agreements. Mortgagee may conclusively rely on a certificate of an officer of Mortgagor as to whether any amendment contemplated by this Section 7.5(b) is permitted.
(c) Notwithstanding anything to the contrary contained herein, Mortgagee may grant extensions of time or waivers of the requirement for the creation or perfection of security interests in or the obtaining of insurance (including title insurance) or surveys with respect to particular assets (including extensions beyond the date hereof for the perfection of security
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interests in the assets of Mortgagor on such date) where it reasonably determines, in consultation with the Issuer, that perfection or obtaining of such items cannot be accomplished by the time or times at which it would otherwise be required by this Mortgage, the other Note Documents, the Notes Indenture Documents or any Other First Lien Agreement.
Section 7.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS MORTGAGE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.6.
Section 7.7 Termination or Release.
In each case subject to the terms of the Intercreditor Agreements:
(a) This Mortgage and the Liens and security interests created by this Mortgage shall automatically terminate and be released upon the occurrence of the later of the Termination Date and, if the Notes or any Other First Lien Obligations are outstanding on the Termination Date, the date when all the Notes and Other First Lien Obligations (other than contingent or unliquidated obligations or liabilities not then due and any other obligations that, by the terms of the Notes Indenture or Other First Lien Agreements, are not required to be paid in full prior to such termination and release) have been paid in full and the Secured Parties have no further commitment to extend credit under any Notes Indenture Document or Other First Lien Agreement.
(b) [Mortgagor shall automatically be released from its obligations hereunder and the security interests in the Mortgaged Property shall be automatically released upon the consummation of any transaction not prohibited by the Indenture, the Notes Indenture or any Other First Lien Agreement as a result of which Mortgagor ceases to be a Subsidiary of the Issuer or otherwise becomes an Excluded Subsidiary or ceases to be a Guarantor or is otherwise released from its obligations under the Guarantee.]3
(c) The security interests in the Mortgaged Property shall automatically be released (i) upon any sale or other transfer thereof by Mortgagor that is not prohibited by the Indenture, the Notes Indenture or any Other First Lien Agreement to any person that is not a Note Party, (ii) upon the effectiveness of any written consent to the release of the security interest granted hereby in such Mortgaged Property pursuant to Section 13.01 of the Indenture and any applicable provision of any Notes Indenture Document or Other First Lien Agreement (in each case, to the extent required), or (iii) as otherwise may be provided in the Intercreditor Agreements.
3 | NTD: To be included if Mortgagor is a Subsidiary Loan Party. |
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(d) If the Mortgaged Property shall become subject to the release provisions set forth in Section [ ] of the applicable Intercreditor Agreement or Section 15.09 of the Indenture, the Mortgaged Property shall be automatically released from the security interest hereunder in the Mortgaged Property to the extent provided therein.
(e) Solely with respect to the Obligations (as defined in the Indenture), Mortgagor shall automatically be released from its obligations hereunder and/or the security interests in the Mortgaged Property shall in each case be automatically released upon the occurrence of any of the circumstances set forth in Section 15.12 of the Indenture without delivery of any instrument or performance of any act by any party, and all rights to the Mortgaged Property shall revert to Mortgagor.
(f) Solely with respect to any Secured Obligations in respect of the Notes or any Other First Lien Obligations, Mortgagor shall automatically be released from its corresponding obligations hereunder and/or the security interests in the Mortgaged Property shall in each case be automatically released upon the occurrence of any of the circumstances set forth in the section governing release of collateral in the applicable Other First Lien Agreement or Notes Indenture Document without delivery of any instrument or performance of any act by any party, and all rights to the Mortgaged Property shall revert to Mortgagor.
(g) In connection with any termination or release pursuant to this Section 7.7, Mortgagee shall execute and deliver to Mortgagor all documents that Mortgagor shall reasonably request to evidence such termination or release (including, without limitation, mortgage releases or UCC termination statements), and will duly assign and transfer to Mortgagor, such of the Mortgaged Property that may be in the possession of Mortgagee and has not theretofore been sold or otherwise applied or released pursuant to this Mortgage. Any execution and delivery of documents pursuant to this Section 7.7 shall be made without recourse to or warranty by Mortgagee. In connection with any termination or release pursuant to this Section 7.7, Mortgagor shall be permitted to take any action in connection therewith consistent with such release including, without limitation, the filing of mortgage releases or UCC termination statements. Upon the receipt of any necessary or proper instruments of termination, satisfaction or release prepared by Mortgagor, and any documents, certificates or opinions required to be delivered under the Indenture, the Notes Indenture or Other First Lien Agreement, Mortgagee shall execute, deliver or acknowledge such instruments or releases to evidence the release of any Mortgaged Property permitted to be released pursuant to this Mortgage. Mortgagor agrees to pay all out-of-pocket expenses incurred by Mortgagee (and its representatives) in connection with the execution and delivery of such release documents or instruments.
Section 7.8 Waiver of Stay, Moratorium and Similar Rights. Mortgagor agrees, to the full extent that it may lawfully do so, that it will not at any time insist upon or plead or in any way take advantage of any stay, marshalling of assets, extension, redemption or moratorium law now or hereafter in force and effect so as to prevent or hinder the enforcement of the provisions of this Mortgage or the Secured Obligations secured hereby, or any agreement between Mortgagor and Mortgagee or any rights or remedies of Mortgagee or any other Secured Party.
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Section 7.9 Applicable Law. The provisions of this Mortgage shall be governed by and construed under the laws of the state in which the Mortgaged Property is located.
Section 7.10 Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Mortgage and are not to affect the construction of, or to be taken into consideration in interpreting, this Mortgage.
Section 7.11 Severability. In the event any one or more of the provisions contained in this Mortgage should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 7.12 Mortgagee as Agent. Mortgagee has been appointed to act as Agent by the other Secured Parties pursuant to the Indenture, the Notes Indenture and the Collateral Agreement. In acting hereunder, the Mortgagee shall be entitled to all of the rights, benefits, privileges, protections, indemnities and immunities provided to it under the Article XI of the Indenture, Article VII or the Notes Indenture and any similar provisions under any Other First Lien Agreement. Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of the Mortgaged Property) in accordance with the terms of the Indenture, the Notes Indenture, the Collateral Agreement and this Mortgage. Mortgagor and all other persons shall be entitled to rely on releases, waivers, consents, approvals, notifications and other acts of Mortgagee, without inquiry into the existence of required consents or approvals of the Secured Parties therefor.
Section 7.13 Recording Documentation To Assure Security. Mortgagor shall promptly, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any of the Mortgaged Property or to any property intended to be subject to the lien hereof or the security interests created hereby to be filed, registered and recorded in such manner and in such places as may be required by any present or future law and shall take such actions as shall be necessary in order to publish notice of and fully to protect the validity and priority of the liens, assignment, and security interests purported to be created upon the Mortgaged Property and the interest and rights of Mortgagee therein. Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. In the event Mortgagee advances any sums to pay the amounts set forth in the preceding sentence, such advances shall be secured by this Mortgage.
Section 7.14 Further Acts. Mortgagor shall, at the sole cost and expense of Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds,
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conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances which may be necessary to assure, perfect, convey, assign, mortgage, transfer and confirm unto Mortgagee, the property and rights hereby conveyed or assigned or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. In the event Mortgagor shall fail after written demand to execute any instrument or take any action required to be executed or taken by Mortgagor under this Section 7.14, Mortgagee may (but shall not be obligated to) execute or take the same as the attorney-in-fact for Mortgagor, such power of attorney being coupled with an interest and is irrevocable. Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. In the event Mortgagee advances any sums to pay the amounts set forth in the preceding sentence, such advances shall be secured by this Mortgage.
Section 7.15 Additions to Mortgaged Property. All right, title and interest of Mortgagor in and to all extensions, amendments, relocations, restakings, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by or released to Mortgagor or constructed, assembled or placed by Mortgagor upon the Land, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case without any further mortgage, conveyance, assignment or other act by Mortgagor, shall become subject to the Lien and security interest of this Mortgage as fully and completely and with the same effect as though now owned by Mortgagor and specifically described in the grant of the Mortgaged Property above, but at any and all times Mortgagor will execute and deliver to Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as may be required for the purpose of expressly and specifically subjecting the same to the Lien and security interest of this Mortgage.
Section 7.16 Relationship. The relationship of Mortgagee to Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes Indenture, any Other First Lien Agreement, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between Mortgagee and Mortgagor other than as lender and borrower and mortgagor and mortgagee.
Section 7.17 No Claims Against Mortgagee. Nothing contained in this Mortgage shall constitute any consent or request by Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof, nor as giving Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Mortgagee in respect thereof or any claim that any lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the lien hereof, except Permitted Liens.
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Section 7.18 Mortgagees Fees and Expenses; Indemnification.
(a) Mortgagor agrees that Mortgagee shall be entitled to reimbursement of its expenses incurred hereunder by the Mortgagor and Mortgagee and other indemnitees shall be indemnified by the Mortgagor, in each case of this clause (a), mutatis mutandis, as provided in Section 11.07 of the Indenture and any applicable provision of any Notes Indenture Document or Other First Lien Agreement.
(b) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby. The provisions of this Section 7.18 shall remain operative and in full force and effect regardless of the termination of this Mortgage, any other Note Document, any Notes Indenture Document or any Other First Lien Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Mortgage, any other Note Document, any Notes Indenture Document or any Other First Lien Agreement, or any investigation made by or on behalf of Mortgagee or any other Secured Party. All amounts due under this Section 7.18 shall be payable within fifteen days (or such longer period as the Trustee may agree) on written demand therefor.
Section 7.19 Jurisdiction; Consent to Service of Process.
(a) Mortgagor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Mortgagee, any Secured Party, or any Affiliate of the foregoing, in any way relating to this Mortgage, any other Note Document, any Notes Indenture Document, any Other First Lien Agreement or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Mortgage or in any other Note Document, any Notes Indenture Document or any Other First Lien Agreement shall affect any right that Mortgagee or any Secured Party may otherwise have to bring any action or proceeding relating to this Mortgage, any other Note Document, any Notes Indenture Document or any Other First Lien Agreement against Mortgagor or its properties in the courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Mortgage, the other Note Documents, any Notes Indenture Document or any Other First Lien
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Agreement in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Mortgage irrevocably consents to service of process in the manner provided for notices in Section 7.1. Nothing in this Mortgage will affect the right of any party to this Mortgage, any other Note Document, any Notes Indenture Document or any Other First Lien Agreement to serve process in any other manner permitted by law.
Section 7.20 Subject to Intercreditor Agreements. Notwithstanding anything herein to the contrary, (i) the Liens and security interests granted to the Mortgagee for the benefit of the Secured Parties pursuant to this Mortgage and (ii) the exercise of any right or remedy by the Mortgagee hereunder or the application of proceeds (including insurance and condemnation proceeds) of the Mortgaged Property are subject to the provisions of the Intercreditor Agreements to the extent provided therein. In the event of any conflict between the terms of the Intercreditor Agreements and the terms of this Mortgage, the terms of the applicable Intercreditor Agreement shall govern.
Section 7.21 Excluded Other First Lien Obligations. On or after the date hereof, Mortgagor may from time to time elect to exclude any Series of Other First Lien Obligations (as defined in the Collateral Agreement) from the Secured Obligations hereunder by delivering to the Collateral Agent a written notice identifying the Series to be excluded and stating that such Series shall be excluded from the Secured Obligations hereunder and certifying that such exclusion is permitted by the documents governing such Series, in which case such Series and the Other First Lien Obligations (as defined in the Collateral Agreement) thereunder shall, for all purposes of this Mortgage, not constitute Secured Obligations or Other First Lien Obligations (and shall be excluded from the definitions thereof and all derivative defined terms used herein), and shall not be secured by this Mortgage or otherwise subject to the terms hereof (it being understood that Mortgagor may execute and deliver a separate mortgage or other security agreement on the Mortgaged Property to secure such Series provided that such mortgage or other security agreement is made subject to the Intercreditor Agreements). Mortgagee agrees to execute any and all further documents, agreements and instruments (including amendments to this Mortgage) and take all such further actions that may be required or that Mortgagor may reasonably request, in each case in connection with any exclusion of Other First Lien Obligations (as defined in the Collateral Agreement) from the Secured Obligations hereunder pursuant to this Section 7.21.
ARTICLE VIII LOCAL LAW PROVISIONS
Section 8.1 Local Law Provisions. Notwithstanding anything to the contrary contained in this Mortgage but subject to the Intercreditor Agreements and to Section 5.18 of the Collateral Agreement, in the event of any conflict or inconsistency between the provisions of this Article 8 and the other provisions of this Mortgage, the provisions of this Article 8 will govern.
[LOCAL LAW PROVISIONS TO FOLLOW]
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IN WITNESS WHEREOF, Mortgagor has on the date set forth in the acknowledgement hereto, effective as of the date first above written, caused this instrument to be duly EXECUTED AND DELIVERED by authority duly given.
MORTGAGOR: |
[ ], | |
a [ ] |
By: |
| |
Name: | ||
Title: |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
STATE OF NEW YORK | ) | |||
) | ss: | |||
COUNTY OF NEW YORK | ) |
I, the undersigned, a notary public in and for said County and State aforesaid, DO HEREBY CERTIFY, that [ ], personally known to me to be the Secretary, of [ ], a [ ], personally known to me to be the person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such Secretary, he signed and delivered the said instrument of said corporation, pursuant to the authority given by the Board of Directors of said corporation a free and voluntary act, and as the free and voluntary act and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and official seal, this day of , 20 .
Signature of Notary
Commission expires , 20 .
[local counsel to advise on how to
conform to state law]
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
EXHIBIT A
LEGAL DESCRIPTION
Legal Description of premises commonly known as [COMMON NAME, IF ANY] and located at [INSERT ADDRESS]:
[to come from title policy]
Exh. A-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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EXHIBIT B
PERMITTED ENCUMBRANCES
Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked [Pro Forma Policy] issued by [Title Insurance Company], dated as of the date hereof and delivered to Mortgagee on the date hereof, bearing [Title Insurance Company] reference number [Title Number] relating to the real property described in Schedule A attached he
Exh. B-1
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.6
POMEGRANATE PARENT HOLDINGS, INC.
STOCK OPTION PLAN
(including amendments through February 28, 2018)
Section 1. Purpose
The Plan authorizes the Committee to provide employees or directors of the Company or its Affiliates, who are in a position to contribute to the long-term success of the Company or its Affiliates, with Options to acquire Shares in the Company. The Company believes that this incentive program will cause those individuals to increase their interest in the welfare of the Company and its Affiliates, and aid in attracting, retaining and motivating individuals of outstanding ability.
Section 2. Definitions
Capitalized terms used herein shall have the meanings set forth in this Section.
(a) | Affiliate means a Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. As used in this definition, the term control, including the correlative terms controlling, controlled by and under common control with, means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person. |
(b) | Apollo Investor means AP VIII Pomegranate Holdings, L.P., a Delaware limited partnership, or any other investment fund managed by Affiliates of Apollo Global Management LLC that acquires Shares. |
(c) | Board means the Board of Directors of the Company. |
(d) | Capital Stock of any Person means any and all shares, membership interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. |
(e) | Cause shall mean, with respect to Grantee who is also a participant in The Fresh Market Inc. Severance Plan, Cause within the meaning of such plan, and otherwise shall mean a finding by the Committee that the Grantee has (i) committed a felony or a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform his employment duties (other than by reason of a physical or mental impairment) or to implement the reasonable directives of |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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the Company (in each case which, if curable, is not cured within 30 days after notice thereof to the Grantee by the Committee), (iv) violated any material policy of the Company (which, if curable, is not cured within 30 days after notice thereof to the Grantee by the Committee), or (v) engaged in conduct that is materially injurious to the Company, monetarily or otherwise. |
(f) | Change in Control shall mean: |
(i) | any event occurs the result of which is that any Person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Apollo Investors, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act directly or indirectly, of more than 50% of the Voting Stock of the Company or any successor company thereto, including, without limitation, through a merger or consolidation or purchase of Voting Stock of the Company; provided that Affiliates of Apollo Global Management LLC do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a wholly owned subsidiary of such Person, shall not be treated as a Change in Control; or |
(ii) | the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its consolidated subsidiaries taken as a whole to any Person or group of related Persons other than to Apollo Investors. |
(g) | Code shall mean the Internal Revenue Code of 1986, as amended. |
(h) | Committee shall mean the Compensation Committee of the Board, unless a different committee is appointed by the Board to administer the Plan. |
(i) | Company shall mean Pomegranate Parent Holdings, Inc., a corporation organized under the laws of the State of Delaware. |
(j) | Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter, and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, and any subsidiary of any of the foregoing. |
(k) | Effective Date shall mean April 27, 2016. |
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(l) | Employee shall mean any individual that is providing services to the Company or any of its Affiliates as an employee or director. |
(m) | Exchange Act shall mean the Securities Exchange Act of 1934, as amended. |
(n) | Fair Market Value means, (i) with respect to Shares after an IPO, the closing price of the Shares on the primary national securities exchange on which such Shares are then traded, if any, on the trading day prior to the date as of which the Fair Market Value is to be determined, and (ii) in all other events, the amount determined by the Board of Directors in its good faith judgment using commonly accepted valuation techniques based upon the amount that would be recovered by the holder of such Shares if all of the assets of the Company were sold to a buyer in a single transaction at arms length and the proceeds from such transaction, as determined in good faith by the Board of Directors, were distributed in a liquidation of the Company pursuant to the Companys Certificate of Incorporation. |
(o) | Grant Letter shall mean a letter, certificate or other agreement accepted by the Grantee, evidencing the grant of an Option hereunder and containing such terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall approve. |
(p) | Grantee shall mean an Employee granted an Option under the Plan. |
(q) | IPO means the initial underwritten public offering of Shares by the Company or any selling securityholders pursuant to an effective registration statement filed by the Company with the Securities and Exchange Commission (other than (i) a registration relating solely to an employee benefit plan or employee stock plan, a dividend reinvestment plan, or a merger or a consolidation, (ii) a registration incidental to an issuance of securities under Rule 144A, (iii) a registration on Form S-4 or any successor form, or (iv) a registration on Form S-8 or any successor form) under the Securities Act). |
(r) | ISO shall mean any Option or portion thereof that meets the requirements of an incentive stock option under Section 422 of the Code, and that is designated by the Committee to be an ISO. |
(s) | Nonqualified Option shall mean any Option or portion thereof that is not an ISO. |
(t) | Options shall refer to options issued under and subject to the Plan. |
(u) | Permitted Transferee means (i) the Grantees spouse, (ii) any lineal ancestor or descendant (including by adoption and stepchildren) of the Grantee, (iii) any trust of which the Grantee is the controlling trustee and which is established solely for the benefit of any of the foregoing individuals, (iv) the estate of the Grantee established by reason of the Grantees death, or (v) any corporation, limited liability company or partnership, all of the interests of which are (or is) owned by one or more of the persons identified clause (i), (ii), (iii) or (iv). |
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(v) | Person means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity. |
(w) | Plan shall mean this Option Plan as set forth herein and as amended from time to time. |
(x) | Preferred Stock as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. |
(y) | Qualified Public Offering means an underwritten public offering of Shares by the Company or any selling securityholders pursuant to an effective registration statement filed by the Company with the Securities and Exchange Commission (other than (i) a registration relating solely to an employee benefit plan or employee stock plan, a dividend reinvestment plan, or a merger or a consolidation, (ii) a registration incidental to an issuance of securities under Rule 144A, (iii) a registration on Form S-4 or any successor form, or (iv) a registration on Form S-8 or any successor form) under the Securities Act of 1933, as amended, pursuant to which the aggregate offering price of the Shares sold in such offering by the Company and/or other selling securityholders (together with the aggregate offering prices from any prior such offerings) is at least $300 million. |
(z) | Securities Act means the Securities Act of 1933, as amended. |
(aa) | Share shall mean a share of common stock of the Company, par value $.01 per share. |
(bb) | Specified Conduct means, with respect to a Grantee who is party to any employment or other agreement containing covenants applicable following a Grantees termination of employment, a breach of any of such covenants, and otherwise means (i) unauthorized disclosure of confidential information relating to the Company or its Affiliates, (ii) directly or indirectly, without the prior written consent of the Company, engaging in or investing as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is primarily engaged in a Competing Business; provided, however, that this provision shall not prevent the Grantee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system, (iii) accepting employment with any Person that is directly or indirectly (including through an Affiliate) engaged in any manner in a Competing Business if such employment would result in the Grantee being involved in the |
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management, operations or business affairs of the Affiliate, division, segment or other portion of such Person that conducts such Competing Business, (iv) directly or indirectly (A) soliciting, recruiting or hiring any Person who is at such time, or who at any time during the 12-month period prior to such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with, the Company or any of its Affiliates, (B) soliciting or encouraging any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates, or (C) interfering with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates, or (v) directly or indirectly, interfering with, disrupting or attempting to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand. |
(cc) | Voting Stock of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity. |
Section 3. Shares Available under the Plan
Subject to the provisions of Section 7, the total number of Shares that may be issued under the Plan shall not exceed 6,300,000. If, prior to exercise, any awards are forfeited, lapse or terminate for any reason without the issuance of Shares, the Shares covered thereby may again be available for Option grants under the Plan.
Section 4. Administration of the Plan
(a) Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:
(i) to select the Employees to whom Options may be granted;
(ii) to determine the number of Shares subject to an Option;
(iii) to determine the terms and conditions of any Option granted under the Plan, including the purchase or exercise price, vesting and other conditions relating to exercise, and termination of the right to exercise;
(iv) to determine whether any Option shall be an ISO or a Nonqualified Option;
(v) to determine the restrictions or conditions related to the delivery, holding and disposition of Shares;
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(vi) to prescribe the form of each Grant Letter;
(vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Option, or Grant Letter or other instrument hereunder; and
(ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. Any action of the Committee within its authority with respect to the Plan shall be final, conclusive and binding on all Persons, including the Company, its Affiliates, Grantees, or any Person claiming any rights under the Plan from or through any Grantee, except to the extent the Committee may subsequently modify, or take further action not consistent with, its prior action. If not specified in the Plan, the time at which the Committee must or may make any determination shall be determined by the Committee, and any such determination may thereafter be modified by the Committee. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any Affiliate of the Company the authority, subject to such terms as the Committee shall determine, to perform such functions as the Committee may determine, to the extent permitted under applicable law.
(c) Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any of its Affiliates, the Companys independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. To the fullest extent permitted by applicable law, no member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on its behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.
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Section 5. Option Termination.
Unless otherwise determined by the Committee and set forth in a Grant Letter, Options shall terminate on the earliest of:
(a) the 91st day following the date the Grantee ceases to be an Employee for any reason; provided, however, that (i) in all cases the portion of any Option that did not vest prior to or upon the date of termination of employment or engagement with the Company or its Affiliates for any reason shall terminate immediately upon such termination, and (ii) if such termination is for Cause, the vested portion shall terminate as well;
(b) the seventh anniversary of the date of grant as set forth in the Grant Letter, or, with respect to Options granted upon or as soon as practicable after the Effective Date, the seventh anniversary of the Effective Date; and
(c) cancellation, termination or expiration of the Options pursuant to action taken by the Committee in accordance with Section 7.
Section 6. Exercise of Options
(a) Only the vested portion of any Option may be exercised. A Grantee shall exercise an Option by delivery of written notice to the Company setting forth the number of Shares with respect to which the Option is to be exercised, together with cash, a certified check or bank draft payable to the order of the Company, in amount equal to the sum of the exercise price for such Shares and any withholding tax obligation arising in connection with such exercise. The Committee may, in its sole discretion, permit other forms of payment, including notes or other contractual obligations of a Grantee to make payment on a deferred basis.
(b) Before the Company issues any Shares to a Grantee pursuant to the Plan, the Company shall have the right to require that the Grantee make such provision, or furnish the Company such authorization, necessary or desirable so that the Company may satisfy its obligation under applicable tax laws to withhold for income or other taxes due upon or incident to such issuance. The Committee may, in its discretion, permit such withholding obligation to be satisfied through the withholding of Shares that would otherwise be delivered to the Grantee.
(c) As a condition to the grant of an Option or delivery of any Shares upon exercise of an Option, (i) the Grantee shall make all customary investment representations and provide or execute such other documents as may be requested by the Company, and (ii) the Company shall have the right to require that the Grantee become party to any stockholders agreement then generally in effect on substantially the same terms as the minority stockholders party thereto then are subject to (excluding any additional economic benefits set forth therein), in which case the terms of any such agreement as to voting, drag-alongs, tag-alongs and similar matters shall take precedence over the terms of the Plan and any an Grant Letter to the extent of any inconsistency; provided that in no event shall any stockholder agreement modify the economic terms of any Option or Shares issued to a Grantee under the Plan.
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Section 7. Adjustment Upon Changes in Capitalization
In the event any recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange or issuance of Shares or other securities, any stock dividend or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, or other similar transactions or events, affects the Shares, then the Committee shall make such equitable adjustment as it determines is appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, including adjustment in (i) the number and kind of Shares deemed to be available thereafter for grants of Options under Section 3, (ii) the number and kind of Shares that may be delivered or deliverable in respect of outstanding Options, and (iii) the exercise price of Options. In addition, the Committee is authorized to make such adjustments as it shall in its sole discretion determine are appropriate in the terms and conditions of, and the criteria included in, Options (including, without limitation, cancellation of Options in exchange for the in-the-money value, if any, of the vested portion thereof, which may be paid in such form of consideration to be received by holders of Stock or such other consideration as the Committee shall determine, cancellation of unvested and/or out-of-the-money Options for no consideration, substitution of Options using securities of a successor or other entity, acceleration of the time that Options expire, or adjustment of performance targets or the manner in which they are calculated) in recognition of unusual or nonrecurring events (including, without limitation, a Change in Control or an event described in the preceding sentence) affecting the Company, any Affiliate of the Company or the financial statements of the Company or any Affiliate of the Company, or in response to changes in applicable laws, regulations or accounting principles. Without limiting the foregoing, as a condition to receipt of any consideration in respect of an Option in connection with a Change in Control, the Committee may require that the Grantee execute a release of claims, become a party to all or a part of the definitive transaction agreement effecting the Change in Control, become party to a non-competition or similar agreement, and/or become party to an indemnification agreement, provided that any indemnification obligation shall not exceed the proceeds received by the Grantee with respect to the Option.
Section 8. Restrictions on Issuing Shares.
No Shares shall be issued or transferred to a Grantee unless and until all applicable legal requirements have been complied with to the satisfaction of the Committee. If, at the time a Grantee attempts to exercise an Option (or portion thereof), such exercise would not be in compliance with any applicable law, the Committee may, in its discretion, either preclude such exercise, or cancel such Option (or such portion thereof) in exchange for a payment from the Company in an amount equal to the difference between the then Fair Market Value of the Shares subject to such Option (or such portion thereof) and the aggregate exercise price thereof, less applicable withholding taxes. Such payment may be made in the form of cash, Shares, or combination thereof, and any such payment in Shares
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shall be deemed an issuance of Shares under the Plan, including Section 9 below. The Committee shall also have the right to condition the acquisition of Shares on the Grantees undertaking in writing to comply with such restrictions on any subsequent disposition of the Shares as the Committee shall deem necessary or advisable as a result of any applicable law, regulation, official interpretation thereof, or any underwriting agreement.
Section 9. Rights/Restrictions on Shares.
Except as set specifically forth in a Grant Letter:
(a) Transfer Restrictions. Except for transfers made pursuant to Sections 9(b), (c) or (d) below, Shares issued to a Grantee pursuant to the Plan may not be sold, pledged, encumbered or otherwise transferred, other than to a Permitted Transferee. Any such Permitted Transferee shall be subject to all the terms and conditions of the Plan and Grant Letter, including the provisions of this Section 9, and where required by the context, the term Grantee as used under the Plan shall mean such Permitted Transferee.
(b) Repurchase Right. Unless otherwise determined in a Grant Letter, during the one year period following a Grantees ceasing to be an Employee for any reason, or, if later, the date the Grantee acquires Shares under the Plan, the Company shall have the right (but not the obligation) to repurchase all of the Shares issued under the Plan and then held by the Grantee at the time the Company exercises such right. During such period, the Company may exercise its repurchase right more than once, provided that when it exercises such right, it must apply to all of the Shares then held by the Grantee. The price per Share to be paid by the Company should it choose to exercise its repurchase right shall equal the Fair Market Value per Share, provided, however, if the Shares are to be repurchased following a termination for Cause, or if, prior to such repurchase the Grantee engages in Specified Conduct, then the price per Share to be paid by the Company shall not exceed (i) the price per Share paid by the Grantee, less (ii) any dividend or other distribution per Share previously paid (or dividend or distribution equivalent paid in respect of Shares subject to an Option). The price per Share to be paid by the Company should it choose to exercise its repurchase right shall be paid in cash or by plain check against delivery of certificates representing the repurchased Shares; provided that, if such payment would result in a default or breach on the part of the Company or any subsidiary under any loan or other agreement, then payment shall be deferred until the first business day that it may occur without any such default or breach existing or resulting. The Company may offset against the payment of the repurchase price any amounts owed by the Grantee to the Company or any Affiliate of the Company. Should the Company choose not to exercise its repurchase right, or is otherwise prohibited by law or contract from doing so, the Apollo Investors may exercise such right as if they were the Company but in such case there shall be no payment deferral.
(c) Drag-Along Right. If the Company or one or more Apollo Investors notifies a holder of Shares issued under the Plan that it or they desires to sell Shares in a transaction constituting a Change in Control and specifies the terms and conditions of such proposed transfer, then such holder shall take all necessary and desirable actions
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reasonably requested by the Company or such Apollo Investors in connection with the consummation of such sale, and within ten (10) business days of the receipt of such notice (or such longer period of time as such shall be designated in such notice) such holder shall cause a pro rata number of his Shares to be sold to the designated purchaser on the same terms and conditions for the same per share consideration and at the same time as the Shares being sold by such Apollo Investors. In furtherance, and not in limitation, of the foregoing, in connection with such a sale, such holder will, (i) consent to and raise no objections against the sale or the process pursuant to which it was arranged, (ii) waive any dissenters rights and other similar rights and (iii) execute all documents containing such terms and conditions as those executed by such Apollo Investors as directed by such Apollo Investors, provided that any liability of all of the selling stockholders to the purchaser for indemnification obligations shall be borne by each of them on a pro rata basis determined according to the number of Shares sold by each of them, and in any case shall not exceed the proceeds received as consideration for such sale.
(d) Tag-Along Right. If one or more Apollo Investors desires to sell Shares that, after taking into account all prior sales of Shares by Apollo Investors, represent at least 40% of the outstanding Shares of the Company (disregarding any sale to Affiliates of such Apollo Investor, who shall continue to be subject to the provisions of this Section 9(d)), then such one or more Apollo Investors shall give written notice of such pending sale to all holders of Shares or of a vested portion of an Option issued under the Plan. Within ten (10) business days after receipt of written notice of such impending sale, a holder of Shares or vested options issued under the Plan may, but is not obligated to, by written notice, request that such Apollo Investor cause such designated purchaser to purchase on the same terms and conditions as are applicable to such Apollo Investors Shares, the number of such holders Shares to be sold including any Shares obtained through the exercise of a vested portion of an Option in the manner described in this Plan prior to the pending sale, which as a percentage of such holders Shares shall not exceed the percentage of such Apollo Investors Shares to be sold. The Company shall cause such Apollo Investor to agree, within ten (10) business days of the receipt of such notice (or such longer period of time as such Apollo Investor shall designate in such notice) to cause such holders Shares to be purchased by the designated purchaser on the same terms and conditions for the same per share consideration and at the same time as the sale of the Apollo Investors Shares. In furtherance, and not in limitation, of the foregoing, in connection with such a sale, such holder will, (i) consent to and raise no objections against the sale or the process pursuant to which it was arranged, (ii) waive any dissenters rights and other similar rights and (iii) execute all documents containing such terms and conditions as those executed by such Apollo Investor as directed by such Apollo Investor.
(e) Voting. Each holder of Shares issued under the Plan shall be deemed to have irrevocably appointed Apollo Management VIII, L.P. on behalf of certain affiliated co-investment partnerships (with full power of substitution), as such holders proxy and attorney-in-fact (in such capacity, the Proxy Holder) to vote and give or withhold consent, with respect to all Shares held by such stockholder at any time, for all matters subject to the vote of such holder from time to time in such manner as the Proxy Holder shall determine in its sole and absolute discretion, whether at any meeting (whether annual
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or special and whether or not an adjourned meeting) of the Company or by written consent or otherwise, giving and granting to the Proxy Holder all powers such holder would possess if personally present and hereby ratifying and confirming all that the Proxy Holder shall lawfully do or cause to be done by virtue hereof. The Proxy Holder shall not have any liability to any holder of Shares as a result of any action taken or failure to take action pursuant to the foregoing proxy except for any action or failure to take action not taken or omitted in good faith or which involves intentional misconduct or a knowing violation of applicable law. The Company acknowledges the validity of the foregoing irrevocable proxy, and agrees to recognize the Proxy Holder as the sole attorney and proxy for each such holder of Shares at all times.
(f) Lapse of Certain Provisions. Subsection (d) above shall lapse upon an IPO, subsections (b) and (c) above shall lapse upon a Qualified Public Offering, and the restrictions in paragraph (a) shall lapse as set forth in a Grant Agreement; provided, however, that unless otherwise determined by the Committee, each Grantee shall enter into such standstill agreements and related agreements as the managing underwriters of any public offering may request.
(g) Certificates for Shares. Shares issued under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Shares are registered in the name of a Grantee, such certificates may bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Shares, and the Company may retain physical possession of the certificates, in which case the Grantee shall be required to have delivered a power of transfer to the Company, endorsed in blank, relating to the Shares.
(h) Third Party Beneficiaries Rights. Apollo Investors and their Affiliates shall be third party beneficiaries under subsections (b) and (c), and Apollo Management VIII, L.P. shall be a third party beneficiary under subsection (e), and they each shall be entitled to enforce their rights thereunder as to any Grantee.
Section 10. General Provisions
(a) Grant Letter. Each award under the Plan shall be evidenced by a Grant Letter. The terms and provisions of such Grant Letters may vary among Grantees and among different awards granted to the same Grantee.
(b) No Right to Employment. The grant of an award under the Plan in any year shall not give the Grantee any right to similar grants in future years, any right to continue such Grantees employment relationship with the Company or its Affiliates, or, with respect to an Option, until the Option is exercised and Shares are issued, any rights as a stockholder of the Company. All Grantees shall remain subject to discharge to the same extent as if the Plan were not in effect. For purposes of the Plan, a Grantee shall cease to be an Employee upon a sale of any subsidiary of the Company that employs or engages such Grantee, unless the Grantee shall otherwise continue to provide services to the Company or another subsidiary of the Company as an employee or director.
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(c) No Funding. No Grantee, and no beneficiary or other Persons claiming under or through the Grantee, shall have any right, title or interest by reason of any award under the Plan to any particular assets of the Company or Affiliates of the Company, or any Shares allocated or reserved for the purposes of the Plan or subject to any Option except as set forth herein. The Company shall not be required to establish any fund or make any other segregation of assets to assure satisfaction of the Companys obligations under the Plan.
(d) No Transfers. No Option may be sold, transferred, assigned, pledged or otherwise encumbered, except by will or the laws of descent and distribution, and an Option shall be exercisable during the Grantees lifetime only by the Grantee. Upon a Grantees death, the estate or other beneficiary of such deceased Grantee shall be subject to all the terms and conditions of the Plan and Grant Letter, including the provisions relating to the termination of the right to exercise an Option.
(e) Governing Law; Jurisdiction. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Each Grantee, and each beneficiary or other Person claiming under or through the Grantee by accepting the grant of an Option consents to the exclusive jurisdiction of any state or federal court located within the State of Delaware, agrees that all actions or proceedings relating to the Plan shall be litigated in such courts, waives any defense of forum non conveniens, and agrees to be bound by any final and nonappealable judgment rendered thereby in connection with the Plan. To the extent the Grantee is a party to an employment agreement with the Company or any of its Affiliates that provides for binding arbitration of employment disputes, then any disputes between the Company and such Grantee arising under the Plan shall be arbitrated in accordance with the procedures set forth in such employment agreement, and the award of the arbitrator may be confirmed in any state or federal court having jurisdiction over the location in which the arbitration hearing was held.
Section 11. Amendment or Termination
In addition to its authority elsewhere in the Plan, the Committee may, at any time, amend or terminate the Plan or any Grant Letter; provided, however, that, no such action shall adversely affect the rights of any Grantee in any material respect with respect to Options previously granted hereunder or under such Grant Letter.
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Exhibit 10.8
TFM Severance Plan Adopted 10/22/19
THE FRESH MARKET, INC.
SEVERANCE PLAN1
SECTION 1. Purpose. The purpose of this Severance Plan (this Plan) is to promote the interests of The Fresh Market, Inc. (the Company) and its stockholders by retaining certain management-level employees through the provision of severance protections to such employees in the event their employment is terminated under the circumstances described in this Plan.
SECTION 2. Definitions. For purposes of this Plan, the following terms shall have the meanings set forth below unless otherwise defined in the Pomegranate Parent Holdings, Inc. Stock Option Plan, as may be amended from time to time, or a successor plan (the Option Plan):
(a) Affiliate means, a Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. As used in this definition, the term control, including the correlative terms controlling, controlled by and under common control with, means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.
(b) Annual Base Salary means, with respect to any Participant, such Participants annual rate of base salary in effect immediately prior to such Participants Termination Date (excluding any reduction thereto that constitutes Good Reason).
(c) Benefit Continuation Period means, as of the Participants Termination Date, if a Participant is (i) the Chief Executive Officer (CEO), absent any other written agreement signed by the CEO and the Company, twenty-four (24) months; (ii) an Executive Vice President or a Senior Vice President, eighteen (18) months; (iii) a Group Vice President, fifteen (15) months; and (iv) a Vice President, twelve (12) months.
(d) Board means the Executive Board of Directors of the Company.
(e) Cause means, with respect to any Participant, the occurrence of any one of the following:
(i) the Parti cipants willful and continued failure to perform substantially his or her duties with the Company or any of its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness);
(ii) the Participants willful misconduct or gross negligence that is materially and demonstrably injurious to the financial reputation or good will of the Company or any of its Affiliates;
(iii) the Participants commission of (A) a felony or (B) any crime that the Company reasonably believes will result in material injury to the financial reputation or good will of the Company or any of its Affiliates;
1 | Note that this Severance Plan will dictate severance benefits other than in relation to equity which is being issued by an indirect parent of the Company. The equity award agreement with the Companys indirect parent will control. |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(iv) the Participants breach of any fiduciary duty or duty of loyalty to the Company or any of its Affiliates, including embezzlement, fraud, or misappropriation of funds;
(v) the Participants material breach of any written agreement with the Company or any of its Affiliates (including the Employment Agreement entered into between the Participant and the Company (an Employment Agreement) or any restrictive covenants between the Participant and the Company or any Affiliates);
(vi) the Participants willful breach of any material provision of the Companys Code of Business Conduct and Ethics or any other material provision of a written Company policy; or
(vii) the Participants failure to cooperate with an investigation by any governmental authority.
For the purposes of this provision, no act or failure to act on the Participants part shall be considered willful unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participants action or omission was in the best interests of the Company. The Company may terminate a Participants employment for Cause pursuant to clause (i), (ii), (v), (vi) or (vii) above only after giving the Participant written notice of the specific circumstances that constitute Cause and if the Participant fails to cure the circumstances that gave rise to Cause within 30 days following delivery of such notice. All determinations relating to a termination of a Participants employment for Cause shall be made by the Company in its sole discretion; provided that, during the Protection Period, a termination of a Participants employment for Cause shall not be effective unless and until there has been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (excluding, if applicable, the Participant) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Participant and the Participant is given an opportunity, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Participant has acted or failed to act in a manner described in clause (i), (ii), (v), (vi), or (vii) above and specifying the particulars thereof in detail.
(f) Change in Control shall mean:
(i) any event occurs the result of which is that any Person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Apollo Investors(defined below), becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act directly or indirectly, of more than 50% of the Voting Stock of the Company or any successor company thereto, including, without limitation, through a merger or consolidation or purchase of Voting Stock of the Company; provided that Affiliates of Apollo Global Management LLC do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a wholly owned subsidiary of such Person, shall not be treated as a Change in Control; or
(ii) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its consolidated subsidiaries taken as a whole to any Person or group of related Persons other than to Apollo Investors. As used herein, Apollo Investor means AP VIII Pomegranate Holdings, L.P., a Delaware limited partnership, or any other investment fund managed by Affiliates of Apollo Global Management LLC that acquires Shares.
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(g) Change in Control Date means the date on which a Change in Control occurs.
(h) Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and the regulations promulgated thereunder, as in effect from time to time.
(i) Disability means, with respect to any Participant, that the Participant becomes eligible to receive income replacement benefits under any long-term disability plan covering employees of the Company or its Affiliates.
(j) ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute thereto, and the regulations promulgated thereunder as in effect from time to time.
(k) Exchange Act means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute thereto, and the regulations promulgated thereunder as in effect from time to time.
(l) Excise Tax means the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such tax.
(m) Executive Officer means executive officer as defined in Rule 3b-7 promulgated under the Exchange Act.
(n) Fair Market Value means:
(i) with respect to Shares after an IPO, the closing price of the Shares on the primary national securities exchange on which such Shares are then traded, if any, on the trading day prior to the date as of which the Fair Market Value is to be determined; and
(ii) in all other events, the amount determined by the Board of Directors in its good faith judgment using commonly accepted valuation techniques based upon the amount that would be recovered by the holder of such Shares if all of the assets of the Company were sold to a buyer in a single transaction at arms length and the proceeds from such transaction, as determined in good faith by the Board of Directors, were distributed in a liquidation of the Company pursuant to the Companys Certificate of Incorporation.
(o) Good Reason means the occurrence of any of the events or circumstances set forth below without a Participants express prior written consent and other than as a result of the Participants Disability:
(i) the failure of the Company to pay the Participant any material compensation when due;
(ii) the delivery by the Company of a notice to the Participant of the intent to terminate the Participants employment for any reason, other than for Cause or Disability, in each case in accordance with this Plan, regardless of whether such termination is intended to become effective during or after the term of this Plan;
(iii) a material reduction of the Participants Base Salary that similarly affects substantially all Executive Officers of the Company and its Affiliates, and other than any such reduction that results from a demotion of the Participant into a position that the Participant occupied within the six (6) months immediately prior to such demotion;
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(iv) any change of the Participants principal place of employment to a location more than 50 miles from the Participants principal place of employment immediately prior to the change, which change increases the Participants commute from the Participants principal residence;
(v) a material reduction in the Participants target annual bonus, that similarly affects substantially all Executive Officers of the Company and its Affiliates; or
(vi) any material adverse change unilaterally dictated by the Company in the Participants positions, duties, responsibilities or reporting relationships from the Participants positions, duties, responsibilities or reporting relationships, or any unilateral assignment to the Participant by the Company of duties or responsibilities that are materially inconsistent in an adverse respect with the Participants positions.
The Participants right to terminate employment for Good Reason shall not be affected by the Participants incapacity due to physical or mental illness. A termination of employment by the Participant for Good Reason shall be effectuated by giving the Company written notice (Notice of Termination for Good Reason), not later than 90 days following the date that the Participant would reasonably be expected to be aware of the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provisions of this Plan on which the Participant relied. The Company shall be entitled, during the 30-day period following receipt of a Notice of Termination for Good Reason, to cure the circumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive its right to cure or reduce the cure period by delivery of written notice to that effect to the Participant (such 30-day or shorter period, the Cure Period). If, during the Cure Period, such circumstance is remedied, the Participant shall not be permitted to terminate employment for Good Reason as a result of such circumstance. If, at the end of the Cure Period, the circumstance that constitutes Good Reason has not been remedied, the Participant shall be entitled to terminate employment for Good Reason during the five (5) day period that follows the end of the Cure Period (the Termination Period). If the Participant does not terminate employment during the Termination Period, the Participant shall not be permitted to terminate employment for Good Reason as a result of such circumstance.
(p) Payment means any payment, benefit or distribution by the Company, any of its Affiliates or any trust established by the Company or its Affiliates, to or for the benefit of a Participant, whether paid, payable, distributed, distributable or provided pursuant to this Plan or otherwise, including any payment, benefit or other right that constitutes a parachute payment within the meaning of Section 280G.
(q) Protection Period means the period commencing on the Change in Control Date and ending on the second anniversary thereof.
(r) Section 280G means Section 280G of the Code.
(s) Section 409A means Section 409A of the Code.
(t) Severance Bonus Value means (i) with respect to any Participant who has a target annual bonus for the calendar year in which such Participants Termination Date occurs, such target annual bonus (excluding any reduction thereto that constitutes Good Reason), or (ii) with respect to any
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Participant who does not have a target annual bonus for the calendar year in which such Participants Termination Date occurs, the average of the regular annual cash bonuses actually paid to such Participant in the three (3) calendar years immediately prior to the calendar year in which such Termination Date occurs or such lesser number of calendar years during which such Participant was employed by the Company; provided that with respect to any such calendar year during which such Participants regular annual cash bonus was prorated because such Participant was not employed by the Company for the full calendar year, the regular annual cash bonus paid to such Participant for such calendar year shall be annualized for purposes of determining such Participants Severance Bonus Value.
(u) Severance Multiple means, with respect to any Participant: (i) if the Participant is the CEO as of the Participants Termination Date, absent any other written agreement signed by the CEO and the Company, 2; (ii) if the Participant is an Executive Vice President or Senior Vice President as of the Participants Termination Date, 1.5; (iii) if the Participant is a Group Vice President as of the Participants Termination Date, 1.25; and (iv) if the Participant is a Vice President as of the Participants Termination Date, 1; provided that, for the purpose of this definition, any change in title or position prior to such Termination Date that would constitute Good Reason shall be disregarded.
(v) Shares means shares of common stock of the Company, $0.01 par value, or such other securities of the Company into which such shares shall be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar transaction.
(w) Termination Date means the date on which the termination of a Participants employment, in accordance with the terms of this Plan, is effective.
SECTION 3. Eligibility. The participants in this Plan (Participants) are those employees whose title includes, as of the date of adoption of the Severance Plan, Vice President, Senior Vice President, Group Vice President, Executive Vice President, Companys President, and, absent any other written agreement signed by the CEO and the Company, Chief Executive Officer.
SECTION 4. Termination of Employment at Any Time Other Than During the Protection Period by the Company Without Cause or by the Participant for Good Reason. Subject to Section 7, if a Participants employment is terminated either (x) by the Company or any of its Affiliates other than for Cause, death or Disability or (y) by resignation of the Participant with Good Reason, in each case, at any time other than during the Protection Period but other than in the circumstances described in Section 6, then the Participant shall be entitled to the following payments and benefits; provided that no such payments and benefits shall be paid to the Participant until the Participants termination of employment qualifies as a separation from service (within the meaning of Section 409A):
(a) Severance Pay. The Company shall pay the Participant in an amount equal to the product of (i) the Participants Severance Multiple and (ii) the Participants Annual Base Salary (the Salary Multiple), payable in equal monthly installments over a number of years equal to the Severance Multiple, beginning on the 61st day following the Participants Termination Date; provided that such amount (or any portion thereof) may, at the Companys discretion, be payable in a lump-sum payment under the separation pay plan exception specified in Treas. Reg. § 1.409A-1(b)(9) (limited to up to $560,000 in separation pay in 2019, but which amount may increase or decrease annually pursuant to the Code) on the 61st day following such Termination Date, to the extent that such payment does not result in penalties or additional taxes under Section 409A. If any partial lump-sum payment of such amount is made pursuant to this Section 4(a), the remaining amount shall be paid, in the Companys discretion, in either equal monthly installments over the remaining number of years equal to the Severance Multiple or in such other payment manner as allowable by applicable law.
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(b) Prorated Annual Bonus. The Company shall pay the Participant an amount equal to the product of (i) the annual cash bonus the Participant would have received under the annual incentive plan in which the Participant participates immediately prior to the Participants Termination Date with respect to the calendar year in which such Termination Date occurs had he or she been actively employed throughout the entire such calendar year and (ii) a fraction, the numerator of which is the number of days that the Participant was actively employed by the Company in such calendar year, and the denominator of which is 365, in a lump-sum payment on the later of (A) the 61st day following such Termination Date and (B) the date payments under such plan are made with respect to such calendar year to participants who remain actively employed by the Company or its Affiliates throughout the remainder of such calendar year.
(c) COBRA Continuation Benefits. To the extent that a Participant was participating in the Companys medical, vision, and/or dental benefits plan (Benefits Plan) on the Termination Date and subject to the Participants timely election of continued benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), the Company will pay a portion of the Participants COBRA premiums (including coverage for the Participants eligible dependents, if applicable) (the COBRA Premiums) until the earliest of (i) the last day of the Benefit Continuation Period, (ii) the date the Participant first becomes eligible for medical, vision, and/or dental coverage with a subsequent employer, or (iii) the date the Participant is no longer eligible under COBRA. The amount of the COBRA Premium paid by the Company will be equal to the employer portion of the premium for the level of coverage under the Companys Benefits Plan selected by the Participant immediately prior to the Termination Date. The Participant will be solely responsible for the remaining portion of the COBRA Premium. The Benefit Continuation Period shall run concurrently with the eighteen-month COBRA continuation period. After the Benefit Continuation Period and during the remainder of the COBRA continuation period (if applicable), a Participant may continue COBRA continuation coverage at his or her sole expense. Notwithstanding the foregoing, if at any time the Company determines that the payment of COBRA Premiums would result in a violation of applicable law (including the 2010 Patient Protection and Affordable Care Act, as amended), then in lieu of paying COBRA Premiums, the Company shall pay such Participant on the last day of each remaining month of the Benefit Continuation Period, a fully taxable cash payment equal to the COBRA Premium for such month. Nothing in this Section 4(c) shall operate to reduce, or be construed as reducing, the Participants group health plan continuation rights under COBRA in any manner.
(d) Accrued Rights. The Participant shall be entitled to payments of any unpaid annual base salary, annual bonus or other amounts earned or accrued through the Participants Termination Date (the rights to such payments, the Accrued Rights). The Accrued Rights shall be payable on their respective scheduled payment dates.
SECTION 5. Termination of Employment During the Protection Period by the Company Without Cause or by the Participant for Good Reason. Subject to Section 7, if a Participants employment is terminated either (x) by the Company or its Affiliates other than for Cause, death or Disability or (y) by resignation of the Participant with Good Reason, in each case, during the Protection Period, then the Participant shall be entitled to the following payments and benefits; provided that no such payments and benefits shall be paid to the Participant until the Participants termination of employment qualifies as a separation from service (within the meaning of Section 409A):
(a) Severance Pay. The Company shall pay the Participant (i) the Salary Multiple, payable in equal monthly installments over a number of years equal to the Severance Multiple, beginning on the 61st day following the Participants Termination Date; provided that such amount (or any portion thereof) may, at the Companys discretion, be payable in a lump-sum payment under the separation pay plan exception specified in Treas. Reg. § 1.409A-1(b)(9) (limited to up to $560,000 in separation pay in
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2019, but which amount may increase or decrease annually pursuant to the Code) on the 61st day following such Termination Date to the extent that such payment does not result in penalties or additional taxes under Section 409A, and (ii) an amount equal to the product of (A) the Participants Severance Multiple and (B) the Participants Severance Bonus Value (the amount described in this clause (ii), the Bonus Multiple), payable in a lump-sum payment on the 61st day following such Termination Date. . If any partial lump-sum payment of such amount is made pursuant to this Section 5(a), the remaining amount shall be paid, in the Companys discretion, in either equal monthly installments over the remaining number of years equal to the Severance Multiple or in such other payment manner as allowable by applicable law.
(b) Prorated Annual Bonus. The Company shall pay the Participant an amount equal to the product of (i) the annual cash bonus the Participant would have received under the annual incentive plan in which the Participant participates immediately prior to the Participants Termination Date with respect to the calendar year in which such Termination Date occurs had he or she been actively employed throughout the entire such calendar year and (ii) a fraction, the numerator of which is the number of days that the Participant was actively employed by the Company in such calendar year, and the denominator of which is 365, in a lump-sum payment on the later of (A) the 61st day following such Termination Date and (B) the date payments under such plan are made with respect to such calendar year to participants who remain actively employed by the Company or its Affiliates throughout the remainder of such calendar year.
(c) COBRA Continuation Benefits. The Participant shall be entitled to the COBRA Continuation Benefits, subject to the conditions set forth in Section 4(b) above.
(d) Accrued Rights. The Participant shall be entitled to the Accrued Rights, payable on the terms set forth in Section 4(d).
SECTION 6. Anticipatory Termination. If (a) a Participants employment is terminated by the Company without Cause within the six (6) months immediately prior to the Change in Control Date or (b) an action is taken with respect to a Participant within the six (6) months immediately prior to the Change in Control Date that would constitute Good Reason, and the Participant reasonably demonstrates that such termination or action (i) was at the request of a third party that had indicated an intention or taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with, or in anticipation of, a Change in Control that has been threatened or proposed, so long as such Change in Control actually occurs, then, subject to Section 7, (A) the Company shall pay the Participant the Bonus Multiple, payable in a lump-sum payment on the later of (x) the 61st day following the Participants Termination Date and (y) the Change in Control Date, and (B) to the extent that such payment does not result in penalties or additional taxes under Section 409A, any unpaid installments of the Salary Multiple owing to the Participant pursuant to Section 4(a) shall be accelerated and paid in a lump sum on the later of (x) the 61st day following such Termination Date and (y) the Change in Control Date. If any such termination or action occurs while an agreement is pending and the effective provisions of such agreement provide for a transaction or transactions that if consummated would constitute a Change in Control, then such termination or action shall be deemed to have occurred in connection with a Change in Control.
SECTION 7. Release of Claims. Notwithstanding any provision of this Plan to the contrary, if the Company provides a Participant with a Separation Agreement and Release in the form of Exhibit A within five days of the Participants Termination Date, then, unless on or prior to the 60th day following such Termination Date, (i) the Participant shall have executed and delivered such release and (ii) such release shall have become effective and irrevocable in accordance with its terms, (A) no payments shall be paid or made available to the Participant under Section 4(a), 5(a), or 6 and (B) the Company shall be relieved of all obligations to provide or make available any further benefits to the Participant pursuant to Section 4(b) or 5(b).
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Restrictive Covenants. Notwithstanding any provision of this Plan to the contrary, if a Participant (a) violates any of his or her obligations in his or her Employment Agreement in a manner that is materially and demonstrably injurious to the Company or any of its Affiliates, (b) breaches any restrictive covenants between the Participant and the Company or any of its Affiliates, or (c) a Participant challenges or contests the reasonableness, validity or enforceability of any limitations or obligations contained in his or her Employment Agreement, then the Company shall be relieved of all obligations to provide or make available any further payments or benefits to the Participant pursuant to this Plan. The foregoing shall not prejudice the Companys or any of its Affiliates other rights or remedies under applicable law or equity. In addition, the Company and a Participant agree that if the Participant violates any restrictive covenant, the Company may (i) cease payment of any amounts otherwise due under Section 4 or 5 above (other than Accrued Rights) and/or (ii) recoup any amounts otherwise due under Section 4 or 5 above (other than Accrued Rights) that were previously paid or provided to the Participant.
SECTION 9. Other Termination. If a Participants employment is terminated in any circumstance not described in Section 4, 5 or 6 (including as a result of death or Disability), the Participant shall not be entitled to any compensation or benefits from the Company under this Plan.
SECTION 10. Tax Matters. (a) Withholding. The Company will deduct and withhold from any amounts payable under this Plan such Federal, state, local, foreign or other taxes as are required to be withheld pursuant to any applicable law or regulation.
(b) Effect of Sections 280G and 4999 of the Code. Anything in this Plan to the contrary notwithstanding, in the event it shall be determined that any Payment to or in respect of a Participant would be subject to the Excise Tax, then the Payments shall be reduced (but not below zero) but only to the extent that such reduction in the Payments would result in the Participant retaining a larger amount, on an after-tax basis (including all Federal, state, local and other income taxes and the Excise Tax), than if the Participant received the entire amount of such Payments. The Company shall reduce or eliminate the Payments in the following order: (1) the portion of the Payments that is attributable to any accelerated vesting of options to purchase Shares with a per Share exercise price greater than the Fair Market Value per Share on the Change in Control Date (Underwater Options), (2) cash payments that do not constitute deferred compensation (within the meaning of Section 409A), (3) equity-based awards other than Underwater Options, (4) welfare or in-kind benefits and (5) cash payments that do constitute deferred compensation, in each case in reverse order beginning with payments or benefits that are to be paid the farthest in time from the Determination (as defined below). The determination of whether the Payments shall be reduced as provided in this Section 10(b) and the amount of such reduction shall be made at the Companys expense by the Companys accounting firm or tax firm (the Accounting Firm), which shall provide its determination (the Determination), together with detailed supporting calculations and documentation, to the Company and the Participant within 30 business days after the Participants Termination Date and, if the Participants employment is terminated in the circumstances described in Section 6, within 30 business days after the Change in Control Date. If the Accounting Firm determines that no Excise Tax is payable by the Participant with respect to the Payments, it shall furnish the Participant with an opinion reasonably acceptable to the Participant that no Excise Tax will be imposed with respect to any Payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Participant. If any Payment to a Participant, including those made in connection with or contingent on a change in ownership or control, would be deemed to be an excess parachute payment within the meaning of Section 280G of the Code (Excess Parachute Payment), and if the Company has no publicly-traded stock, the Company, with the consent of the
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Participant, will use commercially reasonable efforts to obtain shareholder approval within the meaning of Section 280G(b)(5) of the Code of such payments or benefits in order to exempt such payments or benefits from being considered an Excess Parachute Payment. A Participants consent to shareholder approval shall include a waiver by the Participant of any such payments or benefits that are not approved by the shareholders.
(c) Section 409A of the Code. (i) It is intended that the provisions of this Plan comply with Section 409A, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.
(ii) No Participant nor any creditors or beneficiaries of any Participant shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Plan or under any other plan, policy, arrangement or agreement of or with the Company or any of its Affiliates (this Plan and such other plans, policies, arrangements and agreements, the Company Plans) to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to a Participant or for a Participants benefit under any Company Plan may not be reduced by, or offset against, any amount owing by the Participant to the Company or any of its Affiliates.
(iii) Each installment payment payable to a Participant provided for in any Company Plan shall be deemed to be a separate payment within the meaning of Treas. Reg. Section 1.409A-2(b)(iii) or any successor thereto.
(iv) To the extent required by Section 409A, any amount payable under a Company Plan that constitutes deferred compensation (within the meaning of Section 409A) subject to, and not exempt from, Section 409A, payable or provided to a Participant upon a termination of employment shall only be paid or provided to the Participant upon the Participants separation from service (within the meaning of Section 409A). If, at the time of a Participants separation from service, (A) the Participant is a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (B) the Company shall make a good faith determination that an amount payable under a Company Plan constitutes deferred compensation 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 taxes or penalties under Section 409A, then the Company (or its Affiliate, as applicable) shall not pay such amount on the otherwise scheduled payment date but shall instead accumulate such amount and pay it on the first business day after such six-month period, together with interest, at the prime rate then in effect at Bank of America or any successor thereto.
(v) Except as specifically permitted by Section 409A, the benefits and reimbursements provided to the Participant under any Company Plan during any calendar year shall not affect the benefits and reimbursements to be provided to the Participant under the relevant section of such Company Plan in any other calendar year, and the right to such benefits and reimbursements cannot be liquidated or exchanged for any other benefit and shall be provided in accordance with Treas. Reg. Section 1.409A-3(i)(1)(iv) or any successor thereto. Further, in the case of reimbursement payments, such payments shall be made to the Participant on or before the last day of the calendar year following the calendar year in which the underlying fee, cost or expense is incurred.
(vi) The Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on the Participant or for the Participants account in
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
connection with any Company Plan (including any taxes and penalties under Section 409A), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes or penalties.
SECTION 11. Miscellaneous. (a) Duration; Termination; Amendment; Modification. This Plan shall become effective upon the date of its adoption by the Board (the Effective Date). The Board may amend or modify this Plan (including Exhibit A) at any time. Notwithstanding the foregoing but subject to Section 8, beginning on the date of a Change in Control and ending twenty-four (24) months after the date of a Change in Control (and, with respect to a specific Participant, until the last payments are made under Sections 5 and 6 of this Plan with respect to that Participant), except to the minimum extent required to comply with any applicable law, this Plan may not be (i) amended or modified in any manner that decreases the payments or benefits payable to any Participant or otherwise adversely affects any Participants economic rights or (ii) terminated, in each case, without such Participants prior written consent; provided, however, that Sections 5 and 6 of this Plan shall only be effective with respect to the first Change in Control that occurs following the Effective Date and the Participants shall not be entitled to any payments or benefits pursuant to Section 5 or 6 of this Plan with respect to any subsequent Change in Control.
(b) No Waiver. The failure of a Participant to insist upon strict adherence to any term of this Plan on any occasion shall not be considered a waiver of such Participants rights or deprive such Participant of the right thereafter to insist upon strict adherence to that term or any other term of this Plan. No failure or delay by any Participant in exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(c) Severability. If any term or provision of this Plan is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Plan shall nonetheless remain in full force and effect.
(d) Survival. The provisions of this Plan shall survive and remain binding and enforceable, notwithstanding the expiration or termination of the Protection Period or this Plan, the termination of a Participants employment with the Company for any reason or any settlement of the financial rights and obligations arising from a Participants participation hereunder, to the extent necessary to preserve the intended benefits of such provisions.
(e) Neutral Reference. The Company agrees that if anyone inquires of the Company for an employment reference regarding Participants employment with the Company, the only information given in response will be dates of employment and the positions held.
(f) Future Employment. Participant agrees not to apply or seek employment with the Company for the number of weeks Participant is receiving severance benefits as outlined in the Severance Plan. This provision will constitute a complete bar to any claims that Participant may have should Participant apply for employment with the Company during such time period and not be hired.
(g) Disputes. (i) Except as otherwise specifically provided herein, all disputes, controversies and claims arising between the Company and any Participant concerning the subject matter of this Plan shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims set forth in the Participants Employment Agreement.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11(g)(i), to the extent permitted by applicable law, by participating in this Plan, each Participant irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Plan.
(h) No Mitigation or Offset; Enforcement of this Plan. The Companys obligation to make the payments provided for in this Plan and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against any Participant or others. In no event shall any Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and, except as otherwise expressly provided for in this Plan, such amounts shall not be reduced whether or not the Participant obtains other employment.
(i) Relation to Other Plans. Nothing in this Plan shall prevent or limit a Participants continuing or future participation in any plan, practice, policy or program provided by the Company or any Affiliate thereof for which the Participant may qualify, nor shall anything in this Plan limit or otherwise affect any rights the Participant may have under any contract or agreement with the Company or any Affiliate thereof. Vested benefits and other amounts a Participant is otherwise entitled to receive under any incentive compensation (including any equity award agreement), deferred compensation, retirement, pension or other plan, practice, policy or program of, or any contract or agreement with, the Company or any Affiliate thereof shall be payable in accordance with the terms of each such plan, practice, policy, program, contract or agreement, as the case may be. Notwithstanding the foregoing provisions of this Section 11(i), the amounts payable under this Plan shall be paid in lieu of, and by participating in this Plan the Participant waives the right to receive, any cash severance payment that the Participant is otherwise eligible to receive upon termination of employment under any other severance plan, practice, policy or program of the Company or any Affiliate thereof.
(j) Successors. This Plan shall bind any successor (a Successor) to all or substantially all of the business or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would have been obligated under this Plan if no such succession had taken place. In the case of any transaction in which a Successor would not, pursuant to the foregoing provision or by operation of law, be bound by this Plan, the Company shall require such Successor expressly and unconditionally to assume and agree to perform the Companys obligations under this Plan, in the same manner and to the same extent that the Company would have been required to perform such obligations if no such succession had taken place. The term Company, as used in this Plan, shall mean the Company as hereinbefore defined and any Successor and any assignee to such business or assets that by reason hereof becomes bound by this Plan.
(k) Default in Payment. Any payment not made within ten business days after it is due in accordance with this Plan shall thereafter bear interest, compounded annually, at the prime rate in effect from time to time at Bank of America or any successor thereto.
(l) Governing Law and Venue. This Plan shall be deemed to be made in the State of North Carolina, and, to the extent not preempted by ERISA, the validity, interpretation, construction and performance of this Plan in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief, the parties expressly consent to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and a Participant waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court.
(m) Headings and References. The headings of this Plan are inserted for convenience only and neither constitute a part of this Plan nor affect in any way the meaning or interpretation of this Plan. When a reference in this Plan is made to a Section, such reference shall be to a Section of this Plan unless otherwise indicated.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(n) Construction. For purposes of this Plan, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(o) Notices. All notices or other communications required or permitted by this Plan will be made in writing and all such notices or communications will be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. | |
628 Green Valley Road, Suite 500 | ||
Greensboro, North Carolina 27408 | ||
Attention: General Counsel | ||
With a copy to: | Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | |
Riverfront Plaza - West Tower | ||
901 East Byrd Street, Suite 1300 | ||
Richmond, VA 23219 | ||
Attention: Elizabeth Ebanks, Esq. | ||
If to the Participant: | The Participants address as most recently supplied to the Company and set forth in the Companys records |
or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
Adopted by the Board of Directors of The Fresh Market, Inc. as of October 22, 2019.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
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EXHIBIT A
SEPARATION AGREEMENT AND RELEASE
I. Release. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, with the intention of binding himself/herself, his/her heirs, executors, administrators and assigns, does hereby release and forever discharge The Fresh Market, Inc., a Delaware corporation (the Company), and its present and former subsidiaries and affiliates, together with their present and former officers, directors, executives, agents, employees, successors, predecessors and assigns (collectively, the Released Parties), from any and all claims, actions, causes of action, demands, rights, damages, debts, accounts, suits, expenses, attorneys fees and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown (collectively, the Claims), which the undersigned now has, owns or holds, or has at any time heretofore had, owned or held against any Released Party, arising out of or in any way connected with the undersigneds employment relationship with the Company, its subsidiaries, predecessors or affiliates, or the termination thereof, under any Federal, state or local statute, rule, or regulation, or principle of common, tort or contract law, including, but not limited to, the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201 et seq., the Family and Medical Leave Act of 1993, as amended (the FMLA), 29 U.S.C. §§ 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq., the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq., and any other equivalent or similar Federal, state, or local statute; provided, however, that nothing herein shall release the Company of (i) its obligations under that certain Severance Plan of the Company in which the undersigned participates (including the Accrued Rights (as defined therein)) and (ii) any director and officer indemnification or insurance obligations in favor of the undersigned. The undersigned understands that, as a result of executing this Separation Agreement and Release, he/she will not have the right to assert that the Company or any other Released Party unlawfully terminated his/her employment or violated any of his/her rights in connection with his/her employment or otherwise.
The undersigned affirms that he/she has not filed or caused to be filed, and is not presently a party to, any Claim, complaint or action against any Released Party in any forum or form and that he/she knows of no facts that may lead to any Claim, complaint or action being filed against any Released Party in any forum by the undersigned or by any agency or group. The undersigned further affirms that he/she has been paid and/or has received all leave (paid or unpaid), compensation, wages, bonuses and/or benefits to which he/she may be entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, and/or benefits are due to him/her from the Company and its subsidiaries, except as specifically provided in this Separation Agreement and Release. The undersigned furthermore affirms that he/she has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested under the FMLA. If any agency or court assumes jurisdiction of any such Claim, complaint or action against any Released Party on behalf of the undersigned, the undersigned will request such agency or court to withdraw the matter.
The undersigned further declares and represents that he/she has carefully read and fully understands the terms of this Separation Agreement and Release and that he/she has been advised and had the opportunity to seek the advice and assistance of counsel with regard to this Separation Agreement and Release, that he/she may take up to and including [21][45] days from receipt of this Separation Agreement and Release, to consider whether to sign this Separation Agreement and Release, that he/she
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
may revoke this Separation Agreement and Release within seven calendar days after signing it by delivering to the Company written notification of revocation, and that he/she knowingly and voluntarily, of his/her own free will, without any duress, being fully informed and after due deliberate action, accepts the terms of and signs the same as his own free act.
II. Protected Rights. The Company and the undersigned agree that nothing in this Separation Agreement and Release is intended to or shall be construed to affect, limit or otherwise interfere with any non-waivable right of the undersigned under any Federal, state or local law, including the right to file a charge or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (EEOC) or to exercise any other right that cannot be waived under applicable law. The undersigned is releasing, however, his/her right to any monetary recovery or relief should the EEOC or any other agency pursue Claims on his/her behalf. Further, should the EEOC or any other agency obtain monetary relief on his/her behalf, the undersigned assigns to the Company all rights to such relief.
III. Severability and Incorporation. If any term or provision of this Separation Agreement and Release is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Separation Agreement and Release shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Separation Agreement and Release is not affected in any manner materially adverse to any party. Further, to the extent not otherwise addressed in this Separation Agreement and Release, the Severance Plan adopted October 22, 2019 and incorporated by reference herein shall govern the rights, responsibilities and obligations of the parties.
IV. GOVERNING LAW. THIS SEPARATION AGREEMENT AND RELEASE SHALL BE DEEMED TO BE MADE IN THE STATE OF NORTH CAROLINA, AND THE VALIDITY, INTERPRETATION,CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Effective on the eighth calendar day following the date set forth below.
THE FRESH MARKET, INC. | ||
By |
| |
Name: | ||
Title: | ||
EMPLOYEE, | ||
| ||
[NAME] | ||
Date | ||
Signed: |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.9
ML&B Draft 1/20/20
BY EMAIL
January 22, 2020
Jason Potter
jason.nelsonhbs@gmail.com
Dear Jason:
This letter confirms our offer to you of employment with The Fresh Market, Inc. (the Company) on the following terms and conditions:
1. | Employment. You will serve as President and Chief Executive Officer of the Company (CEO), commencing on the date when you obtain authorization to work in the United States in accordance with paragraph 9(a) below, which we expect will occur by March 1, 2020 (the Commencement Date). As President and CEO, you will report to the Board of Directors of the Company (the Board), and perform such duties consistent with your position as President and CEO and as otherwise directed by the Board. You will be employed on a full-time, exclusive basis, and your employment will be based at the headquarters in Greensboro, North Carolina. For so long as you are President and CEO, you will also be appointed to serve as a member of the Board. As an executive officer of the Company, you will be subject to all of the Companys policies. |
2. | Base Salary. Your annual rate of base salary (the Base Salary) will be $750,000, payable in accordance with the Companys regular payroll practices. Your Base Salary will be reviewed from time to time by the Board. |
3. | Annual Incentive Compensation. You will be eligible to participate in the Companys annual incentive compensation plan, as may be amended from time to time (the AIP). Your target incentive under the AIP will be 100% of your Base Salary (the Target Bonus). Your actual bonus will be based on achievement levels of same store sales, EBITDA or other performance metrics approved by the Board under the AIP in consultation with you at the start of each fiscal year (or, for 2020, as soon as practicable after the Commencement Date). Any bonus payment will be conditional on your remaining employed on the bonus payment date. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
4. | Equity-Based Incentive Compensation. Upon or as soon as practicable after the Commencement Date, you will be granted options (the Options) to purchase 2,793,296 shares of Pomegranate Parent Holdings, Inc., the Companys parent company (Parent) at an exercise price per share of $1.05 pursuant to Parents Stock Option Plan (the Option Plan), attached as Exhibit A, and the form of grant letter attached as Exhibit B. The Options will vest upon the earlier of a Change in Control or IPO (each as defined in the Option Plan). The Options will have an outside term of 7 years. The Options and shares issued upon exercise of the Options will be subject to the terms of the Option Plan and the option grant letter. |
5. | Relocation; Starting Bonus. You agree to relocate your principal residence to the Greensboro, North Carolina area within six months of the Commencement Date. To help you defray the costs of temporary housing in, and relocation to, the Greensboro, North Carolina area, you will be entitled to a starting bonus of $100,000, payable with the first payroll coincident with or next following the Commencement Date. You will not be entitled to any further relocation benefits under the Companys relocations policies or otherwise. If during the 12 month period following the Commencement Date, your employment with the Company is terminated by the Company for Cause, as provided in paragraph 7(c) below, or by you without Good Reason, as provided in paragraph 7(d) below, you will promptly repay to the Company the full amount of the starting bonus you received pursuant to this paragraph 5. |
6. | Employee Benefit Plans. You will participate in the Companys employee benefit plans, from time to time in effect, and generally available for the Companys senior executives, subject to plan terms and applicable Company policies. You will receive four weeks of vacation each year. |
7. | Termination of Employment. |
a. | Death. Your employment will terminate upon your death. Your beneficiaries will be entitled to (i) any earned but unpaid Base Salary, to be paid within 10 days of your termination of employment, (ii) any amounts accrued and payable under the terms of any of the Companys written benefit plans or agreements (payable in accordance with such plan or agreement), and (iii) reimbursement of any unreimbursed business expenses properly incurred during the Employment Period (collectively the Accrued Obligations). All of the Options, to the extent not vested, will terminate upon such termination of employment. |
b. | Disability. The Company may terminate your employment by reason of your Disability. Disability means a finding by the Company that you have been unable to perform your essential job functions, with or without a reasonable accommodation, by reason of a physical or mental impairment for a period of 90 days within a period of 180 consecutive days. If the Company determines in good faith that your Disability has occurred, it will give you notice of its intention to terminate your employment (the Notice of Intention to Terminate). If within thirty (30) days of the Notice of Intention to Terminate, you do not |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
return to full-time performance of your responsibilities, your employment will terminate. If you do return to full-time performance in that thirty (30) day period, the Notice of Intention to Terminate will be cancelled under this Employment Agreement. Upon such termination, you will be entitled to the Accrued Obligations. The timing of the payment of the Accrued Obligations will be in accordance with paragraph 7(a). The Company agrees that termination by reason of your Disability shall not adversely impact your eligibility for benefits under any Company long term disability plan in which you participate. All of the Options, to the extent not vested, will terminate upon such termination of employment. |
c. | Termination by the Company for Cause. The Company may terminate your employment for Cause with or without notice. Cause means that you have (i) been convicted in court or by a governmental agency with (x) a felony, or (y) a misdemeanor involving moral turpitude, (ii) committed an act of fraud or embezzlement against the Company or its subsidiaries, (iii) materially breached this agreement or breached the Restrictive Covenant Agreement and such breach has continued after you have been provided written notice thereof by the Company and a 30 day period to cure, to the extent curable, (iv) materially violated any written policy of the Company resulting in material injury to the Company or its subsidiaries, monetarily or otherwise, (v) materially failed, refused or neglected to (x) substantially perform your duties (not measured by economic performance and other than by reason of a physical or mental impairment) or (y) use best efforts to implement the directives of the Company (not measured by economic performance and other than by reason of a physical or mental impairment) that are consistent with your position, and such failure, refusal or neglect has continued after you have been provided written notice thereof by the Company and an adequate opportunity to cure, or (vi) willfully engaged in misconduct resulting in material injury to the Company or its subsidiaries, monetarily or otherwise. Upon termination for Cause, you will be entitled only to the Accrued Obligations. The timing of the payment of the Accrued Obligations will be in accordance with paragraph 7(a). All of the Options, whether or not vested, will terminate upon such termination of employment. |
d. | Termination by You. You may terminate your employment with or without Good Reason. If such termination is without Good Reason, you agree to provide 30 days written notice to the Company. Upon such termination you will be entitled only to the Accrued Obligations. The timing of the payment of the Accrued Obligations will be in accordance with paragraph 7(a). In order to terminate your employment for Good Reason, you must first provide written notice to the Company of the circumstances that you believe constitute Good Reason within 30 days of their first occurrence, and then provide the Company an opportunity to remedy such circumstances within 30 days of such notice. Assuming such circumstances in fact constitute Good Reason, if the Company fails to remedy such circumstances within such 30 day period, you may resign your employment for Good Reason within 15 days thereafter. For purposes |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
hereof, Good Reason means (i) the Companys material breach of its obligations under this agreement, (ii) a material reduction of your Base Salary, (iii) a material and adverse diminution of your duties and authority as President and CEO, and (iv) a relocation of the Companys principal office by more than 50 miles. Upon such termination you will be entitled to the amounts set forth in paragraph 7(e) below as if your employment was terminated by the Company without Cause, subject to the conditions set forth therein. All of the Options, to the extent not vested, will terminate upon such termination of employment. |
e. | Termination by the Company without Cause. Subject to the terms and conditions set forth herein, the Company may terminate your employment for any or no reason upon giving you 30 days written notice (or pay in lieu of such notice). If such termination is not for Cause and not by reason of your death or Disability, then, in addition to the Accrued Obligations, and in lieu of any other severance benefits otherwise payable under any Companys Severance Plan or any other severance policy, and any other damages payable in connection with such termination, you will be entitled to continued payment of your Base Salary for a period equal to 12 months, payable over the 12-month period following such termination on the Companys regularly scheduled monthly pay dates ( subject to the remaining provisions of this paragraph 7(e)) (the Severance Benefits). Your right to the Severance Benefits shall be conditional upon (x) your compliance with the Restrictive Covenant Agreement and (y) your execution and non-revocation of a customary release of claims in favor of the Company and its affiliates, in a form to be provided by the Company (the Release). You must execute the Release within forty-five (45) days following the date of the termination of your employment. The first payment of continued Base Salary pursuant to this paragraph 7(e) shall be made on the effective date of the Release as set forth in this paragraph 7(e), provided that, if termination of your employment occurs within forty-five (45) days before the end of the calendar year, the first payment will be made on the later of (I) the effective date of the Release as set forth in this paragraph 7(e) or (II) January 2 of the year following the year in which termination of your employment occurs, and provided further that the first payment shall include any amounts that would have otherwise been due from the date of termination to the date of first payment. The timing of the payment of the Accrued Obligations will be in accordance with paragraph 7(a). All of the Options, to the extent not vested, will terminate upon such termination of employment. |
8. | Restrictive Covenants. Your acceptance of this offer and commencement of employment will be conditioned upon your execution of the Restrictive Covenant Agreement in the form attached as Exhibit C. |
9. | Conditions to Employment. |
a. | Immigration Compliance. As a condition to your employment by the Company, you will be required to present documentation establishing your identity and demonstrating that you have authorization to work in the United States, and this |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
offer and your employment is contingent upon the appropriate employment visa being filed with and approved by the United States Citizenship and Immigration Services (the USCIS). The Company will provide reasonable assistance in connection with your application for a visa. If you have not provided such documentation to the Companys satisfaction by March 15, 2020, the Companys offer of employment will become void, and neither you nor the Company will have any obligations hereunder, provided that you agree to maintain the confidentiality of the terms of this agreement and the exhibits, and comply with the confidentiality provisions contained in the Restrictive Covenant Agreement. |
b. | References and Background Check. Your employment is contingent upon satisfactory completion of all pre-employment and post-employment processing and background screening. You agree to provide your consent for the Company or a third party designated by the Company to conduct a background check. You represent that all information provided or that you may provide to the Company or its agents with regard to your background check was or will be true, complete and correct. |
c. | No Conflicts. You further represent to the Company that your acceptance of employment and performance of services with the Company is not and will not be prohibited by, and does not and will not result in a breach under, any agreement to which you are or were a party. |
10. | At Will Employment. Your employment and compensation with the Company are at will meaning that either the Company or you can terminate your employment at any time and for any or no reason. The terms of this letter, therefore, do not and are not intended to create either an express and/or implied contract of employment. |
11. | IRC 409A. This offer is intended to comply with the short-term deferral rule under Treasury Regulation Section 1.409A-1(b)(4) and be exempt from Section 409A of the Internal Revenue Code, and shall be construed and interpreted in accordance with such intent. If any provision contained in this offer conflicts with the requirements of Section 409A (or the exemptions intended to apply under this offer), the Company and you agree to enter into an amendment to this offer to cause it to comply with the requirements of Section 409A (or the applicable exemptions thereto) and to deliver to you the intended economic benefits described herein. In no event, however, shall the Company be required to provide any form of gross-up payment to you for any taxes imposed by Section 409A. Neither you nor any of your creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this offer letter or under any other plan, policy, arrangement or agreement of or with the Company or any of its affiliates (this offer letter and such other plans, policies, arrangements and agreements, the Company Plans) to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to you or for your benefit under any Company Plan may not be reduced by, or offset against, any amount owing by you to the Company or any of its affiliates. Except as specifically permitted by Section 409A, |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the benefits and reimbursements provided to you under any Company Plan during any calendar year will not affect the benefits and reimbursements to be provided to you under the relevant section of such Company Plan in any other calendar year, and the right to such benefits and reimbursements cannot be liquidated or exchanged for any other benefit and will be provided in accordance with Section 409A and its associated regulations. Further, in the case of reimbursement payments, such payments will be made to you on or before the last day of the calendar year following the calendar year in which the underlying fee, cost or expense is incurred. |
12. | Withholding. The Company shall have the right to withhold from any amount payable to you hereunder an amount necessary in order for the Company to satisfy any withholding tax obligation it may have under applicable law. |
13. | Entire Agreement. This letter, together with the Restrictive Covenant Agreement and the applicable Company plan documents and policies, constitute the complete and exclusive agreement between us regarding your employment and supersede any prior term sheet, representations or promises, whether written or oral. In the event of any conflict between this letter and the Restrictive Covenant Agreement, the terms of this letter will govern and control. This letter may only be amended or modified in a written agreement signed by you and a person authorized to act on behalf of the Board. This offer is governed by North Carolina law. |
We look forward to your employment with the Company. Please indicate your acceptance of this letter by signing where indicated below and returning an executed copy to me at your earliest convenience.
Very truly yours, |
THE FRESH MARKET, INC. |
|
Name: Andrew Jhawar |
Title: Chairman of the Board |
AGREED AND ACCEPTED: |
|
Jason Potter |
|
Date: | 22/Feb/20 | |||||
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this Agreement), dated as of August , 2020, (the Effective Date) between The Fresh Market, Inc., a Delaware corporation (the Company), and James Heaney (the Employee).
WHERAS, the Company desires to retain the services and employment of the Employee on behalf of the Company, upon the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company seeks to provide the Employee with an opportunity to participate in The Fresh Market, Inc. Severance Plan adopted October 22, 2019 (the Severance Plan), which is incorporated herein by reference; and
WHEREAS, as a condition of the services and employment contemplated by the parties, including participation in the Severance Plan, the Company has required that the Employee enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, all capitalized terms not defined herein shall have the meanings specified in the Severance Plan.
SECTION 2. Employment; Duties. On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Employee, and the Employee hereby agrees to accept such employment, for the Employment Term (as defined below). The Employee warrants and represents that the Employee will not be in breach of any obligation owed to a third party by becoming employed by or working for the Company. During the Employment Term, the Employee shall serve as the Chief Financial Officer of the Company and shall report to the Chief Executive Officer of the Company (CEO), or designated CEO, performing the duties and responsibilities commensurate with the position assigned to the Employee with respect to the business of the Company and such other duties and responsibilities that may be assigned to the Employee from time to time.
SECTION 3. Performance. The Employee shall serve the Company faithfully and to the best of the Employees ability and shall devote his or her full business time, energy, experience and talents to the business of the Company, and will not engage in any other employment activities for any direct or indirect remuneration without the written approval of the Chief Executive Officer (CEO); provided that it shall not be a violation of this Agreement for the Employee to manage his or her personal investments, engage in or serve such civic, community, charitable, educational, or religious organizations or institutions as the Employee may select so long as such service does not create an actual or potential conflict of interest with, or interfere with the performance of, the Employees job, duties or obligations to the Company or conflict with the Employees covenants under Section 7 of this Agreement, in each case, as determined in the sole judgment of the Board of Directors of the Company (the Board as defined in the Severance Plan to be the Executive Board of Directors of the Company).
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 4. Employment Term. The Employees employment under this Agreement shall commence as of the Effective Date and shall continue in effect unless earlier terminated as set out in Section 6 below. The Employees period of employment under this Agreement shall be referred to as the Employment Term.
SECTION 5. Compensation.
(a) Base Salary. During the Employment Term, the Employee shall be entitled to receive an annual base salary of Five Hundred Thousand and no/100 Dollars ($500,000.00) (Base Salary). Base Salary shall be paid in accordance with Companys ordinary payroll practices and internal policies generally applicable to Company employees and subject to such deductions, withholdings and other taxes as required by law or as otherwise permissible under such practices or policies.
(b) Annual Bonus. During the Employment Term starting with fiscal year 2020, the Employee will be eligible to receive an annual bonus opportunity targeted at Seventy-five Percent (75%) of Employees Base Salary under and subject to the terms and conditions of the Companys annual incentive compensation plan.
(c) Long-Term Incentives. During the Employment Term, the Employee will be eligible to receive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (or any successor plan) (the Option Plan). The Board may, in its sole discretion, grant equity awards from time to time under the Option Plan and any awards will be subject to the terms and conditions of the Option Plan and any applicable award documents.
(d) Employee Benefits. During the Employment Term, the Employee will be eligible to participate in the employee benefit plans and programs (including being entitled to Paid Annual Leave) generally available to Company employees as may be in effect from time to time and subject to the eligibility requirements of the plans and programs. Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plan or program from time to time as it deems appropriate.
(e) Company Policies. The Employee agrees and acknowledges that he or she will be subject to, and will comply with, all Company policies and procedures.
SECTION 6. At-Will Employment; Termination of Employment.
(a) At-Will Employment. This Agreement does not constitute a guarantee of employment for any specific period of time, and the Employment Term with the Company is at will. Either the Employee or the Company may terminate the Employees employment at any time, without cause or notice, subject to the provisions of this Section 6. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. The Employees right to any compensation following a termination shall be only as set forth in the Severance Plan.
(b) Termination of Employment by the Employee. Notwithstanding Section 6(a) above, except as otherwise provided in the Severance Plan for a resignation of employment for Good Reason, the Employee may terminate his or her employment at any time, upon not less than thirty (30) days prior written notice to the Company (the Notice Period). At any time during the Notice Period, the CEO may (in his or her sole and absolute discretion) (i) relieve the Employee of the Employees duties and responsibilities (in whole or part), (ii) place the Employee on paid leave-of-absence status, (iii) impose conditions with respect to attending or remaining away from the Companys place(s) of business, or (iv) accelerate the Employees termination date, in which case the Company shall pay the applicable amount of the Employees Base Salary in a lump sum for the remainder of the Notice Period.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Termination of Employment by the Company. The Company may terminate the Employees employment without Cause or for Disability, upon written notice to the Employee, subject to applicable law. The Company may terminate the Employees employment for Cause in accordance with the terms of the Severance Plan. If the Employee dies while employed by the Company, all obligations of both parties will immediately terminate (except as set forth herein or in the Severance Plan).
(d) Severance Benefits. The Employees right to any severance benefits following a termination of employment shall be only as set forth in the Severance Plan.
SECTION 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. (i) The Company and the Employee agree that, during the course of the Employment Term with the Company, the Employee has had and will continue to have access to, and has gained and will continue to gain knowledge with respect to, Confidential Information. The Employee agrees that the Employee shall not, without the prior written consent of the Company, during the period of the Employment Term with the Company and thereafter for so long as it remains Confidential Information to the greatest extent permitted by applicable law, use or disclose, or knowingly permit any unauthorized Person to use, disclose or gain access to, any Confidential Information; provided, however, that the Employee may disclose Confidential Information (x) to a Person to whom the disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employees employment, (y) as required by law or (z) as ordered by a court, provided that in any event described in the preceding clause (y) or (z), (A) the Employee shall promptly notify the Company in writing, and consult with and assist the Company (at the Companys sole cost) in seeking a protective order or request for another appropriate remedy, (B) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms of the preceding clause (A), the Employee shall disclose only that portion of the Confidential Information that, in the written opinion of the Employees legal counsel, is legally required to be disclosed and shall exercise reasonable best efforts to assure that confidential treatment shall be accorded to such Confidential Information by the receiving Person or entity and (C) to the extent permitted by applicable law, the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof. As requested by the Company from time to time and upon termination of the Employment Term with the Company, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form (including electronic), of all Confidential Information in the Employees possession or control irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that all such materials have been so delivered.
(ii) Without limiting the foregoing, the Employee agrees to keep confidential the existence of, and any information concerning, any dispute between the Employee and the Company or any of its Affiliates, except that the Employee may disclose information concerning such dispute to the court considering such dispute or to the Employees legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of such dispute).
(iii) For purposes of this Agreement, Confidential Information means information, observations and data concerning the business and affairs of the Company or any of its Affiliates, including all business information (whether or not in written form) that relates to the Company or any of its Affiliates, or their directors, officers, employees, customers, suppliers or contractors or any other third parties with respect to which the Company or any of its Affiliates has a business relationship or owes a duty of confidentiality, or their respective businesses or products, and that is not known to the public
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
generally other than as a result of the Employees breach of this Agreement, including technical information or reports; trade secrets; unwritten knowledge and know-how; operating instructions; training manuals; customer lists, if applicable; customer buying records and habits; product sales records and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information shall not include such information known to the Employee prior to the Employees involvement with the Company or any of its Affiliates or information rightfully obtained from a third party (other than pursuant to a breach by the Employee of this Agreement or any other duty of confidentiality).
(b) Noncompetition and Nonsolicitation. (i) Within the Geographic Territory and during the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the applicable period described in this Section 7(b)(i), the Noncompetition Period), the Employee shall not:
(A) directly or indirectly, without the prior written consent of the Company, engage in or invest as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is engaged primarily in a Competing Business; provided, however, that this provision shall not prevent the Employee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system; or
(B) accept employment with any Person that is engaged in any manner in a Competing Business if such employment would result in the Employee being involved in the management, operations or business affairs of the subsidiary, division, segment or other portion of such Person that conducts such Competing Business;
For purposes of this Agreement, Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, Lowes Foods and any subsidiary of any of the foregoing if such subsidiary performs the same or substantially similar services as the Company.
For purposes of this Agreement, Geographic Territory means (a) any state within the contiguous United States of America where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, (b) any province or territory within Canada where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, and (c) any standard metropolitan statistical area (as defined by the U.S. Census Bureau) where the Company has a business office, retail location or distribution center or has taken substantial steps toward the development of a new business office, retail location or distribution center at the time of the Employees termination. Clauses (a), (b) and (c) are separate and independent territories, and, notwithstanding Section 11(h), the use of the term or in this definition shall be interpreted in the disjunctive.
(ii) During the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the Nonsolicitation Period), the Employee shall not, directly or indirectly, without the prior written consent of the Company, (A) actively solicit, recruit or hire any Person who is at such time, or who at any time during the 12-month period prior to such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Company or any of its Affiliates, (B) actively solicit or encourage any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates or (C) intentionally interfere with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates.
(iii) During the Nonsolicitation Period, the Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand.
(iv) The Noncompetition Period and the Nonsolicitation Period shall be tolled during (and shall be deemed automatically extended by) any period during which the Employee is in violation of the provisions of this Section 7(b).
(v) In the event that a court of competent jurisdiction determines that any provision of this Section 7(b) is invalid or more restrictive than permitted under the governing law of such jurisdiction, then, only as to enforcement of this Section 7(b) within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(c) Nondisparagement. The Employee shall not, directly or indirectly, whether in writing or orally, criticize, denigrate or disparage the Company or any of its Affiliates, its predecessors and successors, or any of the current or former directors, officers, employees, stockholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that this provision shall not restrict the Employees ability to make truthful statements in good faith in response to any governmental inquiry or request for information or otherwise when required by legal process to do so.
(d) Return of Propertv. The Employee acknowledges that all documents, records, files, lists, equipment, computer, software or other property (including intellectual property) relating to the businesses of the Company or any of its Affiliates, in whatever form (including electronic), and all copies thereof, that have been or are received or created by the Employee while an employee of the Company or any of its Affiliates (including Confidential Information) are and shall remain the property of the Company and its Affiliates, and the Employee shall immediately return such property to the Company upon the termination of the Employment Term and, in any event, at the Companys request. The Employee further agrees that any property situated on the premises of, and owned by, the Company or any of its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Companys personnel at any time with or without notice.
(e) Cooperation. The Employee agrees that, upon reasonable notice and without the necessity of the Companys obtaining a subpoena or court order, the Employee shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation or defense of any claims asserted against the Company or any of its Affiliates, that relates to events occurring during the Employment Term with the Company as to which the Employee may have relevant information (including furnishing relevant information and materials to the Company or its designee and providing testimony at depositions and at trial), provided that the Company shall reimburse the Employee for expenses reasonably incurred in connection with any such cooperation occurring after the termination of the Employment Term and provided further that any such cooperation occurring after the termination of the Employment Term shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Employees business or personal affairs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Remedies and Injunctive Relief. The Employee acknowledges that a violation by the Employee of any of the covenants contained in this Agreement would cause irreparable damage to the Company and its Affiliates in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to injunctive relief (including temporary restraining orders, preliminary injunctions and permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in this Agreement in addition to any other legal or equitable remedies it may have. The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all such rights shall be unrestricted.
SECTION 9. Acknowledgments.
(a) The Employee acknowledges that the Company and its Affiliates have expended and will continue to expend substantial amounts of time, money and effort to develop business strategies, employee and customer relationships and goodwill to build an effective organization. The Employee acknowledges that the Company has a legitimate business interest in and right to protect its Confidential Information, goodwill and employee and customer relationships, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its customer and employee relationships. The Employee further acknowledges that the Company and its Affiliates are entitled to protect and preserve the going concern value of the Company to the extent permitted by law.
(b) In light of the foregoing acknowledgments, the Employee agrees that the covenants contained in this Agreement are reasonable and properly required for the adequate protection of the businesses and goodwill of the Company and its Affiliates. The Employee further acknowledges that, although the Employees compliance with the covenants contained in this Agreement may temporarily impact the Employee from earning a livelihood in a business similar to the business of the Company, the Employees experience and capabilities are such that the Employee has other opportunities to earn a livelihood and adequate means of support for the Employee and the Employees dependents.
(c) Prior to execution of this Agreement, the Employee was advised by the Company of the Employees right to seek independent advice from an attorney of the Employees own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that, in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the Companys directors, officers, employees or agents that are not expressly set forth herein, and that the Employee is relying only upon the Employees own judgment and any advice provided by the Employees attorney.
(d) In light of the acknowledgements contained in this Section 9, the Employee agrees not to challenge or contest the reasonableness, validity or enforceability of any limitations and obligations contained in this Agreement.
SECTION 10. Section 409A Compliance. All amounts payable under this Agreement are intended to comply with the short term deferral exception from Section 409A of the
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Internal Revenue Code (Section 409A) specified in Treas. Reg. § 1.409A-l(b)(4) (or any successor provision) or the separation pay plan exception specified in Treas. Reg. § 1.409A-1 (b)(9) (or any successor provision), or both of them, and shall be interpreted in a manner consistent with the applicable exceptions. Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible. Each installment payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying Section 409A. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Employee is a specified employee (as defined by Section 409A) and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days following Employees death. Termination of employment, resignation or words of similar import, as used in this Agreement shall mean, with respect to any payments subject to Section 409A, Employees separation from service as defined by Section 409A. If any payment subject to Section 409A is contingent on the delivery of a Release by the Employee and could occur in either of two calendar years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to the Employee. The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A.
SECTION 11. Miscellaneous.
(a) Assignment and Successor. This Agreement may be assigned by the Company to any Affiliate or successor to the business or assets of the Company. In the event of any such assignment, the Company shall cause such Afflliate or successor, to assume the obligations of the Company hereunder, by a written agreement addressed to the Employee, concurrently with any assignment, with the same effect as if such assignee were the Company hereunder. This Agreement is personal to the Employee and the Employee may not assign or any rights or delegate any responsibilities hereunder.
(b) Entire Agreement. This Agreement, together with the Severance Plan and the Companys handbook and policies, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party hereto. None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein. To the extent this Agreement conflicts with the Companys handbook and other policies, this Agreement and the Severance Plan control.
(c) Amendment; No Waiver. No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by the Employee and a duly authorized officer of the Company. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No failure or delay by either party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(d) Disputes. (i) The Company and the Employee agree that, except as otherwise specifically provided herein, all disputes, controversies and claims arising between them concerning the subject matter of this Agreement shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims provided to the Employee at or around the time of hire.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11(d)(i), to the extent permitted by applicable law, the parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
(e) Governing Law and Venue; Interpretation. This Agreement shall be deemed to be made in the State of North Carolina, and the validity, interpretation, construction and performance of this Agreement in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief for violation of the Employees covenants in Section 7, the Employee hereby expressly consents to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and the Employee hereby waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of either party hereto by any court or other governmental or judicial authority by reason of such partys having or being deemed to have structured or drafted such provision.
(f) Tax Withholding. All amounts payable under this Agreement shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.
(g) Headings and References. The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such reference is to a Section of this Agreement unless otherwise indicated.
(h) Construction. For purposes of this Agreement, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(i) Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions can be consummated as originally contemplated to the fullest extent possible.
(j) Survival of Obligations. Sections 7-9 and 11 of this Agreement shall survive any material change in the Employees position or terms and conditions of employment, and shall survive the expiration or termination of this Agreement and the termination of the Employment Term with the Company, regardless of which party terminates the Agreement or employment relationship between them, or why such termination occurs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(k) Notices. All notices or other communications required or permitted by this Agreement shall be made in writing and all such notices or communications shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. | |
628 Green Valley Road, Suite 500 | ||
Greensboro, North Carolina 27408 | ||
Attention: Chief Human Resources Officer | ||
If to the Employee: | The Employees address as most recently supplied to the Company and set forth in the Companys records. |
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(l) Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
THE FRESH MARKET, INC., | ||||
By |
| |||
Name: | Chris Himebauch | |||
Title: | Chief Human Resources Officer |
EMPLOYEE | ||
|
| |
|
Name: James Heaney |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this Agreement), dated as of July 27, 2020, (the Effective Date) between The Fresh Market, Inc., a Delaware corporation (the Company), and Brian Johnson (the Employee).
WHERAS, the Company desires to retain the services and employment of the Employee on behalf of the Company, upon the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company seeks to provide the Employee with an opportunity to participate in The Fresh Market, Inc. Severance Plan adopted October 22, 2019 (the Severance Plan), which is incorporated herein by reference; and
WHEREAS, as a condition of the services and employment contemplated by the parties, including participation in the Severance Plan, the Company has required that the Employee enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, all capitalized terms not defined herein shall have the meanings specified in the Severance Plan.
SECTION 2. Employment; Duties. On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Employee, and the Employee hereby agrees to accept such employment, for the Employment Term (as defined below). The Employee warrants and represents that the Employee will not be in breach of any obligation owed to a third party by becoming employed by or working for the Company. During the Employment Term, the Employee shall serve as the SVP, Store Operations of the Company and shall report to the Chief Executive Officer of the Company (CEO), or designated CEO, performing the duties and responsibilities commensurate with the position assigned to the Employee with respect to the business of the Company and such other duties and responsibilities that may be assigned to the Employee from time to time.
SECTION 3. Performance. The Employee shall serve the Company faithfully and to the best of the Employees ability and shall devote his or her full business time, energy, experience and talents to the business of the Company, and will not engage in any other employment activities for any direct or indirect remuneration without the written approval of the Chief Executive Officer (CEO); provided that it shall not be a violation of this Agreement for the Employee to manage his or her personal investments, engage in or serve such civic, community, charitable, educational, or religious organizations or institutions as the Employee may select so long as such service does not create an actual or potential conflict of interest with, or interfere with the performance of, the Employees job, duties or obligations to the Company or conflict with the Employees covenants under Section 7 of this Agreement, in each case, as determined in the sole judgment of the Board of Directors of the Company (the Board as defined in the Severance Plan to be the Executive Board of Directors of the Company).
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 4. Employment Term. The Employees employment under this Agreement shall commence as of the Effective Date and shall continue in effect unless earlier terminated as set out in Section 6 below. The Employees period of employment under this Agreement shall be referred to as the Employment Term.
SECTION 5. Compensation.
(a) Base Salary. During the Employment Term, the Employee shall be entitled to receive an annual base salary of Three Hundred Seventy-five Thousand and no/100 Dollars ($375,000.00) (Base Salary). Base Salary shall be paid in accordance with Companys ordinary payroll practices and internal policies generally applicable to Company employees and subject to such deductions, withholdings and other taxes as required by law or as otherwise permissible under such practices or policies.
(b) Annual Bonus. During the Employment Term starting with fiscal year 2020, the Employee will be eligible to receive an annual bonus opportunity targeted at Fifty Percent (50%) of Employees Base Salary under and subject to the terms and conditions of the Companys annual incentive compensation plan.
(c) Long-Term Incentives. During the Employment Term, the Employee will be eligible to receive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (or any successor plan) (the Option Plan). The Board may, in its sole discretion, grant equity awards from time to time under the Option Plan and any awards will be subject to the terms and conditions of the Option Plan and any applicable award documents.
(d) Employee Benefits. During the Employment Term, the Employee will be eligible to participate in the employee benefit plans and programs (including being entitled to Paid Annual Leave) generally available to Company employees as may be in effect from time to time and subject to the eligibility requirements of the plans and programs. Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plan or program from time to time as it deems appropriate.
(e) Company Policies. The Employee agrees and acknowledges that he or she will be subject to, and will comply with, all Company policies and procedures.
SECTION 6. At-Will Employment; Termination of Employment.
(a) At-Will Employment. This Agreement does not constitute a guarantee of employment for any specific period of time, and the Employment Term with the Company is at will. Either the Employee or the Company may terminate the Employees employment at any time, without cause or notice, subject to the provisions of this Section 6. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. The Employees right to any compensation following a termination shall be only as set forth in the Severance Plan.
(b) Termination of Employment by the Employee. Notwithstanding Section 6(a) above, except as otherwise provided in the Severance Plan for a resignation of employment for Good Reason, the Employee may terminate his or her employment at any time, upon not less than thirty (30) days prior written notice to the Company (the Notice Period). At any time during the Notice Period, the CEO may (in his or her sole and absolute discretion) (i) relieve the Employee of the Employees duties and responsibilities (in whole or part), (ii) place the Employee on paid leave-of-absence status, (iii) impose
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
conditions with respect to attending or remaining away from the Companys place(s) of business, or (iv) accelerate the Employees termination date, in which case the Company shall pay the applicable amount of the Employees Base Salary in a lump sum for the remainder of the Notice Period.
(c) Termination of Employment by the Company. The Company may terminate the Employees employment without Cause or for Disability, upon written notice to the Employee, subject to applicable law. The Company may terminate the Employees employment for Cause in accordance with the terms of the Severance Plan. If the Employee dies while employed by the Company, all obligations of both parties will immediately terminate (except as set forth herein or in the Severance Plan).
(d) Severance Benefits. The Employees right to any severance benefits following a termination of employment shall be only as set forth in the Severance Plan.
SECTION 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. (i) The Company and the Employee agree that, during the course of the Employment Term with the Company, the Employee has had and will continue to have access to, and has gained and will continue to gain knowledge with respect to, Confidential Information. The Employee agrees that the Employee shall not, without the prior written consent of the Company, during the period of the Employment Term with the Company and thereafter for so long as it remains Confidential Information to the greatest extent permitted by applicable law, use or disclose, or knowingly permit any unauthorized Person to use, disclose or gain access to, any Confidential Information; provided, however, that the Employee may disclose Confidential Information (x) to a Person to whom the disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employees employment, (y) as required by law or (z) as ordered by a court, provided that in any event described in the preceding clause (y) or (z), (A) the Employee shall promptly notify the Company in writing, and consult with and assist the Company (at the Companys sole cost) in seeking a protective order or request for another appropriate remedy, (B) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms of the preceding clause (A), the Employee shall disclose only that portion of the Confidential Information that, in the written opinion of the Employees legal counsel, is legally required to be disclosed and shall exercise reasonable best efforts to assure that confidential treatment shall be accorded to such Confidential Information by the receiving Person or entity and (C) to the extent permitted by applicable law, the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof. As requested by the Company from time to time and upon termination of the Employment Term with the Company, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form (including electronic), of all Confidential Information in the Employees possession or control irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that all such materials have been so delivered.
(ii) Without limiting the foregoing, the Employee agrees to keep confidential the existence of, and any information concerning, any dispute between the Employee and the Company or any of its Affiliates, except that the Employee may disclose information concerning such dispute to the court considering such dispute or to the Employees legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of such dispute).
(iii) For purposes of this Agreement, Confidential Information means information, observations and data concerning the business and affairs of the Company or any of its Affiliates, including all business information (whether or not in written form) that relates to the Company or any of its Affiliates, or their directors, officers, employees, customers, suppliers or contractors or any other third parties with respect to which the Company or any of its Affiliates has a business relationship or owes a
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
duty of confidentiality, or their respective businesses or products, and that is not known to the public generally other than as a result of the Employees breach of this Agreement, including technical information or reports; trade secrets; unwritten knowledge and know-how; operating instructions; training manuals; customer lists, if applicable; customer buying records and habits; product sales records and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information shall not include such information known to the Employee prior to the Employees involvement with the Company or any of its Affiliates or information rightfully obtained from a third party (other than pursuant to a breach by the Employee of this Agreement or any other duty of confidentiality).
(b) Noncompetition and Nonsolicitation. (i) Within the Geographic Territory and during the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the applicable period described in this Section 7(b)(i), the Noncompetition Period), the Employee shall not:
(A) directly or indirectly, without the prior written consent of the Company, engage in or invest as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is engaged primarily in a Competing Business; provided, however, that this provision shall not prevent the Employee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system; or
(B) accept employment with any Person that is engaged in any manner in a Competing Business if such employment would result in the Employee being involved in the management, operations or business affairs of the subsidiary, division, segment or other portion of such Person that conducts such Competing Business;
For purposes of this Agreement, Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, Lowes Foods and any subsidiary of any of the foregoing if such subsidiary performs the same or substantially similar services as the Company.
For purposes of this Agreement, Geographic Territory means (a) any state within the contiguous United States of America where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, (b) any province or territory within Canada where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, and (c) any standard metropolitan statistical area (as defined by the U.S. Census Bureau) where the Company has a business office, retail location or distribution center or has taken substantial steps toward the development of a new business office, retail location or distribution center at the time of the Employees termination. Clauses (a), (b) and (c) are separate and independent territories, and, notwithstanding Section ll(h), the use of the term or in this definition shall be interpreted in the disjunctive.
(ii) During the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the Nonsolicitation Period), the Employee shall not, directly or indirectly, without the prior written consent of the Company, (A) actively solicit, recruit or hire any Person who is at such time, or who at any time during the 12-month period prior to
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with, the Company or any of its Affiliates, (B) actively solicit or encourage any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates or (C) intentionally interfere with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates.
(iii) During the Nonsolicitation Period, the Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand.
(iv) The Noncompetition Period and the Nonsolicitation Period shall be tolled during (and shall be deemed automatically extended by) any period during which the Employee is in violation of the provisions of this Section 7(b).
(v) In the event that a court of competent jurisdiction determines that any provision of this Section 7(b) is invalid or more restrictive than permitted under the governing law of such jurisdiction, then, only as to enforcement of this Section 7(b) within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(c) Nondisparagement. The Employee shall not, directly or indirectly, whether in writing or orally, criticize, denigrate or disparage the Company or any of its Affiliates, its predecessors and successors, or any of the current or former directors, officers, employees, stockholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that this provision shall not restrict the Employees ability to make truthful statements in good faith in response to any governmental inquiry or request for information or otherwise when required by legal process to do so.
(d) Return of Property. The Employee acknowledges that all documents, records, files, lists, equipment, computer, software or other property (including intellectual property) relating to the businesses of the Company or any of its Affiliates, in whatever form (including electronic), and all copies thereof, that have been or are received or created by the Employee while an employee of the Company or any of its Affiliates (including Confidential Information) are and shall remain the property of the Company and its Affiliates, and the Employee shall immediately return such property to the Company upon the termination of the Employment Term and, in any event, at the Companys request. The Employee further agrees that any property situated on the premises of, and owned by, the Company or any of its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Companys personnel at any time with or without notice.
(e) Cooperation. The Employee agrees that, upon reasonable notice and without the necessity of the Companys obtaining a subpoena or court order, the Employee shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation or defense of any claims asserted against the Company or any of its Affiliates, that relates to events occurring during the Employment Term with the Company as to which the Employee may have relevant information (including furnishing relevant information and materials to the Company or its designee and providing testimony at depositions and at trial), provided that the Company shall reimburse the Employee for expenses reasonably incurred in connection with any such cooperation occurring after the termination of the Employment Term and provided further that any such cooperation occurring after the termination of the Employment Term shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Employees business or personal affairs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Remedies and Injunctive Relief. The Employee acknowledges that a violation by the Employee of any of the covenants contained in this Agreement would cause irreparable damage to the Company and its Affiliates in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to injunctive relief (including temporary restraining orders, preliminary injunctions and permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in this Agreement in addition to any other legal or equitable remedies it may have. The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all such rights shall be unrestricted.
SECTION 9. Acknowledgments.
(a) The Employee acknowledges that the Company and its Affiliates have expended and will continue to expend substantial amounts of time, money and effort to develop business strategies, employee and customer relationships and goodwill to build an effective organization. The Employee acknowledges that the Company has a legitimate business interest in and right to protect its Confidential Information, goodwill and employee and customer relationships, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its customer and employee relationships. The Employee further acknowledges that the Company and its Affiliates are entitled to protect and preserve the going concern value of the Company to the extent permitted by law.
(b) In light of the foregoing acknowledgments, the Employee agrees that the covenants contained in this Agreement are reasonable and properly required for the adequate protection of the businesses and goodwill of the Company and its Affiliates. The Employee further acknowledges that, although the Employees compliance with the covenants contained in this Agreement may temporarily impact the Employee from earning a livelihood in a business similar to the business of the Company, the Employees experience and capabilities are such that the Employee has other opportunities to earn a livelihood and adequate means of support for the Employee and the Employees dependents.
(c) Prior to execution of this Agreement, the Employee was advised by the Company of the Employees right to seek independent advice from an attorney of the Employees own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that, in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the Companys directors, officers, employees or agents that are not expressly set forth herein, and that the Employee is relying only upon the Employees own judgment and any advice provided by the Employees attorney.
(d) In light of the acknowledgements contained in this Section 9, the Employee agrees not to challenge or contest the reasonableness, validity or enforceability of any limitations and obligations contained in this Agreement.
SECTION 10. Section 409A Compliance. All amounts payable under this Agreement are intended to comply with the short term deferral exception from Section 409A of the
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Internal Revenue Code (Section 409A) specified in Treas. Reg. § 1.409A-1(b)(4) (or any successor provision) or the separation pay plan exception specified in Treas. Reg. § 1.409A-l(b)(9) (or any successor provision), or both of them, and shall be interpreted in a manner consistent with the applicable exceptions. Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible. Each installment payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying Section 409A. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Employee is a specified employee (as defined by Section 409A) and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days following Employees death. Termination of employment, resignation or words of similar import, as used in this Agreement shall mean, with respect to any payments subject to Section 409A, Employees separation from service as defined by Section 409A. If any payment subject to Section 409A is contingent on the delivery of a Release by the Employee and could occur in either of two calendar years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to the Employee. The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A.
SECTION 11. Miscellaneous.
(a) Assignment and Successor. This Agreement may be assigned by the Company to any Affiliate or successor to the business or assets of the Company. In the event of any such assignment, the Company shall cause such Affiliate or successor, to assume the obligations of the Company hereunder, by a written agreement addressed to the Employee, concurrently with any assignment, with the same effect as if such assignee were the Company hereunder. This Agreement is personal to the Employee and the Employee may not assign or any rights or delegate any responsibilities hereunder.
(b) Entire Agreement. This Agreement, together with the Severance Plan and the Companys handbook and policies, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party hereto. None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein. To the extent this Agreement conflicts with the Companys handbook and other policies, this Agreement and the Severance Plan control.
(c) Amendment; No Waiver. No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by the Employee and a duly authorized officer of the Company. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No failure or delay by either party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(d) Disputes. (i) The Company and the Employee agree that, except as otherwise specifically provided herein, all disputes, controversies and claims arising between them concerning the subject matter of this Agreement shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims provided to the Employee at or around the time of hire.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11(d)(i), to the extent permitted by applicable law, the parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
(e) Governing Law and Venue; Interpretation. This Agreement shall be deemed to be made in the State of North Carolina, and the validity, interpretation, construction and performance of this Agreement in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief for violation of the Employees covenants in Section 7, the Employee hereby expressly consents to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and the Employee hereby waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of either party hereto by any court or other governmental or judicial authority by reason of such partys having or being deemed to have structured or drafted such provision.
(f) Tax Withholding. All amounts payable under this Agreement shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.
(g) Headings and References. The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such reference is to a Section of this Agreement unless otherwise indicated.
(h) Construction. For purposes of this Agreement, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(i) Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions can be consummated as originally contemplated to the fullest extent possible.
(j) Survival of Obligations. Sections 7-9 and 11 of this Agreement shall survive any material change in the Employees position or terms and conditions of employment, and shall survive the expiration or termination of this Agreement and the termination of the Employment Term with the Company, regardless of which party terminates the Agreement or employment relationship between them, or why such termination occurs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(k) Notices. All notices or other communications required or permitted by this Agreement shall be made in writing and all such notices or communications shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. | |
628 Green Valley Road, Suite 500 | ||
Greensboro, North Carolina 27408 | ||
Attention: Chief Human Resources Officer | ||
If to the Employee: | The Employees address as most recently | |
supplied to the Company and set forth in the | ||
Companys records. |
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(l) Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
THE FRESH MARKET, INC., | ||||
By |
| |||
Name: | Chris Himebauch | |||
Title: | Chief Human Resources Officer |
EMPLOYEE, | ||||
| ||||
Name: | Brian Johnson |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this Agreement), dated as of November 29, 2019, (the Effective Date) between The Fresh Market, Inc., a Delaware corporation (the Company), and Chris Himebauch (the Employee).
WHEREAS, Employees employment with the Company began on November 18, 2018;
WHERAS, the Company desires to continue retaining the services and employment of the Employee on behalf of the Company, upon the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company seeks to provide the Employee with an opportunity to participate in The Fresh Market, Inc. Severance Plan adopted October 22, 2019 (the Severance Plan), which is incorporated herein by reference; and
WHEREAS, as a condition of the services and employment contemplated by the parties, including participation in the Severance Plan, the Company has required that the Employee enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, all capitalized terms not defined herein shall have the meanings specified in the Severance Plan.
SECTION 2. Employment; Duties. On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Employee, and the Employee hereby agrees to accept such employment, for the Employment Term (as defined below). The Employee warrants and represents that the Employee will not be in breach of any obligation owed to a third party by becoming employed by or working for the Company. During the Employment Term, the Employee shall serve as the Senior Vice President - Chief Human Resources Officer of the Company and shall report to the Chief Executive Officer of the Company (CEO), or designated CEO, performing the duties and responsibilities commensurate with the position assigned to the Employee with respect to the business of the Company and such other duties and responsibilities that may be assigned to the Employee from time to time.
SECTION 3. Performance. The Employee shall serve the Company faithfully and to the best of the Employees ability and shall devote his or her full business time, energy, experience and talents to the business of the Company, and will not engage in any other employment activities for any direct or indirect remuneration without the written approval of the CEO; provided that it shall not be a violation of this Agreement for the Employee to manage his or her personal investments, engage in or serve such civic, community, charitable, educational, or religious organizations or institutions as the Employee may select so long as such service does not create an actual or potential conflict of interest with, or interfere with the performance of, the Employees job, duties or obligations to the Company or conflict with the Employees covenants under Section 7 of this Agreement, in each case, as determined in the sole judgment of the Board of Directors of the Company (the Board as defined in the Severance Plan to be the Executive Board of Directors of the Company).
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 4. Employment Term. The Employees employment under this Agreement shall commence as of the Effective Date and shall continue in effect unless earlier terminated as set out in Section 6 below. The Employees period of employment under this Agreement shall be referred to as the Employment Term.
SECTION 5. Compensation.
(a) Base Salary. During the Employment Term, the Employee shall be entitled to receive an annual base salary of Three Hundred Fifty Thousand and no/100 Dollars ($350,000.00) (Base Salary). Base Salary shall be paid in accordance with Companys ordinary payroll practices and internal policies generally applicable to Company employees and subject to such deductions, withholdings and other taxes as required by law or as otherwise permissible under such practices or policies.
(b) Annual Bonus. During the Employment Term, the Employee will be eligible to receive an annual bonus opportunity targeted at Fifty Percent (50%) of Employees Base Salary under and subject to the terms and conditions of the Companys annual incentive compensation plan.
(c) Long-Term Incentives. During the Employment Term, the Employee will be eligible to receive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (or any successor plan) (the Option Plan). The Board may, in its sole discretion, grant equity awards from time to time under the Option Plan and any awards will be subject to the terms and conditions of the Option Plan and any applicable award documents.
(d) Employee Benefits. During the Employment Term, the Employee will be eligible to participate in the employee benefit plans and programs (including being entitled to Paid Annual Leave) generally available to Company employees as may be in effect from time to time and subject to the eligibility requirements of the plans and programs. Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plan or program from time to time as it deems appropriate.
(e) Company Policies. The Employee agrees and acknowledges that he or she will be subject to, and will comply with, all Company policies and procedures.
SECTION 6. At-Will Employment; Termination of Employment.
(a) At-Will Employment. This Agreement does not constitute a guarantee of employment for any specific period of time, and the Employment Term with the Company is at will. Either the Employee or the Company may terminate the Employees employment at any time, without cause or notice, subject to the provisions of this Section 6. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. The Employees right to any compensation following a termination shall be only as set forth in the Severance Plan.
(b) Termination of Employment by the Employee. Notwithstanding Section 6(a) above, except as otherwise provided in the Severance Plan for a resignation of employment for Good Reason, the Employee may terminate his or her employment at any time, upon not less than thirty (30) days prior written notice to the Company (the Notice Period). At any time during the Notice Period, the CEO may (in his or her sole and absolute discretion) (i) relieve the Employee of the Employees duties and responsibilities (in whole or part), (ii) place the Employee on paid leave-of-absence status, (iii) impose conditions with respect to attending or remaining away from the Companys place(s) of business, or (iv) accelerate the Employees termination date, in which case the Company shall pay the applicable amount of the Employees Base Salary in a lump sum for the remainder of the Notice Period.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Termination of Employment by the Company. The Company may terminate the Employees employment without Cause or for Disability, upon written notice to the Employee, subject to applicable law. The Company may terminate the Employees employment for Cause in accordance with the terms of the Severance Plan. If the Employee dies while employed by the Company, all obligations of both parties will immediately terminate (except as set forth herein or in the Severance Plan).
(d) Severance Benefits. The Employees right to any severance benefits following a termination of employment shall be only as set forth in the Severance Plan.
SECTION 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. (i) The Company and the Employee agree that, during the course of the Employment Term with the Company, the Employee has had and will continue to have access to, and has gained and will continue to gain knowledge with respect to, Confidential Information. The Employee agrees that the Employee shall not, without the prior written consent of the Company, during the period of the Employment Term with the Company and thereafter for so long as it remains Confidential Information to the greatest extent permitted by applicable law, use or disclose, or knowingly permit any unauthorized Person to use, disclose or gain access to, any Confidential Information; provided, however, that the Employee may disclose Confidential Information (x) to a Person to whom the disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employees employment, (y) as required by law or (z) as ordered by a court, provided that in any event described in the preceding clause (y) or (z), (A) the Employee shall promptly notify the Company in writing, and consult with and assist the Company (at the Companys sole cost) in seeking a protective order or request for another appropriate remedy, (B) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms of the preceding clause (A), the Employee shall disclose only that portion of the Confidential Information that, in the written opinion of the Employees legal counsel, is legally required to be disclosed and shall exercise reasonable best efforts to assure that confidential treatment shall be accorded to such Confidential Information by the receiving Person or entity and (C) to the extent permitted by applicable law, the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof. As requested by the Company from time to time and upon termination of the Employment Term with the Company, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form (including electronic), of all Confidential Information in the Employees possession or control irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that all such materials have been so delivered.
(ii) Without limiting the foregoing, the Employee agrees to keep confidential the existence of, and any information concerning, any dispute between the Employee and the Company or any of its Affiliates, except that the Employee may disclose information concerning such dispute to the court considering such dispute or to the Employees legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of such dispute).
(iii) For purposes of this Agreement, Confidential Information means information, observations and data concerning the business and affairs of the Company or any of its Affiliates, including all business information (whether or not in written form) that relates to the Company or any of its Affiliates, or their directors, officers, employees, customers, suppliers or contractors or any other third parties with respect to which the Company or any of its Affiliates has a business relationship or owes a duty of confidentiality, or their respective businesses or products, and that is not known to the public
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
generally other than as a result of the Employees breach of this Agreement, including technical information or reports; trade secrets; unwritten knowledge and know-how; operating instructions; training manuals; customer lists, if applicable; customer buying records and habits; product sales records and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information shall not include such information known to the Employee prior to the Employees involvement with the Company or any of its Affiliates or information rightfully obtained from a third party (other than pursuant to a breach by the Employee of this Agreement or any other duty of confidentiality).
(b) Noncompetition and Nonsolicitation. (i) Within the Geographic Territory and during the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the applicable period described in this Section 7(b)(i), the Noncompetition Period), the Employee shall not:
(A) directly or indirectly, without the prior written consent of the Company, engage in or invest as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is engaged primarily in a Competing Business; provided, however, that this provision shall not prevent the Employee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system; or
(B) accept employment with any Person that is engaged in any manner in a Competing Business if such employment would result in the Employee being involved in the management, operations or business affairs of the subsidiary, division, segment or other portion of such Person that conducts such Competing Business;
For purposes of this Agreement, Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, Lowes Foods and any subsidiary of any of the foregoing if such subsidiary performs the same or substantially similar services as the Company.
For purposes of this Agreement, Geographic Territory means (a) any state within the contiguous United States of America where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, (b) any province or territory within Canada where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, and (c) any standard metropolitan statistical area (as defined by the U.S. Census Bureau) where the Company has a business office, retail location or distribution center or has taken substantial steps toward the development of a new business office, retail location or distribution center at the time of the Employees termination. Clauses (a), (b) and (c) are separate and independent territories, and, notwithstanding Section 11(h), the use of the term or in this definition shall be interpreted in the disjunctive.
(ii) During the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the Nonsolicitation Period), the Employee shall not, directly or indirectly, without the prior written consent of the Company, (A) actively solicit, recruit or hire any Person who is at such time, or who at any time during the 12-month period prior to such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Company or any of its Affiliates, (B) actively solicit or encourage any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates or (C) intentionally interfere with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates.
(iii) During the Nonsolicitation Period, the Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand.
(iv) The Noncompetition Period and the Nonsolicitation Period shall be tolled during (and shall be deemed automatically extended by) any period during which the Employee is in violation of the provisions of this Section 7(b).
(v) In the event that a court of competent jurisdiction determines that any provision of this Section 7(b) is invalid or more restrictive than permitted under the governing law of such jurisdiction, then, only as to enforcement of this Section 7(b) within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(c) Nondisparagement. The Employee shall not, directly or indirectly, whether in writing or orally, criticize, denigrate or disparage the Company or any of its Affiliates, its predecessors and successors, or any of the current or former directors, officers, employees, stockholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that this provision shall not restrict the Employees ability to make truthful statements in good faith in response to any governmental inquiry or request for information or otherwise when required by legal process to do so.
(d) Return of Property. The Employee acknowledges that all documents, records, files, lists, equipment, computer, software or other property (including intellectual property) relating to the businesses of the Company or any of its Affiliates, in whatever form (including electronic), and all copies thereof, that have been or are received or created by the Employee while an employee of the Company or any of its Affiliates (including Confidential Information) are and shall remain the property of the Company and its Affiliates, and the Employee shall immediately return such property to the Company upon the termination of the Employment Term and, in any event, at the Companys request. The Employee further agrees that any property situated on the premises of, and owned by, the Company or any of its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Companys personnel at any time with or without notice.
(e) Cooperation. The Employee agrees that, upon reasonable notice and without the necessity of the Companys obtaining a subpoena or court order, the Employee shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation or defense of any claims asserted against the Company or any of its Affiliates, that relates to events occurring during the Employment Term with the Company as to which the Employee may have relevant information (including furnishing relevant information and materials to the Company or its designee and providing testimony at depositions and at trial), provided that the Company shall reimburse the Employee for expenses reasonably incurred in connection with any such cooperation occurring after the termination of the Employment Term and provided further that any such cooperation occurring after the termination of the Employment Term shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Employees business or personal affairs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Remedies and Injunctive Relief. The Employee acknowledges that a violation by the Employee of any of the covenants contained in this Agreement would cause irreparable damage to the Company and its Affiliates in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to injunctive relief (including temporary restraining orders, preliminary injunctions and permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in this Agreement in addition to any other legal or equitable remedies it may have. The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all such rights shall be unrestricted.
SECTION 9. Acknowledgments.
(a) The Employee acknowledges that the Company and its Affiliates have expended and will continue to expend substantial amounts of time, money and effort to develop business strategies, employee and customer relationships and goodwill to build an effective organization. The Employee acknowledges that the Company has a legitimate business interest in and right to protect its Confidential Information, goodwill and employee and customer relationships, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its customer and employee relationships. The Employee further acknowledges that the Company and its Affiliates are entitled to protect and preserve the going concern value of the Company to the extent permitted by law.
(b) In light of the foregoing acknowledgments, the Employee agrees that the covenants contained in this Agreement are reasonable and properly required for the adequate protection of the businesses and goodwill of the Company and its Affiliates. The Employee further acknowledges that, although the Employees compliance with the covenants contained in this Agreement may temporarily impact the Employee from earning a livelihood in a business similar to the business of the Company, the Employees experience and capabilities are such that the Employee has other opportunities to earn a livelihood and adequate means of support for the Employee and the Employees dependents.
(c) Prior to execution of this Agreement, the Employee was advised by the Company of the Employees right to seek independent advice from an attorney of the Employees own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that, in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the Companys directors, officers, employees or agents that are not expressly set forth herein, and that the Employee is relying only upon the Employees own judgment and any advice provided by the Employees attorney.
(d) In light of the acknowledgements contained in this Section 9, the Employee agrees not to challenge or contest the reasonableness, validity or enforceability of any limitations and obligations contained in this Agreement.
SECTION 10. Section 409A Compliance. All amounts payable under this Agreement are intended to comply with the short term deferral exception from Section 409A of the
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Internal Revenue Code (Section 409A) specified in Treas. Reg. § 1.409A-1(b)(4) (or any successor provision) or the separation pay plan exception specified in Treas. Reg. § 1.409A-l(b)(9) (or any successor provision), or both of them, and shall be interpreted in a manner consistent with the applicable exceptions. Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible. Each installment payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying Section 409A. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Employee is a specified employee (as defined by Section 409A) and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days following Employees death. Termination of employment, resignation or words of similar import, as used in this Agreement shall mean, with respect to any payments subject to Section 409A, Employees separation from service as defined by Section 409A. If any payment subject to Section 409A is contingent on the delivery of a Release by the Employee and could occur in either of two calendar years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to the Employee. The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A.
SECTION 11. Miscellaneous.
(a) Assignment and Successor. This Agreement may be assigned by the Company to any Affiliate or successor to the business or assets of the Company. In the event of any such assignment, the Company shall cause such Affiliate or successor, to assume the obligations of the Company hereunder, by a written agreement addressed to the Employee, concurrently with any assignment, with the same effect as if such assignee were the Company hereunder. This Agreement is personal to the Employee and the Employee may not assign or any rights or delegate any responsibilities hereunder.
(b) Entire Agreement. This Agreement, together with the Severance Plan and the Companys handbook and policies, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party hereto. None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein. To the extent this Agreement conflicts with the Companys handbook and other policies, this Agreement and the Severance Plan control.
(c) Amendment; No Waiver. No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by the Employee and a duly authorized officer of the Company. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No failure or delay by either party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandomnent of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(d) Disputes. (i) The Company and the Employee agree that, except as otherwise specifically provided herein, all disputes, controversies and claims arising between them concerning the subject matter of this Agreement shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims provided to the Employee at or around the time of hire.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11(d)(i), to the extent permitted by applicable law, the parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
(e) Governing Law and Venue; Interpretation. This Agreement shall be deemed to be made in the State of North Carolina, and the validity, interpretation, construction and performance of this Agreement in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief for violation of the Employees covenants in Section 7, the Employee hereby expressly consents to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and the Employee hereby waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of either party hereto by any court or other governmental or judicial authority by reason of such partys having or being deemed to have structured or drafted such provision.
(f) Tax Withholding. All amounts payable under this Agreement shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.
(g) Headings and References. The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such reference is to a Section of this Agreement unless otherwise indicated.
(h) Construction. For purposes of this Agreement, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(i) Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions can be consummated as originally contemplated to the fullest extent possible.
(j) Survival of Obligations. Sections 7-9 and 11 of this Agreement shall survive any material change in the Employees position or terms and conditions of employment, and shall survive the expiration or termination of this Agreement and the termination of the Employment Term with the Company, regardless of which party terminates the Agreement or employment relationship between them, or why such termination occurs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(k) Notices. All notices or other communications required or permitted by this Agreement shall be made in writing and all such notices or communications shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. | |
628 Green Valley Road, Suite 500 | ||
Greensboro, North Carolina 27408 | ||
Attention: General Counsel | ||
If to the Employee: | The Employees address as most recently | |
supplied to the Company and set forth in the | ||
Companys records. |
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(I) Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
THE FRESH MARKET, INC., | ||||
By |
| |||
Name: | ||||
Title: | ||||
EMPLOYEE, | ||||
| ||||
Name: | Chris Himebauch |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this Agreement), dated as of May 12, 2020, (the Effective Date) between The Fresh Market, Inc., a Delaware corporation (the Company), and Kevin Miller (the Employee).
WHERAS, the Company desires to retain the services and employment of the Employee on behalf of the Company, upon the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company seeks to provide the Employee with an opportunity to participate in The Fresh Market, Inc. Severance Plan adopted October 22, 2019 (the Severance Plan), which is incorporated herein by reference; and
WHEREAS, as a condition of the services and employment contemplated by the parties, including participation in the Severance Plan, the Company has required that the Employee enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, all capitalized terms not defined herein shall have the meanings specified in the Severance Plan.
SECTION 2. Employment; Duties. On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Employee, and the Employee hereby agrees to accept such employment, for the Employment Term (as defined below). The Employee warrants and represents that the Employee will not be in breach of any obligation owed to a third party by becoming employed by or working for the Company. During the Employment Term, the Employee shall serve as the Chief Marketing Officer of the Company and shall report to the Chief Executive Officer of the Company (CEO), or designated CEO, performing the duties and responsibilities commensurate with the position assigned to the Employee with respect to the business of the Company and such other duties and responsibilities that may be assigned to the Employee from time to time.
SECTION 3. Performance. The Employee shall serve the Company faithfully and to the best of the Employees ability and shall devote his or her full business time, energy, experience and talents to the business of the Company, and will not engage in any other employment activities for any direct or indirect remuneration without the written approval of the Chief Executive Officer (CEO); provided that it shall not be a violation of this Agreement for the Employee to manage his or her personal investments, engage in or serve such civic, community, charitable, educational, or religious organizations or institutions as the Employee may select so long as such service does not create an actual or potential conflict of interest with, or interfere with the performance of, the Employees job, duties or obligations to the Company or conflict with the Employees covenants under Section 7 of this Agreement, in each case, as determined in the sole judgment of the Board of Directors of the Company (the Board as defined in the Severance Plan to be the Executive Board of Directors of the Company).
SECTION 4. Employment Term. The Employees employment under this Agreement shall commence as of the Effective Date and shall continue in effect unless earlier terminated as set out in Section 6 below. The Employees period of employment under this Agreement shall be referred to as the Employment Term.
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 5. Compensation.
(a) Base Salary. During the Employment Term, the Employee shall be entitled to receive an annual base salary of Three Hundred Thirty Thousand and no/100 Dollars ($330,000.00) (Base Salary). Base Salary shall be paid in accordance with Companys ordinary payroll practices and internal policies generally applicable to Company employees and subject to such deductions, withholdings and other taxes as required by law or as otherwise permissible under such practices or policies.
(b) Annual Bonus. During the Employment Term starting with fiscal year 2020, the Employee will be eligible to receive an annual bonus opportunity targeted at Fifty Percent (50%) of Employees Base Salary under and subject to the terms and conditions of the Companys annual incentive compensation plan.
(c) Long-Term Incentives. During the Employment Term, the Employee will be eligible to receive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (or any successor plan) (the Option Plan). The Board may, in its sole discretion, grant equity awards from time to time under the Option Plan and any awards will be subject to the terms and conditions of the Option Plan and any applicable award documents.
(d) Employee Benefits. During the Employment Term, the Employee will be eligible to participate in the employee benefit plans and programs (including being entitled to Paid Annual Leave) generally available to Company employees as may be in effect from time to time and subject to the eligibility requirements of the plans and programs. Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plan or program from time to time as it deems appropriate.
(e) Company Policies. The Employee agrees and acknowledges that he or she will be subject to, and will comply with, all Company policies and procedures.
SECTION 6. At-Will Employment; Termination of Employment.
(a) At-Will Employment. This Agreement does not constitute a guarantee of employment for any specific period of time, and the Employment Term with the Company is at will. Either the Employee or the Company may terminate the Employees employment at any time, without cause or notice, subject to the provisions of this Section 6. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. The Employees right to any compensation following a termination shall be only as set forth in the Severance Plan.
(b) Termination of Employment by the Employee. Notwithstanding Section 6(a) above, except as otherwise provided in the Severance Plan for a resignation of employment for Good Reason, the Employee may terminate his or her employment at any time, upon not less than thirty (30) days prior written notice to the Company (the Notice Period). At any time during the Notice Period, the CEO may (in his or her sole and absolute discretion) (i) relieve the Employee of the Employees duties and responsibilities (in whole or part), (ii) place the Employee on paid leave-of-absence status, (iii) impose conditions with respect to attending or remaining away from the Companys place(s) of business, or (iv) accelerate the Employees termination date, in which case the Company shall pay the applicable amount of the Employees Base Salary in a lump sum for the remainder of the Notice Period.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Termination of Employment by the Company. The Company may terminate the Employees employment without Cause or for Disability, upon written notice to the Employee, subject to applicable law. The Company may terminate the Employees employment for Cause in accordance with the terms of the Severance Plan. If the Employee dies while employed by the Company, all obligations of both parties will immediately terminate (except as set forth herein or in the Severance Plan).
(d) Severance Benefits. The Employees right to any severance benefits following a termination of employment shall be only as set forth in the Severance Plan.
SECTION 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. (i) The Company and the Employee agree that, during the course of the Employment Term with the Company, the Employee has had and will continue to have access to, and has gained and will continue to gain knowledge with respect to, Confidential Information. The Employee agrees that the Employee shall not, without the prior written consent of the Company, during the period of the Employment Term with the Company and thereafter for so long as it remains Confidential Information to the greatest extent permitted by applicable law, use or disclose, or knowingly permit any unauthorized Person to use, disclose or gain access to, any Confidential Information; provided, however, that the Employee may disclose Confidential Information (x) to a Person to whom the disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employees employment, (y) as required by law or (z) as ordered by a court, provided that in any event described in the preceding clause (y) or (z), (A) the Employee shall promptly notify the Company in writing, and consult with and assist the Company (at the Companys sole cost) in seeking a protective order or request for another appropriate remedy, (B) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms of the preceding clause (A), the Employee shall disclose only that portion of the Confidential Information that, in the written opinion of the Employees legal counsel, is legally required to be disclosed and shall exercise reasonable best efforts to assure that confidential treatment shall be accorded to such Confidential Information by the receiving Person or entity and (C) to the extent permitted by applicable law, the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof. As requested by the Company from time to time and upon termination of the Employment Term with the Company, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form (including electronic), of all Confidential Information in the Employees possession or control irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that all such materials have been so delivered.
(ii) Without limiting the foregoing, the Employee agrees to keep confidential the existence of, and any information concerning, any dispute between the Employee and the Company or any of its Affiliates, except that the Employee may disclose information concerning such dispute to the court considering such dispute or to the Employees legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of such dispute).
(iii) For purposes of this Agreement, Confidential Information means information, observations and data concerning the business and affairs of the Company or any of its Affiliates, including all business information (whether or not in written form) that relates to the Company or any of its Affiliates, or their directors, officers, employees, customers, suppliers or contractors or any other third parties with respect to which the Company or any of its Affiliates has a business relationship or owes a duty of confidentiality, or their respective businesses or products, and that is not known to the public generally other than as a result of the Employees breach of this Agreement, including technical information or reports; trade secrets; unwritten knowledge and know-how; operating instructions; training manuals; customer lists, if applicable; customer buying records and habits; product sales records
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information shall not include such information known to the Employee prior to the Employees involvement with the Company or any of its Affiliates or information rightfully obtained from a third party (other than pursuant to a breach by the Employee of this Agreement or any other duty of confidentiality).
(b) Noncompetition and Nonsolicitation. (i) Within the Geographic Territory and during the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the applicable period described in this Section 7(b)(i), the Noncompetition Period), the Employee shall not:
(A) directly or indirectly, without the prior written consent of the Company, engage in or invest as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is engaged primarily in a Competing Business; provided, however, that this provision shall not prevent the Employee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system; or
(B) accept employment with any Person that is engaged in any manner in a Competing Business if such employment would result in the Employee being involved in the management, operations or business affairs of the subsidiary, division, segment or other portion of such Person that conducts such Competing Business;
For purposes of this Agreement, Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, Lowes Foods and any subsidiary of any of the foregoing if such subsidiary performs the same or substantially similar services as the Company.
For purposes of this Agreement, Geographic Territory means (a) any state within the contiguous United States of America where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, (b) any province or territory within Canada where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, and (c) any standard metropolitan statistical area (as defined by the U.S. Census Bureau) where the Company has a business office, retail location or distribution center or has taken substantial steps toward the development of a new business office, retail location or distribution center at the time of the Employees termination. Clauses (a), (b) and (c) are separate and independent territories, and, notwithstanding Section 11(h), the use of the term or in this definition shall be interpreted in the disjunctive.
(ii) During the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the Nonsolicitation Period), the Employee shall not, directly or indirectly, without the prior written consent of the Company, (A) actively solicit, recruit or hire any Person who is at such time, or who at any time during the 12-month period prior to such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with, the Company or any of its Affiliates, (B) actively solicit or encourage any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates or (C) intentionally interfere with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(iii) During the Nonsolicitation Period, the Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand.
(iv) The Noncompetition Period and the Nonsolicitation Period shall be tolled during (and shall be deemed automatically extended by) any period during which the Employee is in violation of the provisions of this Section 7(b).
(v) In the event that a court of competent jurisdiction determines that any provision of this Section 7(b) is invalid or more restrictive than permitted under the governing law of such jurisdiction, then, only as to enforcement of this Section 7(b) within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(c) Nondisparagement. The Employee shall not, directly or indirectly, whether in writing or orally, criticize, denigrate or disparage the Company or any of its Affiliates, its predecessors and successors, or any of the current or former directors, officers, employees, stockholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that this provision shall not restrict the Employees ability to make truthful statements in good faith in response to any governmental inquiry or request for information or otherwise when required by legal process to do so.
(d) Return of Property. The Employee acknowledges that all documents, records, files, lists, equipment, computer, software or other property (including intellectual property) relating to the businesses of the Company or any of its Affiliates, in whatever form (including electronic), and all copies thereof, that have been or are received or created by the Employee while an employee of the Company or any of its Affiliates (including Confidential Information) are and shall remain the property of the Company and its Affiliates, and the Employee shall immediately return such property to the Company upon the termination of the Employment Term and, in any event, at the Companys request. The Employee further agrees that any property situated on the premises of, and owned by, the Company or any of its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Companys personnel at any time with or without notice.
(e) Cooperation. The Employee agrees that, upon reasonable notice and without the necessity of the Companys obtaining a subpoena or court order, the Employee shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation or defense of any claims asserted against the Company or any of its Affiliates, that relates to events occurring during the Employment Term with the Company as to which the Employee may have relevant information (including furnishing relevant information and materials to the Company or its designee and providing testimony at depositions and at trial), provided that the Company shall reimburse the Employee for expenses reasonably incurred in connection with any such cooperation occurring after the termination of the Employment Term and provided further that any such cooperation occurring after the termination of the Employment Term shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Employees business or personal affairs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Remedies and Injunctive Relief. The Employee acknowledges that a violation by the Employee of any of the covenants contained in this Agreement would cause irreparable damage to the Company and its Affiliates in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to injunctive relief (including temporary restraining orders, preliminary injunctions and permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in this Agreement in addition to any other legal or equitable remedies it may have. The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all such rights shall be unrestricted.
SECTION 9. Acknowledgments.
(a) The Employee acknowledges that the Company and its Affiliates have expended and will continue to expend substantial amounts of time, money and effort to develop business strategies, employee and customer relationships and goodwill to build an effective organization. The Employee acknowledges that the Company has a legitimate business interest in and right to protect its Confidential Information, goodwill and employee and customer relationships, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its customer and employee relationships. The Employee further acknowledges that the Company and its Affiliates are entitled to protect and preserve the going concern value of the Company to the extent permitted by law.
(b) In light of the foregoing acknowledgments, the Employee agrees that the covenants contained in this Agreement are reasonable and properly required for the adequate protection of the businesses and goodwill of the Company and its Affiliates. The Employee further acknowledges that, although the Employees compliance with the covenants contained in this Agreement may temporarily impact the Employee from earning a livelihood in a business similar to the business of the Company, the Employees experience and capabilities are such that the Employee has other opportunities to earn a livelihood and adequate means of support for the Employee and the Employees dependents.
(c) Prior to execution of this Agreement, the Employee was advised by the Company of the Employees right to seek independent advice from an attorney of the Employees own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that, in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the Companys directors, officers, employees or agents that are not expressly set forth herein, and that the Employee is relying only upon the Employees own judgment and any advice provided by the Employees attorney.
(d) In light of the acknowledgements contained in this Section 9, the Employee agrees not to challenge or contest the reasonableness, validity or enforceability of any limitations and obligations contained in this Agreement.
SECTION 10. Section 409A Compliance. All amounts payable under this Agreement are intended to comply with the short term deferral exception from Section 409A of the Internal Revenue Code (Section 409A) specified in Treas. Reg. § 1.409A-l(b)(4) (or any successor provision) or the separation pay plan exception specified in Treas. Reg. § 1.409A-1 (b)(9) (or any successor provision), or both of them, and shall be interpreted in a manner consistent with the applicable
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
exceptions. Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible. Each installment payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying Section 409A. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Employee is a specified employee (as defined by Section 409A) and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days following Employees death. Termination of employment, resignation or words of similar import, as used in this Agreement shall mean, with respect to any payments subject to Section 409A, Employees separation from service as defined by Section 409A. If any payment subject to Section 409A is contingent on the delivery of a Release by the Employee and could occur in either of two calendar years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to the Employee. The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A.
SECTION 11. Miscellaneous.
(a) Assignment and Successor. This Agreement may be assigned by the Company to any Affiliate or successor to the business or assets of the Company. In the event of any such assignment, the Company shall cause such Affiliate or successor, to assume the obligations of the Company hereunder, by a written agreement addressed to the Employee, concurrently with any assignment, with the same effect as if such assignee were the Company hereunder. This Agreement is personal to the Employee and the Employee may not assign or any rights or delegate any responsibilities hereunder.
(b) Entire Agreement. This Agreement, together with the Severance Plan and the Companys handbook and policies, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party hereto. None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein. To the extent this Agreement conflicts with the Companys handbook and other policies, this Agreement and the Severance Plan control.
(c) Amendment; No Waiver. No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by the Employee and a duly authorized officer of the Company. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No failure or delay by either party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(d) Disputes. (i) The Company and the Employee agree that, except as otherwise specifically provided herein, all disputes, controversies and claims arising between them concerning the subject matter of this Agreement shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims provided to the Employee at or around the time of hire.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11 (d)(i), to the extent permitted by applicable law, the parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
(e) Governing Law and Venue; Interpretation. This Agreement shall be deemed to be made in the State of North Carolina, and the validity, interpretation, construction and performance of this Agreement in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief for violation of the Employees covenants in Section 7, the Employee hereby expressly consents to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and the Employee hereby waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of either party hereto by any court or other governmental or judicial authority by reason of such partys having or being deemed to have structured or drafted such provision.
(f) Tax Withholding. All amounts payable under this Agreement shall he subject to the withholding of all applicable taxes and deductions required by any applicable law.
(g) Headings and References. The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such reference is to a Section of this Agreement unless otherwise indicated.
(h) Construction. For purposes of this Agreement, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(i) Severabilitv. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions can be consummated as originally contemplated to the fullest extent possible.
(j) Survival of Obligations. Sections 7-9 and 11 of this Agreement shall survive any material change in the Employees position or terms and conditions of employment, and shall survive the expiration or termination of this Agreement and the termination of the Employment Term with the Company, regardless of which party terminates the Agreement or employment relationship between them, or why such termination occurs.
(k) Notices. All notices or other communications required or permitted by this Agreement shall be made in writing and all such notices or communications shall be deemed to have been duly given
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. | |
628 Green Valley Road, Suite 500 | ||
Greensboro, North Carolina 27408 | ||
Attention: Chief Human Resources Officer | ||
If to the Employee: | The Employees address as most recently | |
supplied to the Company and set forth in the | ||
Companys records. |
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(l) Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall he deemed to be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
THE FRESH MARKET, INC., | ||||||
By
|
| |||||
Name: Chris Himebauch | ||||||
Title: Chief Human Resources Officer | ||||||
EMPLOYEE, | ||||||
| ||||||
Name: Kevin Miller |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (this Agreement), dated as of December 7, 2020, (the Effective Date) between The Fresh Market, Inc., a Delaware corporation (the Company), and Carlos Clark (the Employee).
WHEREAS, the Company desires to retain the services and employment of the Employee on behalf of the Company, upon the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to enter into such employment with the Company, upon the terms and conditions hereinafter set forth;
WHEREAS, the Company seeks to provide the Employee with an opportunity to participate in The Fresh Market, Inc. Severance Plan adopted October 22, 2019 (the Severance Plan), which is incorporated herein by reference; and
WHEREAS, as a condition of the services and employment contemplated by the parties, including participation in the Severance Plan, the Company has required that the Employee enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, all capitalized terms not defined herein shall have the meanings specified in the Severance Plan.
SECTION 2. Employment; Duties. On the terms and subject to the conditions set forth herein, the Company hereby agrees to employ the Employee, and the Employee hereby agrees to accept such employment, for the Employment Term (as defined below). The Employee warrants and represents that the Employee will not be in breach of any obligation owed to a third party by becoming employed by or working for the Company. During the Employment Term, the Employee shall serve as the Senior Vice President, General Counsel of the Company and shall report to the Chief Executive Officer of the Company (CEO), or designated, performing the duties and responsibilities commensurate with the position assigned to the Employee with respect to the business of the Company and such other duties and responsibilities that may be assigned to the Employee from time to time.
SECTION 3. Performance. The Employee shall serve the Company faithfully and to the best of the Employees ability and shall devote his or her full business time, energy, experience and talents to the business of the Company, and will not engage in any other employment activities for any direct or indirect remuneration without the written approval of the Chief Executive Officer (CEO); provided that it shall not be a violation of this Agreement for the Employee to manage his or her personal investments, engage in or serve such civic, community, charitable, educational, or religious organizations or institutions as the Employee may select so long as such service does not create an actual or potential conflict of interest with, or interfere with the performance of, the Employees job, duties or obligations to the Company or conflict with the Employees covenants under Section 7 of this Agreement, in each case, as determined in the sole judgment of the Board of Directors of the Company (the Board as defined in the Severance Plan to be the Executive Board of Directors of the Company).
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 4. Employment Term. The Employees employment under this Agreement shall commence as of the Effective Date and shall continue in effect unless earlier terminated as set out in Section 6 below. The Employees period of employment under this Agreement shall be referred to as the Employment Term.
SECTION 5. Compensation.
(a) Base Salary. During the Employment Term, the Employee shall be entitled to receive an annual base salary of Three-Hundred Forty Thousand and no/100 Dollars ($340,000.00) (Base Salary). Base Salary shall be paid in accordance with Companys ordinary payroll practices and internal policies generally applicable to Company employees and subject to such deductions, withholdings and other taxes as required by law or as otherwise permissible under such practices or policies.
(b) Annual Bonus. During the Employment Term starting with fiscal year 2020, the Employee will be eligible to receive an annual bonus opportunity targeted at Fifty Percent (50%) of Employees Base Salary under and subject to the terms and conditions of the Companys annual incentive compensation plan.
(c) Long-Term Incentives. During the Employment Term, the Employee will be eligible to receive awards under the Pomegranate Parent Holdings, Inc. Stock Option Plan (or any successor plan) (the Option Plan). The Board may, in its sole discretion, grant equity awards from time to time under the Option Plan and any awards will be subject to the terms and conditions of the Option Plan and any applicable award documents.
(d) Employee Benefits. During the Employment Term, the Employee will be eligible to participate in the employee benefit plans and programs (including being entitled to Paid Annual Leave) generally available to Company employees as may be in effect from time to time and subject to the eligibility requirements of the plans and programs. Nothing in this Agreement shall prevent the Company from amending or terminating any employee benefit plan or program from time to time as it deems appropriate.
(e) Company Policies. The Employee agrees and acknowledges that he or she will be subject to, and will comply with, all Company policies and procedures.
SECTION 6. At-Will Employment; Termination of Employment.
(a) At-Will Employment. This Agreement does not constitute a guarantee of employment for any specific period of time, and the Employment Term with the Company is at will. Either the Employee or the Company may terminate the Employees employment at any time, without cause or notice, subject to the provisions of this Section 6. Any contrary representations that may have been made to the Employee shall be superseded by this Agreement. The Employees right to any compensation following a termination shall be only as set forth in the Severance Plan.
(b) Termination of Employment by the Employee. Notwithstanding Section 6(a) above, except as otherwise provided in the Severance Plan for a resignation of employment for Good Reason, the Employee may terminate his or her employment at any time, upon not less than thirty (30) days prior written notice to the Company (the Notice Period). At any time during the Notice Period, the CEO may (in his or her sole and absolute discretion) (i) relieve the Employee of the Employees duties and responsibilities (in whole or part), (ii) place the Employee on paid leave-of-absence status, (iii) impose conditions with respect to attending or remaining away from the Companys place(s) of business, or (iv) accelerate the Employees termination date, in which case the Company shall pay the applicable amount of the Employees Base Salary in a lump sum for the remainder of the Notice Period.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(c) Termination of Employment by the Company. The Company may terminate the Employees employment without Cause or for Disability, upon written notice to the Employee, subject to applicable law. The Company may terminate the Employees employment for Cause in accordance with the terms of the Severance Plan. If the Employee dies while employed by the Company, all obligations of both parties will immediately terminate (except as set forth herein or in the Severance Plan).
(d) Severance Benefits. The Employees right to any severance benefits following a termination of employment shall be only as set forth in the Severance Plan.
SECTION 7. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. (i) The Company and the Employee agree that, during the course of the Employment Term with the Company, the Employee has had and will continue to have access to, and has gained and will continue to gain knowledge with respect to, Confidential Information. The Employee agrees that the Employee shall not, without the prior written consent of the Company, during the period of the Employment Term with the Company and thereafter for so long as it remains Confidential Information to the greatest extent permitted by applicable law, use or disclose, or knowingly permit any unauthorized Person to use, disclose or gain access to, any Confidential Information; provided, however, that the Employee may disclose Confidential Information (x) to a Person to whom the disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employees employment, (y) as required by law or (z) as ordered by a court, provided that in any event described in the preceding clause (y) or (z), (A) the Employee shall promptly notify the Company in writing, and consult with and assist the Company (at the Companys sole cost) in seeking a protective order or request for another appropriate remedy, (B) in the event that such protective order or remedy is not obtained, or if the Company waives compliance with the terms of the preceding clause (A), the Employee shall disclose only that portion of the Confidential Information that, in the written opinion of the Employees legal counsel, is legally required to be disclosed and shall exercise reasonable best efforts to assure that confidential treatment shall be accorded to such Confidential Information by the receiving Person or entity and (C) to the extent permitted by applicable law, the Company shall be given an opportunity to review the Confidential Information prior to disclosure thereof. As requested by the Company from time to time and upon termination of the Employment Term with the Company, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form (including electronic), of all Confidential Information in the Employees possession or control irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that all such materials have been so delivered.
(ii) Without limiting the foregoing, the Employee agrees to keep confidential the existence of, and any information concerning, any dispute between the Employee and the Company or any of its Affiliates, except that the Employee may disclose information concerning such dispute to the court considering such dispute or to the Employees legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of such dispute).
(iii) For purposes of this Agreement, Confidential Information means information, observations and data concerning the business and affairs of the Company or any of its Affiliates, including all business information (whether or not in written form) that relates to the Company or any of its Affiliates, or their directors, officers, employees, customers, suppliers or contractors or any other third parties with respect to which the Company or any of its Affiliates has a business relationship or owes a duty of confidentiality, or their respective businesses or products, and that is not known to the public
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
generally other than as a result of the Employees breach of this Agreement, including technical information or reports; trade secrets; unwritten knowledge and know-how; operating instructions; training manuals; customer lists, if applicable; customer buying records and habits; product sales records and documents, and product development, marketing and sales strategies; market surveys; marketing plans; profitability analyses; product cost; long-range plans; information relating to pricing, competitive strategies and new product development; information relating to any forms of compensation or other personnel-related information; contracts; and supplier lists. Confidential Information shall not include such information known to the Employee prior to the Employees involvement with the Company or any of its Affiliates or information rightfully obtained from a third party (other than pursuant to a breach by the Employee of this Agreement or any other duty of confidentiality).
(b) Noncompetition and Nonsolicitation. (i) Within the Geographic Territory and during the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the applicable period described in this Section 7(b)(i), the Noncompetition Period), the Employee shall not:
(A) directly or indirectly, without the prior written consent of the Company, engage in or invest as an owner, partner, stockholder, licensor, director, officer, agent, employee or consultant for any Person that is engaged primarily in a Competing Business; provided, however, that this provision shall not prevent the Employee from passively investing as a less than two percent stockholder in the securities of any company listed on a national securities exchange or quoted on an automated quotation system; or
(B) accept employment with any Person that is engaged in any manner in a Competing Business if such employment would result in the Employee being involved in the management, operations or business affairs of the subsidiary, division, segment or other portion of such Person that conducts such Competing Business;
For purposes of this Agreement, Competing Business means: (a) any specialty grocery retailer, whether national or regional, with more than $50 million in revenue in its most recently completed fiscal year; and (b) Kroger, including Harris Teeter and Marianos Fresh Market, Publix, Wegmans, Whole Foods Market, Trader Joes, Sprouts Farmers Market, Natural Grocers, Earth Fare, Luckys Market, Fresh Thyme, Lowes Foods and any subsidiary of any of the foregoing if such subsidiary performs the same or substantially similar services as the Company.
For purposes of this Agreement, Geographic Territory means (a) any state within the contiguous United States of America where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, (b) any province or territory within Canada where the Company conducts any business, excluding any business that consists solely of purchases or sales via the Companys catalog or the Internet, and (c) any standard metropolitan statistical area (as defined by the U.S. Census Bureau) where the Company has a business office, retail location or distribution center or has taken substantial steps toward the development of a new business office, retail location or distribution center at the time of the Employees termination. Clauses (a), (b) and (c) are separate and independent territories, and, notwithstanding Section 11(h), the use of the term or in this definition shall be interpreted in the disjunctive.
(ii) During the Employment Term with the Company or any of its Affiliates and continuing for the period of twelve (12) months thereafter (the Nonsolicitation Period), the Employee shall not, directly or indirectly, without the prior written consent of the Company, (A) actively solicit, recruit or hire any Person who is at such time, or who at any time during the 12-month period prior to such solicitation or hiring had been, an employee of, or an exclusive consultant then under contract with,
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the Company or any of its Affiliates, (B) actively solicit or encourage any employee of the Company or any of its Affiliates to leave the employment of the Company or any of its Affiliates or (C) intentionally interfere with the relationship of the Company or any of its Affiliates with any Person or entity who or that is employed by or otherwise engaged to perform services for the Company or any of its Affiliates.
(iii) During the Nonsolicitation Period, the Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt any past, present or prospective relationship, contractual or otherwise, between the Company or any of its Affiliates, on the one hand, and any of their respective customers, partners, suppliers or stockholders on the other hand.
(iv) The Noncompetition Period and the Nonsolicitation Period shall be tolled during (and shall be deemed automatically extended by) any period during which the Employee is in violation of the provisions of this Section 7(b).
(v) In the event that a court of competent jurisdiction determines that any provision of this Section 7(b) is invalid or more restrictive than permitted under the governing law of such jurisdiction, then, only as to enforcement of this Section 7(b) within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.
(c) Nondisparagement. The Employee shall not, directly or indirectly, whether in writing or orally, criticize, denigrate or disparage the Company or any of its Affiliates, its predecessors and successors, or any of the current or former directors, officers, employees, stockholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light; provided that this provision shall not restrict the Employees ability to make truthful statements in good faith in response to any governmental inquiry or request for information or otherwise when required by legal process to do so.
(d) Return of Property. The Employee acknowledges that all documents, records, files, lists, equipment, computer, software or other property (including intellectual property) relating to the businesses of the Company or any of its Affiliates, in whatever form (including electronic), and all copies thereof, that have been or are received or created by the Employee while an employee of the Company or any of its Affiliates (including Confidential Information) are and shall remain the property of the Company and its Affiliates, and the Employee shall immediately return such property to the Company upon the termination of the Employment Term and, in any event, at the Companys request. The Employee further agrees that any property situated on the premises of, and owned by, the Company or any of its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Companys personnel at any time with or without notice.
(e) Cooperation. The Employee agrees that, upon reasonable notice and without the necessity of the Companys obtaining a subpoena or court order, the Employee shall provide reasonable cooperation in connection with any suit, action or proceeding (or any appeal from any suit, action or proceeding), and any investigation or defense of any claims asserted against the Company or any of its Affiliates, that relates to events occurring during the Employment Term with the Company as to which the Employee may have relevant information (including furnishing relevant information and materials to the Company or its designee and providing testimony at depositions and at trial), provided that the Company shall reimburse the Employee for expenses reasonably incurred in connection with any such cooperation occurring after the termination of the Employment Term and provided further that any such cooperation occurring after the termination of the Employment Term shall be scheduled to the extent reasonably practicable so as not to unreasonably interfere with the Employees business or personal affairs.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
SECTION 8. Remedies and Injunctive Relief. The Employee acknowledges that a violation by the Employee of any of the covenants contained in this Agreement would cause irreparable damage to the Company and its Affiliates in an amount that would be material but not readily ascertainable, and that any remedy at law (including the payment of damages) would be inadequate. Accordingly, the Employee agrees that, notwithstanding any provision of this Agreement to the contrary, the Company shall be entitled (without the necessity of showing economic loss or other actual damage) to injunctive relief (including temporary restraining orders, preliminary injunctions and permanent injunctions) in any court of competent jurisdiction for any actual or threatened breach of any of the covenants set forth in this Agreement in addition to any other legal or equitable remedies it may have. The preceding sentence shall not be construed as a waiver of the rights that the Company may have for damages under this Agreement or otherwise, and all such rights shall be unrestricted.
SECTION 9. Acknowledgments.
(a) The Employee acknowledges that the Company and its Affiliates have expended and will continue to expend substantial amounts of time, money and effort to develop business strategies, employee and customer relationships and goodwill to build an effective organization. The Employee acknowledges that the Company has a legitimate business interest in and right to protect its Confidential Information, goodwill and employee and customer relationships, and that the Company would be seriously damaged by the disclosure of Confidential Information and the loss or deterioration of its customer and employee relationships. The Employee further acknowledges that the Company and its Affiliates are entitled to protect and preserve the going concern value of the Company to the extent permitted by law.
(b) In light of the foregoing acknowledgments, the Employee agrees that the covenants contained in this Agreement are reasonable and properly required for the adequate protection of the businesses and goodwill of the Company and its Affiliates. The Employee further acknowledges that, although the Employees compliance with the covenants contained in this Agreement may temporarily impact the Employee from earning a livelihood in a business similar to the business of the Company, the Employees experience and capabilities are such that the Employee has other opportunities to earn a livelihood and adequate means of support for the Employee and the Employees dependents.
(c) Prior to execution of this Agreement, the Employee was advised by the Company of the Employees right to seek independent advice from an attorney of the Employees own selection regarding this Agreement. The Employee acknowledges that the Employee has entered into this Agreement knowingly and voluntarily and with full knowledge and understanding of the provisions of this Agreement after being given the opportunity to consult with counsel. The Employee further represents that, in entering into this Agreement, the Employee is not relying on any statements or representations made by any of the Companys directors, officers, employees or agents that are not expressly set forth herein, and that the Employee is relying only upon the Employees own judgment and any advice provided by the Employees attorney.
(d) In light of the acknowledgements contained in this Section 9, the Employee agrees not to challenge or contest the reasonableness, validity or enforceability of any limitations and obligations contained in this Agreement.
SECTION 10. Section 409A Compliance. All amounts payable under this Agreement are intended to comply with the short term deferral exception from Section 409A of the
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Internal Revenue Code (Section 409A) specified in Treas. Reg. § 1.409A-l(b)(4) (or any successor provision) or the separation pay plan exception specified in Treas. Reg. § 1.409A-l(b)(9) (or any successor provision), or both of them, and shall be interpreted in a manner consistent with the applicable exceptions. Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible. Each installment payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying Section 409A. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Employee is a specified employee (as defined by Section 409A) and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days following Employees death. Termination of employment, resignation or words of similar import, as used in this Agreement shall mean, with respect to any payments subject to Section 409A, Employees separation from service as defined by Section 409A. lf any payment subject to Section 409A is contingent on the delivery of a Release by the Employee and could occur in either of two calendar years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to the Employee. The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A.
SECTION 11. Miscellaneous.
(a) Assignment and Successor. This Agreement may be assigned by the Company to any Affiliate or successor to the business or assets of the Company. In the event of any such assignment, the Company shall cause such Affiliate or successor, to assume the obligations of the Company hereunder, by a written agreement addressed to the Employee, concurrently with any assignment, with the same effect as if such assignee were the Company hereunder. This Agreement is personal to the Employee and the Employee may not assign or any rights or delegate any responsibilities hereunder.
(b) Entire Agreement. This Agreement, together with the Severance Plan and the Companys handbook and policies, sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party hereto. None of the parties shall be liable or bound to any other party in any manner by any representations and warranties or covenants relating to such subject matter except as specifically set forth herein. To the extent, this Agreement conflicts with the Companys handbook and other policies, this Agreement and the Severance Plan control.
(c) Amendment: No Waiver. No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by the Employee and a duly authorized officer of the Company. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No failure or delay by either party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment of any steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.
(d) Disputes. (i) The Company and the Employee agree that, except as otherwise specifically provided herein, all disputes, controversies and claims arising between them concerning the subject matter of this Agreement shall be resolved by arbitration in accordance with the Companys Agreement to Resolve Claims provided to the Employee at or around the time of hire.
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(ii) Without limiting the generality of Section 11(d)(i), to the extent permitted by applicable law, the parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement.
(e) Governing Law and Venue; Interpretation. This Agreement shall be deemed to be made in the State of North Carolina, and the validity, interpretation, construction and performance of this Agreement in all respects shall be governed by the laws of the State of North Carolina without regard to its principles of conflicts of law. In the event the Company pursues equitable relief for violation of the Employees covenants in Section 7, the Employee hereby expressly consents to the personal jurisdiction and venue of the state and federal courts located in North Carolina for any such lawsuit and the Employee hereby waives all objections based upon lack of jurisdiction or improper or inconvenient venue of any such court. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of either party hereto by any court or other governmental or judicial authority by reason of such partys having or being deemed to have structured or drafted such provision.
(f) Tax Withholding. All amounts payable under this Agreement shall be subject to the withholding of all applicable taxes and deductions required by any applicable law.
(g) Headings and References. The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement. When a reference in this Agreement is made to a Section, such reference is to a Section of this Agreement unless otherwise indicated.
(h) Construction. For purposes of this Agreement, the words include and including, and variations thereof, shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words without limitation. The term or is not exclusive. The word extent in the phrase to the extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if.
(i) Severability. If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement are not affected in any manner materially adverse to either party. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions can be consummated as originally contemplated to the fullest extent possible.
(j) Survival of Obligations. Sections 7-9 and II of this Agreement shall survive any material change in the Employees position or terms and conditions of employment, and shall survive the expiration or termination of this Agreement and the termination of the Employment Term with the Company, regardless of which party terminates the Agreement or employment relationship between them, or why such termination occurs.
(k) Notices. All notices or other communications required or permitted by this Agreement shall be made in writing and all such notices or communications shall be deemed to have been duly given
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: | The Fresh Market, Inc. 628 Green Valley Road, Suite 500 Greensboro, North Carolina 27408 | |
Attention: Chief Human Resources Officer | ||
If to the Employee: | The Employees address as most recently supplied to the Company and set forth in the Companys records. |
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(l) Counterpart. This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
THE FRESH MARKET, INC., | ||||||
By
|
| |||||
Name: Chris Himebauch | ||||||
Title: Chief Human Resources Officer | ||||||
EMPLOYEE, | ||||||
| ||||||
Name: Carlos Clark |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.15
ML&B Draft 1/20/20
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
Jan 22, 2020
Jason Potter
c/o The Fresh Market, Inc.
628 Green Valley Road
Greensboro, NC 27408
Re: Grant of Option
Dear Jason:
As you know, The Fresh Market, Inc. (TFM) was acquired by Pomegranate Holdings, Inc. pursuant to an Agreement and Plan of Merger, dated as of March 11, 2016 among TFM, Pomegranate Holdings, Inc., and Pomegranate Merger Sub, Inc. Pomegranate Holdings, Inc. is a wholly owned subsidiary of Pomegranate Parent Holdings, Inc. (the Company), which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC.
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock of the Company (Shares), on the terms and conditions set forth below. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 2,793,296 |
2. | Exercise Price per Share: $1.05 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or IPO, provided you have continuously been an Employee through the time of the Change in Control or IPO, as applicable. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan; provided that for purposes of Section 5, Cause shall have the meaning as set forth in the offer letter between you and TFM dated January 22, 2020. |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
5. | Exercise of Option. The Option shall be exercisable in accordance Section 6 of the Plan. |
6. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 2,793,296 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 6 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 6 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For the avoidance of doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of the foregoing, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
7. | Repurchase Rights. The Shares subject to the Option shall be subject to the repurchase rights as set forth in Section 9(b) of the Plan. For the avoidance of doubt, in determining Fair Market Value for purposes thereof, the Board shall apply valuation methods consistent with its prior determinations of Fair Market Value. |
8. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD HAVE BEEN ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES. |
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
9. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company will not treat the grant of the Option itself as taxable income to you, and is not responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
| |
Name: | Andrew Jhawar | |
Title: |
Agreed to and Accepted by: | ||
| ||
Name: Jason Potter |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.16
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
September 4, 2020
Jim Heaney
Re: Grant of Option (Grant Date: September 3, 2020)
Dear Jim:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 400,000 |
2. | Exercise Price per Share: $5.50 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 400,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the avoidance of doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD |
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Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
HAVE BEEN ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES. |
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
will not treat the grant of the Option itself as taxable income to you, and is not responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
| |
Name: | Jason Potter | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Jim Heaney |
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.17
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
July 27, 2020
Brian Johnson
Re: Grant of Option (Grant Date: July 7, 2020)
Dear Brian:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 300,000 |
2. | Exercise Price per Share: $3.30 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 300,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For the avoidance of |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD HAVE BEEN |
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES.
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and thatthe Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company will not treat the grant of the Option itself as taxable income to you, and is not |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance ofthis option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
![]() | |
Name: | Jason Potter | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Brian Johnson |
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.18
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
February 28, 2019
Chris Himebauch
Re: Grant of Option (Grant Date: December 31, 20 18)
Dear Chris:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 300,000 |
2. | Exercise Price per Share: $3.30 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 300,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the avoidance of doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD |
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
HAVE BEEN ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES.
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management ofthis award, and that the Company and/or any of its Affiliates may, each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
will not treat the grant of the Option itself as taxable income to you, and is not responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
![]() | |
Name: | Laurence B. Appel | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Chris Himebauch |
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.19
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
July 15, 2020
Kevin Miller
Re: Grant of Option (Grant Date: July 7. 2020)
Dear Kevin:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 300,000 |
2. | Exercise Price per Share: $3.30 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 300,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9( a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For the avoidance of |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD HAVE BEEN |
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES. |
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph S(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company will not treat the grant of the Option itself as taxable income to you, and is not |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
![]() | |
Name: | Jason Potter | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Kevin Miller |
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.20
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
December 21, 2020
Carlos Clark
Re: Grant of Option (Grant Date: December 14, 2020)
Dear Carlos:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 300,000 |
2. | Exercise Price per Share: $9.35 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 300,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For the avoidance of |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD HAVE BEEN |
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES. |
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company will not treat the grant of the Option itself as taxable income to you, and is not |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
![]() | |
Name: | Jason Potter | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Carlos Clark |
4
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
Exhibit 10.21
POMEGRANATE PARENT HOLDINGS, INC.
c/o Apollo Management VIII, L.P.
9 West 57th Street
New York, NY 10019
November 12, 2019
Dan Portnoy
Re: Grant of Option (Grant Date: November 6, 2019)
Dear Dan:
We are pleased to inform you that you have been granted an option (the Option) to purchase shares of common stock (Shares) Pomegranate Parent Holdings, Inc. (the Company), on the terms and conditions set forth below. The Fresh Market, Inc. is an indirect wholly-owned subsidiary of the Company, which in turn is majority-owned by an investment fund controlled by an affiliate of Apollo Global Management LLC. The Option has been granted pursuant to the Companys Stock Option Plan (the Plan), and the Option and underlying Shares are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.
1. | Number of Shares subject to the Option: 400,000 |
2. | Exercise Price per Share: $3.30 |
3. | Vesting: The Option shall vest upon the earlier of a Change in Control or any Investor Sale immediately following which the Investor Percentage falls below 50%, provided that you remain employed through the date of such transaction. |
4. | Termination of the Option. The Option shall terminate pursuant to the provisions of Section 5 of the Plan. |
5. | Release from Transfer Restrictions. The transfer restrictions contained in Section 9(a) of the Plan shall lapse on a Change in Control. In addition, following any Investor Sale, a number of Shares shall be released from the transfer restrictions contained in Section 9(a) of the Plan as is equal to (i) 400,000 Shares (subject to adjustment for stock splits etc.) multiplied by the excess of 100% over the Investor Percentage, minus (ii) the number of Shares previously released under this paragraph 5 from the transfer restrictions contained in Section 9(a) of the Plan (subject to adjustment for stock splits etc.); provided, that if immediately following any Investor Sale, the Investor Percentage falls below 30%, then all of the Shares shall be released from the transfer restrictions; provided further, that this paragraph 5 shall not be construed as releasing any Shares that are non-transferable by reason of a standstill agreement or related agreement entered into at the request of the managing underwriters of the Qualified Public Offering. For |
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
the avoidance of doubt, the number of Shares released shall be based upon and include all Shares held or which may be acquired by you, including Shares subject to Options upon the subsequent exercise thereof. Further, following a Qualified Public Offering, there shall be released from the transfer restrictions contained in Section 9(a) of the Plan, Shares having a fair market value equal to the tax withholding obligation due by reason of exercise of any Option within the thirty day period prior to the date it is scheduled to terminate pursuant to Section 5 of the Plan. For purposes of this letter, (x) Investor Sale means of sale of Shares by an Apollo Investor in connection with or following a Qualified Public Offering, and (y) Investor Percentage means the percentage derived by dividing (i) the number of Shares held by all Apollo Investors immediately following the applicable Investor Sale, by (ii) the number of Shares held by all Apollo Investors as of the date hereof (subject to adjustment for stock splits etc.). |
6. | Representations. By accepting this Option, you represent, acknowledge and/or agree to the following, and understand that the Company would not have granted this Option to you but for your representations, acknowledgements and agreements below. |
(a) | Shares Unregistered; Investor Knowledge. You acknowledge and agree that (i) neither the grant of the Option nor the offer to acquire Shares upon exercise thereof has been registered under applicable securities laws; (ii) there is no established market for the Shares and it is not anticipated that there will be any such market for the Shares in the foreseeable future; and (iii) your knowledge and experience in financial and business matters are such that you are capable of evaluating the merits and risks of any investment in the Shares. |
(b) | One-Time Benefit. You acknowledge and agree that: (i) this award is a one-time benefit, which does not create any contractual or other right to receive future awards, or benefits in lieu of awards; (ii) all determinations with respect to any such future awards, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the exercise or purchase price, and the time or times when each award shall vest, will be at the sole discretion of the Company; (iii) this award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; and (iv) THAT THIS AWARD SHALL NOT CREATE A RIGHT TO FURTHER EMPLOYMENT WITH THE COMPANY OR ITS AFFILIATES AND SHALL NOT INTERFERE WITH THE ABILITY OF THE COMPANY OR ANY OF ITS AFFILIATES TO TERMINATE YOUR EMPLOYMENT RELATIONSHIP AT ANY TIME, AND UPON TERMINATION OF YOUR EMPLOYMENT FOR ANY REASON WHATSOEVER, ANY RIGHTS IN RESPECT OF THE OPTION OR THE UNDERLYING SHARES TO WHICH YOU WOULD |
2
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
HAVE BEEN ENTITLED HAD YOUR EMPLOYMENT NOT TERMINATED SHALL LAPSE UPON THE DATE OF TERMINATION UNLESS EXPRESSLY STATED OTHERWISE HEREIN OR THE PLAN, AND YOU SHALL NOT BE ENTITLED TO ANY COMPENSATION IN RESPECT OF LOSS OF ALL OR ANY OF THE OPTION OR UNDERLYING SHARES. |
(c) | Employee Data Privacy. You consent to the collection, use and transfer of personal data as described in this paragraph 5(c). You understand that the Company and its Affiliates hold certain personal information about you including, but not limited to, your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, common shares or directorships held in the Company, details of all other entitlement to common shares awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the purpose of managing and administering this award (Data). You further understand that the Company and/or its Affiliates will transfer Data among themselves as necessary for the purposes of implementation, administration and management of this award, and that the Company and/or any of its Affiliates may each further transfer Data to any third parties assisting the Company in such implementation, administration and management, or to any potential acquirer of the Company or its Affiliates. You authorize them to receive, possess, use, retain and transfer Data in electronic or other form, for the purposes of implementing, administering and managing this award, including any requisite transfer of such Data as may be required for the administration of this award and/or the subsequent holding common shares on your behalf to a broker or other third party with whom the shares acquired on exercise may be deposited, or, in the case of a potential acquirer, for the purpose of performing diligence on the Company or its Affiliates. You understand that he or she may, at any time, view the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the local human resources representative. |
(d) | Confidentiality. You agree not to disclose or discuss in any way the terms of this award to or with anyone other than members of your immediate family, or your personal counsel or financial advisors (and you will advise such persons of the confidential nature of this award). |
7. | Federal Taxes: The Option granted to you is treated as a nonqualified option for federal tax purposes, so when you exercise the Option, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Option. The Company is not making any representations concerning the tax treatment of the Option except that the Company |
3
Confidential Treatment Requested by The Fresh Market Holdings, Inc.
Pursuant to 17 C.F.R. Section 200.83
will not treat the grant of the Option itself as taxable income to you, and is not responsible for any taxes, interest or penalties you incur in connection with your Option, even if the taxing authorities successfully challenge any position taken by the Company in respect of wage withholding and reporting or otherwise. |
We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.
Sincerely,
POMEGRANATE PARENT HOLDINGS, INC.
By:
|
![]() | |
Name: | Laurence B. Appel | |
Title: | Authorized Signatory |
Agreed to and Accepted by: | ||
| ||
Name: Dan Portnoy |
4
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