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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
______________________
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-32731
______________________
CHIPOTLE MEXICAN GRILL, INC.
(Exact name of registrant as specified in its charter)
______________________
Delaware
(State or other jurisdiction of
incorporation or organization)
610 Newport Center Drive, Suite 1100 Newport Beach, CA
(Address of Principal Executive Offices)
84-1219301
(IRS Employer
Identification No.)
92660
(Zip Code)
Registrant’s telephone number, including area code: (949) 524-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.01 per share
Trading Symbol(s)
CMG
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
______________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act (check one):
☒ Large accelerated filer
☐ Smaller reporting company
☐ Emerging growth company
☐ Non-accelerated filer
☐ Accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2023, the aggregate market value of the registrant’s outstanding common equity held by non-affiliates was $46.885 billion, based on the closing price of
the registrant’s common stock on June 30, 2023, the last trading day of the registrant’s most recently completed second fiscal quarter. For purposes of this calculation, shares
of common stock held by each executive officer and director and by holders of 5% or more of the outstanding common stock have been excluded since those persons may
under certain circumstances be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 2, 2024, there were 27,421,169 shares of the registrant’s common stock, par value of $0.01 per share outstanding.
Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2024 annual meeting of shareholders, which will be filed
no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
TABLE OF CONTENTS
PART I
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8.
Financial Statements and Supplementary Data
PART II
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Note 1 – Description of Business and Summary of Significant Accounting Policies
Note 2 – Supplemental Balance Sheet Information
Note 3 – Revenue Recognition
Note 4 – Fair Value Measurements
Note 5 – Equity Investments
Note 6 – Income Taxes
Note 7 – Shareholders’ Equity
Note 8 – Stock-Based Compensation and Employee Benefit Plans
Note 9 – Leases
Note 10 – Earnings Per Share
Note 11 – Commitments and Contingencies
Note 12 – Debt
Note 13 – Related Party Transactions
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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Cautionary Note Regarding Forward-Looking Statements
PART I
This report includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projected
cash from operations, expected capital expenditures for 2024 and all other statements that are not historical facts. We use words such as “may,” “will,”
“should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “think,” “estimate,” “seek,” “expect,” “predict,” “could,” “project,” “potential”,
“goal” and other similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements
are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future
results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties described in this report
under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” so you should not
place undue reliance on forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ
materially from those described in the statements, including: increasing wage inflation and the competitive labor market, including as a result of
regulations such as California AB 1228, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing
shortages; increases in ingredient and other operating costs and the inability of our third-party suppliers and business partners to fulfill their
responsibilities and commitments due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions and
supply shortages; increasing supply costs (including beef, tortillas, queso, salsa, beans and rice); risks of food safety incidents and food-borne illnesses;
risks associated with our reliance on certain information technology systems operated by us or by third parties and potential failures, outages or
interruptions; privacy and cybersecurity risks, including risk of breaches, unauthorized access, theft, modification, destruction or ransom of guest or
employee personal or confidential information stored on our network or the network of third-party providers; the impact of competition, including from
sources outside the restaurant industry; the competitive labor market and changes in the availability and cost of labor and the impact of any union
organizing efforts and our responses to such efforts; the financial impact of increasing our average hourly wage; the impact of federal, state or local
government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages;
our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites and the equipment needed to fully outfit new
restaurants, construction materials and contractors and the expected costs to accelerate our international expansion through franchise restaurants in the
Middle East; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in guests' perceptions
of our brand, including as a result of actual or rumored food safety concerns or other negative publicity, decreased overall consumer spending, including
as a result of high inflation, mass layoffs, fears of possible recession and higher energy costs, or the inability to increase menu prices or realize the benefits
of menu price increases; risks associated with our digital business, including risks arising from our reliance on third party delivery services; and risks
relating to litigation, including possible governmental actions and potential class action litigation related to food safety incidents, cybersecurity incidents,
employment or privacy laws, advertising claims or other matters. We are including this Cautionary Note to make applicable and take advantage of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or
revise any forward-looking statements after the date of this report as a result of new information, future events or other developments, except as required by
applicable laws and regulations.
ITEM 1. BUSINESS
General
Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries (“Chipotle,” “we,” “us,” or “our”) owns and operates Chipotle
Mexican Grill restaurants, which feature a relevant menu of burritos, burrito bowls (a burrito without the tortilla), quesadillas, tacos, and salads. We strive
to cultivate a better world by serving responsibly sourced, classically cooked, real food with wholesome ingredients and without artificial colors, flavors or
preservatives. We are passionate about providing a great guest experience and making our food more accessible to everyone while continuing to be a brand
with a demonstrated purpose. Our first Chipotle restaurant opened in Denver, Colorado in 1993. Over 30 years later, our devotion to seeking out high-
quality ingredients, raised with respect for animals, farmers, and the environment, remains at the core of our commitment to Food with Integrity.
As of December 31, 2023, we owned and operated 3,371 Chipotle restaurants throughout the United States (“U.S.”) and 66 international Chipotle
restaurants. We manage our operations based on eight regions and aggregate our operations to one reportable segment. Our revenue is derived from sales
by our restaurants.
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Business Strategy
We are a brand with a demonstrated purpose of Cultivating a Better World. Our mission is to win today while we grow our future by focusing on five
key fundamental strategies:
(cid:0) Sustaining world class people leadership by developing and retaining diverse talent at every level;
(cid:0) Running successful restaurants with a people accountable culture that provides great Food with Integrity while delivering exceptional in-
restaurant and digital experiences;
(cid:0) Making the brand visible, relevant, and loved to improve overall guest engagement;
(cid:0) Amplifying technology and innovation to drive growth and productivity at our restaurants, support centers and in our supply chain; and
(cid:0) Expanding access and convenience by accelerating new restaurant openings in North America and internationally.
Food with Integrity
Serving high-quality food while still charging reasonable prices is critical to ensuring guests enjoy wholesome food at a great value. In our Chipotle
restaurants, we strive to serve only meats that are raised in accordance with criteria we have established in an effort to improve sustainability and promote
animal welfare, and without the use of non-therapeutic antibiotics or added growth hormones. We brand these meats as “Responsibly Raised®.” We also
seek to use responsibly grown produce, by which we mean produce grown by suppliers whose practices conform to our Food with Integrity standards and
our priorities with respect to environmental considerations and employee welfare. For more information about our sustainability and animal welfare
initiatives, see our biennial Sustainability Report and interim Update Report on our website www.chipotle.com/sustainability.
Purchasing
Maintaining the high levels of quality and safety we demand in our restaurants depends in part on our ability to acquire high-quality, fresh ingredients
and other necessary supplies that meet our specifications from reliable suppliers. Our 26 independently owned and operated regional distribution centers
purchase from various suppliers we carefully select based on quality, price, availability, and the suppliers’ understanding of and adherence to our mission
and Food with Integrity standards. We have also sought to increase, where practical, the number of suppliers for our ingredients to help mitigate pricing
volatility and reduce our reliance on one or several suppliers, which could create supply shortages. In addition, we closely monitor industry news, trade
tariffs, weather, exchange rates, foreign demand, crises and other world events that may affect our ingredient prices or available supply. Certain key
ingredients (beef, tomatoes, tortillas and adobo) are purchased from a small number of suppliers.
Quality Assurance and Food Safety
We are committed to serving only safe, high-quality food. Our food safety and quality assurance teams work to ensure compliance with our food
safety programs and practices, components of which include:
(cid:0) natural inhibitors (to prevent microbial growth in ingredients);
(cid:0) advanced technologies (tools that reduce or eliminate pathogens while maintaining food quality);
(cid:0) enhanced restaurant procedures (protocols for handling ingredients and sanitizing surfaces in our restaurants);
(cid:0) food safety certifications;
(cid:0) internal and third-party restaurant inspections;
(cid:0) small grower support during on-site audits;
(cid:0) supplier interventions (steps to mitigate food safety risks before ingredients reach Chipotle); and
(cid:0) ingredient traceability.
These and other food safety practices underscore our commitment to be a leader in food safety while continuing to serve high-quality food that our
guests love. Our food safety and quality assurance teams establish and monitor our quality and food safety programs and work closely with suppliers to
ensure our high standards are met throughout the supply chain. We maintain a limited list of approved suppliers, many of whom are among the top
suppliers in the industry. In addition, we have a team approach where our training, operations, culinary, legal and restaurant food safety and quality
assurance departments develop and implement operating standards for food quality, food preparation, restaurant cleanliness, employee health protocols, and
safety in the restaurants. Our food safety programs are also intended to ensure that we not only continue to comply with applicable national, federal, state
and local food safety regulations, but also establish Chipotle as an industry leader in food safety. To help achieve this goal, we have a Food Safety Advisory
Council comprised of some of the nation’s foremost food safety authorities. The Food Safety Advisory Council is charged with evaluating our programs
and advising us on ways to elevate our already high standards for food safety. Our food safety and quality assurance team members hold board seats and
participate in technical working groups with several associations. This gives us the opportunity to learn and share our knowledge and expertise with other
food safety professionals and regulatory agencies.
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Digital Business
Our digital platform continues to be a strategic driver of our growth. In recent years, we have significantly upgraded our capabilities by digitizing our
restaurant kitchens, expanding our partnerships with third-party delivery services and building more Chipotlanes, which is our drive through format for
customer pick-up of digital orders. Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party
delivery aggregators and include revenue deferrals associated with Chipotle Rewards. Digital sales represented 37.4% of food and beverage revenue in
2023, compared to 39.4% of food and beverage revenue in 2022. We have made digital ordering convenient with enhancements to the Chipotle app and
website, such as customization, contactless delivery, and group ordering and we have improved the overall guest experience within the app with the
inclusion of order readiness messaging, wrong location detection and reminders to scan for points.
Human Capital
At Chipotle, our vision is to cultivate an environment where our employees can thrive, pursue their passion and become lifelong leaders. We believe
in investing and supporting our people because they are our most important asset and give us a competitive advantage in our business. As of December 31,
2023, Chipotle employed 116,068 people worldwide and 1,088 contract workers. Of our employees, 114,042 worked in the United States, and 2,026
worked internationally across Canada, France, Germany, and the United Kingdom. Within the U.S., 112,572 employees worked in our restaurants, and
1,470 in our Restaurant Support Centers. There were no union petitions or campaigns in 2023. We continue to bargain with the one restaurant that voted in
2022 to form a union, and we believe that our relationship with our employees is good. We also believe our efforts to manage our workforce have been
effective, as evidenced by a strong culture and our employees’ demonstrated commitment to living our purpose and values.
Talent Acquisition
We continue to invest heavily in recruiting top talent and ensuring appropriate staffing levels are maintained, especially during our two peak hiring
seasons (spring and fall). We focus on new and innovative ways to attract and engage talent for our restaurants, which includes marketing campaigns that
build on our documentary-style television spots, featuring unscripted testimonials from team members about the impact Chipotle has had on their lives. We
invest in advertising on social media and highlight growth opportunities and the possible trajectory of achieving six-figure total compensation in
approximately three years.
Additionally, we now offer a formal Summer Internship Program to invest in students while creating opportunities for our restaurant employees to
further gain exposure to our Restaurant Support Centers.
Diversity, Equity & Inclusion
Maintaining a diverse, equitable and inclusive work environment is critical to our success as a business. As of December 31, 2023, U.S.-based
employee diversity statistics were as follows:
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Our most recent EEO-1 consolidated report is posted on the Investors page of our website at www.ir.chipotle.com under Corporate Governance –
Human Capital Information and additional details about the demographics of our employee population is included in our biennial Sustainability Report and
interim Update Report on our website www.chipotle.com/sustainability.
Notably, our rate of internal promotions for 2023 was similar within our employee populations, with approximately 50% of promoted employees
identifying as female and 39% of promoted employees identifying as Hispanic or Latino.
We have undertaken several actions to promote diverse, equitable and inclusive work environments.
(cid:0) We created a consistent and structured candidate interview process with new interview guides. This ensures quality, speed and equitable hiring
practices are followed throughout internal and external candidate interviews. We also launched an internal job board across multiple
communication channels to our employees to provide increased visibility and access to internal opportunities.
(cid:0) Since December 2021, we have participated in Management Leadership for Tomorrow’s Black Equity at Work Certification Program, which
establishes a comprehensive aggregate measurement system and provides a rigorous, results-oriented approach that accelerates progress toward
Black equity internally, amongst our employees, and externally by supporting Black equity within our business partners and in the communities
where we operate.
(cid:0) In early 2023, we engaged an independent third-party consultant to conduct a Talent Management Equity Audit to identify places in our talent
management cycle where we may need to eliminate bias and/or create more equitable policies, practices, and procedures; identify potential
blockers and new opportunities to create and sustain equity in talent management; and identify key strengths and pockets of risk. The consultant
concluded that Chipotle has a robust set of processes, practices and policies to enable equitable talent recruiting, development and retention
throughout the company and identified opportunities to strengthen Chipotle’s existing practices. See the Investors page of our website at
www.ir.chipotle.com under Corporate Governance – Human Capital Information for additional details.
(cid:0) We have a holistic approach to pay equity to ensure consistent and equitable treatment among our employees. We retain an independent third-
party compensation consultant each year to conduct a pay equity analysis of our U.S. and Canadian workforce, including factors of pay (e.g.,
grade level, tenure in role, most recent promotion) and external market conditions (e.g., geographic location), to ensure consistency and equitable
treatment among our employees. In 2023, our review included 99% of our U.S. and Canadian employee population, excluding only
approximately 50 of our most senior management employees. The analysis identified small, isolated pay gaps for certain segments of the
population, and we subsequently made pay adjustments to close those gaps. Since there are not many common roles among our 50 most senior
executives, we consider both internal equity by level as well as individualized market data to help ensure we maintain pay equity among this
group.
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Talent Development
We provide high-quality growth and development opportunities to retain top talent and support internal promotions. In 2023, we had more than
24,000 internal promotions, including 100% of U.S. based Regional Vice Presidents, 87% of Team Directors, and 87% of Field Leaders. To develop our
employees, we provide the following programs:
(cid:0) Leadership Evolution and Development: Focuses on preparing a cross-functional cohort of mid-level managers for the future of work and
leadership. During the 9-month program, participants learn the critical capabilities of leading oneself, leading others, and leading the business
with topics designed to stretch capabilities and improve decision-making skills.
(cid:0) Cultivate University: A four-day immersive leadership experience designed to upskill our new multi-unit restaurant leaders to excel in their role
and execute on their Top 5 KPIs. Participants are introduced to a variety of leadership models as well as operational tools to support them in
leading effective teams and driving results in their restaurants.
(cid:0) General Manager Upskilling: Trains our restaurant leaders in fundamental soft skills to help bolster their leadership acumen so that they can
better lead their teams and create an exceptional guest experience.
(cid:0) Executive Development: Focuses on developing high potential Team Directors in areas such as leadership, marketing, business and finance, data
and analytics, ESG and hospitality, so they gain an in-depth understanding of various functions within the company.
(cid:0) Teach & Taste Live seminars: Offers lunch and learn sessions on leadership topics such as effective communication, emotional intelligence, and
building a culture of accountability to provide on-going professional development for employees at our Restaurant Support Centers. Each course
introduces a new leadership skill and offers best practices and actionable tools to continue developing the top talent that supports our field
operations.
(cid:0) Development courses and online programs that focus on creating a culture of belonging.
(cid:0) Online executive coaching for mid- and senior-level leaders throughout the organization.
(cid:0) Succession Planning: We utilize talent calibrations to identify a diverse pipeline of emerging leaders and define appropriate development
programs.
Total Rewards
The financial, physical, and mental wellness of our employees remains our top priority and we believe we have compelling compensation packages
and incentive programs, and a robust suite of benefit offerings that enable us to engage current team members and attract new team members:
(cid:0) We have made substantial investments in our compensation packages, including competitive wages and industry leading incentive programs,
such as our annual and quarterly bonus programs, which allow us to attract and retain the top talent in the industry.
(cid:0) We offer a Debt-Free Degree program that provides Chipotle employees access to nearly 100 degrees at 10 universities, completely tuition debt
free.
(cid:0) We support Career Certificates, which further enhances our Tuition Assistance benefits by providing on-demand certificate programs to help
Chipotle team members advance their careers in as little as eight weeks.
(cid:0) In 2023, we launched a program that provides our medically enrolled employees and their families with a Health Pro who can help them
navigate the complex healthcare environment, helping them understand how their health benefits cover their care, how to save money, as well as
get expert, high-quality medical care.
(cid:0) In 2023, we also offered personalized mental health assistance to all Chipotle employees and their family members with support available 24/7
via in-person, phone, or virtual visits with a licensed counselor.
(cid:0) Starting in 2024, we are partnering with SoFi to offer student loan payment matching programs via our 401(k)-retirement program. This, in
addition to a credit optimization service, will help bolster our employees’ financial well-being.
Culture and Engagement
Giving employees the opportunity to provide anonymous feedback is a key part of our employee engagement strategy, which positively contributes to
our culture. This begins with soliciting feedback regarding onboarding. As of December 31, 2023, 9 in 10 respondents in our restaurants reported a
favorable onboarding experience. For our employees in field support organizations and Restaurant Support Centers, nearly 95% of respondents had a
favorable view of their onboarding. Results of our surveys are shared with business partners and senior leaders, who continuously work to improve the
experience for all employees.
To encourage a collaborative working culture between our Restaurant Support Centers and restaurant operations, we created an Operations Council
comprised of employees from restaurant and field leadership, operations, and our business partners, who work together to share feedback and implement
new projects collaboratively.
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Additionally, to promote an engaged culture, we respond to employees quickly via our Employee Service Center (“ESC”). The ESC is available
seven days a week to resolve employee questions about things like restaurant health and safety, compliance, benefits, payroll, etc. We also maintain a
confidential Respectful Workplace Hotline that allows employees to anonymously report concerns like sexual harassment, discrimination, and retaliation.
Government Regulation and Environmental Matters
We are subject to various federal, state and local laws and regulations that govern aspects of our business operations. While costs associated with
compliance with laws and regulations have increased as the number and scope of regulation have increased, the total costs incurred have not had, and are
not expected to have, a material effect on our capital expenditures, results of operations or competitive position. See “Risk Factors” in Item 1A for
discussion of risks relating to federal, state, local and international laws and regulations applicable to our business.
Seasonality
Seasonal factors influencing our business are described under the heading “Quarterly Financial Data/Seasonality” in Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Competition
The fast-casual, quick-service, and casual dining segments of the restaurant industry are highly competitive with respect to, among other things, taste,
price, food quality and presentation, service, location, convenience, brand reputation, cleanliness, and ambience of each restaurant. Our competition
includes a variety of restaurants in each of these segments, including locally-owned restaurants, as well as national and regional chains. Competition from
food delivery services, which offer meals from a wide variety of restaurants, also has increased in recent years and is expected to continue to increase.
Many of our competitors also offer dine-in, carry-out, online, catering, and delivery services. Among our main competitors are restaurant formats that claim
to serve higher quality ingredients without artificial flavors, colors and preservatives, and that serve food quickly and at a reasonable price.
Our Intellectual Property and Trademarks
“Chipotle,” “Chipotle Mexican Grill,” “Food with Integrity,” “Responsibly Raised,” “Chipotle Rewards,” and a number of other marks and related
designs and logos are U.S. registered trademarks of Chipotle. We have filed trademark applications for a number of additional marks in the U.S. as well. In
addition to our U.S. registrations, we have registered trademarks for “Chipotle” and a number of other marks in Canada, the European Union, the Middle
East and various other countries, and have filed trademark applications for “Chipotle Mexican Grill,” “Chipotle” and a number of other marks in additional
countries. We also believe that the design of our restaurants is our proprietary trade dress and have registered elements of our restaurant design for trade
dress protection in the U.S. as well.
From time to time, we have taken action against other restaurants that we believe are misappropriating our trademarks, restaurant designs or
advertising. Although our policy is to protect and defend vigorously our rights to our intellectual property, we may not be able to adequately protect our
intellectual property, which could harm the value of our brand and adversely affect our business.
Available Information
We maintain a website at www.chipotle.com, including an investor relations section at ir.chipotle.com, on which we routinely post important
information, such as webcasts of quarterly earnings calls and other investor events in which we participate or host, and any related materials. Our Code of
Ethics and our Supplier Code of Conduct also are available in this section of our website. You may access our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as other reports relating to us that are filed with or furnished
to the SEC, free of charge in the investor relations section of our website as soon as reasonably practicable after such material is electronically filed with or
furnished to the SEC. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers
that file electronically with the SEC at www.sec.gov.
The contents of the websites mentioned above and elsewhere in this report are not incorporated into and should not be considered a part of this
report. The references to the URLs for these websites are intended to be inactive textual references only.
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ITEM 1A. RISK FACTORS
You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including
the “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” section and the consolidated financial statements and
related notes. If any of the risks and uncertainties described below occur or continue to occur, our business, financial condition and results of operations,
and the trading price of our common stock could be materially and adversely affected. The risks and uncertainties described below are those that we have
identified as material but are not the only risks and uncertainties we face. Our business is also subject to general risks and uncertainties that affect many
other companies, including, but not limited to, overall economic and industry conditions. Additional risks not currently known to us or that we presently
deem immaterial may arise or become material and may negatively impact our business, reputation, financial condition, results of operations or the trading
price of our common stock.
Risks Related to the Nature of our Business and the Restaurant Industry
Food safety and food-borne illness concerns may have an adverse effect on our business by decreasing sales and increasing costs.
Food safety is our top priority, and we dedicate significant resources to ensuring that our guests enjoy safe, high-quality food products. However,
even with strong preventative controls and interventions, food safety risks cannot be completely eliminated in every restaurant. Incidents of food-borne
illnesses continue to occur in the restaurant industry and may result from the failure of restaurant employees or suppliers to follow our food safety policies
and procedures, or from employees or guests entering our restaurant while ill and contaminating ingredients or surfaces. Although we monitor and audit
compliance with our program, we cannot guarantee that each and every food item is safely and properly maintained from the start of the supply chain
through guest consumption. Any report, legitimate or rumored, of food-borne illness such as E. coli, hepatitis A, norovirus or salmonella, or other food
safety issues, such as food tampering or contamination, at one of our restaurants could adversely affect our reputation and have a negative impact on our
sales. In addition, instances of food-borne illness or food safety issues that occur solely at competitors’ restaurants could result in negative publicity about
the restaurant industry and adversely impact our sales. Social media has dramatically increased the speed with which negative publicity, including actual or
perceived food safety incidents, is disseminated before there is any meaningful opportunity to investigate, respond to and address an issue. The occurrence
of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower
margins.
We may be at a higher risk for food safety incidents than some competitors due to our greater use of fresh, unprocessed produce, handling of raw
chicken in our restaurants, our reliance on employees cooking with traditional methods and the lack of added preservatives and frozen ingredients in our
menu items. The risk of illnesses associated with our food also may increase due to our delivery or catering businesses, in which our food is transported,
stored and/or served in conditions that are not under our control. All of these factors could have an adverse impact on our ability to attract and retain guests,
which could in turn have a material adverse effect on our growth and profitability.
Our digital business, which accounted for a significant portion of our 2023 total revenue, is subject to risks.
In 2023, 37.4% of our food and beverage revenue was derived from digital orders, which includes third-party delivery and customer pickup in-
restaurant and through our Chipotlanes. Approximately 18% of our 2023 food and beverage revenue consisted of delivery orders for which we are reliant
on third-party delivery companies. Depending on which ordering platform a guest uses – our platform or the platform of a third-party delivery service – the
delivery fee we collect from the guest may be less than the actual delivery cost, which has a negative impact on our profitability. In addition, several
jurisdictions (e.g., California, New York City and Seattle) have implemented minimum wages for delivery drivers, and other jurisdictions are considering
similar wage regulations, which could increase delivery fees and decrease our digital sales. In 2023, we implemented menu price increases to partially
offset the increases in ingredients, labor and other costs; however, our higher menu prices may cause some guests to shift their purchases to other
restaurants offered on the platform. If the third-party delivery companies we utilize increase their fees or give greater priority or promotions on their
platforms to other restaurants, our delivery business and our sales may be negatively impacted. These delivery companies maintain control over data
regarding our guests who use their platform and over the guest experience. We use our mobile app to drive convenience and increase brand engagement
with our guests. If a third-party delivery driver fails to make timely deliveries or fails to deliver the complete order, our guests may attribute the bad
customer experience to Chipotle and our reputation and sales could be negatively impacted. The ordering and payment platforms used by these third
parties, our mobile app or our online ordering site have been and could again be interrupted by technological failures, user errors, cyber-attacks or other
factors, which could adversely impact sales through these channels and negatively impact our overall sales and reputation. In addition, the delivery business
has been consolidating and may continue to consolidate, which may give third-party delivery companies more leverage in negotiating the terms and pricing
of contracts, which in turn could negatively impact our profits from this channel.
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The restaurant industry is highly competitive. If we are not able to compete successfully, our business, financial condition and results of
operations would be adversely affected.
The restaurant industry is highly competitive with respect to taste preferences, price, food quality and selection, customer service, brand reputation,
digital engagement, advertising and promotional initiatives, and the location, attractiveness and maintenance of restaurants. We also compete with non-
traditional market participants, such as “convenience meals” in the form of entrées, side dishes or meal preparation kits from the deli or prepared foods
sections of grocery stores, meal kit delivery services, and “ghost” or “dark” kitchens, where meals are prepared at separate takeaway premises rather than a
restaurant. Increased competition could have an adverse effect on our sales, profitability and development plans. If guest or dietary preferences change, if
our marketing efforts are unsuccessful, or if our restaurants are unable to compete successfully with other restaurant outlets, our business could be
adversely affected.
We continue to believe that our commitment to higher-quality and responsibly sourced ingredients resonates with guests and gives us a competitive
advantage; however, many of our competitors also make claims related to the quality of their ingredients and lack of artificial flavors, colors and
preservatives. The increasing use of these claims by competitors, regardless of the accuracy of such claims, may lessen our differentiation and make it more
difficult for us to compete. If we are unable to continue to maintain our distinctiveness and compete effectively, our business, financial condition and
results of operations could be adversely affected.
If we do not continue to persuade guests of the benefits of paying higher prices for our higher-quality food, our sales and results of operations
could be hurt.
Our success depends in large part on our ability to persuade guests that food made with ingredients that were raised or grown according to our Food
with Integrity principles are worth paying a higher price relative to prices of some of our competitors, particularly quick-service restaurants. Under our
Food with Integrity principles, for example, animals must be responsibly raised, and the milk in our sour cream, cheese and queso must come from cows
that have not been treated with rBGH, practices which typically are more costly than conventional farming. If we are not able to successfully persuade
guests that consuming food made in accordance with our Food with Integrity principles is better for them and the environment, or if guests do not agree
with the overall value proposition of our menu, our sales could be adversely affected, which would negatively impact our results of operations.
Our inability or failure to recognize, respond to and effectively manage the immediacy of social media could have a material adverse impact on
our business.
Social media and internet-based communications, including video-sharing, social networking, and gaming and messaging platforms, give users
immediate access to a broad audience. These platforms have dramatically increased the speed and scale of dissemination and accessibility of information,
including negative comments about our food quality or safety, negative guest or employee experiences and videos depicting inappropriate behavior of
employees and guests. Accurate, inaccurate or misleading information can be widely disseminated before there is any meaningful opportunity to respond or
address an issue. It is impossible for us to fully predict or control social media backlash, and the inappropriate use of social media by our guests or
employees could harm our business, prospects, financial condition, and results of operations, regardless of the information’s accuracy.
Use of social media is an important element of our marketing efforts. Social media and internet-based communication platforms are evolving rapidly,
and we need to continuously innovate and evolve our marketing strategies to maintain our brand relevance and broad appeal to guests. We also continue to
invest in other digital marketing initiatives to reach our guests and build their awareness of, engagement with, and loyalty to us, including our “Chipotle
Rewards” loyalty program. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues, increased
customer engagement or brand recognition. Other risks associated with our use of social media and internet-based communication platforms include
association with influencers or online celebrities who become embroiled in controversy, platforms and business partners who experience challenges,
improper disclosure of proprietary information, negative comments about us, exposure of personally identifiable information, fraud, hoaxes or malicious
dissemination of false information. Use of social media by our employees, guests and associates could lead to litigation or result in negative publicity that
could damage our reputation.
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Risks Related to Human Capital
If we are not able to hire, develop and retain qualified restaurant employees and/or appropriately plan our workforce, our growth plan and
profitability could be adversely affected.
Our aggressive pace of opening new restaurants can make it increasingly difficult to recruit and hire sufficient numbers of qualified employees to
manage and work in our restaurants, to maintain an effective system of internal controls for a dispersed workforce and to train employees to deliver a
consistently high-quality product and customer experience, which could materially harm our business and results of operations. Maintaining appropriate
staffing in our restaurants requires precise workforce planning, which has become more complex due to predictive scheduling laws (also called “fair
workweek” or “secure scheduling”) and “just cause” termination legislation in certain geographic areas where we operate. The market for qualified talent
continues to be competitive and we must continue to offer competitive wages, benefits and workplace conditions to retain qualified employees. We have
experienced and may continue to experience challenges in hiring and retaining restaurant employees and in maintaining full restaurant staffing in various
locations, which has resulted in longer wait times for guest orders, temporary closures of the digital make line and decreased employee and guest
satisfaction. In one instance, we permanently closed a restaurant due to lack of necessary staff after a prolonged recruiting effort. A shortage of qualified
candidates who meet legal work authorization requirements, failure to hire, train and retain new restaurant employees in a timely manner or higher than
expected turnover levels could affect our ability to open new restaurants, grow sales at existing restaurants or meet our labor cost objectives. In addition,
failure to adequately monitor and proactively respond to employee dissatisfaction could lead to poor guest satisfaction, higher turnover, litigation and
unionization efforts, which could negatively impact our ability to meet our growth targets. We have experienced labor union efforts to organize groups of
our employees from time to time and, if successful, those organizational efforts may decrease our operational flexibility and disrupt our normal operations,
which could adversely affect our business.
If we fail to comply with applicable federal, state and local employment and labor laws and regulations, it could have a material, adverse impact
on our business.
Various federal, state and local employment and labor laws and regulations govern our relationships with our employees, and similar laws and
regulations apply to our operations outside of the U.S. These laws and regulations relate to matters such as employment discrimination, wage and hour
laws, requirements to provide and document meal and rest periods or other benefits, family leave mandates, requirements regarding working conditions and
accommodations to certain employees, citizenship or work authorization and related requirements, insurance and workers’ compensation rules, healthcare
laws and anti-discrimination and anti-harassment laws. We incur substantial costs to comply with these laws and regulations and non-compliance could
expose us to significant liabilities. For example, we have had lawsuits filed against us alleging violations of federal and state laws regarding employee
wages and payment of overtime, meal and rest breaks, employee classification, employee record-keeping and related practices with respect to our
employees. We incur legal costs to defend these types cases, and we could incur losses from these and similar cases, and the amount of such losses or costs
could be material.
In addition, several jurisdictions (e.g. New York City, Philadelphia, Chicago, Seattle, etc.) have implemented fair workweek or “secure scheduling”
legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees, and additional jurisdictions are
considering similar legislation. Several jurisdictions also have implemented sick pay and paid time off legislation, which requires employers to provide
paid time off to employees, and “just cause” termination legislation, which restricts companies’ ability to terminate employees or reduce employees’ hours
unless they can prove “just cause” or a “bona fide economic reason” for the termination or reduction in hours. All of these regulations impose additional
obligations on us and our failure to comply with any of these regulations could subject us to penalties and other legal liabilities, which could adversely
affect our ability to attract and retain employees and our results of operations, and potentially cause us to close or reduce operating hours of some
restaurants in these jurisdictions. For example, we previously reported the settlement of a complaint alleging that we violated New York City’s Fair
Workweek law and Earned Safe and Sick Time Act, and we also have been and are undergoing several audits of our compliance with employment law
requirements, which could result in additional liabilities. Our liability exposure for these employment laws and regulations may be higher than our
restaurant peers because we are one of the largest restaurant companies that owns and operates all our restaurants, while most of our restaurant peers
franchise some or a significant portion of their operations.
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Increases in the cost of labor, including mandated minimum wage increases, could adversely impact our business and profitability.
Our profitability has been and could continue to be adversely impacted by increases in labor costs, including wages and benefits, which are some of
our most significant costs, including increases triggered by federal, state and local laws governing matters such as minimum wages, meal and rest breaks
and changes to eligibility for overtime pay; regulations regarding scheduling and benefits; increased health care and workers’ compensation insurance
costs; and higher wages and benefit costs necessary to attract, hire and retain high-quality employees with the right skill sets in a highly competitive job
market. In addition, state and local laws may require wage increases and standards on working hours and other factors that would restrict our flexibility to
respond to market conditions and increase our costs without corresponding benefits. Beginning in April 2024, new California legislation requires national
restaurant chains, including Chipotle, to pay a minimum $20 per hour wage to restaurant workers in California, which minimum wage may be increased
annually by a state-appointed council. Other state, county and city jurisdictions are considering similar regulations. Our ability to offset higher labor costs
by increasing menu prices depends on the willingness of our guests to pay the higher prices and the perceived value of our meals relative to competitors. If
competitive or inflationary pressures or other factors prevent us from offsetting higher labor costs by increased menu prices, our profitability may decline.
A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills could impact our
strategic growth plans and jeopardize our ability to meet our business performance expectations and growth targets.
Our ability to continue to grow our business depends substantially on the contributions and abilities of our executive leadership team and other key
management personnel. Changes in senior management could expose us to significant changes in strategic direction and initiatives. A failure to maintain
appropriate organizational capacity and capability to support our strategic initiatives or to build adequate bench strength with key skillsets required for
seamless succession of leadership, could jeopardize our ability to meet our business performance expectations and growth targets. If we are unable to
attract, develop, retain and incentivize sufficiently experienced and capable management personnel, our business and financial results may suffer.
Risks Related to Cybersecurity, Data Privacy and IT Systems
Breaches or other unauthorized access, theft, modification or destruction of guest and/or employee personal, confidential or other material
information that is stored in our systems or by third parties on our behalf could adversely affect our business.
As our reliance on technology has grown, the scope and severity of risks posed to our systems from cyber threats has increased. Many of our
information technology systems (whether cloud-based or hosted in proprietary servers), including those used for our point-of-sale, web and mobile
platforms, online and mobile payment systems, delivery services and rewards programs and administrative functions, contain personal, financial or other
information that is entrusted to us by our guests, business partners and employees. Many of our information technology systems also contain confidential
information about our business, such as business strategies, development initiatives and designs, and confidential information about third parties, such as
suppliers. Similar to many other restaurant companies, we have in the past experienced, and we expect to continue to experience, cyber-attacks, including
phishing, and other attempts to breach, or gain unauthorized access to, our systems and databases. To date, these attacks have not had a material impact on
our operations, but we cannot provide assurance that they will not have an impact in the future.
Our third-party providers’ and business partners’ information technology systems and databases are likewise subject to such risks. The number and
frequency of these attempts varies from year to year but could be exacerbated to some extent by an increase in our digital operations. In addition, we
provide some guest and employee data, as well as confidential information important to our business, to third parties to conduct our business. Individuals
performing work for us and these third parties also may access some of this data, including on personally owned digital devices. To the extent we, a third
party or such an individual were to experience a breach of our or their information technology systems that results in the unauthorized access, theft, use,
destruction or other compromises of customers’ or employees’ data or confidential information of Chipotle stored in or transmitted through such systems,
including through cyber-attacks or other external or internal methods, it could result in a material loss of revenues from the potential adverse impact to our
reputation and brand, a decrease in our ability to retain customers or attract new ones, the imposition of potentially significant costs (including loss of data
or payment for recovery of data) and liabilities, loss of business, loss of business partners and licensees and the disruption to our supply chain, business and
plans. Unauthorized access, theft, use, destruction or other compromises are becoming increasingly sophisticated and may occur through a variety of
methods, including attacks using malicious code, vulnerabilities in software, hardware or other infrastructure (including systems used by our supply chain),
system misconfigurations, phishing or social engineering. The rapid evolution and increased adoption of artificial intelligence technologies may intensify
our cybersecurity risks. Our logging capabilities, or the logging capabilities of third parties, are not always complete or sufficiently granular, affecting our
ability to fully understand the scope of security breaches.
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Such security breaches also could result in a violation of applicable U.S. and international privacy, cyber and other laws or trigger data breach
notification laws, including new disclosure rules promulgated by the SEC, and subject us to private third party or securities litigation and governmental
investigations and proceedings, any of which could result in our exposure to material civil or criminal liability.
We may be required to make significant capital investments and other expenditures to investigate security incidents, remedy cybersecurity problems,
recuperate lost data, prevent future compromises and adapt systems and practices to react to the changing threat environment. These include costs
associated with notifying affected individuals and other agencies, additional security technologies, training and personnel, retention of experts and
providing credit monitoring services for individuals whose data has been breached. These costs could be material and could adversely impact our results of
operations in the period in which they are incurred, including by causing us to delay the pursuit of other important business strategies and initiatives, and
may not meaningfully limit the success of future attempts to breach our information technology systems.
Media or other reports of existing or perceived security vulnerabilities in our systems or those of our third-party business partners or service
providers can also adversely impact our brand and reputation and materially impact our business. Additionally, the techniques and sophistication used to
conduct cyber-attacks and compromise information technology systems, as well as the sources and targets of these attacks, change frequently and are often
not recognized until such attacks are launched or have been in place for a period of time. The rapid evolution and increased adoption of artificial
intelligence technologies amplifies these concerns. We continue to make significant investments in technology, third-party services and personnel to
develop and implement systems and processes that are designed to anticipate cyber-attacks and to prevent or minimize breaches of our information
technology systems or data loss, but these security measures cannot provide assurance that we will be successful in preventing such breaches or data loss.
We may incur increased costs to comply with privacy and data protection laws and, if we fail to comply, we could be subject to government
enforcement actions, private litigation and adverse publicity.
Complex local, state, federal and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other
processing of personal data. These privacy and data protection laws and regulations are quickly evolving, with new or modified laws and regulations
proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement. For example, the
European Union’s General Data Protection Regulation (“GDPR”) requires companies to meet certain requirements regarding the handling of personal data,
including its use, protection and transfer and the ability of persons whose data is stored to correct or delete such data about themselves, and failure to meet
the GDPR requirements could result in penalties of up to 4% of annual worldwide revenue. Additionally, the California Consumer Privacy Act of 2018
(“CCPA”) provides a private right of action for data breaches and requires companies that process the personal information of California residents to make
new disclosures to consumers about their data collection, use and sharing practices, allow consumers to opt out of certain data sharing with third parties and
to request deletion of personal information (subject to certain exceptions). Other states passed similar privacy legislation that took effect in 2023, and other
states and countries passed or are considering expanding or passing comprehensive privacy laws. If we fail, or are perceived to have failed, to properly
respond to security breaches of our or a third party’s information technology systems or fail to properly respond to or honor consumer requests under any of
the foregoing privacy laws, we could experience reputational damage, adverse publicity, loss of consumer confidence, reduced sales and profits,
complications in executing our growth initiatives and regulatory and legal risk, including regulatory fines and penalties, and in some cases civil liabilities
where individuals have been provided with a private right of action.
Compliance with the current and future privacy and data protection laws can be costly and time-consuming and there is no assurance that our
compliance efforts will be successful in preventing breaches or data loss. Our failure to comply with applicable laws and regulations or other obligations to
which we may be subject relating to personal information, or to protect personal information from unauthorized access, use or other processing, could
result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines or damage to
our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business.
The regulatory environment related to privacy and data security is changing at an ever-increasing pace, with new, increasingly rigorous, and often
unclear requirements applicable to our business. In addition, the issues regulated by privacy laws (such as advertising and marketing, children, biometric,
employee, surveillance, artificial intelligence, and health related information) have expanded, as have the number of city, state, federal and international
governmental bodies and agencies that have recently passed or are currently considering privacy legislation or regulatory rulemaking. Where not limited by
preemption and where there are perceived shortcomings in federal laws, many states have passed or are considering adopting stricter versions of federal
privacy laws (e.g., state level statutes similar to the Telephone Consumer Protection Act of 1991, the Health Insurance Portability and Accountability Act,
and the Children’s Online Privacy Protection Act of 1998). Private service providers also have implemented mandatory privacy requirements impacting
businesses, like Chipotle, that wish to utilize services available on their platforms.
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In addition, a number of recent lawsuits have pled creative claims under privacy legislation such as the Video Privacy Protection Act, Electronic
Communications Privacy Act (including the WireTap Act and Stored Communications Act), Computer Fraud and Abuse Act, and similar state laws
alleging wiretapping, eavesdropping, tape recording and invasion of privacy through the use of marketing pixels, analytics software, session replay
technology, voice recording, and live chat functionality. Defending against such claims can be costly and strain internal resources.
Taken together, Chipotle faces rapidly increasing compliance costs in order to modify its operations and business practices to comply with applicable
laws, regulations and other requirements.
We rely heavily on information technology systems and failures or interruptions in our IT systems could harm our ability to effectively operate
our business and/or result in the loss of guests or employees.
We rely heavily on information technology systems, including the point-of-sale and payment processing system in our restaurants, technologies
supporting our digital and delivery business, technologies that trace ingredients back to suppliers and growers and manage our supply chain, our rewards
program, technologies that facilitate marketing initiatives, employee engagement and payroll processing, and various other processes and transactions. Our
ability to effectively manage our business and coordinate the procurement, production, distribution, safety and sale of our products depends significantly on
the availability, reliability and security of these systems. Many of these critical systems are provided and managed by third parties, and we are reliant on
these third-party providers to implement protective measures that ensure the security and availability of their systems. Although we have operational
safeguards in place, these safeguards may not be effective in preventing the failure of these third-party systems or platforms to operate effectively and be
available. Failures may be caused by various factors, including power outages, catastrophic events, physical theft, computer and network failures,
inadequate or ineffective redundancy, problems with transitioning to upgraded or replacement systems or platforms, flaws in third-party software or
services, errors or improper use by our employees or the third-party service providers. If any of our critical IT systems were to become unreliable,
unavailable, compromised or otherwise fail, and we were unable to recover in a timely manner, we could experience an interruption in our operations that
could have a material adverse impact on our profitability.
Risks Related to Supply Chain
Increases in the costs of ingredients and other materials, including increases caused by inflation, global conflicts and climate risks, or the failure
to procure sufficient ingredients could adversely affect our results of operations.
Supply chain risk could increase our costs and result in a shortage of ingredients and supplies that are critical to our restaurant operations. The
markets for some of our ingredients, such as beef, avocado and other produce, are particularly volatile due to factors beyond our control such as limited
sources, seasonal shifts, climate conditions, inclement weather, natural disasters, recent inflationary trends, military and geopolitical conflicts and industry
demand, including as a result of animal disease outbreaks, international commodity markets, food safety concerns, product recalls and government
regulation. In addition, for certain of our ingredients and other materials, we have a limited number of suppliers and distributors. We remain in regular
contact with our key suppliers and to date we have not experienced significant prolonged disruptions in our supply chain; however, inflationary pressures
for certain supplies and ingredients could continue as inflation increases continue across the global supply chain. Our efforts to mitigate future price risk
through forward contracts, strong partnerships with key suppliers, directly managing key raw material procurement, diversifying our supply base and other
activities may not fully insulate us from increases in commodity costs, which could have an adverse impact on our profitability.
We also could be adversely impacted by price increases specific to meats raised in accordance with our Responsibly Raised animal welfare criteria,
and ingredients grown in accordance with our Food with Integrity specifications, the markets for which are generally smaller and more concentrated than
the markets for conventionally raised or grown ingredients. Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef,
dairy (for cheese, sour cream and queso), avocados, tomatoes and pork, would have a particularly adverse effect on our operating results. If the cost of one
or more ingredients significantly increases, we may choose to temporarily suspend serving menu items that use those ingredients, such as guacamole or one
of our proteins, rather than pay the increased cost. Any such changes to our available menu may negatively impact our restaurant traffic and could
adversely impact our sales and brand.
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Shortages or interruptions in the supply of ingredients could adversely affect our operating results.
Our business is dependent on frequent and consistent deliveries of ingredients that comply with our Food with Integrity specifications, such as dairy
(for cheese, sour cream and queso). We may experience shortages, delays or interruptions in the supply of ingredients and other supplies to our restaurants
due to inclement weather, natural disasters, labor issues or other operational disruptions at our suppliers, distributors or transportation providers, or other
conditions beyond our control. Ongoing global conflicts have disrupted and could continue to disrupt some shipping routes, which could result in shortages
or delays of certain ingredients. In addition, we have a single or a limited number of suppliers for some of our ingredients, including certain oils, tomatoes,
tortillas and adobo. Although we believe we have potential alternative suppliers and sufficient reserves of ingredients, shortages or interruptions in our
supply of ingredients could adversely affect our financial results.
Legal and Regulatory Risks
We could be party to litigation or other legal proceedings that could adversely affect our business, results of operations and reputation.
We have been and likely will continue to be subject to litigation and other legal proceedings that may adversely affect our business. These legal
proceedings may involve claims brought by employees, guests, government agencies, suppliers, shareholders or others through private actions,
administrative proceedings, regulatory actions or other litigation, including litigation on a class or collective basis on behalf of what can be a large group of
potential claimants. These legal proceedings have involved, and in the future may involve, allegations of illegal, unfair or inconsistent employment
practices, including those governing wage and hour, employment of minors, discrimination, harassment, wrongful termination, and vacation and family
leave laws; food safety issues including food-borne illness, food contamination and adverse health effects from consumption of our food products; data
security or privacy breaches; guest discrimination; personal injury in our restaurants; marketing and advertising claims, including claims that our Food with
Integrity or other sustainability claims are misleading or inaccurate; infringement of patent, copyright or other intellectual property rights; violation of the
federal securities laws; workers’ compensation; or other concerns. We are party to a number of pending lawsuits and governmental audits alleging
violations of federal and state employment laws, including wage and hour claims, and we could be involved in similar or even more significant litigation
and legal proceedings in the future. Even if the allegations against us in current or future legal matters are unfounded or we ultimately are held not liable,
the costs to defend ourselves may be significant and the litigation may subject us to substantial settlements, fines, penalties or judgments against us and
may divert management's attention away from operating our business, all of which could negatively impact our financial condition and results of
operations. Litigation also may generate negative publicity, regardless of whether the allegations are valid, or we ultimately are not liable, which could
damage our reputation, and adversely impact our sales as well as our relationships with our employees and guests.
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We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and
regulations could adversely affect our operational efficiencies, ability to attract and retain talent and results of operations.
Our business is subject to extensive federal, state, local and international laws and regulations, including those relating to:
(cid:0) preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food
system, including inspections and mandatory food recalls, menu labeling and nutritional content;
(cid:0) employment practices and working conditions, including minimum wage rates, wage and hour practices, meal and rest breaks, fair
workweek/secure scheduling and “just cause” legislation, employment of minors, discrimination, harassment, classification of employees, paid
and family leave, workplace safety, immigration and overtime among others;
(cid:0) privacy and data security (including regulations governing the protection of personal information, advertising and marketing, access by children,
biometrics, surveillance, artificial intelligence, health-related information and financial information), such as California Privacy Rights Act and
CCPA in California and privacy-related legislation in a growing number of other states, and international laws such as GDPR in the European
Union and Personal Information Protection and Electronic Documents Act in Canada;
(cid:0) health, sanitation, safety and fire standards and the sale of alcoholic beverages;
(cid:0) building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land
use;
(cid:0) public accommodations and safety conditions, including the Americans with Disabilities Act and similar state laws that give civil rights
protections to individuals with disabilities in the context of employment, public accommodations, online resources and other areas;
(cid:0) environmental matters, such as emissions and air quality; water consumption; the discharge, storage, handling, release and disposal of hazardous
or toxic substances; local ordinances restricting the types of packaging we can use in our restaurants; and claims we make about our
sustainability practices and achievements; and
(cid:0) public company compliance, disclosure and governance matters, including accounting and tax regulations, SEC and NYSE disclosure
requirements.
Compliance with these laws and regulations, and future new laws or changes in these laws or regulations that impose additional requirements, can be
costly. Any failure or perceived failure to comply with these laws or regulations could result in, among other things, revocation of required licenses,
administrative enforcement actions, fines and civil and criminal liability.
Risks Related to Our Growth and Business Strategy
If we are unable to meet our projections for new restaurant openings, or efficiently maintain the attractiveness of our existing restaurants, our
profitability could suffer.
Our growth depends on our ability to open new restaurants at an aggressive rate and operate them profitably as soon as possible. In the past year, the
cost of opening new restaurants has increased, due to construction labor inflation and increased costs of materials and equipment. Our timeline for
completing construction also has gotten longer, due to landlord reluctance to commit to building in light of high interest rates, tight money supply and
general economic conditions, and due to backlogs and long wait times for us to obtain required permits and utility hookups. In addition, we incur
substantial startup expenses each time we open a new restaurant, and it can take up to 36 months to ramp up the sales and profitability of a new restaurant,
during which time costs may be higher as we train new employees and build up a customer base. If we are unable to build the customer base that we expect
or fail to overcome the higher startup expenses associated with new restaurants, our new restaurants may not be as profitable as our existing restaurants.
Our ability to open and profitably operate new restaurants also is subject to various risks, such as the identification and availability of desirable locations;
the negotiation of acceptable lease terms; the need to obtain all required governmental permits (including zoning approvals and liquor licenses) and comply
with other regulatory requirements; the availability of capable contractors and subcontractors; increases in the cost and decreases in the availability of labor
and building material; changes in weather, natural disasters, pandemics or other acts of God that could delay construction and adversely affect guest traffic;
our ability to hire and train qualified management and restaurant employees; and general economic and business conditions. At each potential location, we
compete with other restaurants and retail businesses for desirable development sites, construction contractors, management personnel, hourly employees
and other resources. If we are unable to successfully manage these risks, we could face increased costs and lower than anticipated sales and earnings in
future periods.
In addition, we continue to improve our existing restaurants through remodels, upgrades and regular upkeep. If the costs associated with remodels,
upgrades or regular upkeep are higher than anticipated, restaurants are closed for remodeling for longer periods than planned or remodeled restaurants do
not perform as expected, we may not realize our projected desired return on investment, which could have a negative effect on our operating results.
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Our failure to effectively manage and support our growth could have a negative adverse effect on our business and financial results.
As of December 31, 2023, we owned and operated over 3,400 Chipotle restaurants and we plan to open a significant number of new restaurants in the
next several years. Our existing restaurant management systems, back-office technology systems and processes, financial and management controls,
information systems and personnel may not be adequate to support our continued growth. To effectively manage a larger number of restaurants, we may
need to upgrade and expand our infrastructure and information systems, automate more processes that currently are manual or require manual intervention
and hire, train and retrain restaurant employees and corporate support staff, all of which may result in increased costs and at least temporary inefficiencies.
We also place a lot of importance on our culture, which we believe has been an important contributor to our success, and as we continue to grow it may be
increasingly difficult to maintain our culture. Our failure to sufficiently invest in our infrastructure and information systems and maintain our strong
staffing and culture could harm our brand and operating results.
If we partner with or acquire new businesses and third-party providers that do not align with our core values or that do not fulfill their
contractual responsibilities and commitments, our brand reputation and international growth plans could suffer.
Our global growth strategy includes expanding our existing restaurant footprint and introducing Chipotle in new international jurisdictions in which
we currently do not operate. The success of our strategy will depend on our identifying and partnering with new business partners, including licensees, joint
venture partners, suppliers and distributors, and may include identifying suitable acquisition targets in these new jurisdictions that align with our core
values. In 2023, we signed our first-ever development agreement to open restaurants in the Middle East in partnership with international franchise retail
operator Alshaya Group, which will initially open new Chipotle restaurants in Dubai and Kuwait before expanding further across the region. Licensees like
Alshaya, and future joint venture partners would be authorized to operate restaurants under the Chipotle brand, and we believe guests will expect the same
quality of food and customer service in these third-party operated restaurants as they receive in Chipotle-operated restaurants. We provide extensive
training to our business partners and we include specific food quality and safety standards and guest service requirements in the contracts we sign with our
business partners; however, we do not have direct control over the restaurants operated by third-party partners, and the quality and service in those
restaurants may be less than the quality and service of Chipotle-operated restaurants. Failure of our business partners to adhere to our high food quality and
operating standards could damage our brand reputation and impair our international expansion plans. New partnerships and/or acquisitions also may divert
management’s attention from other initiatives and/or day-to-day operations, which could adversely affect our business and results of operations.
The market price of our common stock may be more volatile than the market price of our peers.
We believe the market price of our common stock generally has traded at a higher price-earnings ratio than stocks of most of our peer companies as
well as the overall market, which typically has reflected market expectations for higher future operating results. At any given point in time, our price-
earnings ratio may trade at more than twice the price-earnings ratio of the S&P 500. Also, the trading market for our common stock has been volatile at
times, including because of adverse publicity events. As a result, if we fail to meet market expectations for our operating results in the future, any resulting
decline in the price of our common stock could be significant.
Risks Related to Sustainability Factors
We are subject to evolving public disclosure requirements and expectations, including with respect to sustainability matters, that could expose us
to numerous risks and could adversely affect our reputation and results of operations.
We are subject to evolving disclosure obligations promulgated by governmental and regulatory organizations relating to sustainability factors that
impact our business. These disclosure obligations are complex and not always consistent, making compliance difficult and uncertain. In addition, investors,
guests and other stakeholders increasingly are focusing on sustainability matters and related disclosures. We have incurred and expect to continue to incur
increased expenses and management time and attention to comply with these disclosure obligations and stakeholder expectations. For example, measuring
Scope 1, 2 and 3 greenhouse gas emissions relating to our business, developing reduction plans and initiatives, and creating and disclosing achievable
reduction goals can be costly, difficult and time consuming and is subject to evolving reporting standards, including California’s Climate Corporate Data
Accountability Act, California’s Greenhouse Gases: Climate-Related Financial Risk Bill, the SEC’s proposed climate-related reporting requirements, and
similar proposals by other local and international regulatory agencies. We may also communicate certain initiatives and goals regarding sustainability and
human capital management related matters, such as diversity, responsible sourcing and social investments in our SEC filings or in other public disclosures.
In November 2021, we announced that we had set science-based targets validated by the Science Based Targets Initiative to reduce absolute Scope 1, 2 and
3 greenhouse gas emissions 50% by 2030 from a 2019 base year, and achievement of this goal is subject to risks and uncertainties, many of which are
outside of our control and may prove to be more difficult and costly than we anticipate.
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In addition, statements about our sustainability-related initiatives and goals, and progress toward those goals, may be based on standards for
measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the
future. If we are unable to meet our sustainability-related goals or evolving stakeholder or industry expectations and standards, or if we are perceived to
have not responded appropriately to the growing concern for sustainability issues, investors, guest and other stakeholders may choose to patronize a
competitor that they perceive to be more responsive, and our reputation, business or financial condition may be adversely affected. If our sustainability-
related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our sustainability goals on a timely basis,
or at all, our reputation, business, financial performance and growth could be adversely affected.
In addition, we could be criticized by anti-ESG stakeholders for the scope or nature of our sustainability initiatives or goals or for any revisions to
these goals. We could also be subjected to negative responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or
consumers (such as boycotts or negative publicity campaigns) that could adversely affect our reputation, business, financial performance and growth.
Climate change and volatile adverse weather conditions could adversely affect our restaurant sales or results of operations.
There is growing concern that climate change and global warming has caused and may continue to cause more severe, volatile weather or extended
droughts, which could increase the frequency and duration of weather impacts on our operations. Adverse weather conditions have in the past and may
again impact guest traffic at our restaurants and, in more severe cases such as hurricanes, tornadoes, wildfires or other natural disasters, cause temporary
restaurant closures, all of which negatively impact our restaurant sales. In addition, our supply chain is subject to increased costs caused by the effects of
climate change, diminishing energy and water resources. Increasing weather volatility and changes in global weather patterns can reduce crop size and crop
quality, or destroy crops altogether, which could result in decreased availability or higher pricing for our produce and other ingredients. We may be forced
to source ingredients from new geographic regions, which could impact quality and taste, and increase our costs. These factors are beyond our control and,
in many instances, unpredictable. Climate change and government regulation relating to climate change also could result in construction delays for new
restaurants and interruptions to the availability or increases in the cost of utilities. The ongoing and long-term costs of these impacts related to climate
change and other sustainability-related issues could have a material adverse effect on our business and financial condition if we are not able to mitigate
them.
General Risk Factors
Economic and business factors that are largely beyond our control may adversely affect consumer behavior and the results of our operations.
Restaurant dining generally is dependent upon consumer discretionary spending, which may be affected by general economic conditions that are
beyond our control. Increasing or prolonged high inflation, international, domestic and regional economic conditions, consumer income levels, financial
market volatility, a slow or stagnant pace of economic growth, mass layoffs, rising energy costs, rising interest rates, social unrest, military conflicts and
governmental, political and budget concerns or divisions may have a negative effect on consumer confidence and discretionary spending. Persistent
inflation and concern about a prolonged economic downturn may lead consumers to decrease their discretionary spending. A significant decrease in our
guest traffic or average transactions would negatively impact our financial performance. The actual or perceived threat of a pandemic or communicable
disease, terrorist attack, mass shooting, heightened security requirements, including cybersecurity, or a failure to protect information systems for critical
infrastructure, such as the electrical grid and telecommunications systems, could harm our operations, the economy or consumer confidence generally. Any
of the above factors or other unfavorable changes in business and economic conditions affecting our guests could increase our costs, reduce traffic in our
restaurants or limit our ability to increase pricing, any of which could lower our profit margins and have a material adverse effect on our sales, financial
condition and results of operations. These factors also could cause us to, among other things, reduce the number and frequency of new restaurant openings,
close restaurants or delay remodeling of our existing restaurant locations. Further, poor economic conditions may force nearby businesses to shut down,
which could reduce traffic to our restaurants or cause our restaurant locations to be less attractive.
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Our quarterly financial results may fluctuate significantly, including due to factors that are not in our control.
Our quarterly financial results may fluctuate significantly and could fail to meet investors’ expectations for various reasons, including:
(cid:0) negative publicity about the safety of our food, employment-related issues, litigation or other issues involving our restaurants;
(cid:0) fluctuations in supply costs, particularly for our most significant ingredients, and our inability to offset the higher cost with price increases,
without adversely impacting guest traffic;
(cid:0) our inability to purchase sufficient quantities of our key ingredients as our restaurant count grows;
(cid:0) labor availability and wages of restaurant management and employees;
(cid:0) increases in marketing or promotional expenses;
(cid:0) the timing of new restaurant openings and related revenues and expenses, and the operating costs at newly opened restaurants;
(cid:0) the impact of inclement weather and natural disasters, such as freezes and droughts, which could decrease guest traffic and increase the costs of
ingredients;
(cid:0) the amount and timing of stock-based compensation;
(cid:0) litigation, settlement costs and related legal expenses;
(cid:0) tax expenses, asset impairment charges and non-operating costs; and
(cid:0) variations in general economic conditions, including the impact of rising inflation and the impact of rising interest rates on consumer demand
trends.
As a result of any of these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any
year. Average restaurant sales or comparable restaurant sales in any future period may decrease.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
As a global company, we are regularly subject to cyberattacks and other cybersecurity incidents. In response, we have implemented cybersecurity
processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework
considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. Our enterprise risk management team
collaborates with our Information Security function, led by our Chief Information Security Officer (“CISO”) and our Chief Customer and Technology
Officer (“CCTO”), to gather insights for assessing, identifying and managing cybersecurity threat risks, their severity, and potential mitigations. We also
are a member of an industry cybersecurity intelligence and risk sharing organization to stay abreast of changes in the cybersecurity environment.
We assess Chipotle’s Information Security program using an industry cybersecurity framework from the National Institute of Standards and
Technology. This program includes policies, processes and procedures that help assess and identify our cybersecurity risks and inform how security
measures and controls are developed, implemented and maintained. The risk assessment along with risk-based analysis and judgment are used to select
security controls to address risks. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the
Company and others if a risk materializes, feasibility and cost of controls and impact of controls on operations.
We maintain internal resources to perform penetration testing designed to simulate evolving tactics and techniques of real-world threat actors, engage
with industry partners and law enforcement and intelligence communities and conduct tabletop exercises and periodic risk interviews across our business.
We also engage an independent third party to perform internal and external penetration testing of Chipotle's information security environment periodically
and engage other third parties to periodically conduct assessments of our cybersecurity capabilities. In addition, we continue to expand training and
awareness practices to mitigate risk from human error, including mandatory computer-based training and internal communications for employees. Our
employees undergo cybersecurity awareness training and regular phishing awareness campaigns that are based upon and designed to emulate real-world
contemporary threats. We provide prompt feedback (and, if necessary, additional training or remedial action) based on the results of such exercises.
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Our processes also address cybersecurity risks associated with our use of third-party service providers including suppliers, software and cloud-based
service providers, as well as third-party security firms used in different capacities to provide or operate some of our cybersecurity controls and technology
systems. We proactively evaluate the cybersecurity risk of a third party by utilizing a repository of risk assessments, external monitoring sources, threat
intelligence and predictive analytics to better inform Chipotle during contracting and vendor selection processes. Additionally, when third party risks are
identified, we require those third parties to agree by contract to implement appropriate security controls. Security issues are documented and tracked, and
periodic monitoring of third parties is conducted in an effort to mitigate risk.
In addition to the processes, technologies, and controls that we have in place to reduce the likelihood of a material cybersecurity incident (or series of
related cybersecurity incidents), Chipotle has a written incident response plan outlining how to address cybersecurity events that occur. The plan sets forth
the steps for coordination among various corporate functions and governance groups and serves as a framework for the execution of responsibilities across
businesses and operational roles. Our incident response plan is designed to help us coordinate actions to prepare for, detect, respond to and recover from
cybersecurity incidents, and includes processes to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to assess the
need for disclosure, comply with applicable legal obligations and mitigate the impact to our brand and reputation and on impacted parties. We also maintain
insurance coverage that, subject to its terms and conditions, is intended to help us cover certain costs associated with cybersecurity incidents and
information system failures.
In addition to our cybersecurity incident response plan, we conduct tabletop exercises to enhance our incident response preparedness. We maintain
business continuity and disaster recovery plans to prepare for and respond to the potential for a disruption in the technology we rely on.
Chipotle (or the third parties it relies on) may not be able to fully, continuously, or effectively implement security controls as intended. As described
above, we utilize a risk-based approach and judgment to determine whether and how to implement certain security controls and it is possible that we may
not implement the necessary controls if we are unable to recognize or underestimate a particular risk. In addition, security controls, no matter how well
designed or implemented, may only mitigate and not fully eliminate cybersecurity risks. Cybersecurity events, when detected by security tools or third
parties, may not always be identified immediately or addressed in the manner intended by our cybersecurity incident response plan.
Impact of cybersecurity risks on business strategy, results of operations or financial condition
Based on the information available as of the date of this Annual Report, we have no reason to believe any risks from cybersecurity threats, including
as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy,
results of operations or financial condition. For additional information, see “Risks Related to Cybersecurity, Data Privacy and IT Systems,” in Item 1A,
“Risk Factors” in this Annual Report.
Cybersecurity Governance
Our cybersecurity risk management and strategy processes are led by our CISO and our CCTO. These individuals have collectively over 50 years of
professional experience in various roles across multiple industries involving managing information security, developing cybersecurity strategy,
implementing effective information and cybersecurity programs and managing multiple industry and regulatory compliance environments. Both individuals
previously held positions similar to their current roles at other large publicly traded organizations.
Cybersecurity is an important part of our risk management processes and an area of focus for our Board of Directors (the “Board”) and management.
Although cybersecurity risk oversight continues to remain a top priority for the Board, the Audit and Risk Committee of our Board has primary oversight
responsibility for the Company’s cybersecurity and other technology risks. The Committee regularly reviews and discusses with our CISO and our CCTO
the Company’s cybersecurity, privacy and data security programs, the status of projects to strengthen internal cybersecurity, results from third-party
assessments, and any significant cybersecurity incidents, including recent incidents at other companies and the emerging threat landscape. The Committee
also reviews with management the implementation and effectiveness of the Company’s controls to monitor and mitigate cybersecurity risks. In addition,
our Board receives an annual report and quarterly written updates regarding our cybersecurity program.
ITEM 2. PROPERTIES
As of December 31, 2023, there were 3,437 restaurants operated by Chipotle and our consolidated subsidiaries. Our main office is located at 610
Newport Center Drive, Suite 1100, Newport Beach, CA 92660 and our telephone number is (949) 524-4000. We lease our main office and substantially all
of the properties on which we operate restaurants. We own 17 properties and operate restaurants on all of them. For additional information regarding the
lease terms and provisions, see Note 1. “Description of Business and Summary of Significant Accounting Policies” and Note 9. “Leases” in our
consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”
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ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 11. “Commitments and Contingencies” in our consolidated financial statements included in
Item 8. “Financial Statements and Supplementary Data.”
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock trades on the New York Stock Exchange under the symbol “CMG.”
As of February 5, 2024, there were approximately 1,508 shareholders of record. This does not include persons whose stock is in nominee or “street
name” accounts through brokers.
Purchases of Equity Securities by the Issuer
The table below reflects shares of common stock we repurchased during the fourth quarter of 2023.
October
November
December
Total
Purchased 10/1 through 10/31
Purchased 11/1 through 11/30
Purchased 12/1 through 12/31
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs(1)
Approximate
Dollar Value of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs
52,611 $ 271,538,394
Total Number
of Shares
Purchased
52,611 $
Average Price
Paid Per Share
1,840.49
13,084 $
2,092.54
13,084 $ 244,159,596
8,828 $
2,271.49
8,828 $ 424,106,921
74,523 $
1,935.80
74,523
(1) Shares were repurchased pursuant to repurchase programs announced on July 26, 2023 and October 26, 2023.
(2) The December total includes an additional $200 million in authorized repurchases approved on December 14, 2023 and announced February 6,
2024. There is no expiration date for this program. The authorization to repurchase shares will end when we have repurchased the maximum amount
of shares authorized, or we have determined to discontinue such repurchases.
Dividend Policy
We are not required to pay any dividends and have not declared or paid any cash dividends on our common stock. We intend to continue to retain
earnings for use in the operation and expansion of our business and to repurchase shares of common stock (subject to market conditions), and therefore do
not anticipate paying any cash dividends on our common stock in the foreseeable future.
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COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the cumulative annual stockholders return on our common stock from December 31, 2018, through December 31,
2023, to that of the total return index for the S&P 500 and the S&P 500 Restaurants Index assuming an investment of $100 on December 31, 2018. In
calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only. They do
not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of our common stock. The values
shown are neither indicative nor determinative of future performance. This graph is not “soliciting material,” is not deemed filed with the Securities and
Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation language in any such filing.
Company/Index
Chipotle Mexican Grill, Inc.
S&P 500
S&P 500 Restaurants
$
2018
2019
2020
2021
2022
2023
100 $
100
100
194 $
129
122
321 $
150
141
405 $
190
170
321 $
153
153
536
191
172
*$100 invested on December 31, 2018, in stock or index, including reinvestment of dividends.
Fiscal year ending December 31, 2023.
Source data: FactSet
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ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our consolidated financial statements and related notes included in Item 8. “Financial
Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2023 items and year-to-year comparisons of 2023 to 2022.
Discussions of 2021 items and year-to-year comparisons of 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended
December 31, 2022. The discussion contains forward-looking statements involving risks, uncertainties and assumptions that could cause our results to
differ materially from expectations. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that might cause such differences include
those described in Item 1A. “Risk Factors” and elsewhere in this report.
Overview
As of December 31, 2023, we operated 3,371 Chipotle restaurants throughout the United States, and 66 international Chipotle restaurants. We manage
our U.S. operations based on eight regions and aggregate our operations to one reportable segment.
Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we commonly discuss the following key
operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because
management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:
(cid:0) Comparable restaurant sales
(cid:0) Restaurant operating costs as a percentage of total revenue
(cid:0) New restaurant openings
2023 Financial Highlights, year-over-year:
(cid:0) Total revenue increased 14.3% to $9.9 billion
(cid:0) Comparable restaurant sales increased 7.9%
(cid:0) Diluted earnings per share was $44.34, a 38.4% increase from $32.04, which includes a $0.52 after-tax impact from expenses related to
restaurant and corporate level impairment and closure costs, accelerated depreciation and corporate restructuring, partially offset by a reduction
in contingencies related to certain legal proceedings.
Sales Trends. Comparable restaurant sales increased 7.9% for the year ended December 31, 2023. The increase is primarily attributable to higher
transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for
restaurants in operation for at least 13 full calendar months. Digital sales represented 37.4% of total food and beverage revenue.
Restaurant Operating Costs. During the year ended December 31, 2023, our restaurant operating costs (food, beverage and packaging; labor;
occupancy; and other operating costs) were 73.8% of total revenue, a decrease from 76.1% during the year ended December 31, 2022. The decrease was
driven primarily by sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food
ingredients and, to a lesser extent, wage inflation.
Restaurant Development. During the year ended December 31, 2023, we opened 271 new restaurants, which included 238 restaurants with a
Chipotlane. We expect to open approximately 285-315 new restaurants in 2024 (including 5 to 10 relocations), which assumes developer, permit,
inspection, and utility delays do not worsen. We expect that at least 80% of our new restaurants will include a Chipotlane.
Cultivate Next Fund. Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further
our mission to Cultivate a Better World. The Fund has an initial size of $50.0 million, which is financed almost entirely by Chipotle. As of December 31,
2023, we have made $33.0 million in investments through this Fund. In December 2023, our Board approved an additional $50.0 million financial
commitment to this Fund. As of December 31, 2023, none of this additional $50.0 million has been invested.
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Restaurant Activity
The following table details restaurant unit data for the years indicated.
Beginning of period
Chipotle openings
Non-Chipotle openings
Chipotle permanent closures
Chipotle relocations
Non-Chipotle permanent closures
Total restaurants at end of period
Results of Operations
Year ended December 31,
2022
2023
3,187
270
1
(3)
(12)
(6)
3,437
2,966
235
1
(3)
(12)
-
3,187
Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.
Revenue
Food and beverage revenue
Delivery service revenue
Total revenue
Average restaurant sales (1)
Comparable restaurant sales increase
Transactions
Average check
Menu price increase
Check mix
Year ended December 31,
2022
2023
Percentage
change
$
$
$
(dollars in millions)
9,804.1 $
67.5
9,871.6 $
3.0 $
7.9%
5.0%
2.9%
5.2%
(2.3%)
8,558.0
76.7
8,634.7
2.8
8.0%
0.9%
7.1%
12.0%
(4.9%)
14.6%
(11.9%)
14.3%
6.9%
(1) Average restaurant sales refer to the average trailing 12-month food and beverage sales for restaurants in operation for at least 12 full calendar months.
The following is a summary of the change in restaurant sales for the period indicated:
For the period ending December 31, 2022
Change from:
Comparable restaurant sales
Restaurant not yet in comparable base opened in 2023
Restaurant not yet in comparable base opened in 2022
Other
For the period ending December 31, 2023
Food, Beverage and Packaging Costs
Food, beverage and packaging
As a percentage of total revenue
Year ended
(dollars in millions)
8,634.7
636.3
242.1
356.3
2.2
9,871.6
$
$
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
2,912.6
29.5%
$
2,602.2
30.1%
11.9%
(0.6%)
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Food, beverage and packaging costs decreased 0.6% as a percentage of total revenue for the year ended December 31, 2023 compared to the year
ended December 31, 2022, including 1.6% from menu price increases and 0.6% from lower avocado costs, partially offset by 1.6% due to inflation across
several ingredient costs, primarily beef, tortillas and queso.
Labor Costs
Labor costs
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
2,441.0
24.7%
$
2,198.0
25.5%
11.1%
(0.8%)
Labor costs decreased 0.8% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022,
including 1.4% from sales leverage, partially offset by 0.8% due to restaurant wage inflation.
Beginning in April 2024, California legislation will require national restaurant chains, including Chipotle, to pay a minimum $20 per hour wage to
restaurant workers in California This will increase wages in California nearly 20% and will result in wage inflation increasing from the low to mid-single
digit range to the mid-single-digit range. We expect to increase menu prices in California to mitigate higher wage costs resulting from this legislation.
Occupancy Costs
Occupancy costs
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
503.3
5.1%
$
460.4
5.3%
9.3%
(0.2%)
Occupancy costs decreased 0.2% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December 31,
2022, primarily due to sales leverage, partially offset by increased rent expense associated with new restaurants.
Other Operating Costs
Other operating costs
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
1,428.7
14.5%
$
1,311.9
15.2%
8.9%
(0.7%)
Other operating costs decreased 0.7% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended December
31, 2022, including 0.6% of sales leverage and 0.2% of lower delivery expenses, partially offset by 0.1% of higher maintenance costs.
General and Administrative Expenses
General and administrative expense
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
(dollars in millions)
633.6
6.4%
$
564.2
6.5%
12.3%
(0.1%)
$
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Following is a summary of the change in General and administrative expense for the periods indicated:
For the period ending December 31, 2022
Change from:
Performance bonuses
Stock-based compensation, primarily performance-based awards
Outside services related to corporate initiatives
Wages, primarily due to headcount growth
Conferences, primarily biennial All Managers’ Conference
Other
For the period ending December 31, 2023
Depreciation and Amortization
Year ended
(dollars in millions)
564.2
31.1
24.3
14.5
10.9
(8.9)
(2.5)
633.6
$
$
Depreciation and amortization
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
319.4
3.2%
$
286.8
3.3%
11.4%
(0.1%)
Depreciation and amortization decreased 0.1% as a percentage of total revenue for the year ended December 31, 2023 compared to the year ended
December 31, 2022, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants and, to a lesser
extent, the reduction of useful lives for certain leasehold improvements.
Impairment, Closure Costs, and Asset Disposals
Impairment, closure costs, and asset disposals
As a percentage of total revenue
$
Year ended December 31,
2023
2022
Percentage
change
(dollars in millions)
38.4
0.4%
$
21.1
0.2%
81.5%
0.2%
Impairment, closure costs, and asset disposals increased in dollar terms for the year ended December 31, 2023 compared to the year ended December
31, 2022, primarily due to elevated impairment of operating lease assets and leasehold improvements and higher charges related to the replacement of
certain leasehold improvements and, to a lesser extent, the replacement of certain kitchen equipment. These elevated impairments include the impact of
closing all Pizzeria Locale restaurants.
Interest and Other Income, Net
Interest and other income, net
As a percentage of total revenue
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
62.7
0.6%
$
21.1
0.2%
196.7%
0.4%
Interest and other income, net increased in dollar terms for the year ended December 31, 2023 compared to the year ended December 31, 2022,
primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits, partially offset by a gain
on our investments in Tractor Beverages, Inc. of $10.4 million recognized in the second quarter of 2022.
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Provision for Income Taxes
Provision for income taxes
Effective income tax rate
*Not meaningful
Year ended December 31,
2023
2022
Percentage
change
$
(dollars in millions)
(391.8)
24.2%
$
(282.4)
23.9%
38.7%
n/m*
The effective income tax rate increased 0.3% for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due
to a 0.4% decrease in excess tax benefits from equity vesting and exercises.
Quarterly Financial Data/Seasonality
Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales and net income are lower
in the first and fourth quarters due, in part, to the holiday season and because fewer people eat out during periods of inclement weather (the winter months)
than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For example,
restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or
outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way,
worldwide health pandemics, impact of inflation on consumer spending, fluctuations in food or packaging costs, or the timing of menu price increases or
promotional activities and other marketing initiatives. The number of trading days in a quarter can also affect our results, although, on an overall annual
basis, changes in trading days do not have a significant impact.
Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based compensation expense and related tax
rate impacts, litigation, settlement costs and related legal expenses, impairment charges and non-operating costs, timing of marketing or promotional
expenses, the number and timing of new restaurants opened in a quarter, and closure of restaurants. New restaurants typically have higher operating costs
following opening because of the expenses associated with their opening and operating inefficiencies in the months immediately following opening.
Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.
Liquidity and Capital Resources
Cash and Investments
As of December 31, 2023, we had a cash and marketable investments balance of $1.8 billion, non-marketable investments of $75.4 million, and
$25.6 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from
operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion,
we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and
refurbish our existing restaurants; and for general corporate purposes. As of December 31, 2023, $424.1 million remained available for repurchases of
shares of our common stock, which includes the $200.0 million additional authorization approved by our Board of Directors on December 14, 2023. Under
the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
Borrowing Capacity
As of December 31, 2023, we had $500.0 million of undrawn borrowing capacity under a line of credit facility.
Use of Cash
We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures,
working capital requirements and other cash needs for the foreseeable future. Assuming no significant declines in comparable restaurant sales, we expect
we will generate positive cash flow for the foreseeable future.
We have not required significant working capital because customers generally pay using cash or credit and debit cards and because our operations do
not require significant receivables, nor do they require significant inventories due, in part, to our use of various fresh ingredients. In addition, we generally
have the right to pay for the purchase of food, beverages and supplies sometime after the receipt of those items, generally within ten days, thereby reducing
the need for incremental working capital to support our growth.
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Our total capital expenditures for 2023 were $560.7 million. In 2023, we spent on average about $1.4 million in development and construction costs
per new restaurant, or about $1.2 million net of landlord reimbursements of $0.2 million. In 2024, we expect to incur about $635.0 million in total capital
expenditures. We expect approximately $430.0 million in capital expenditures related to our construction of new restaurants, before any reductions for
landlord reimbursements. For new restaurants to be opened in 2024, we anticipate average development costs will remain consistent with 2023. We expect
approximately $130.0 million in capital expenditures related to investments in existing restaurants including remodeling and similar improvements, new
equipment and hardware, technology to optimize efficiencies. Finally, we expect a portion of our incurred capital expenditures to be for additional
corporate initiatives including investments in technology to boost innovation, enhance the guest experience, and improve operations.
The following table summarizes current and long-term material cash requirements as of December 31, 2023, which we expect to fund primarily with
operating cash flows:
Operating leases(1)
Purchase obligations(2)
Total
Total
2024
$
$
6,343
2,090
8,433
$
$
Payments Due by Fiscal Year
2025-2026
(dollars in millions)
$
$
447
969
1,416
$
971
768
1,739
$
2027-2028
Thereafter
938
352
1,290
$
$
3,987
1
3,988
(1)
(2)
See Note 9. “Leases” of our consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” This includes
commitments related to reasonably certain renewal periods.
Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant
terms. We have excluded agreements that are cancelable without penalty. The majority of our purchase obligations relate to food, beverage and
packaging, capital projects, information technology, marketing initiatives and corporate sponsorships, and other miscellaneous items.
The above table does not include income tax liabilities for uncertain tax positions for which we are not able to make a reasonably reliable estimate of
the amount and period of related future payments. Additionally, we have excluded our estimated loss contingencies, due to uncertainty regarding the timing
and amount of payment. See Note 11. “Commitments and Contingencies” of our consolidated financial statements included in Item 8. “Financial
Statements and Supplementary Data.”
Cash Flows
Cash provided by operating activities was $1.8 billion for the year ended December 31, 2023, compared to $1.3 billion for the year ended December
31, 2022. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities.
Cash used in investing activities was $946.0 million for the year ended December 31, 2023, compared to $830.0 million for the year ended December
31, 2022. The change was primarily associated with increased capital expenditures of $81.6 million primarily related to costs associated with new
restaurant development and, to a lesser extent, a $34.4 million increase in investment purchases net of investment maturities.
Cash used in financing activities was $660.7 million for the year ended December 31, 2023, compared to $929.4 million for the year ended
December 31, 2022. The change was primarily due to decreased treasury stock repurchases of $237.8 million and, to a lesser extent, $29.8 million of lower
payments of tax withholdings related to stock-based compensation.
Critical Accounting Estimates
We describe our significant accounting policies in Note 1. “Description of Business and Summary of Significant Accounting Policies” of our
consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Critical accounting estimates are those that we
believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of
inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate
under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or
factors.
Leases
The majority of our operating leases consist of restaurant locations and office space. We determine if a contract contains a lease at inception. Our
leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods. Generally, the lease term is
the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years. If the
estimate of our reasonably certain lease term was changed, our depreciation and rent expense could differ materially.
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Operating lease assets and liabilities are recognized at the lease commencement date, which is the date we control the use of the property. Operating
lease liabilities represent the present value of lease payments not yet paid. We made the policy election to combine lease and non-lease components. We
consider fixed common area maintenance (“CAM”) part of our fixed future lease payments; therefore, fixed CAM is also included in our operating lease
liability. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments,
initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate
incremental borrowing rates corresponding to the reasonably certain lease term. As we have no outstanding debt nor committed credit facilities, secured or
otherwise, we estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment. If
the estimate of our incremental borrowing rate was changed, our operating lease assets and liabilities could differ materially.
Deferred Revenue
Chipotle Rewards
Eligible customers who enroll in the Chipotle Rewards loyalty program generally earn points for every dollar spent. After accumulating the required
number of points, the customer may select a reward. Earned rewards generally expire one to two months after they are issued, and points generally expire if
an account is inactive for a period of six months.
The estimation of the standalone selling price of points and other rewards issued to customers involves several assumptions, primarily the estimated
value of product for which the reward is expected to be redeemed and the probability that the points or reward will expire. Our estimate of points and other
rewards we expect to be redeemed is based on historical company specific data. These inputs are subject to change over time due to factors such as menu
price increases, changes in point redemption options and changes in customer behavior. A relative increase of 100 basis points in our estimated ultimate
redemption rate for future redemptions would have resulted in a reduction of food and beverage revenue on our consolidated statement of income and
comprehensive income of approximately $0.9 million for the year ended December 31, 2023.
Gift Cards
We sell gift cards, which do not have expiration dates, and we do not deduct non-usage fees from outstanding gift card balances. Gift card balances
are initially recorded as unearned revenue. We recognize revenue from gift cards when the gift card is redeemed by the customer. Historically, the majority
of gift cards are redeemed within one year. In addition, a portion of gift cards are not expected to be redeemed and will be recognized as breakage over time
in proportion to gift card redemptions (“gift card breakage rate”). The gift card breakage rate is based on company and program specific information,
including historical redemption patterns, and expected remittance to government agencies under unclaimed property laws, if applicable. We evaluate our
gift card breakage rate estimate annually, or more frequently as circumstances warrant, and apply that rate to gift card redemptions. A relative decrease of
100 basis points to our gift card breakage rate would have resulted in a reduction of food and beverage revenue on our consolidated statement of income
and comprehensive income of approximately $0.6 million for the year ended December 31, 2023.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets
and liabilities. For restaurant assets, we test impairment at the individual restaurant asset group level, which includes leasehold improvements, property and
equipment and operating lease assets.
The fair value measurement for asset impairment is generally based on Level 3 inputs. We first compare the carrying value of the asset (or asset
group, referred interchangeably throughout as asset) to the asset’s estimated future undiscounted cash flows. If the estimated undiscounted future cash
flows are less than the carrying value of the asset, we determine if we have an impairment loss by comparing the carrying value of the asset to the asset's
estimated fair value. The estimated fair value of the asset is generally determined using the income approach to measure the fair value, which is based on
the present value of estimated future cash flows. Key inputs to the income approach for restaurant assets include the discount rate, projected revenue and
expenses, and sublease income if we are closing the restaurant. In certain cases, management uses other market information, when available, to estimate the
fair value of an asset. The impairment charges represent the excess of each asset’s carrying amount over its estimated fair value and are allocated among the
long-lived asset or assets of the group.
Our estimates of future revenues and expenses are highly subjective judgments based on internal projections and knowledge of our operations,
historical performance, and trends in sales and restaurant operating costs, and can be significantly impacted by changes in our business or economic
conditions. The determination of asset fair value is also subject to significant judgment and utilizes valuation techniques including discounting estimated
future cash flows and market-based analyses to determine fair value. If our estimates or underlying assumptions, including discount rate and sublease
income change in the future, our operating results may be materially impacted.
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Stock-based Compensation
We recognize compensation expense for equity awards over the requisite service period based on the award’s fair value. We use the Black-Scholes
valuation model to determine the fair value of our stock-only stock appreciation rights (“SOSARs”), and we use the Monte Carlo simulation model to
determine the fair value of stock awards that contain market conditions. Both of these models require assumptions to be made regarding our stock price
volatility, the expected life of the award and expected dividend rates. The volatility and the expected life assumptions were based on our historical data.
Similarly, the compensation expense of performance share awards is based in part on the estimated probability of achieving levels of performance
associated with particular levels of payout for performance shares. We determine the probability of achievement of future levels of performance by
comparing the relevant performance level with our internal estimates of future performance. Those estimates are based on a number of assumptions,
including but not limited to growth in restaurant cash flow dollars, growth in comparable restaurant sales and average restaurant level operating margin,
and different assumptions may have resulted in different conclusions regarding the probability of achieving future levels of performance relevant to the
payout levels for the awards. If we change our estimates of stock price volatility or expected lives of our SOSARs, or if we change our assumptions
regarding the probability of achieving future levels of performance with respect to performance share awards, our stock-based compensation expense and
results of operations may be materially impacted.
Insurance Liability
We are self-insured for a significant portion of our employee health benefits programs. We carry significant retentions for risks and associated
liabilities with respect to workers’ compensation, general liability, property and auto damage, employment practices liability, cyber liability and directors’
and officers’ liability. Predetermined loss limits have been arranged with third-party insurance companies to limit exposure to these claims. We record a
liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is based
on a number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions, and is closely monitored and adjusted
when warranted by changing circumstances. If a greater amount of claims occurs compared to what we have estimated, or if medical costs increase beyond
what we expected, our accrued liabilities might not be sufficient. Actual claims experience could also be more favorable than estimated. If we change our
estimates for the cost of claims incurred and unpaid, or if actual claims differ from these estimates, our insurance expense and results of operations may be
materially impacted.
Reserves/Contingencies for Litigation and Other Matters
We are involved in various claims and legal actions that arise in the ordinary course of business. We record an accrual for legal contingencies when
we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss. Although we have recorded
liabilities related to a number of legal actions, our estimates used to determine the amount of these liabilities may not be accurate, and there are other legal
actions for which we have not recorded a liability. As a result, in the event legal actions for which we have not accrued a liability or for which our accrued
liabilities are not accurate are resolved, such resolution may affect our operating results and cash flows.
Income Taxes
Our provision for income taxes, deferred tax assets and liabilities and any related valuation allowance requires the use of estimates based on our
management’s interpretation and application of complex tax laws and accounting guidance. We are primarily subject to income taxes in the U.S. We
establish reserves for uncertain tax positions for material, known tax exposures relating to deductions, transactions and other matters involving some
uncertainty as to the measurement and recognition of the item. We may adjust these reserves when our judgment changes as a result of the evaluation of
new information not previously available and will be reflected in the period in which the new information is available, or due to the expiration of any
applicable statute of limitations. While we believe that our reserves are adequate, issues raised by a tax authority may be resolved at an amount different
than the related reserve and could materially increase or decrease our income tax provision in future periods.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Commodity Price Risks
We are exposed to commodity price risks. Many of the ingredients we use to prepare our food, as well as our packaging materials and utilities to run
our restaurants, are ingredients or commodities that are affected by the price of other commodities, exchange rates, foreign demand, weather, seasonality,
production, availability and other factors outside our control. We work closely with our suppliers and use a mix of forward pricing protocols under which
we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing protocols under which we agree on a fixed price with our
supplier for the duration of that protocol, formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of
the goods, such as spot prices or based on changes in industry indices, and range forward protocols under which we agree on a price range for the duration
of that protocol. Generally, our pricing protocols with suppliers can remain in effect for periods ranging from one to 24 months, depending on the outlook
for prices of the particular ingredient. In some cases, we have minimum purchase obligations. We have tried to increase, where practical, the number of
suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign
demand, weather, crises and other world events that may affect our ingredient prices. Increases in ingredient prices could adversely affect our results if we
choose for competitive or other reasons not to increase menu prices at the same rate at which ingredient costs increase, or if menu price increases result in
customer resistance. We also could experience shortages of key ingredients for many unforeseen reasons, such as crop damage due to inclement weather, if
our suppliers need to close or restrict operations, or due to industry-wide shipping and freight delays.
Changing Interest Rates
We are exposed to interest rate risk through fluctuations of interest rates on our investments. As of December 31, 2023, we had $1.9 billion in cash
and cash equivalents, current and long-term investments, and restricted cash, of which the substantial majority are interest bearing. Changes in interest rates
affect the interest income we earn, and therefore impact our cash flows and results of operations.
Foreign Currency Exchange Risk
A portion of our operations consist of activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation
adjustments resulting from the conversion of our international financial results into the U.S. dollar. However, a substantial majority of our operations and
investment activities are transacted in the U.S., and therefore our foreign currency risk is not material at this date.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
To the Shareholders and the Board of Directors of Chipotle Mexican Grill, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Chipotle Mexican Grill, Inc. (the Company) as of December 31, 2023 and 2022, the
related consolidated statements of income and comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended
December 31, 2023, 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 December 31, 2023 and 2022, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 7, 2024 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
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 account or disclosure to which it relates.
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Description of the
Matter
Evaluation of stock-based compensation performance condition assumptions
The Company incurred $126.7 million in stock-based compensation expense during the year ended December 31, 2023.
Approximately 114,000 of the Company’s vested and non-vested stock awards were subject to performance conditions during
the year ended December 31, 2023. As described in Notes 1 and 8 of the consolidated financial statements, the Company
records the grant date fair value of the performance stock awards and expenses the fair value of the performance stock awards
subject to service conditions over the respective vesting period. Stock-based compensation expense of stock awards subject to
performance conditions is based on the estimated probability of achieving levels of performance associated with particular
levels of payout. Additionally, at each reporting period, the Company evaluates the probable outcome of the performance
conditions including consideration of significant assumptions and as applicable, recognizes the cumulative effect of the change
in estimate in the period of the change.
Auditing the estimated quantity of awards the Company determined are probable of vesting for the Company’s stock awards
subject to performance conditions was complex and judgmental. In particular, the stock compensation expense is sensitive to
significant assumptions including management’s internal estimates of the Company’s future performance.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over
stock-based compensation. We tested controls over management’s review of the assumptions used with regards to the
performance conditions. We also tested management's controls to validate that data used in management’s internal estimates of
the Company’s future performance was complete and accurate.
Our substantive audit procedures included, among others, testing the significant assumptions underlying the performance
conditions (e.g., certain targets related to growth in cumulative restaurant cash flow dollars and cumulative base restaurant cash
flow dollars) and testing the completeness and accuracy of the underlying data. We evaluated management’s significant
assumptions by comparing the assumptions to current market and economic trends, historical results of the Company's
business, and to other relevant factors. We additionally performed a sensitivity analysis of the significant assumptions to
evaluate the change in the expense to be recognized for the stock awards subject to performance conditions. We also evaluated
the adequacy of the Company’s stock-based compensation disclosures included in Notes 1 and 8 of the consolidated financial
statements in relation to these matters.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1997.
Irvine, California
February 7, 2024
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CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Income tax receivable
Investments
Total current assets
Leasehold improvements, property and equipment, net
Long-term investments
Restricted cash
Operating lease assets
Other assets
Goodwill
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Accrued payroll and benefits
Accrued liabilities
Unearned revenue
Current operating lease liabilities
Total current liabilities
Commitments and contingencies (Note 11)
Long-term operating lease liabilities
Deferred income tax liabilities
Other liabilities
Total liabilities
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2023 and
December 31, 2022, respectively
Common stock, $0.01 par value, 230,000 shares authorized, 37,483 and 37,320 shares issued as of December
31, 2023 and December 31, 2022, respectively
Additional paid-in capital
Treasury stock, at cost, 10,057 and 9,693 common shares as of December 31, 2023 and December 31, 2022,
respectively
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying notes to consolidated financial statements.
35
December 31,
2023
2022
560,609 $
115,535
39,309
117,462
52,960
734,838
1,620,713
2,170,038
564,488
25,554
3,578,548
63,082
21,939
8,044,362 $
197,646 $
227,537
147,688
209,680
248,074
1,030,625
3,803,551
89,109
58,870
4,982,155
384,000
106,880
35,668
86,412
47,741
515,136
1,175,837
1,951,147
388,055
24,966
3,302,402
63,158
21,939
6,927,504
184,566
170,456
147,539
183,071
236,248
921,880
3,495,162
98,623
43,816
4,559,481
-
-
375
1,956,160
373
1,829,304
(4,944,656)
(6,657)
6,056,985
3,062,207
8,044,362 $
(4,282,014)
(7,888)
4,828,248
2,368,023
6,927,504
$
$
$
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CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
Food and beverage revenue
Delivery service revenue
Total revenue
Restaurant operating costs (exclusive of depreciation and amortization shown separately
below):
Food, beverage and packaging
Labor
Occupancy
Other operating costs
General and administrative expenses
Depreciation and amortization
Pre-opening costs
Impairment, closure costs, and asset disposals
Total operating expenses
Income from operations
Interest and other income, net
Income before income taxes
Provision for income taxes
Net income
Earnings per share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Other comprehensive income/(loss), net of income taxes:
Foreign currency translation adjustments
Comprehensive income
2023
Year ended December 31,
2022
9,804,124 $
67,525
9,871,649
8,558,001 $
76,651
8,634,652
2021
7,457,169
89,892
7,547,061
2,912,564
2,440,982
503,264
1,428,747
633,584
319,394
36,931
38,370
8,313,836
1,557,813
62,693
1,620,506
(391,769)
1,228,737 $
44.59 $
44.34 $
27,555
27,710
2,602,245
2,197,958
460,425
1,311,905
564,191
286,826
29,560
21,139
7,474,249
1,160,403
21,128
1,181,531
(282,430)
899,101 $
32.28 $
32.04 $
27,851
28,062
2,308,631
1,917,761
416,606
1,197,054
606,854
254,657
21,264
19,291
6,742,118
804,943
7,820
812,763
(159,779)
652,984
23.21
22.90
28,132
28,511
1,231 $
1,229,968 $
(2,534)
896,567 $
(1,125)
651,859
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
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CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Common Stock
Treasury Stock
Balance, December 31, 2020
Stock-based compensation
Stock plan transactions and other
Acquisition of treasury stock
Net income
Other comprehensive income (loss), net of
income taxes
Balance, December 31, 2021
Stock-based compensation
Stock plan transactions and other
Acquisition of treasury stock
Net income
Other comprehensive income (loss), net of
income taxes
Balance, December 31, 2022
Stock-based compensation
Stock plan transactions and other
Acquisition of treasury stock
Net income
Other comprehensive income (loss), net of
income taxes
Balance, December 31, 2023
Shares
Amount
36,704 $
-
428
-
-
-
37,132 $
-
188
-
-
-
37,320 $
-
163
-
-
-
37,483 $
367 $
-
4
-
-
-
371 $
-
2
-
-
-
373 $
-
2
-
-
-
375 $
Additional
Paid-In
Capital
1,549,909
178,703
700
-
-
-
1,729,312
99,821
171
-
-
-
1,829,304
126,686
170
-
-
-
1,956,160
Shares
8,703 $
-
-
349
-
-
9,052 $
-
-
641
-
-
9,693 $
-
-
364
-
Amount
(2,802,075) $
-
-
(554,027)
-
-
(3,356,102) $
-
-
(925,912)
-
-
(4,282,014) $
-
-
(662,642)
-
3,276,163 $
-
-
-
652,984
-
3,929,147 $
-
-
-
899,101
-
4,828,248 $
-
-
-
1,228,737
-
10,057 $
-
(4,944,656) $
-
6,056,985 $
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
(4,229) $
-
-
-
-
(1,125)
(5,354) $
-
-
-
-
(2,534)
(7,888) $
-
-
-
-
1,231
(6,657) $
Total
2,020,135
178,703
704
(554,027)
652,984
(1,125)
2,297,374
99,821
173
(925,912)
899,101
(2,534)
2,368,023
126,686
172
(662,642)
1,228,737
1,231
3,062,207
See accompanying notes to consolidated financial statements.
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CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year ended December 31,
2022
2021
2023
$
1,228,737 $
899,101 $
652,984
Depreciation and amortization
Deferred income tax provision
Impairment, closure costs, and asset disposals
Provision for credit losses
Stock-based compensation expense
Other
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Operating lease assets
Other assets
Accounts payable
Accrued payroll and benefits
Accrued liabilities
Unearned revenue
Income tax payable/receivable
Operating lease liabilities
Other long-term liabilities
Net cash provided by operating activities
Investing activities
Purchases of leasehold improvements, property and equipment
Purchases of investments
Maturities of investments
Proceeds from sale of equipment
Net cash used in investing activities
Financing activities
Acquisition of treasury stock
Tax withholding on stock-based compensation awards
Other financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
Supplemental disclosures of cash flow information
Income taxes paid (refunded)
Purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued
liabilities
Acquisition of treasury stock accrued in accounts payable and accrued liabilities
$
$
$
$
319,394
(9,505)
37,025
1,570
124,016
(13,080)
(11,216)
(3,649)
(39,211)
254,241
4,204
5,313
57,048
3,188
35,685
(5,237)
(214,477)
9,431
1,783,477
(560,731)
(1,115,131)
729,853
-
(946,009)
286,826
(43,195)
20,738
(760)
98,030
(16,202)
(14,026)
(3,011)
(14,660)
234,273
(346)
18,208
9,864
(27,964)
33,374
46,262
(207,186)
3,853
1,323,179
(479,164)
(614,416)
263,548
-
(830,032)
(592,349)
(69,146)
843
(660,652)
381
177,197
408,966
586,163 $
(830,140)
(98,970)
(294)
(929,404)
(1,007)
(437,264)
846,230
408,966 $
254,657
(12,357)
17,086
493
176,392
(4,599)
(1,687)
(6,392)
(26,826)
223,837
3,993
21,440
(44,555)
10,997
34,387
193,379
(207,164)
(3,984)
1,282,081
(442,475)
(429,350)
345,748
4,035
(522,042)
(466,462)
(79,870)
(2,274)
(548,606)
(1,039)
210,394
635,836
846,230
400,229 $
275,796 $
(17,831)
76,415 $
5,643 $
72,021 $
4,497 $
63,802
7,695
See accompanying notes to consolidated financial statements.
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CHIPOTLE MEXICAN GRILL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, unless otherwise specified)
1. Description of Business and Summary of Significant Accounting Policies
In this annual report on Form 10-K, Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries, is collectively referred to as
“Chipotle,” “we,” “us,” or “our.”
We develop and operate restaurants that serve a relevant menu of burritos, burrito bowls, quesadillas, tacos, and salads, made using fresh, high-
quality ingredients. As of December 31, 2023, we operated 3,437 restaurants, including 3,371 Chipotle restaurants within the United States, and 66
international Chipotle restaurants. In the current year we closed all non-Chipotle restaurants. We manage our U.S. operations based on eight regions and
aggregate our operations to one reportable segment.
Principles of Consolidation and Basis of Presentation
Our consolidated financial statements include our accounts, our wholly and majority owned subsidiaries and investees we control after elimination of
all intercompany accounts and transactions.
Management Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial
statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates under
different assumptions or conditions.
Cash and Cash Equivalents
We consider highly liquid investment instruments purchased with an initial maturity of three months or less to be cash equivalents. Amounts
receivable from credit card companies are also considered cash equivalents as they are both short-term and highly liquid in nature. We maintain cash and
cash equivalent balances that exceed federally-insured limits with a number of financial institutions.
Restricted Cash
We maintain certain cash balances restricted as to withdrawal or use. Restricted cash assets are primarily insurance-related restricted trust assets.
Accounts Receivable
Accounts receivable primarily consists of receivables from third party gift card distributors, delivery partners, insurance liabilities covered by third-
party insurance carriers and vendor rebates.
Allowance for Credit Losses
We closely monitor accounts receivable and held to maturity investment balances and estimate the allowance for credit losses when lifetime credit
losses are expected by management. Our estimate is based on historical collection experience, external market data and other factors, including those
related to current market conditions and events. We do not recognize a reserve for expected credit losses related to our U.S. Treasury security investments
as management has concluded there is no risk of non-payment.
As of December 31, 2023 and 2022, our allowance for credit losses was $2,742 and $1,180, respectively.
Inventory
Inventory, consisting principally of food, beverages, and supplies, is valued at the lower of first-in, first-out cost or net realizable value.
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Equity Method Investments
Investments are accounted for under the equity method if we are able to exercise significant influence, but not control, over an investee. Our share of
the earnings or losses as reported by the investees is included in interest and other income, net on the consolidated statements of income and comprehensive
income. The investments are evaluated for impairment annually and when facts and circumstances indicate that the carrying value may not be recoverable.
If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in interest income and other income, net on our
consolidated statements of income and comprehensive income.
Investments
Investments classified as trading securities are carried at fair value with any unrealized gain or loss being recorded in interest and other income, net
on the consolidated statements of income and comprehensive income. Investments classified as available-for-sale are carried at fair value with unrealized
gains and losses, net of tax, included as a component of other comprehensive income (loss), net of income taxes on the consolidated statements of income
and comprehensive income. Held-to-maturity securities are carried at amortized cost. Non-marketable equity investments are measured at cost, less
impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the
same issuer. These gains or losses are included in interest and other income, net on the consolidated statements of income and comprehensive income.
Impairment charges on investments are recognized in interest and other income, net on the consolidated statements of income and comprehensive
income when management believes the decline in the fair value of the investment is other-than-temporary.
Fair Value Measurements
Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants.
For assets and liabilities recorded or disclosed at fair value, we determine fair value based on the following:
Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be
corroborated with observable market data.
Level 3: Unobservable inputs for the asset or liability. This includes certain pricing models, discounted cash flow methodologies and similar
techniques that use significant unobservable inputs.
Foreign Currency Translation
The functional currency of our foreign entities is the currency of the primary economic environment in which the entity operates. The operations,
assets, and liabilities of our entities outside the U.S. are initially measured using the functional currency of that entity. Gains and losses arising from the
impact of foreign currency exchange rate fluctuations on transactions in foreign currency are included as a separate component of other comprehensive
income (loss), net of income taxes on the consolidated statements of income and comprehensive income. Assets and liabilities of these foreign entities are
translated at exchange rates in effect as of the balance sheet date. Income and expense accounts are translated monthly using average monthly exchange
rates. Resulting translation adjustments are recorded in accumulated other comprehensive loss on the consolidated balance sheets.
Leasehold Improvements, Property and Equipment
Leasehold improvements, property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and
construction of a restaurant are capitalized. During the years ended December 31, 2023, 2022 and 2021, we capitalized $15,385, $12,695, and $10,870 of
internal costs, respectively. Expenditures for refurbishments and improvements that significantly add to the productivity capacity or extend the useful life
are capitalized, while expenditures for maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term, which generally includes option periods that
are reasonably certain, or the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated
depreciation and any related gain or loss is reflected in impairment, closure costs, and asset disposals in the consolidated statements of income and
comprehensive income. Assets to be disposed of are reported at the lower of their carrying amount or fair value less estimated costs to sell.
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At least annually, or when impairment indicators are present, we evaluate, and adjust when necessary, the estimated useful lives of leasehold
improvements, property and equipment. The changes in estimated useful lives did not have a material impact on depreciation in any period. The estimated
useful lives are:
Leasehold improvements and buildings
Furniture and fixtures
Equipment
Leases
3-20 years
4-7 years
3-10 years
The majority of our operating leases consist of restaurant locations and office space. We determine if a contract contains a lease at inception. Our
leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods. Generally, the lease term is
the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years.
We recognize an operating lease asset and operating lease liability for each lease with a contractual term greater than 12 months at the time of lease
inception. We do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a
straight-line basis over the lease term.
Operating lease assets and liabilities are recognized at the lease commencement date, which is the date we control the use of the property. Operating
lease liabilities represent the present value of lease payments not yet paid. We made the policy election to combine lease and non-lease components. We
consider fixed CAM part of our fixed future lease payments; therefore, fixed CAM is also included in our lease liability. To determine the present value of
lease payments not yet paid, we estimate incremental borrowing rates corresponding to the lease term including reasonably certain renewal periods. As we
have no outstanding debt nor committed credit facilities, secured or otherwise, we estimate this rate based on prevailing financial market conditions,
comparable company and credit analysis, and management judgment.
Total lease costs, which are recorded primarily as occupancy costs, include fixed operating lease costs, variable lease costs and short-term lease costs.
Most of our real estate leases require we pay certain expenses, such as CAM costs, real estate taxes and insurance, of which the fixed portion is included in
operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. In addition to the above costs, variable lease costs also
include amounts based on a percentage of gross sales in excess of specified levels and are recognized when probable and are not included in determining
the present value of our operating lease liability.
Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments, initial
direct costs, lease incentives, and impairment of operating lease assets. For operating leases, operating lease assets are reduced over the lease term by the
recognized straight-line lease expense less the amount of accretion of the lease liability. Additionally, tenant incentives used to fund leasehold
improvements are generally recognized when earned and reduce our right-of-use asset related to the lease. These are amortized through the operating lease
asset as reductions of expense over the lease term.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have not entered into any leases
with related parties.
Goodwill
Goodwill is not subject to amortization, but instead is tested for impairment annually in the fourth quarter, or more frequently when impairment
indicators are present, and we are required to record any necessary impairment adjustments. Impairment is measured as the excess of the carrying value
over the fair value of the goodwill. No impairment charges were recognized on goodwill for the years ended December 31, 2023, 2022, and 2021.
Other Assets
Other assets consist primarily of a rabbi trust as described further in Note 4. “Fair Value Measurements,” software as a service implementation costs
where the service period is greater than one year, an equity method investment described further in Note 5. “Equity Investments” and transferable liquor
licenses.
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Insurance Liability
We are self-insured for a significant portion of our employee health benefits programs, and carry significant retentions for risks and associated
liabilities with respect to workers’ compensation, general liability, property and auto damage, employment practices liability, cyber liability and directors’
and officers’ liability. Predetermined loss limits have been arranged with third party insurance companies to limit exposure to these claims. We record a
liability that represents our estimated cost of claims incurred and unpaid as of the balance sheet date. Our estimated liability is not discounted and is based
on a number of assumptions and factors, including historical trends, actuarial assumptions and economic conditions, and is closely monitored and adjusted
when warranted by changing circumstances.
Reserves/Contingencies for Litigation and Other Matters
We are involved in various claims and legal actions that arise in the ordinary course of business. We record an accrual for legal contingencies when
we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss.
Income Taxes
We compute income taxes using the asset and liability method, under which deferred income tax assets and liabilities are recognized based on the
differences between the financial reporting bases and the respective tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which we expect the temporary differences to reverse. Any effects of changes in
income tax rates or tax laws are included in the provision for income taxes in the period that includes the enactment date.
We routinely assess the realizability of our deferred tax assets by jurisdiction and may record a valuation allowance if, based on all available positive
and negative evidence, we determine that some portion of the deferred tax assets may not be realized prior to expiration. If we determine that we may be
able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes during the period in which the determination was made that the deferred tax asset can be
realized.
We evaluate our tax filing positions and recognize a tax benefit from an uncertain tax position only if it is more likely than not that based on its
technical merits the tax position will be sustained upon examination by the relevant taxing authorities, including resolutions of any related appeals or
litigation processes. The tax benefits recognized in the financial statements from such a position are measured based on the largest tax benefit that has a
greater than 50% likelihood of being realized upon settlement with a taxing authority. For uncertain tax positions that do not meet this threshold, we record
a related tax reserve in the period in which it arises. We adjust our unrecognized tax benefit liability and provision for income taxes in the period in which
the uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new
information becomes available that requires a change in recognition and/or measurement of the liability.
We recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in the provision for
income taxes in our consolidated statements of income and comprehensive income. Accrued interest and penalties are included within the related tax
reserve on our consolidated balance sheets.
Revenue Recognition
We generally recognize revenue, net of discounts and incentives, when payment is tendered at the point of sale. We report revenue net of sales-related
taxes collected from customers and remitted to governmental taxing authorities. Food and beverage revenue primarily relates to the sale of food and
beverages. Delivery service revenue is comprised of delivery and related service fees charged to customers on sales made through Chipotle’s app and
website.
Delivery
We offer our customers delivery in almost all of our geographic regions. Delivery services are fulfilled by third-party service providers. In some
cases, we make delivery sales through our website Chipotle.com or the Chipotle App (“White Label Sales”). In other cases, we make delivery sales through
a non-Chipotle owned channel, such as the delivery partner’s website or mobile app (“Marketplace Sales”). With respect to White Label Sales, we control
the delivery services and generally recognize revenue, including delivery fees, when the delivery partner transfers food to the customer. For these sales, we
receive payment directly from the customer at the time of sale. With respect to Marketplace Sales, we generally recognize revenue, excluding delivery fees
collected by the delivery partner, when control of the food is transferred to the delivery partner. We receive payment from the delivery partner subsequent
to the transfer of food and the payment terms are short-term in nature.
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Gift Cards
We sell gift cards, which do not have expiration dates and we do not deduct non-usage fees from outstanding gift card balances. Gift card balances
are initially recorded as unearned revenue. We recognize revenue from gift cards when the gift card is redeemed by the customer. Historically, the majority
of gift cards are redeemed within one year. In addition, a portion of gift cards are not expected to be redeemed and will be recognized as breakage over time
in proportion to gift card redemptions. The gift card breakage rate is based on company and program specific information, including historical redemption
patterns, and expected remittance to government agencies under unclaimed property laws, if applicable. We evaluate our gift card breakage rate estimate
annually, or more frequently as circumstances warrant, and apply that rate to gift card redemptions. Gift card liability balances are typically highest at the
end of each calendar year following increased gift card sales during the holiday season; accordingly, revenue recognized from gift card liability balances is
highest in the first quarter of each calendar year.
Chipotle Rewards
We have a loyalty program called Chipotle Rewards. Eligible customers who enroll in the program generally earn points for every dollar spent.
We may also periodically offer promotions, which typically provide the customer with the opportunity to earn bonus points or other rewards.
Customers may redeem earned points for various rewards, which are primarily comprised of free food and beverage items. Earned rewards generally expire
one month to two months after they are issued, and points generally expire if an account is inactive for a period of six months.
We defer revenue associated with the estimated selling price of points or rewards earned by customers as each point or reward is earned, net of points
or rewards we do not expect to be redeemed. The estimated selling price of each point or reward earned is based on the estimated value of the product for
which the reward is expected to be redeemed. Our estimate of points and rewards we expect to be redeemed is based on historical and other company
specific data. The costs associated with rewards redeemed are primarily included in food, beverage, and packaging on our consolidated statements of
income and comprehensive income.
We evaluate Chipotle Rewards point breakage annually, or more frequently as circumstances warrant. The result of this annual breakage assessment
did not have a material impact on our consolidated financial statements.
We recognize revenue associated with Chipotle Rewards within food and beverage revenue on the consolidated statements of income and
comprehensive income when a customer redeems an earned reward. Deferred revenue associated with Chipotle Rewards is included in unearned revenue
on our consolidated balance sheets.
Food, Beverage and Packaging Costs
Food, beverage and packaging costs include inventory, warehousing and related purchasing and distribution costs.
Other Operating Costs
Other operating costs include, among other items, marketing and promotional costs, delivery expense, bank and credit card processing fees,
restaurant utilities, technology costs, and maintenance costs.
Consideration Received from Vendors
We receive consideration for a variety of vendor-sponsored programs, such as volume rebates and promotions. Vendor consideration is recorded as a
reduction of food, beverage and packaging or other operating costs on our consolidated statements of income and comprehensive income depending on the
classification of the related costs.
Advertising, Marketing and Promotional Costs
Advertising, marketing and promotional costs are expensed as incurred and totaled $264,085, $250,673 and $222,091 for the years ended
December 31, 2023, 2022 and 2021, respectively. Advertising, marketing and promotional costs include costs related to free food which a customer does
not need to make a purchase to earn. These costs are included in other operating costs on the consolidated statements of income and comprehensive
income.
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Stock-Based Compensation
During 2023, we issued shares as part of employee compensation pursuant to the Chipotle Mexican Grill, Inc. 2022 Stock Incentive Plan (the “2022
Incentive Plan”). SOSARs and stock awards generally vest equally on the second and third anniversaries of the grant date, and SOSARs expire after seven
years. Stock-based compensation expense is generally recognized on a straight-line basis for each separate vesting portion. Compensation expense related
to employees eligible to retire and retain full rights to the awards is recognized over 12 months which coincides with the service period required to earn the
full award. We estimate forfeitures based on historical data when determining the amount of stock-based compensation costs to be recognized in each
period. We have also granted stock awards with performance vesting conditions and/or market vesting conditions. Stock awards with performance or
market vesting conditions generally vest based on our achievement versus stated targets or criteria over a three-year performance and service period.
Performance goals are determined by the Board and include measures such as comparable restaurant sales, average restaurant operating margin, restaurant
cash flow, new restaurant unit growth, and total shareholder return relative to our peer group. Compensation expense on stock awards subject to
performance conditions, which is based on the quantity of awards we have determined are probable of vesting, is recognized over the longer of the
estimated performance goal attainment period or time vesting period. Compensation expense is recognized ratably for awards subject to market conditions
regardless of whether the market condition is satisfied, provided that the requisite service has been met. Some stock-based compensation awards are made
to employees involved in our new restaurant development activities, and expense for these awards is recognized as capitalized development and included in
leasehold improvements, property and equipment, net, on the consolidated balance sheets.
Restaurant Pre-Opening Costs
Pre-opening costs, including rent, wages, benefits and travel for training and opening teams, food and other restaurant operating costs, are expensed
as incurred prior to a restaurant opening for business, and are included in operating expenses on the consolidated statements of income and comprehensive
income.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets
and liabilities. For restaurant assets we test impairment at the individual restaurant asset group level, which includes leasehold improvements, property and
equipment and operating lease assets.
The fair value measurement for asset impairment is generally based on Level 3 inputs. See “Fair Value Measurements” above for a description of
level inputs. We first compare the carrying value of the asset (or asset group, referred interchangeably throughout as asset) to the asset’s estimated future
undiscounted cash flows. If the estimated undiscounted future cash flows are less than the carrying value of the asset, we determine if we have an
impairment loss by comparing the carrying value of the asset to the asset's estimated fair value. The estimated fair value of the asset is generally determined
using the income approach to measure the fair value, which is based on the present value of estimated future cash flows. Key inputs to the income approach
for restaurant assets include the discount rate, projected restaurant revenues and expenses, and sublease income if we are closing the restaurant. In certain
cases, management uses other market information, when available, to estimate the fair value of an asset. The impairment charges represent the excess of
each asset’s carrying amount over its estimated fair value and are allocated among the long-lived asset or assets of the group.
Earnings per Share
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares of common
stock outstanding during each period. Diluted earnings per share (“diluted EPS”) is calculated using income available to common shareholders divided by
diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock
underlying SOSARs and non-vested stock awards (collectively “stock awards”). Diluted EPS considers the impact of potentially dilutive securities except
in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Stock awards are excluded from
the calculation of diluted EPS in the event they are subject to performance conditions or are antidilutive.
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Recently Issued Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The
ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and
information used to assess segment performance. The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.
We are currently evaluating the impact of adopting this ASU on our disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes
amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and
income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should
be applied either prospectively or retrospectively. We are currently evaluating the impact of adopting this ASU on our disclosures.
We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a
significant impact to the consolidated financial statements.
2. Supplemental Balance Sheet Information
Prepaid expenses and other current assets were as follows:
Prepaid expenses
Other current assets
Prepaid expenses and other current assets
Leasehold improvements, property and equipment, net were as follows:
Land
Leasehold improvements and buildings
Furniture and fixtures
Equipment
Construction in Progress
Leasehold improvements, property and equipment, gross
Accumulated depreciation
Leasehold improvements, property and equipment, net
Accrued payroll and benefits were as follows:
Workers' compensation liability
Accrued payroll, bonuses and taxes
Other accrued payroll and benefits
Accrued payroll and benefits
$
$
$
December 31,
2023
2022
97,670 $
19,792
117,462 $
69,167
17,245
86,412
December 31,
2023
12,943 $
2,595,866
267,294
1,114,236
161,721
4,152,060
(1,982,022)
2022
12,943
2,317,277
242,166
989,895
123,453
3,685,734
(1,734,587)
1,951,147
$
2,170,038 $
December 31,
2023
2022
$
$
30,520 $
170,251
26,766
227,537 $
27,531
118,638
24,287
170,456
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Accrued liabilities were as follows:
Sales and use tax payable
General, product and automobile insurance reserves
Other accrued liabilities
Accrued liabilities
3. Revenue Recognition
Gift Cards
The gift card liability included in unearned revenue on the consolidated balance sheets was as follows:
Gift card liability
December 31,
2023
2022
42,071 $
30,169
75,448
147,688 $
35,567
29,544
82,428
147,539
$
$
December 31,
2023
2022
$
164,930 $
145,014
Revenue recognized from the redemption of gift cards that was included in unearned revenue at the beginning of the year was as follows:
Revenue recognized from gift card liability balance at the beginning of the year
$
61,389 $
59,175 $
48,605
2023
Year ended December 31,
2022
2021
Chipotle Rewards
Changes in our Chipotle Rewards liability included in unearned revenue on the consolidated balance sheets were as follows:
Chipotle Rewards liability, beginning balance
Revenue deferred
Revenue recognized
Chipotle Rewards liability, ending balance
2023
Year ended December 31,
2022
38,057 $
135,490
(128,797)
44,750 $
25,572 $
121,406
(108,921)
38,057 $
$
$
2021
22,337
106,759
(103,524)
25,572
46
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4. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying value of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of
their short-term nature.
Our held-to-maturity investments are comprised of U.S. Treasury securities and a corporate debt security, which are held at amortized cost. We also
have investments in convertible notes receivable which are held at fair-value. Additionally, we maintain a deferred compensation plan with related assets
held in a rabbi trust.
The following tables show our cash, cash equivalents, and debt investments by significant investment category as of December 31, 2023 and 2022:
Cash
Level 1(1)
Money market funds
Time deposits
U.S. Treasury securities
Corporate debt securities
Subtotal
Level 3
Corporate debt security(2)
Notes receivable(3)
Subtotal
Total
Adjusted cost
$
128,458 $
355,872
76,279
1,200,658
19,755
1,652,564
17,401
14,500
31,901
1,812,923 $
$
Unrealized
Gains
Unrealized
Losses
Fair Value
Cash and Cash
Equivalents
Current
Investments
December 31, 2023
- $
- $
128,458 $
128,458 $
- $
Long-term
Investments
-
-
-
4,352
13
4,365
-
1,289
1,289
5,654 $
-
-
4,083
7
4,090
355,872
76,279
1,200,927
19,761
1,652,839
355,872
76,279
-
-
432,151
27
141
168
4,258 $
17,374
15,648
33,022
1,814,319 $
-
-
-
560,609 $
-
-
731,339
-
731,339
999
2,500
3,499
734,838 $
-
-
469,319
19,755
489,074
16,402
13,148
29,550
518,624
Adjusted cost
$
75,829 $
Unrealized
Gains
Unrealized
Losses
Fair Value
Cash and Cash
Equivalents
Current
Investments
December 31, 2022
- $
- $
75,829 $
75,829 $
- $
Long-term
Investments
-
232,477
75,694
847,354
1,155,525
-
-
63
63
-
-
14,355
14,355
232,477
75,694
833,062
1,141,233
232,477
75,694
-
308,171
-
-
515,136
515,136
17,900
4,860
22,760
1,254,114 $
-
222
222
285 $
700
-
700
15,055 $
17,200
5,082
22,282
1,239,344 $
-
-
-
-
-
-
515,136 $
Total
(1) Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
$
384,000 $
(2) The fair value of the corporate debt security is measured using Level 3 (unobservable) inputs. We determined the fair value for the corporate debt
security using an internally-developed valuation model and unobservable inputs include credit and liquidity spreads and effective maturity.
47
Cash
Level 1(1)
Money market funds
Time deposits
U.S. Treasury securities
Subtotal
Level 3
Corporate debt security(2)
Note receivable(3)
Subtotal
-
-
332,218
332,218
17,900
5,082
22,982
355,200
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(3) We have elected to measure our investments in convertible notes receivable of private companies at fair value under the fair value option. The fair value
of the notes receivable is measured using Level 3 (unobservable) inputs. We determined the fair value for the notes receivable using an internally-
developed valuation model and unobservable inputs include estimates of the equity value of the underlying business and the timing and probability of
future financing events.
Rabbi Trust
We have elected to fund certain deferred compensation plan obligations, as described further in Note 8. “Stock-Based Compensation and Employee
Benefit Plans”, through a rabbi trust, the assets of which are designated as trading securities. The rabbi trust is subject to creditor claims in the event of
insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in mutual funds,
consistent with the investment choices selected by participants in their Deferred Plan accounts, which are designated as trading securities, carried at fair
value, and are included in other assets on the consolidated balance sheets. We record trading gains and losses, along with the offsetting amount related to
the increase or decrease in deferred compensation to reflect our exposure to liabilities for payment under the deferred plan in general and administrative
expenses on the consolidated statements of income and comprehensive income.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as leasehold
improvements, property and equipment, certain long-term investments, operating lease assets, other assets, and goodwill. These assets are measured at fair
value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if there has been an observable
price change of a non-marketable equity security.
The following table summarizes our restaurant and office assets measured at fair value by hierarchy level on a nonrecurring basis:
Leasehold improvements, property and equipment, net
Operating lease assets
Total
Carrying Value
December 31,
2023
2022
3,571 $
4,505
8,076 $
264
713
977
Level
3
3
$
$
Fair value of these assets was measured using Level 3 inputs (unobservable inputs for the asset or liability). Unobservable inputs include the discount
rate, projected restaurant revenues and expenses, and sublease income if we are closing and intend to sublease the restaurant or office space. For the years
ended December 31, 2023, 2022 and 2021, we recorded asset impairments related to restaurants and offices of $12,613, $2,387 and $4,727, respectively.
Costs are recorded within impairment, closure costs, and asset disposals on the consolidated statements of income and comprehensive income. Carrying
value after the impairment charges approximates fair value.
48
Table of Contents
5. Equity Investments
Equity method investments
Other investments
Total
Equity Method Investments
December 31,
2023
2022
$
$
8,896 $
45,864
54,760 $
11,697
32,855
44,552
As of December 31, 2023, we owned 4,325 shares of common stock of Tractor Beverages, Inc. (“Tractor”). Our investment represents ownership of
approximately 10.2% of Tractor, and we have invested total cash consideration of $10,000. As we are a significant customer of Tractor and maintain board
representation, we are accounting for our investment under the equity method. There were no impairment charges for the year ended December 31, 2023 or
2022 associated with this equity method investment. The investment in common stock is included within other assets on the consolidated balance sheets
with a carrying value of $8,896 and $11,697 as of December 31, 2023 and December 31, 2022, respectively. Refer to Note 13. “Related Party Transactions”
for related party disclosures.
Other Investments
As of December 31, 2023, we hold warrants (the “Tractor Warrants”) to purchase 2,162 shares of common stock of Tractor. Tractor is a privately held
company, and as such, the Tractor Warrants represent non-marketable equity securities. The investment is included within long-term investments on the
consolidated balance sheets with a carrying value of $8,675 and $10,747 as of December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2023, we own 766 shares of the Series C Preferred Stock of Nuro, Inc. (“Nuro”). Our investment represents a minority interest
and we have determined that we do not have significant influence over Nuro. Nuro is a privately held company, and as such, the preferred shares
comprising our investment are illiquid and fair value is not readily determinable. As of December 31, 2023, we have recognized a cumulative gain of
$5,968 related to our investment in Nuro due to observable transactions in prior periods. The investment is included within long-term investments on the
consolidated balance sheets with a carrying value of $15,968 as of December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2023, we held additional investments in other entities through the Cultivate Next Fund. These additional investments are
included within long-term investments on the consolidated balance sheets with a carrying value of $21,221 and $6,140 as of December 31, 2023 and
December 31, 2022, respectively.
6. Income Taxes
Income before income taxes, classified by source of income, was as follows:
Domestic
Foreign
Income before income taxes
2023
1,637,756 $
(17,250)
1,620,506 $
Year ended December 31,
2022
1,192,004 $
(10,473)
1,181,531 $
$
$
2021
818,057
(5,294)
812,763
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The components of the provision for income taxes were as follows:
Current tax:
U.S. Federal
U.S. State and Local
Foreign
Deferred tax:
U.S. Federal
U.S. State and Local
Foreign
Valuation allowance
Provision for income taxes
The effective tax rate differs from the statutory tax rates as follows:
Statutory U.S. federal income tax rate
State income tax, net of related federal income tax benefit
Federal tax credits
Executive compensation disallowed
Valuation allowance
Uncertain tax position reserves
Other
Return to provision and other discrete items
Equity compensation related adjustments
Federal net operating loss
Effective income tax rate
2023
Year ended December 31,
2022
2021
$
$
$
(314,757)
(85,355)
(1,162)
(401,274)
7,992
1,532
7,606
17,130
(7,625)
(391,769)
$
$
(246,210)
(79,041)
(374)
(325,625)
23,502
19,940
(3,771)
39,671
3,524
$
(282,430)
(156,447)
(15,351)
(338)
(172,136)
33,004
(20,404)
7,229
19,829
(7,472)
(159,779)
2023
Year ended December 31,
2022
2021
21.0 %
4.0
(1.0)
0.8
0.3
0.4
0.2
(0.2)
(1.3)
-
24.2 %
21.0 %
3.8
(1.0)
0.8
0.2
0.3
0.6
(0.1)
(1.7)
-
23.9 %
21.0 %
3.5
(1.6)
2.9
0.3
-
-
0.1
(4.7)
(1.8)
19.7 %
The effective tax rate for the year ended December 31, 2023, was higher than the effective tax rate for the year ended December 31, 2022, primarily
due to a decrease in excess tax benefits related to option exercises and equity vesting in relation to income before taxes.
50
Table of Contents
The components of the deferred income tax assets and liabilities for continuing operations were as follows:
Deferred income tax liability:
Leasehold improvements, property and equipment, net
Goodwill and other assets
Operating lease assets
Total deferred income tax liability
Deferred income tax asset:
Gift card liability
Capitalized transaction costs
Stock-based compensation and other employee benefits
Foreign net operating loss carry-forwards
State credits
Operating lease liabilities
Allowances, reserves and other
Capitalized research costs
Prepaid assets and other
State net operating loss carry-forwards
Valuation allowance
Total deferred income tax asset
Deferred income tax liabilities
December 31,
2023
2022
$
$
272,017
1,743
972,835
1,246,595
18,101
323
50,954
32,252
1,838
1,038,911
12,870
25,990
6,637
4,332
(34,722)
1,157,486
89,109
$
$
263,444
1,754
901,058
1,166,256
15,893
323
45,129
24,799
3,151
962,815
15,688
17,415
4,685
4,832
(27,097)
1,067,633
98,623
Gross foreign net operating losses (“NOLs”) were $149,891 and $114,727 as of December 31, 2023 and 2022, respectively. Our foreign NOLs can be
carried forward indefinitely.
Gross state NOLs available across all jurisdictions in which we operate were $62,492 and $73,327 as of December 31, 2023 and 2022, respectively.
Our state NOLs expire over varying intervals in the future.
We had gross valuation allowances against certain foreign deferred tax assets of $160,607 and $124,609 as of December 31, 2023 and 2022,
respectively. The increase in the valuation allowance was primarily due to the recording of a valuation allowance on various foreign tax attributes.
Unrecognized Tax Benefits
A reconciliation of the unrecognized tax benefits was as follows:
Beginning of year
Increase resulting from prior year tax positions
Decrease resulting from prior year tax positions
Increase resulting from current year tax positions
Settlements with taxing authorities
Lapsing of statutes of limitations
End of year
Year ended December 31,
2023
2022
2021
$
$
8,902
7,561
(295)
783
(6)
(457)
16,488
$
$
5,262
3,937
-
312
-
(609)
8,902
$
$
10,859
180
(331)
1,387
-
(6,833)
5,262
Interest expense related to uncertain tax positions is recognized in interest and other income, net on the consolidated statements of income and
comprehensive income. Penalties related to uncertain tax positions are recognized in provision for income taxes on the consolidated statements of income
and comprehensive income. For the years ended December 31, 2023, 2022 and 2021, we recognized $1,541, $384 and $180, respectively, in interest
expense related to uncertain tax positions. These are gross amounts before any tax benefits and are included in other liabilities on the consolidated balance
sheets. As of December 31, 2023 and 2022, we have accrued interest of $2,026 and $589, respectively.
The Internal Revenue Service (“IRS”) commenced an examination of our U.S. income tax returns for the tax year ended December 31, 2020 in the
fourth quarter of 2022. The exam is still in progress. As of December 31, 2023, the IRS has not proposed any adjustments to our tax positions.
51
Table of Contents
Our tax returns are currently under audit by the State of Pennsylvania for the tax years ended December 31, 2019, December 31, 2020 and December
31, 2021. As of December 31, 2023, the State of Pennsylvania has not proposed any adjustments to our tax positions. For the majority of states where we
have a significant presence, we are no longer subject to tax examinations by tax authorities for tax years before 2019. Currently, we expect expirations of
statutes of limitations, excluding indemnified amounts, on reserves of approximately $481 within the next twelve months.
It is reasonably possible the amount of the unrecognized benefit with respect to certain unrecognized positions could significantly increase or
decrease within the next twelve months and would have an impact on net income.
Inflation Reduction Act of 2022
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which includes provisions imposing a 15% alternative
corporate minimum tax (“CAMT”), and a 1% excise tax on net stock repurchases made by publicly traded U.S. corporations, which are effective in taxable
years beginning after December 31, 2022. The CAMT does not apply to the Company and the excise tax is immaterial to our financial statements as of
December 31, 2023.
7. Shareholders’ Equity
We have had a stock repurchase program in place since 2008. As of December 31, 2023, we had $424,107 authorized for repurchasing shares of our
common stock, which includes the $200,000 additional authorization approved by our Board of Directors on December 14, 2023. Shares we repurchased
are being held in treasury stock until they are reissued or retired at the discretion of our Board of Directors.
During the years ended December 31, 2023, 2022, and 2021, shares of common stock at a total cost of $69,146, $98,970, and $79,870, respectively,
were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock awards. Shares
surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by us but are not part of publicly
announced share repurchase programs.
8. Stock-Based Compensation and Employee Benefit Plans
Pursuant to the 2022 Stock Incentive Plan, we grant stock options, SOSARs, RSUs, or PSUs to employes and non-employee directors. We issue
shares of common stock upon the exercise of stock options and SOSARs, and the vesting of RSUs and PSUs.
We also have an employee stock purchase plan (“ESPP”), Defined Contribution Plan, and a Deferred Compensation Plan.
Stock-Based Compensation
Under the 2022 Stock Incentive Plan, 2,431 shares of common stock have been authorized and reserved for issuance to eligible participants, of which
2,165 shares were authorized for issuance but not issued or subject to outstanding awards as of December 31, 2023. For purposes of calculating the
available shares remaining, each share issuable pursuant to outstanding full value awards, such as RSUs and PSUs, count as two shares, and each share
underlying a stock option or SOSAR count as one share.
Total stock-based compensation expense was as follows:
$
Stock-based compensation
$
Stock-based compensation, net of income taxes
Total capitalized stock-based compensation included in leasehold improvements, property
$
and equipment, net on the consolidated balance sheets
Excess tax benefit on stock-based compensation recognized in provision for income taxes
$
on the consolidated statements of income and comprehensive income
2023
Year ended December 31,
2022
2021
126,686 $
107,210 $
99,821 $
84,928 $
2,670 $
1,791 $
25,437 $
24,689 $
178,703
159,972
2,311
47,958
52
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SOSARs
A summary of SOSAR activity was as follows (in thousands, except years and per share data):
Weighted-Average
Exercise Price per
Share
Weighted-Average
Remaining
Contractual Life
(Years)
Shares
Outstanding, January 1, 2023
Granted
Exercised
Forfeited or cancelled
Outstanding, December 31, 2023
Exercisable, December 31, 2023
Vested and expected to vest, December 31, 2023
355 $
77
(117)
(20)
295
115
282
1,053.84
1,640.78
722.87
1,579.77
1,302.60
860.55
1,288.79
Aggregate
Intrinsic Value
142,916
$
4.4
2.8
4.3
290,156
164,574
281,385
The total intrinsic value of SOSARs exercised during the years ended December 31, 2023, 2022, and 2021, was $142,830, $77,124, and $498,399,
respectively. Unrecognized stock-based compensation expense for SOSARs as of December 31, 2023 was $28,196 and is expected to be recognized over a
weighted-average period of 1.5 years. SOSARs expire 7 years after the day they were granted.
The weighted-average assumptions utilized in the Black-Scholes option-pricing model to estimate the fair value of SOSARs granted each year were
as follows:
Risk-free interest rate
Expected life (years)
Expected dividend yield
Volatility
Weighted-average Black-Scholes fair value per share at date of grant
2023
2022
2021
4.1 %
3.6
0.0 %
36.4 %
2.1 %
3.6
0.0 %
36.0 %
0.3 %
3.7
0.0 %
35.2 %
$
530.22
$
456.44
$
403.01
The risk-free interest rate is based on U.S. Treasury rates for instruments with similar terms, and the expected life assumption is based on our
historical data. We have not paid dividends to date and do not plan to pay dividends in the near future. The volatility assumption is based on our historical
data and implied volatility.
Non-Vested Stock Awards (RSUs)
A summary of RSU award activity was as follows (in thousands, except per share data):
Outstanding, January 1, 2023
Granted
Vested
Forfeited or cancelled
Outstanding, December 31, 2023
Vested and expected to vest, December 31, 2023
53
Shares
Weighted-
Average Grant
Date Fair Value
per Share
55 $
37
(23)
(9)
60
52
1,396.78
1,666.18
1,211.81
1,581.08
1,604.25
1,600.97
Table of Contents
The weighted-average grant date fair value per RSU granted during the years ended December 31, 2022 and 2021, was $1,559.73 and $1,492.15,
respectively. Unrecognized stock-based compensation expense for non-vested RSU stock awards we have determined are probable of vesting was $33,680
as of December 31, 2023, and is expected to be recognized over a weighted-average period of 1.6 years. The fair value of shares earned as of the vesting
date during the years ended December 31, 2023, 2022, and 2021, was $39,464, $33,959, and $73,540, respectively.
Non-Vested Performance Stock Awards (PSUs)
A summary of PSU award activity was as follows (in thousands, except per share data):
Outstanding, January 1, 2023
Granted
Vested
Expired
Outstanding, December 31, 2023
Vested and expected to vest, December 31, 2023*
Shares
Weighted-
Average Grant
Date Fair Value
per Share
69 $
24
(33)
(4)
56
114
1,194.80
1,606.91
857.00
1,562.35
1,562.14
1,557.11
*The vested and expected to vest total above represents outstanding base PSUs, adjusted for expected payout amounts in line with current and future
estimated performance levels.
The weighted-average fair value per PSU granted during the years ended December 31, 2022 and 2021, was $1,569.39 and $1,479.55, respectively.
The unrecognized stock-based compensation expense for non-vested PSU stock awards we have determined are probable of vesting was $69,610 as of
December 31, 2023, and is expected to be recognized over a weighted-average period of 1.9 years. The fair value of shares earned as of the vesting date
during the years ended December 31, 2023, 2022, and 2021, was $110,794, $177,293, and $97,496, respectively.
During the year ended December 31, 2023, we awarded performance share awards that are subject to service, market, and performance vesting
conditions. The quantity of shares that vest will range from 0% to 300% of the targeted number of shares based on performance factors related to restaurant
cash flow dollars earned over a three-year period beginning on January 1, 2023, and gross new restaurant openings over the same three-year period. If the
defined minimum targets are not met, then no shares will vest. Further, in no event may more than 100% of the target number of PSUs vest if our 3-year
total shareholder return is below the 25th percentile of the constituent companies comprising the S&P 500 on the day of the grant.
During the year ended December 31, 2022, we awarded performance share awards that are subject to service, market, and performance vesting
conditions. The quantity of shares that vest will range from 0% to 300% of the targeted number of shares based on performance factors related to restaurant
cash flow dollars earned over a three-year period beginning on January 1, 2022. If the defined minimum targets are not met, then no shares will vest.
Further, in no event may more than 100% of the target number of PSUs vest if our 3-year total shareholder return is below the 25th percentile of the
constituent companies comprising the S&P 500 on the day of the grant.
During the year ended December 31, 2021, we awarded performance share awards that are subject to service, market, and performance vesting
conditions. The quantity of shares that vest will range from 0% to 300% of the targeted number of shares based on performance factors related to our
growth in comparable restaurant sales and average restaurant margin over a three-year period beginning on January 1, 2021. If the defined minimum targets
are not met, then no shares will vest. Further, in no event may more than 100% of the target number of PSUs vest if our 3-year total shareholder return is
below the 25th percentile of the constituent companies comprising the S&P 500 on the day of the grant.
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Table of Contents
On December 30, 2020, we modified the 2018 Performance Share Awards due to the impact that the COVID-19 pandemic had on the growth in
comparable restaurant sales and restaurant margin relative to the trajectory of both of these performance factors prior to the pandemic, and also due to the
significant shareholder value created over the performance period of the original award, the Compensation Committee of the Board of Directors modified
the 2018 PSU award. This modification pertained to all seven recipients of this award, and resulted in incremental compensation expense of $71,441, of
which $7,255 was recognized during the year ended December 31, 2022, and $0 remained unamortized as of December 31, 2022. The incremental
compensation cost is calculated by multiplying the number of incremental shares generated though the modification by the stock price on the modification
date. The stock price on the modification date of December 30, 2020 was $1,374.17. To receive all incremental shares generated through the modification,
the employees had to remain employed through December 31, 2022, and the incremental shares vested in four installments over this period. The first two
installments of the modification vested during 2021, which included the vesting of 33 PSUs, and the second two installments of the modification vested
during 2022, which included the vesting of 16 PSUs. One employee terminated employment during July 2022, which resulted in the forfeiture of 1 PSU.
On July 27, 2022, we modified certain equity awards of an employee in connection with a separation agreement to allow short-term extension of
vesting of these certain equity awards that would have otherwise vested within eight months of the separation date. This modification impacted one
individual and resulted in incremental compensation expense of $6,701, which was recognized in July 2022.
Employee Stock Purchase Plan
We also offer an ESPP. Employees become eligible to participate in the program after one year of service with Chipotle and may contribute up to
15% of their earnings, subject to an annual maximum dollar amount. The ESPP provides a quarterly offering period to purchase our common stock at a
price of 92.5% of the lower of the fair market value on the first and last trading days of each offering period. A total of 250 shares were authorized for
issuance within the ESPP, of which 248 were available for issuance as of December 31, 2023. For the year ended December 31, 2023, the number of shares
issued were one and for the years ended December 31, 2022, and 2021, the number of shares issued each year under the ESPP were less than one.
Employee Benefit Plans
Defined Contribution Plan
We maintain the Chipotle Mexican Grill 401(k) Plan (“401(k) Plan”) for eligible U.S.-based employees. The 401(k) Plan allows participants to make
cash contributions from payroll deductions. Employees become eligible to receive matching contributions after one year, and at least 1,000 hours, of
service with Chipotle. We match 100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed each pay
period (with an annual true-up) through cash contributions. For the years ended December 31, 2023, 2022, and 2021, matching contributions totaled
approximately $13,821, $12,923, and $10,527, respectively and are included in general and administrative expenses and labor dependent on employee
classification on the consolidated statements of income and comprehensive income. Certain subsidiaries outside the U.S. also offer other similar benefits
and are immaterial to the consolidated statements of income and comprehensive income.
Deferred Compensation Plan
We also maintain the Chipotle Mexican Grill, Inc. Supplemental Deferred Investment Plan (the “Deferred Plan”) for eligible employees. The
Deferred Plan is a non-qualified plan that allows participants to make tax-deferred contributions that cannot be made under the 401(k) Plan because of
Internal Revenue Service limitations. Participants’ earnings on contributions made to the Deferred Plan fluctuate with the actual earnings and losses of a
variety of available investment choices selected by the participant. Total obligations under the Deferred Plan as of December 31, 2023 and 2022 were
$27,178 and $21,140, respectively, and are included in other liabilities on the consolidated balance sheets and were fully funded as of December 31, 2023.
We match 100% of the first 3% of pay contributed by each eligible employee and 50% on the next 2% of pay contributed once the 401(k) contribution
limits are reached.
The following table summarizes estimated current and long-term material cash requirements for our deferred compensation plan as of December 31,
2023:
Deferred compensation(1)
$
27,178
$
5,339
$
6,523
$
5,997
$
9,319
Total
2024
Payments Due by Fiscal Year
2025-2026
2027-2028
Thereafter
(1) Includes scheduled payments from our deferred compensation plan where payment dates are determinable for employed participants in accordance with
the account’s election, and the assumption that active participants will retire at the age of 65 and begin distributions from their accounts at that time. This
does not include future contributions, investment earnings, or future participants. Timing and amounts of payments may vary significantly.
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9. Leases
The weighted-average remaining lease term and discount rate were as follows:
Weighted-average remaining lease term (years)
Weighted-average discount rate
The components of lease cost were as follows:
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost
Classification
Occupancy, Other operating costs, General and administrative expenses and
Pre-opening costs
$
Other operating costs
Occupancy, Other operating costs, General and administrative expenses and
Pre-opening costs
General and administrative expenses
$
Supplemental disclosures of cash flow information related to leases were as follows:
Cash paid for operating lease liabilities
Operating lease assets obtained in exchange for operating lease liabilities
Derecognition of operating lease assets due to terminations or impairment
Maturities of lease liabilities were as follows as of December 31, 2023:
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Operating lease liabilities (Current and Long-Term)
December 31,
2023
December 31,
2022
13.7
5.10%
13.8
4.77%
Year ended December 31,
2022
2023
2021
436,313
519
$
397,112 $
633
364,314
256
111,896
(4,765)
$
543,963
102,636
(5,444)
494,937 $
92,145
(4,930)
451,785
Year ended December 31,
2022
386,238 $
425,243 $
14,718 $
2023
421,591 $
521,759 $
6,862 $
2021
359,391
577,273
5,765
$
$
$
Operating Leases
413,064
$
450,092
443,845
436,937
422,776
3,576,738
5,743,452
1,691,827
4,051,625
$
As of December 31, 2023, the total lease payments include $2,515,107 related to options to extend lease terms that are reasonably certain of being
exercised and exclude approximately $599,015 of legally binding lease payments for leases signed but not yet commenced and $12,737 of future sublease
income.
We have six sale and leaseback transactions, which do not qualify for sale leaseback accounting due to fixed price renewal options prohibiting sale
accounting. These transactions are accounted for under the financing method. Under the financing method, the assets remain on the consolidated balance
sheets and the proceeds from the transactions are recorded as a financing liability. A portion of lease payments are applied as payments of deemed principal
and imputed interest. The deemed landlord financing liability was $774 and $1,158 as of December 31, 2023, and 2022, respectively, with the current
portion of the liability included in accrued liabilities, and the remaining portion included in other liabilities on the consolidated balance sheets.
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10. Earnings Per Share
The following table sets forth the computations of basic and diluted earnings per share:
Net income
Shares:
Weighted-average number of common shares outstanding (for basic calculation)
Dilutive stock awards
Weighted-average number of common shares outstanding (for diluted calculation)
Basic earnings per share
Diluted earnings per share
$
$
$
2023
1,228,737 $
Year ended December 31,
2022
2021
899,101 $
652,984
27,555
155
27,710
44.59 $
44.34 $
27,851
211
28,062
32.28 $
32.04 $
28,132
379
28,511
23.21
22.90
The following stock awards were excluded from the calculation of diluted earnings per share:
Stock awards subject to performance conditions
Stock awards that were antidilutive
Total stock awards excluded from diluted earnings per share
11. Commitments and Contingencies
Purchase Obligations
2023
Year ended December 31,
2022
2021
50
71
121
54
163
217
66
34
100
We enter into various purchase obligations in the ordinary course of business, generally of a short-term nature. Those that are binding primarily relate
to commitments for food purchases and supplies, capital projects, corporate assets, information technology, marketing initiatives and corporate
sponsorships, and other miscellaneous items.
Litigation
We are involved in various claims and legal actions, such as wage and hour, wrongful termination and other employment-related claims, slip and fall
and other personal injury claims, advertising and consumer claims, privacy claims, and lease, construction and other commercial disputes, that arise in the
ordinary course of business, some of which may be covered by insurance. The outcomes of these actions are not predictable, but we do not believe that the
ultimate resolution of any pending or threatened actions of these types will have a material adverse effect on our financial position, results of operations,
liquidity, or capital resources. However, if there is a significant increase in the number of these claims, or if we incur greater liabilities than we currently
anticipate under one or more claims, it could materially and adversely affect our business, financial condition, results of operations and cash flows.
Accrual for Estimated Liability
In relation to various legal matters, we had an accrued legal liability balance of $7,640 and $15,227 included within accrued liabilities on the
consolidated balance sheets as of as of December 31, 2023 and 2022, respectively.
12. Debt
As of December 31, 2023, we had a $500,000 revolving credit facility with JPMorgan Chase Bank (“JPMorgan”) as administrative agent.
Borrowings on the credit facility bear interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.475%, which is subject to increase
due to changes in our total leverage ratio as defined in the credit agreement. We are also obligated to pay a commitment fee of 0.175% per year for unused
amounts under the credit facility, which also may increase due to changes in our total leverage ratio. Further, we are subject to certain covenants defined in
the credit agreement, which include maintaining a total leverage ratio of less than 3.0x, maintaining a consolidated fixed charge coverage ratio of greater
than 1.5x, and limiting us from incurring additional indebtedness in certain circumstances. We had no outstanding borrowings under the credit facility and
were in compliance with all covenants as of December 31, 2023 and December 31, 2022.
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13. Related Party Transactions
As of December 31, 2023, we owned approximately 10.2% of the common stock outstanding of Tractor. As we are a significant customer of Tractor
and maintain board representation, we are accounting for our investment under the equity method. Accordingly, we have identified Tractor as a related
party. We purchase product from the supplier for sale to customers in our restaurants. During the years ended December 31, 2023, 2022 and 2021,
purchases from the supplier were $43,555, $37,015, and $29,400, respectively.
During the second quarter of 2023, we made an investment in the Series A preferred shares of Vebu Inc. (“Vebu”), a developer of restaurant
automation technology. As we are a significant customer of Vebu and maintain board representation, we have determined that we maintain significant
influence over Vebu. During the years ended December 31, 2023, 2022 and 2021, purchases from Vebu were $991, $840, and $0, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, as appropriate, to allow timely
decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial and Administrative Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial and Administrative Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this annual report.
Changes in Internal Control over Financial Reporting
There were no changes during the fiscal quarter ended December 31, 2023 in our internal control over financial reporting (as defined in Rule 13a-
15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Chipotle Mexican Grill, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our
internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our
receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the framework set forth by
the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (the “2013 framework”). Based on
that assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on the criteria
established in the 2013 framework.
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Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of our internal control
over financial reporting as of December 31, 2023. This report follows.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Chipotle Mexican Grill, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Chipotle Mexican Grill, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, Chipotle Mexican Grill, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income,
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February
7, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Irvine, California
February 7, 2024
/s/ Ernst & Young LLP
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ITEM 9B. OTHER INFORMATION
Adoption or Termination of 10b5-1 Trading Plans
During the fiscal quarter ended December 31, 2023, one Section 16 officer adopted modified or terminated a “Rule 10b5-1 trading arrangement” (as
defined in Item 408 of Regulation S-K of the Exchange Act):
Christopher Brandt, Chief Brand Officer, adopted a new trading plan on December 14, 2023 (with the first trade under the plan to occur on or after March
15, 2024). The trading plan will be effective until January 31, 2025 and provides for the exercise of a SOSAR for 4,453 shares and the sale of the net shares
if the Company’s stock price reaches a specified limit order.
The Rule 10b5-1 trading arrangement complies with our Insider Trading Policy and actual transactions will be disclosed in Section 16 filings made with the
SEC in accordance with applicable securities laws, rules and regulations.
Adoption of an Executive Officer Severance Plan and Letter Agreement with the CEO
On February 6, 2024, the Compensation, People and Culture Committee of the Company’s Board of Directors (the “Committee”) approved the
Chipotle Mexican Grill, Inc. Executive Officer Severance Plan, which was effective immediately (the “Severance Plan”). The Severance Plan provides for
severance benefits to the “executive officers” of the Company, as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the
“Participants”), if the Participant’s employment is terminated either by the Company without “cause” (excluding termination by the Company due to the
Participant’s death or disability) or due to a resignation by the Participant for “good reason” (each as defined in the Severance Plan) that in each case does
not entitle the Participant to benefits under the Company’s Change in Control Severance Plan (a “Qualifying Termination”).
Under the Severance Plan, if a Participant experiences a Qualified Termination, the Participant would be eligible to receive (i) cash severance equal
to the sum of the Participant’s base salary plus target cash bonus under the Company’s Annual Incentive Plan for the year in which the Qualifying
Termination occurs multiplied by two, in the case of the Chief Executive Officer, or one and one-half, in the case of other Participants, which cash
severance would be paid in equal installments over 24 months, for the Chief Executive Officer, and 18 months for other Participants, plus (ii) a pro-rated
portion of the Participant’s annual bonus under the Company’s Annual Incentive Plan for the year in which the Qualifying Termination occurs, based on the
Company’s actual performance, plus (iii) the cash equivalent of the employer portion of the cost of the Company group health plans in which the
Participant was participating immediately prior to the Qualifying Termination for 24 months, with respect to the Chief Executive Officer, or for 18 months,
with respect to other Participants. In addition, each Participant will vest in a pro rata portion of their unvested equity awards under the Company’s equity
compensation plans, with the performance-based equity awards vesting based on the extent of the Company’s achievement of the applicable performance-
based metrics. Any SOSARs held by the Participant would be exercisable for 12 months after the Qualifying Termination or if earlier, until the expiration
date.
A Participant’s eligibility for payments and benefits under the Severance Plan is subject to such Participant’s timely execution and nonrevocation of a
separation and general release agreement, in the form provided by the Company, which contains customary confidentiality, non-solicitation and non-
disparagement restrictions.
On February 6, 2024 the Committee also approved a letter agreement with the Company’s Chief Executive Officer providing that, if he is subject to a
Qualifying Termination under the Severance Plan, he will receive an additional 12 months of pro-rated vesting credit for any equity awards held by him on
the Qualifying Termination Date.
The foregoing description of the Severance Plan and the letter agreement with the Company’s Chief Executive Officer does not purport to be
complete and is qualified in its entirety by the full text of the Severance Plan and the letter agreement, which are filed as Exhibit 10.25 and Exhibit 10.26 to
this annual report on Form 10-K and are incorporated herein by reference.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders, which will be filed no later than 120 days
after December 31, 2023.
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ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders, which will be filed no later than 120 days
after December 31, 2023.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders, which will be filed no later than 120 days
after December 31, 2023.
(a)
Number of Securities
to be Issued Upon
Exercise of Outstanding
Options and Rights(1)
(b)
Weighted-Average
Exercise Price of
Outstanding Options and
Rights(1)
(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))(2)
Equity Compensation Plans Approved by Security Holders
Equity Compensation Plans Not Approved by Security Holders
Total
410,735
$
None
$
410,735
1,302.60
N/A
1,302.60
2,412,349
None
2,412,349
__________________
(1) Includes shares issuable in connection with awards with performance and market conditions, which will be issued based on achievement of performance
criteria associated with the awards, with the number of shares issuable dependent on our level of performance. The weighted-average exercise price
in column (b) includes the weighted-average exercise price of SOSARs only.
(2) Includes 2,164,565 shares remaining available under the Chipotle Mexican Grill, Inc. 2022 Stock Incentive Plan, and 247,784 shares remaining
available under the Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan. In addition to being available for future issuance upon exercise of
SOSARs or stock options that may be granted after December 31, 2023, all of the shares available for grant under the Chipotle Mexican Grill, Inc.
2022 Stock Incentive Plan, may instead be issued in the form of restricted stock, restricted stock units, performance shares or other equity-based
awards. Each share underlying a full value award such as restricted stock, restricted stock units or performance shares counts as two shares used
against the total number of securities authorized under the plan.
Additional information for this item is incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders,
which will be filed no later than 120 days after December 31, 2023.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders, which will be filed no later than 120 days
after December 31, 2023.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference from the definitive proxy statement for our 2024 annual meeting of shareholders, which will be filed no later than 120 days
after December 31, 2023.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1. All Financial statements
PART IV
The following consolidated financial statements filed as part of this report are included in Part II, Item 8. “Financial Statements and Supplementary
Data” of this 10-K:
(cid:0) Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and 2021;
(cid:0) Consolidated Balance Sheets as of December 31, 2023 and 2022;
(cid:0) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021;
(cid:0) Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021;
(cid:0) Notes to Consolidated Financial Statements; and
(cid:0) Reports of Independent Registered Public Accounting Firm
2. Financial statement schedules
No schedules are required because either the required information is not present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated financial statements or the notes thereto.
3. Exhibits
Exhibit NumberExhibit Description
3.1
3.2
Amended and Restated Certificate of Incorporation of
Chipotle Mexican Grill, Inc.
Chipotle Mexican Grill, Inc. Amended and Restated
Bylaws
4.1 Form of Stock Certificate for Shares of Common Stock
4.2 Description of Chipotle Securities
10.1† Change in Control Severance Plan, effective June 1, 2019
10.4†
10.3†
10.2†
Form of Participation and Restrictive Covenant Agreement
for Change in Control Severance Plan
Amended and Restated Chipotle Mexican Grill, Inc. 2011
Stock Incentive Plan
Amended and Restated Registration Rights Agreement
dated January 31, 2006 among Chipotle Mexican Grill, Inc.,
McDonald’s Corporation and certain shareholders
10.5† Form of Director and Officer Indemnification Agreement
Offer Letter, dated February 11, 2018, between Brian R.
Niccol and Chipotle Mexican Grill, Inc.
Executive Chairman Agreement dated November 28, 2017
between Chipotle Mexican Grill, Inc. and Steve Ells
10.8† Form of 2018 Stock Appreciation Rights Agreement
10.6†
10.7†
10.9†
Amendment No. 1 dated March 5, 2020 to the Executive
Chairman Agreement dated November 28, 2017 between
Chipotle Mexican Grill, Inc. and Steve Ells
Description of Exhibit Incorporated Herein by Reference
Form
10-Q
8-K
10-K
10-K
10-Q
10-Q
File No.
Filing Date
001-32731 October 26, 2016
001-32731 June 1, 2023
001-32731 February 10, 2012
001-32731 February 5, 2020
001-32731 July 24, 2019
001-32731 July 24, 2019
8-K
001-32731 May 24, 2018
10-K
001-32731 March 17, 2006
001-32731 March 21, 2007
001-32731 February 15, 2018
001-32731 December 1, 2017
001-32731 April 26, 2018
001-32731 April 29, 2020
8-K
8-K
8-K
10-Q
10-Q
63
Exhibit
Number
Filed Herewith
3.1
3.1
4.1
4.2
10.1
10.2
10.1
10.6
10.1
10.1
10.1
10.14
10.1
Table of Contents
10.10
Revolving Credit Agreement dated April 13, 2021, among
Chipotle Mexican Grill, Inc. and JPMorgan Chase Bank,
N.A., Administrative Agent, and other lenders party to the
Agreement, amended February 1, 2023
10.11† Form of 2020 Stock Appreciation Rights Agreement
10.12† Form of 2021 Performance Share Unit Agreement
10.13† Form of 2022 Restricted Stock Unit Agreement
10.14† Form of 2022 Stock Appreciation Rights Agreement
10.15† Form of 2022 Performance Share Agreement
10.16† Form of 2022 Stock Option Agreement (Canada)
10.17† Director Compensation Program and Stock Ownership
Guidelines (Revised May 25, 2023)
10.18† Chipotle Mexican Grill, Inc. 2022 Stock Incentive Plan
10.19† Form of 2023 Restricted Stock Unit Agreement
10.20† Form of 2023 Stock Appreciation Rights Agreement
10.21† Form of 2023 Performance Share Agreement
10.22† Form of 2023 Stock Option Agreement (Canada)
10.23† Chipotle Mexican Grill, Inc. Employee Stock Purchase Plan
10.24† Supplemental Deferred Investment Plan
10.25† Executive Officer Severance Plan
10.26†
Letter Agreement regarding Severance dated February 6,
2024 between Brian Niccol and Chipotle Mexican Grill, Inc.
21.1 Subsidiaries of Chipotle Mexican Grill, Inc.
23.1
31.1
31.2
32.1
Consent of Ernst & Young LLP (as the independent
registered public accounting firm of Chipotle Mexican Grill,
Inc.)
Certification of Chief Executive Officer of Chipotle
Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial and Administrative Officer
of Chipotle Mexican Grill, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer and Chief Financial
and Administrative Officer of Chipotle Mexican Grill, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1† Executive Compensation Recovery Policy
101.INS
Inline XBRL Instance Document (the instance document
does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL
document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
Inline XBRL Taxonomy Extension Definition Linkbase
Document
Inline XBRL Taxonomy Extension Label Linkbase
Document
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
Cover Page Interactive Data File (formatted as inline XBRL
and contained in Exhibit 101)
-
10-K
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-K
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
X
001-32731 February 10, 2021
001-32731 April 29, 2021
001-32731 April 28, 2022
001-32731 April 28, 2022
001-32731 April 28, 2022
001-32731 April 28, 2022
001-32731 July 28, 2023
001-32731 July 27, 2022
001-32731 April 27, 2023
001-32731 April 27, 2023
001-32731 April 27, 2023
001-32731 April 27, 2023
001-32731 October 27, 2023
001-32731 February 9, 2023
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10.36
10.2
10.1
10.2
10.3
10.4
10.1
10.2
10.1
10.2
10.3
10.4
10.3
10.33
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
(1) Portions of this exhibit have been omitted as permitted by applicable regulations.
†- Management contracts and compensatory plans or arrangements required to be filed as exhibits.
64
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ITEM 16. FORM 10-K SUMMARY
None.
65
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
CHIPOTLE MEXICAN GRILL, INC.
By:
Name:
Title:
/s/ JOHN R. HARTUNG
John R. Hartung
Chief Financial and Administrative Officer
Date: February 7, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
Date
Title
/s/ BRIAN NICCOL
Brian Niccol
/s/ JOHN R. HARTUNG
John R. Hartung
/s/ ALBERT BALDOCCHI
Albert S. Baldocchi
/s/ MATTHEW CAREY
Matthew Carey
/s/ GREGG ENGLES
Gregg Engles
/s/ PATRICIA FILI-KRUSHEL
Patricia Fili-Krushel
/s/ LAURA FUENTES
Laura Fuentes
/s/ MAURICIO GUTIERREZ
Mauricio Gutierrez
/s/ ROBIN HICKENLOOPER
Robin Hickenlooper
/s/ SCOTT MAW
Scott Maw
/s/ MARY WINSTON
Mary Winston
February 7, 2024
(principal executive officer)
Chief Executive Officer and Chairman of the Board of Directors
February 7, 2024
(principal financial and accounting officer)
Chief Financial and Administrative Officer
February 7, 2024
Director
February 7, 2024
Director
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FIRST AMENDMENT
Exhibit 10.10
FIRST AMENDMENT, dated as of February 1, 2023 (this “Amendment”), among Chipotle Mexican Grill, Inc., a
Delaware corporation (the “Borrower”), the Lenders party hereto, and JPMorgan Chase Bank, N.A., as
administrative agent (in such capacity, the “Administrative Agent”). Capitalized terms used herein but not
otherwise defined have the meanings assigned to such terms in the Credit Agreement (as hereinafter defined).
WHEREAS, the Borrower, the several lenders from time to time party thereto prior to giving effect to this
Amendment, the other agents party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, previously
entered into that certain Revolving Credit Agreement, dated as of April 13, 2021 (the “Existing Credit
Agreement”, and as amended by this Amendment and as further amended, restated, amended and restated,
modified or supplemented from time to time, the “Credit Agreement”);
W I T N E S S E T H:
WHEREAS, existing loans, commitments and/or other extensions of credit under the Credit Agreement
denominated in Dollars incur or are permitted to incur interest, fees or other amounts based on the LIBO Rate in
accordance with the terms of the Credit Agreement as in effect prior to the First Amendment Effective Date;
WHEREAS, the Administrative Agent, the Borrower and the Required Lenders have elected to trigger an
Early Opt-In Election with respect to the Benchmark applicable to Borrowings denominated in Dollars and,
pursuant to Section 2.14(b) of the Credit Agreement, the Administrative Agent, the Borrower and the Required
Lenders have determined in accordance with the Credit Agreement that LIBO Rate should be replaced with Term
SOFR for all purposes under the Credit Agreement (the “Term SOFR Early Opt-in Election”);
WHEREAS, the Borrower has requested, and the Lenders party hereto who constitute the Required
Lenders have agreed to make certain amendments to the Existing Credit Agreement, among other things, to
provide the Term SOFR Early Opt-in Election, on and subject to the terms and conditions set forth herein; and
WHEREAS, each of the undersigned hereby consents to the terms of this Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt
and sufficiency of which is hereby acknowledged), the parties hereto hereby agree as follows:
SECTION 1.Term SOFR Early Opt-In Election
The Borrower, the Administrative Agent and the Required Lenders hereby agree that an Early Opt-in
Election has occurred under the Credit Agreement effective as of the First Amendment Effective Date and the
applicable proposed amendment incorporating the Benchmark Replacement was posted to the Lenders on and as
of January 25, 2023.
SECTION 2.Certain Amendments to the Existing Credit Agreement To give effect to the Term SOFR
Early Opt-In Election, effective as of the First Amendment Effective Date:
(a) the Credit Agreement shall be amended, without additional consent or approval of any other Lender, to
delete the stricken text (indicated textually in the same manner as the following example: stricken text)
and to add the double-underlined text (indicated textually in the same manner as the following
example: double-underlined text) as set forth in the pages of the Credit Agreement attached as
Exhibit A hereto.
(b) Exhibit C ([Form of] Borrowing Request) to the Credit Agreement shall be amended and restated by
the [Form of] Borrowing Request attached as Exhibit B hereto.(c)Exhibit D ([Form of] Interest
Election Request) to the Credit Agreement shall be amended and restated by the [Form of] Interest
Election Request attached as Exhibit C hereto.
(c) Exhibit D ([Form of] Interest Election Request) to the Credit Agreement shall be amended and restated
by the [Form of] Interest Election Request attached as Exhibit C hereto.
SECTION 3.Representations and Warranties To induce the other parties hereto to enter into this
Amendment, the Borrower hereby represents and warrants to each other party hereto that, as of the First
Amendment Effective Date:
(a)
(b)
no Default or Event of Default exists after giving effect to this Amendment; and
the representations and warranties contained in Article III of the Credit Agreement are correct in all
material respects (or, to the extent subject to materiality or Material Adverse Effect qualifiers, in all respects) on and as of the
date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such
specific date), before and after giving effect to this Amendment, as though made on and as of such date.
SECTION 4.Conditions of Effectiveness
This Amendment shall become effective on and as of the first date (such date, the “First Amendment
Effective Date”) when each of the conditions set forth in this Section 4 shall have been satisfied:
(a) the Administrative Agent shall have received this Amendment, duly executed by the Borrower, the
Administrative Agent and Lenders constituting Required Lenders.
(b) The Administrative Agent shall have received reimbursement of its reasonable out-of-pocket expenses
in connection with the negotiation, preparation and execution of this Amendment and the transactions
contemplated hereby in accordance with Section 9.03 of the Credit Agreement.
SECTION 5 No Other Amendments; References to the Credit Agreement. Other than as specifically
provided herein or in the Credit Agreement, this Amendment shall not operate as a waiver or amendment of any
right, power or privilege of the Lenders under (and as defined in) the Existing Credit Agreement or any other Loan
Document (as such term is defined in the Existing Credit Agreement) or of any other term or condition of the
Existing Credit Agreement or any other Loan Document (as such term is defined in the Existing Credit
Agreement) nor shall the entering into of this Amendment preclude the Lenders from refusing to enter into any
further waivers or amendments with respect to the Existing Credit Agreement. Nothing in this Amendment shall
be deemed to prejudice any right or remedy that the Administrative Agent or any Lender may now have or may
have in the future under or in connection with the Credit Agreement or any other Loan Document, or any other
instrument or agreement referred to therein. All references to the Existing Credit Agreement in any document,
instrument, agreement, or writing that is a Loan Document shall from and after the First Amendment Effective
Date be deemed to refer to the Credit Agreement, and, as used in the Credit Agreement, the terms “Agreement,”
“herein,” “hereafter,” “hereunder,” “hereto” and words of similar import shall mean, from and after the First
Amendment Effective Date, the Credit Agreement. This Amendment shall be a Loan Document for all purposes
under the Credit Agreement and the other Loan Documents.
SECTION 6 Headings. The various headings of this Amendment are inserted for convenience only and
shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
SECTION 7.
Execution in Counterparts. This Amendment may be executed by one or more of the parties
hereto on any number of separate counterparts and all of said counterparts together shall be deemed to constitute
one and the same instrument. A counterpart hereof or a signature page hereto delivered by facsimile or electronic
transmission (such as a .pdf file) shall be effective as delivery of a manually signed, original counterpart hereof.
The parties hereby agree that the Electronic Signatures (as such term is defined in the Existing Credit Agreement)
of the parties will have the same force and effect as a manual signature.
SECTION 8.
specified or otherwise required by the context, to such section of this Amendment.
Cross-References. References in this Amendment to any section are, unless otherwise
SECTION 9 Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 10
Reaffirmation
(a)
The Borrower hereby (i) expressly acknowledges the terms of the Credit Agreement (as amended
by this Amendment), (ii) ratifies and affirms its obligations under the Loan Documents executed by the
undersigned, (iii) acknowledges, renews and extends its continued liability under all such Loan Documents and
agrees such Loan Documents remain in full force and effect and (iv) confirms this Amendment does not represent
a novation of any Loan Document.
(b)
The Borrower hereby reaffirms, as of the First Amendment Effective Date, the covenants and
agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and
agreements as in effect immediately after giving effect to this Amendment and the transactions contemplated
thereby.
(c)
The Borrower hereby acknowledges and agrees that the acceptance by the Administrative Agent
and each applicable Lender of this document shall not be construed in any manner to establish any course of
dealing on such Person’s part, including the providing of any notice or the requesting of any acknowledgment not
otherwise expressly provided for in any Loan Document with respect to any future amendment, waiver,
supplement or other modification to any Loan Document or any arrangement contemplated by any Loan
Document.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their respective authorized officers, as of the date first written above.
CHIPOTLE MEXICAN GRILL,
INC.,
as the Borrower
By:
/s/ Jack Hartung.
Name: Jack Hartung
Title: Chief Financial and
Administrative Officer
JPMORGAN CHASE BANK,
N.A.,
as Administrative Agent and a
Lender
By:
/s/ Gregory Martin
Name: Gregory Martin
Title: Executive Director
Trust Bank
as a Lender
By:
/s/ Alysa Trakas
Name: Alysa Trakas
FIFTH THIRD BANK,
NATIONAL ASSOCIATION as a
Lender
By:
/s/ Dan Kurtz
Name: Jonathan
Title: Authorized
Signatory
BANK OF AMERICA, N.A.,
as a Lender
/s/ Christopher M.
Name: Christopher M.
By:
Holtz
Holtz
Title: Senior Vice
President
MORGAN STANLEY BANK,
N.A.,
as a Lender
By:
/s/ Jack Kuhns
Name: Jack Kuhns
Title: Authorized
Signatory
MUFG BANK, Ltd.,
as a Lender
By:
/s/ Jack Lonker
Name: Jack Lonker
Title: Director
ROYAL BANK OF CANADA,
as a Lender
By:
/s/ Jason Clay
Name: Jason Clay
Title: Director, Corporate
Client Group-Finance
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as a Lender
By:
/s/ Denise Crouch
Name: Denise Crouch
Title: Vice President
.
[Signature Page to First Amendment]
As amended pursuant to the First Amendment, dated as of February 1, 2023
Exhibit A
REVOLVING CREDIT AGREEMENT
dated as of
April 13, 2021
among
Chipotle Mexican Grill, Inc.
as the Borrower
The Lenders Party Hereto
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
___________________________
JPMORGAN CHASE BANK, N.A.,
MORGAN STANLEY MUFG LOAN PARTNERS, LLC, TRUIST BANK, FIFTH THIRD BANK,
NATIONAL ASSOCIATION and CITIBANK, N.A.,
as Joint Bookrunners and Joint Lead Arrangers,
and
MORGAN STANLEY MUFG LOAN PARTNERS, LLC,
TRUIST BANK, FIFTH THIRD BANK, NATIONAL ASSOCIATION and CITIBANK, N.A.,
as Co-Syndication Agents
TABLE OF CONTENTS
Ar cle I
SECTION 1.01.
SECTION 1.02.
SECTION 1.03.
SECTION 1.04.
SECTION 1.05.
SECTION 1.06.
SECTION 1.07.
Ar cle II
SECTION 2.01.
SECTION 2.02.
SECTION 2.03.
SECTION 2.04.
SECTION 2.05.
SECTION 2.06.
SECTION 2.07.
SECTION 2.08.
SECTION 2.09.
SECTION 2.10.
SECTION 2.11.
SECTION 2.12.
SECTION 2.13.
SECTION 2.14.
SECTION 2.15.
SECTION 2.16.
SECTION 2.17.
SECTION 2.18.
SECTION 2.19.
SECTION 2.20.
SECTION 2.21.
SECTION 2.22.
Ar cle III
SECTION 3.01.
SECTION 3.02.
SECTION 3.03.
SECTION 3.04.
SECTION 3.05.
SECTION 3.06.
SECTION 3.07.
SECTION 3.08.
Definitions
Defined Terms
Classification of Loans and Borrowings
Terms Generally
Accounting Terms; GAAP; Pro Forma Calculations
Interest Rates; LIBORBenchmark Notification
Letter of Credit Amounts
Divisions
THE CREDITS
Commitments
Loans and Borrowings
Requests for Borrowings
[Reserved]
[Reserved]
Letters of Credit
Funding of Borrowings
Interest Elections
Termination and Reduction of Commitments
Repayment of Loans; Evidence of Debt
Prepayment of Loans
Fees
Interest
Alternate Rate of Interest
Increased Costs
Break Funding Payments
Withholding of Taxes; Gross-Up
Payments Generally; Pro Rata Treatment; Sharing of Setoffs
Mitigation Obligations; Replacement of Lenders
Defaulting Lenders
Exchange Rates
Increase in Commitment
REPRESENTATIONS AND WARRANTIES
Organization; Powers
Authorization; Enforceability
Governmental Approvals; No Conflicts
Financial Condition; No Material Adverse Effect
Properties
Litigation and Environmental Matters
Compliance with Laws and Agreements
Investment Company Status
Page
1
1
30
30
32
33
38
40
41
46
51
52
54
54
56
56
57
57
SECTION 3.09.
SECTION 3.10.
SECTION 3.11.
SECTION 3.12.
SECTION 3.13.
SECTION 3.14.
SECTION 3.15.
SECTION 3.16.
SECTION 3.17.
SECTION 3.18.
Ar cle IV
SECTION 4.01.
SECTION 4.02.
Ar cle V
SECTION 5.01.
SECTION 5.02.
SECTION 5.03.
SECTION 5.04.
SECTION 5.05.
SECTION 5.06.
SECTION 5.07.
SECTION 5.08.
SECTION 5.09.
SECTION 5.10.
SECTION 5.11.
Ar cle VI
SECTION 6.01.
SECTION 6.02.
SECTION 6.03.
SECTION 6.04.
SECTION 6.05.
SECTION 6.06.
SECTION 6.07.
SECTION 6.08.
SECTION 6.09.
SECTION 6.10.
Ar cle VII
SECTION 7.01.
SECTION 7.02.
SECTION 7.03.
Ar cle VIII
SECTION 8.01.
SECTION 8.02.
SECTION 8.03.
SECTION 8.04.
Taxes
ERISA
Disclosure
Anti-Corruption Laws and Sanctions
Plan Assets; Prohibited Transactions
[Reserved
Labor Matters
Subsidiaries
Insurance
Use of Proceeds and Letters of Credit
CONDITIONS
Effective Date
Each Credit Event
AFFIRMATIVE COVENANTS
Financial Statements; Ratings Change and Other Information
Notices of Material Events
Existence; Conduct of Business
Payment of Taxes
[Reserved]
Books and Records; Inspection Rights
Compliance with Laws
[Reserved]
[Reserved]
Additional Guarantors
Line of Business
NEGATIVE COVENANTS
Subsidiary Indebtedness
Liens
Fundamental Changes
[Reserved].
Restricted Payments
Transactions with Affiliates
Total Leverage Ratio
Consolidated Fixed Charge Coverage Ratio
[Reserved]
Sanctions
EVENTS OF DEFAULT
Events of Default
Remedies Upon an Event of Default
Application of Payments
THE ADMINISTRATIVE AGENT
Authorization and Action
Administrative Agent’s Reliance, Indemnification, Etc.
Posting of Communications
The Administrative Agent Individually
57
57
58
58
58
58
59
59
60
61
61
62
63
63
63
63
64
64
64
64
64
64
65
66
67
67
67
67
67
69
70
71
71
73
74
75
SECTION 8.05.
SECTION 8.06.
SECTION 8.07.
SECTION 8.08.
SECTION 8.09.
Ar cle IX
SECTION 9.01.
SECTION 9.02.
SECTION 9.03.
SECTION 9.04.
SECTION 9.05.
SECTION 9.06.
SECTION 9.07.
SECTION 9.08.
SECTION 9.09.
SECTION 9.10.
SECTION 9.11.
SECTION 9.12.
SECTION 9.13.
SECTION 9.14.
SECTION 9.15.
SECTION 9.16.
SECTION 9.17.
SECTION 9.18.
SECTION 9.19.
SCHEDULES:
Schedule
1.01A
Schedule
2.01A
Schedule
2.01C
Schedule 3.06
Schedule 3.16
Schedule 6.01
Schedule 6.02
EXHIBITS:
Exhibit A
Exhibit B
Successor Administrative Agent
Acknowledgements of Lenders and Issuing Banks
Guarantee Matters
[Reserved]
Certain ERISA Matters
MISCELLANEOUS
Notices
Waivers; Amendments
Expenses; Limitation of Liability; Indemnity; etc.
Successors and Assigns
Survival
Counterparts; Integration; Effectiveness; Electronic Execution
Severability
Right of Setoff
Governing Law; Jurisdiction; Consent to Service of Process
WAIVER OF JURY TRIAL
Headings
Confidentiality
Material Non-Public Information
Interest Rate Limitation
No Fiduciary Duty, etc.
USA PATRIOT Act
Acknowledgement and Consent to Bail-In of Affected Financial Institutions
Acknowledgement Regarding Any Supported QFCs
Releases of Guarantees
76
78
78
79
79
80
87
87
88
88
89
90
90
91
91
91
92
92
93
93
Material Subsidiaries
Commitments
Letter of Credit Commitments
Disclosed Matters
Subsidiaries
Existing Indebtedness
Existing Liens
Form of Guarantee Agreement
Form of Assignment and Assumption
Exhibit C
Exhibit D
Exhibit E
Exhibit F-1
Exhibit F-2
Exhibit F-3
Exhibit F-4
Exhibit G
Form of Borrowing Request
Form of Interest Election Request
[Reserved]
U.S. Tax Certificate (For Non-U.S. Lenders that are not Partnerships for U.S. Federal Income
Tax Purposes)
U.S. Tax Certificate (For Non-U.S. Participants that are not Partnerships for U.S. Federal
Income Tax Purposes)
U.S. Tax Certificate (For Non-U.S. Participants that are Partnerships for U.S. Federal Income
Tax Purposes)
U.S. Tax Certificate (For Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax
Purposes)
Form of Promissory Note
REVOLVING CREDIT AGREEMENT, dated as of April 13, 2021 (as amended, restated, amended
and restated, supplemented or otherwise modified from time to time, this “Agreement”), among Chipotle Mexican
Grill, Inc., a Delaware corporation (the “Borrower”), the Lenders party hereto, and JPMorgan Chase Bank, N.A.,
as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01.Defined Terms. As used in this Agreement, the following terms have the meanings
specified below:
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, bear interest at a rate determined by reference to the Alternate Base Rate.
“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (a) the Daily Simple
SOFR, plus (b) 0.10%; provided that if the Adjusted Daily Simple SOFR Rate as so determined would be less than
the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted Term SOFR Rate” means, for any Term SOFR Borrowing for any Interest Period, an
interest rate per annum equal to (a) the Term SOFR Rate for such Interest Period, plus (b) 0.10%; provided that if
the Adjusted Term SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be
equal to the Floor for the purposes of this Agreement.
“Administrative Agent” means JPMorgan Chase Bank, N.A. in its capacity as administrative agent
for the Lenders hereunder, and any successor appointed pursuant to Section 8.05.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the
Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial
Institution.
“Affiliate” means, 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.
“Agent Indemnitee” has the meaning assigned to it in Section 9.03(c).
“Agreement” has the meaning assigned to it in the preamble hereto.
“Alternate Base Rate” means,
for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b)
the NYFRB Rate in effect on such day plus ½ of 1% and (c) the Adjusted Term SOFR Rate for a one month
Interest Period as published two U.S. Government Securities Business Days prior to such day (or if such day is not
a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business
Day) plus 1%; provided that for the purpose of this definition, the Adjusted Term SOFR Rate for any day shall be
based on the Term SOFR Reference Rate at approximately 5:00 a.m. Chicago time on such day (or any amended
publication time for the Term SOFR Reference Rate, as specified by the CME Term SOFR Administrator in the
Term SOFR Reference Rate methodology). Any change in the Alternate Base Rate due to a change in the Prime
Rate, the NYFRB Rate or the Adjusted Term SOFR Rate shall be effective from and including the effective date of
such change in the Prime Rate, the NYFRB Rate or the Adjusted Term SOFR Rate, respectively. If the Alternate
Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 (for the avoidance of doubt, only
until the Benchmark Replacement has been determined pursuant to Section 2.14(b)),
then the Alternate Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without
reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the
foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“Alternative Currency” means any currencies other than Dollars determined after the Effective
Date by mutual agreement of the Borrower, Lenders, Administrative Agent and applicable Issuing Bank; provided,
that each such currency is a lawful currency that is readily available, freely transferable and not restricted, able to
be converted into Dollars and available in the London interbank deposit market.
“Ancillary Document” has the meaning assigned to it in Section 9.06(b).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the
Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Anti-Money Laundering Laws” means Laws in any jurisdiction in which any Loan Party is
located or doing business that relates to money laundering or terrorism financing, any predicate crime to money
laundering, or any financial record keeping and reporting requirements related thereto.
“Applicable Parties” has the meaning assigned to it in Section 8.03(c).
“Applicable Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment; provided, that in the case of Section 2.20 when a
Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the total Commitments
(disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the
Commitments most recently in effect, giving effect to any assignments and to any Lender’s status as a Defaulting
Lender at the time of determination.
“Applicable Rate” means, for any day, with respect to any ABR Loan or Term Benchmark
Revolving Loan, as the case may be, the applicable rate per annum set forth below under the caption “Term
Benchmark Spread” or “ABR Spread”, as the case may be, based upon the Total Leverage Ratio as set forth in the
most recent Compliance Certificate received by the Administrative Agent pursuant to Section 5.01(c):
Pricing Level
Total Leverage Ratio
Term Benchmark
Spread
I
II
Less than 1.00:1.00
Less than 1.50:1.00 but
greater than or equal to
1.00:1.00
III Less than 2.00:1.00 but
greater than or equal to
1.50:1.00
1.375%
1.625%
1.875%
ABR
Spread
0.375%
0.625%
0.875%
IV Greater than or equal to
2.125%
1.125%
2.00:1.00
For purposes of the foregoing, any increase or decrease in the Applicable Rate resulting from a
change in the Total Leverage Ratio shall become effective as of the third Business Day following the date a
Compliance Certificate is delivered to the Administrative Agent pursuant to Section 5.01(c). If at any time the
Borrower fails to deliver the quarterly or annual financial statements or Compliance Certificate required under
Section 5.01 on or before the date such financial statements or Compliance Certificate are due, Pricing Level IV
shall be deemed applicable for the period commencing three (3) Business Days after such required date of delivery
and ending on the date which is three (3) Business Days after such financial statements or Compliance Certificate
are actually delivered, after which the Pricing Level shall be determined in accordance with the table above, as
applicable.
Notwithstanding the foregoing, Pricing Level I shall be deemed to be applicable until the
Administrative Agent’s receipt of the applicable financial statements and Compliance Certificate for the first fiscal
quarter ending after the Effective Date (unless such financial statements demonstrate that Pricing Level II, III or
IV should have been applicable during such period, in which case such other Pricing Level shall be deemed to be
applicable during such period) and adjustments to the Pricing Level then in effect shall thereafter be effected in
accordance with the preceding paragraph.
“Approved Electronic Platform” has the meaning assigned to it in Section 8.03(a).
“Approved Fund” has the meaning assigned to it in Section 9.04(b).
“Arrangers” means JPMorgan Chase Bank, N.A., Morgan Stanley MUFG Loan Partners, LLC,
acting through Morgan Stanley Senior Funding, Inc. and MUFG Bank, Ltd, Truist Bank, Fifth Third Bank,
National Association and Citibank, N.A. in their capacities as joint lead arrangers hereunder.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and
an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the
Administrative Agent, substantially in the form attached hereto as Exhibit B or any other form (including
electronic records generated by the use of an electronic platform) approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the
earlier of the Maturity Date and the date of termination of the Commitments in full.
“Available Tenor” means, as of any date of determination and with respect to the then-current
Benchmark, as applicable, any tenor for such Benchmark (or component thereof) or payment period for interest
calculated with reference to such Benchmark (or component thereof), as applicable, that is or may be used for
determining the length of an Interest Period for any term rate or otherwise, for determining the frequency of
making payments of interest calculated pursuant to this Agreement as of such date and not including, for the
avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period”
pursuant to clause (e) of Section 2.14.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable
Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article
55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the
implementing law, regulation rule or requirement for such EEA Member Country from time to time which is
described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the
United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or
rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or
other financial institutions or their affiliates (other than through liquidation, administration or other insolvency
proceedings).
“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a
voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or
liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has
taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such
proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof; provided,
that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any
ownership interest, in such Person by a Governmental Authority, unless such ownership interest results in or
provides such Person with immunity from the jurisdiction of courts within the United States or from the
enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental
Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Benchmark” means, initially, the Term SOFR Rate; provided that if a Benchmark Transition
Event, and the related Benchmark Replacement Date have occurred with respect to the Term SOFR Rate or the
then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such
Benchmark Replacement has replaced such prior benchmark rate pursuant to clause (b) of Section 2.14.
“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the
order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(1)
the Adjusted Daily Simple SOFR;
(2)
the sum of: (a) the alternate benchmark rate that has been selected by the
Administrative Agent and the Borrower 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
benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any
evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-
current Benchmark for dollar-denominated syndicated credit facilities at such time in the United States and (b) the
related Benchmark Replacement Adjustment;
If the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than
the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the
other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current
Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor
for any setting of such Unadjusted 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 Administrative Agent and the Borrower
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 such
Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the
applicable Benchmark Replacement Date and/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 such Benchmark with the applicable Unadjusted Benchmark Replacement for dollar-denominated
syndicated credit facilities at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement and/or any Term Benchmark Loan, any technical, administrative or operational changes (including
changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S.
Government Securities Business Day,” the definition of “Interest Period,” timing and frequency of determining
rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation
notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or
operational matters) that the Administrative Agent decides in its reasonable discretion may be appropriate to
reflect the adoption and implementation of such Benchmark and to permit the administration thereof by the
Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent
decides that adoption of any portion of such market practice is not administratively feasible or if the
Administrative Agent determines that no market practice for the administration of such Benchmark exists, in such
other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the
administration of this Agreement and the other Loan Documents).
the following events with respect to such then-current Benchmark:
“Benchmark Replacement Date” means, with respect to any Benchmark, the earliest to occur of
(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 such Benchmark (or the published component used in the calculation thereof)
permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component
thereof); or
(2)
in the case of clause (3) of the definition of “Benchmark Transition Event,” the first
date on which such Benchmark (or the published component used in the calculation thereof) has been determined
and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof)
to be no longer representative; provided, that such non-representativeness will be determined by reference to the
most recent statement or publication referenced in such clause (3) and even if any Available Tenor of such
Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, (i) 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 and (ii) the
“Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to
any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-
current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to any Benchmark, the occurrence of one or
more of the following events with respect to such then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of such
Benchmark (or the published component used in the calculation thereof) announcing that such administrator has
ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently
or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that
will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation thereof), the Federal
Reserve Board, the NYFRB, the CME Term SOFR Administrator, an insolvency official with jurisdiction over the
administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the
administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or
resolution authority over the administrator for such Benchmark (or such component), in each case, which states
that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available
Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of
such statement or publication, there is no successor administrator that will continue to provide any Available Tenor
of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all
Available Tenors of such Benchmark (or such component thereof) are no longer, or as of a specified future date
will no longer be, representative.
respect to any Benchmark if a public statement or publication of information set forth above has occurred
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with
with respect to each then-current Available Tenor of such Benchmark (or the published component used in the
calculation thereof).
“Benchmark Unavailability Period” means, with respect to any Benchmark, the period (if any) (x)
beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has
occurred if, at such time, no Benchmark Replacement has replaced such then-current Benchmark for all purposes
hereunder and under any Loan Document in accordance with Section 2.14 and (y) ending at the time that a
Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any
Loan Document in accordance with Section 2.14.
“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.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of
ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section
4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or
otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit
plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted
in accordance with, 12 U.S.C. 1841(k)) of such party.
“Borrower” has the meaning assigned to it in the introductory paragraph to this Agreement.
“Borrowing” means an advance of Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Term Benchmark Loans, as to which a single Interest Period is in
effect.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03, which shall be substantially in the form attached hereto as Exhibit C (as amended and restated by the
First Amendment in the form attached thereto as Exhibit B) or any other form approved by the Administrative
Agent.
“Business Day” means, any day (other than a Saturday or a Sunday) on which banks are open for
business in New York City; provided that, in addition to the foregoing, a Business Day shall be (a) in relation to
Loans referencing the Adjusted Daily Simple SOFR Rate and any interest rate settings, fundings, disbursements,
settlements or payments of such Loans referencing the Adjusted Daily Simple SOFR Rate, or any other dealings
of such Loans referencing the Adjusted Daily Simple SOFR Rate and (b) in relation to Loans referencing the
Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any
such Loans referencing the Adjusted Term SOFR Rate or any other dealings of such Loans referencing the
Adjusted Term SOFR Rate, any such day that is only a U.S. Government Securities Business Day.
“Capital Lease Obligations” of any Person means, subject to the last sentence of this definition and
Section 1.04, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases or financing leases on a balance sheet of such Person under
GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with
GAAP. The term “Capitalized Lease Obligations” shall not include any obligations with respect to any lease,
concession or license of property that would have been considered an operating lease under GAAP prior to the
adoption of Accounting Standards Codification 842 or any successor or similar pronouncement with respect to
lease accounting (“ASC 842”).
“CFC” shall mean a direct or indirect Subsidiary of the Borrower that is treated as a “controlled
foreign corporation” within the meaning of Section 957 of the Code for U.S. federal income tax purposes.
“CFC Holding Company” shall mean a direct or indirect Subsidiary of the Borrower (i)
substantially all of the assets of which consist of Equity Interests and/or Indebtedness of one or more Foreign
Subsidiaries that are CFCs or (ii) that is treated as a disregarded entity for U.S. federal income tax purposes and
holds Equity Interests of one or more Foreign Subsidiaries.
“Change in Control” means (a) any “person” or “group” (within the meaning of the Securities
Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee,
agent or other fiduciary or administrator of any such plan) directly or indirectly becoming the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934) of Equity Interests representing
more than 35.0% of the aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of the Borrower or (b) during any period of 12 consecutive months, occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Borrower by Persons who were not (i) directors of the
Borrower on the first day of such period, (ii) elected, appointed or nominated to the board of directors of the
Borrower and was approved by individuals referred to in clause (i) above constituting at the time of such election
or nomination at least a majority of the board of directors of the Borrower or (iii) elected, appointed or nominated
to the board of directors of the Borrower and approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of the board of directors of the Borrower.
“Change in Law” means the occurrence after the date of this Agreement of (a) the adoption of or
taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any Governmental Authority or (c)
compliance by any Lender or Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such
Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or issued after the date of this
Agreement; provided, that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in
connection therewith or in the implementation thereof and (y) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any
successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel
III, shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted, issued or
implemented.
“Charges” has the meaning assigned to it in Section 9.14.
Loans comprising such Borrowing are Revolving Loans.
“Class” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as
administrator of the forward-looking term Secured Overnight Financing Rate (SOFR) (or a successor
administrator).
“Code” means the Internal Revenue Code of 1986, as amended.
“Collateral Account” has the meaning assigned to it in Section 2.06(j).
“Commitment” means, with respect to each Lender, the amount set forth on Schedule 2.01A
opposite such Lender’s name, or in the Assignment and Assumption, pursuant to which such Lender shall have
assumed its Commitment, as applicable, and giving effect to (a) any reduction in such amount from time to time
pursuant to Section 2.09 and (b) any reduction or increase in such amount from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04; provided, that at no time shall the Revolving Credit
Exposure of any Lender exceed its Commitment. The initial aggregate amount of the Lenders’ Commitments is
$500,000,000.
“Commitment Fee Rate” means, for any day, the applicable rate per annum set forth below under
the caption “Commitment Fee” based upon the Total Leverage Ratio as set forth in the most recent Compliance
Certificate received by the Administrative Agent pursuant to Section 5.01(c):
Commitment
Fee Level
Total Leverage Ratio
Commitment Fee
I Less than 1.00:1.00
II Less than 1.50:1.00 but
greater than or equal to
1.00:1.00
III Less than 2.00:1.00 but
greater than or equal to
1.50:1.00
IV Greater than or equal to
2.00:1.00
0.175%
0.225%
0.275%
0.325%
For purposes of the foregoing, any increase or decrease in the Commitment Fee Rate resulting from
a change in the Total Leverage Ratio shall become effective as of the third Business Day following the date a
Compliance Certificate is delivered to the Administrative Agent pursuant to Section 5.01(c). If at any time the
Borrower fails to deliver the quarterly or annual financial statements or Compliance Certificate required under
Section 5.01 on or before the date such financial statements or Compliance Certificate are due, Commitment Fee
Level IV shall be deemed applicable for the period commencing three (3) Business Days after such required date
of delivery and ending on the date which is three (3) Business Days after such financial statements or Compliance
Certificate are actually delivered, after which the Commitment Fee Level shall be determined in accordance with
the table above, as applicable.
Notwithstanding the foregoing, Commitment Fee Level I shall be deemed to be applicable until the
Administrative Agent’s receipt of the applicable financial statements and Compliance Certificate for the first fiscal
quarter ending after the Effective Date (unless such financial statements demonstrate that Commitment Fee Level
II, III or IV should have been applicable during such period, in which case such other Commitment Fee Level
shall be deemed to be applicable during such period) and adjustments to the Commitment Fee Level then in effect
shall thereafter be effected in accordance with the preceding paragraph.
“Commitment Increase” has the meaning assigned to it in Section 2.22(a).
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
“Communications” has the meaning assigned to it in Section 8.03(c).
“Compliance Certificate” means a certificate delivered pursuant to Section 5.01(c).
net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by
“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus,
without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for
such period, the sum of (a) income tax expense, (b) Consolidated Interest Charges, (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization
costs, (e) equity-based compensation expense (to the extent paid in equity and not in cash), (f) any extraordinary,
unusual or non-recurring non-cash expenses or losses, (g) to the extent not already included in the Consolidated
Net Income, (x) any expenses and charges that are reimbursable by a third party pursuant to indemnification or
other similar provisions and actually reimbursed and (y) expenses and reimbursements with respect to liability or
casualty events or business interruption, to the extent covered by insurance and actually reimbursed, or, in each
case, if not actually reimbursed, so long as the Borrower has a good faith expectation that such amounts will be
received within the next four fiscal quarters and only to the extent that such amount is in fact reimbursed within
the next four fiscal quarters of the date of the determination by the Borrower that there exists such evidence (with
a deduction for any amount so added back to the extent not so reimbursed within the next four fiscal quarters),
(h) fees, charges, reserves, costs or expenses related to litigation, restructuring, severance activities, discontinued
operations, casualty events and financing, acquisition or divestiture activities, and (i) other non-cash charges and
expenses of the Borrower and its Subsidiaries reducing such Consolidated Net Income and minus, (a) to the extent
included in the statement of such Consolidated Net Income for such period, the sum of (i) interest income, (ii) any
extraordinary, unusual or non-recurring income or gains, (iii) income tax credits (to the extent not netted from
income tax expense) and (iv) any other non-cash gains and (b) any cash payments made during such period in
respect of items described in clause (e) above subsequent to the fiscal quarter in which the relevant non-cash
expenses or losses were reflected as a charge in the statement of Consolidated Net Income, all as determined on a
consolidated basis.
“Consolidated Fixed Charge Coverage Ratio” means, as of the last day of each fiscal quarter of
the Borrower, for the period of the four immediately preceding fiscal quarters ending on such date, for the
Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) the sum of (i) Consolidated EBITDA during
such period plus (ii) Operating Lease and Rental Expense during such period to (b) the sum of (x) Consolidated
Interest Charges during such period plus, without duplication, (y) Operating Lease and Rental Expense during
such period.
“Consolidated Interest Charges” means, for any period, for the Borrower and its Subsidiaries on a
consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related
expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest)
or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in
accordance with GAAP, and (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to
such period under capital leases that is treated as interest in accordance with GAAP.
“Consolidated Net Income” means, for any period, the consolidated net income (or loss) of the
Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided, that there
shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the
Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit)
of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an
ownership interest, except to the extent that any such income is actually received by the Borrower or such
Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of
the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or
requirement of law applicable to such Subsidiary.
Borrower and its Subsidiaries, determined in accordance with GAAP as of such date.
“Consolidated Total Assets” means, as of the date of determination, the consolidated assets of the
“Consolidated Total Debt” means, as of any date of determination, the aggregate principal amount
of all Indebtedness for borrowed money of the Borrower and its Subsidiaries outstanding at such time, in an
amount that would be reflected on the consolidated balance sheet of the Borrower and its Subsidiaries prepared at
such date, determined on a consolidated basis in accordance with GAAP; provided, that Consolidated Total
Debt shall not include any letters of credit, including Letters of Credit, except with respect to any unreimbursed
disbursements thereunder.
“Contractual Requirement” has the meaning assigned to it in Section 3.03.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction
of the management or policies of a Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor
(including overnight) or an interest payment period having approximately the same length (disregarding business
day adjustment) as such Available Tenor.
“Covered Entity” means any of the following:
C.F.R. § 252.82(b);
(a)
C.F.R. § 47.3(b); or
(b)
(c)
C.F.R. § 382.2(b).
a “covered entity” as that term is defined in, and interpreted in accordance with, 12
a “covered bank” as that term is defined in, and interpreted in accordance with, 12
a “covered FSI” as that term is defined in, and interpreted in accordance with, 12
“Covered Party” has the meaning assigned to it in Section 9.18.
“Credit Party” means the Administrative Agent, each Issuing Bank or any other Lender.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal SOFR for
the day (such day “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior
to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such
SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day
immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator
on the SOFR Administrator’s Website. Any change in Daily Simple SOFR due to a change in SOFR shall be
effective from and including the effective date of such change in SOFR without notice to the Borrower.
notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Default” means any event or condition which constitutes an Event of Default or which upon
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance
with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means any Lender that (a) has failed, within two (2) Business Days of the
date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in
Letters of Credit or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless,
in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the
result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and
including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in
writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its
funding obligations under this Agreement (unless such writing or public statement indicates that such position is
based on such Lender’s good faith determination that a condition precedent (specifically identified and including
the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other
agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a
Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender
that it will comply with its obligations (and is financially able to meet such obligations as of the date
of certification) to fund prospective Loans and participations in then outstanding Letters of Credit under this
Agreement, provided, that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such
Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or
(d) has become, or has a direct or indirect parent company that has become, the subject of (i) a Bankruptcy Event
or (ii) a Bail-In Action.
disclosed on Schedule 3.06.
“Disclosed Matters” means the actions, suits and proceedings and the environmental matters
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one
transaction or in a series of transactions and whether effected pursuant to a division or otherwise) of any property
by any Person (including any sale and leaseback transaction and any issuance of Equity Interests by a Subsidiary
of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated therewith.
“Documentation Agent” means Bank of America, N.A.
“Dollar Equivalent” means, for any amount of any currency, at the time of determination thereof,
(a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Alternative
Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of
Dollars with the Alternative Currency last provided (either by publication or otherwise provided to the
Administrative Agent) by the applicable Thomson Reuters Corp., Refinitiv, or any successor thereto (“Reuters”)
source on the Business Day (New York City time) immediately preceding the date of determination or if such
service ceases to be available or ceases to provide a rate of exchange for the purchase of Dollars with the
Alternative Currency, as provided by such other publicly available information service which provides that rate of
exchange at such time in place of Reuters chosen by the Administrative Agent in its sole discretion (or if such
service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars
as determined by the Administrative Agent using any method of determination, it deems appropriate in its sole
discretion) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars
as determined by the Administrative Agent using any method of determination it deems appropriate in its sole
discretion.
“Dollars” or “$” refers to lawful money of the United States of America.
“Domestic Subsidiary” means each Subsidiary of the Borrower that is organized or existing under
the laws of the United States, any state thereof, or the District of Columbia.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any
EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity
established in an EEA Member Country which is a parent of an institution described in clause (a) of this
definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an
institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its
parent.
Liechtenstein, and Norway.
“EEA Member Country” means any of the member states of the European Union, Iceland,
“EEA Resolution Authority” means any public administrative authority or any Person entrusted
with public administrative authority of any EEA Member Country (including any delegee) having responsibility
for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or
waived in accordance with Section 9.02), which date is April 13, 2021.
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated
with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such
contract or record.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions issued, promulgated or entered into by any Governmental Authority, relating in any way to
(i) the environment, (ii) preservation or reclamation of natural resources, (iii) the management, release or
threatened release of any Hazardous Material or (iv) health and safety matters.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for
damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest, but
excluding any debt securities convertible into any of the foregoing.
time, and the rules and regulations promulgated thereunder.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the
Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001(14) of ERISA
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the
regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is
waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (c) 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;
(d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect
to the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon the
Borrower or any of its ERISA Affiliates of Withdrawal Liability or of a determination that a Multiemployer Plan
is, or is expected to be, insolvent, within the meaning of Title IV of ERISA.
Loan Market Association (or any successor Person), as in effect from time to time.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the
“Event of Default” has the meaning assigned to it in Section 7.01.
“Exchange Rate” means with respect to any non-Dollar currency on any date and subject to
Section 2.21, (i) if such amount is an Alternative Currency, the equivalent of such amount in Dollars determined
by using the rate of exchange for the purchase of the Dollars with such currency in the London foreign exchange
market at or about 11:00 A.M. (London time) on a particular day as displayed by ICE Data Services as the “ask
price”, or as displayed on such other information service which publishes that rate of exchange from time to time
in place of ICE Data Services (or if such service ceases to be available, the equivalent of such amount in Dollars
as determined by the Administrative Agent using such other publicly available service for displaying exchange
rates as selected by the Administrative Agent in its reasonable discretion in consultation with the Borrower) and
(b) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined
by the Administrative Agent using a publicly available service for displaying exchange rates as selected by the
Administrative Agent in its reasonable discretion in consultation with the Borrower.
“Excluded Subsidiary” mean (i) each Subsidiary, in each case, for so long as any such Subsidiary
does not (on a consolidated basis with its Subsidiaries) constitute a Material Subsidiary, (ii) any CFC Holding
Company, (iii) any direct or indirect Subsidiary of a CFC, (iv) any Foreign Subsidiary or CFC Holding Company,
(v) each Subsidiary that is prohibited by any applicable Contractual Requirement or Requirements of Law from
guaranteeing the Obligations at the time such Subsidiary becomes a Subsidiary, or which would require
governmental (including regulatory) consent, approval, license or authorization to provide a guarantee (and for so
long as such restriction or any replacement or renewal thereof is in effect, but only, in the case of any Contractual
Requirement, to the extent such restriction was not entered into in contemplation of such Subsidiary constituting
an Excluded Subsidiary), (vi) any other Subsidiary with respect to which, in the reasonable judgment of the
Administrative Agent and the Borrower, as agreed in writing, the cost, burden or other consequences (including
adverse tax consequences) of providing a Guarantee of the Obligations shall be excessive in view of the benefits to
be obtained by the Lenders therefrom, (vii) each other Subsidiary acquired pursuant to a Permitted Acquisition or
other Investment permitted hereunder and financed with assumed secured Indebtedness permitted hereunder, and
each Subsidiary acquired in such Permitted Acquisition or other Investment permitted hereunder that guarantees
such Indebtedness, in each case to the extent that, and for so long as, the documentation relating to such
Indebtedness to which such Subsidiary is a party prohibits such Subsidiary from guaranteeing the Obligations and
such prohibition was not created in contemplation of such Permitted Acquisition or other Investment permitted
hereunder, (viii) each Subsidiary that is not wholly owned directly by (x) the Borrower or (y) one or more of the
Borrower’s wholly owned Subsidiaries and (ix) each special purpose funding vehicle that has entered into any
securitization facility not prohibited hereunder, not for profit Subsidiary and captive insurance company.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation (a) if,
and to the extent that, and only for so long as, all or a portion of the guarantee of such Guarantor of such Swap
Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule,
regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of
any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant,” as
defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such
Guarantor becomes or would become effective with respect to such Swap Obligation or (b) upon the designation
as such in any agreement with respect to such Swap Obligations between the relevant Guarantor and counterparty
applicable to such Swap Obligations; provided that if a Swap Obligation arises under a master agreement
governing more than one Swap, such exclusion shall apply only to the portion of such Swap Obligation that is
attributable to Swaps for which such guarantee is or becomes illegal.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or
required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net
income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of
such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its
applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii)
that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts
payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or
Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan,
Letter of Credit or Commitment (other than pursuant to an assignment request by the Borrower under Section
2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section
2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such
Lender acquired the applicable interest in a Loan, Letter of Credit or Commitment or to such Lender immediately
before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section
2.17(f) and (d) any withholding Taxes imposed under FATCA.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any
amended or successor version that is substantively comparable and not materially more onerous to comply with),
any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section
1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any
intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such
Sections of the Code.
“FCA” has the meaning assigned to such term in Section 1.05.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on
such day’s federal funds transactions by depositary institutions, as determined in such manner as shall be set forth
on the Federal Reserve Bank of New York’s Website from time to time, and published on the next succeeding
Business Day by the NYFRB as the effective federal funds rate; provided, that if the Federal Funds Effective Rate
as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
http://www.newyorkfed.org, or any successor source.
“Federal Reserve Bank of New York’s Website” means the website of the NYFRB at
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the
United States of America.
officer, treasurer or controller of the Borrower.
“Financial Officer” means the chief executive officer, chief financial officer, principal accounting
Borrower, the Lenders party thereto and Administrative Agent.
“First Amendment” means that certain First Amendment, dated as of February 1, 2023, among the
“First Amendment Effective Date” has the meaning assigned to such term in the First
Amendment.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the
execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with
respect to the Adjusted Term SOFR Rate or the Adjusted Daily Simple SOFR, as applicable. For the avoidance of
doubt the initial Floor for each of Adjusted Term SOFR Rate or the Adjusted Daily Simple SOFR shall be 0%.
Subsidiary or is, directly or indirectly, a Subsidiary of a Foreign Subsidiary.
“Foreign Subsidiary” shall mean each Subsidiary of the Borrower that is not a Domestic
“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person,
and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction
other than that in which the Borrower is resident for tax purposes.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Authority” means the government of the United States of America, any other nation
or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise,
of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any other
obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of
any letter of credit or letter of guaranty issued to support such Indebtedness or other obligation; provided, that the
term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or
customary and reasonable indemnity obligations or product warranties in effect on the Effective Date or entered
into in the ordinary course of business or in connection with any acquisition or disposition of assets permitted
under this Agreement (other than such obligations with respect to Indebtedness).
Borrower and each Guarantor, substantially in the form attached hereto as Exhibit A.
“Guarantee Agreement” means the Guarantee Agreement to be executed and delivered by the
“Guarantor” means (i) each Subsidiary of the Borrower that is party to the Guarantee on the
Effective Date and (ii) each Subsidiary of the Borrower that becomes a party to the Guarantee after the Effective
Date pursuant to Section 5.10 or otherwise, in each case, unless and until such Person ceases to be a Guarantor in a
transaction not prohibited by the Loan Documents; provided, that in no event shall any Excluded Subsidiary be
required to be a Guarantor (unless such Subsidiary is no longer an Excluded Subsidiary).
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous
or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances
or wastes of any nature regulated as hazardous, toxic, a contaminant or words of similar meaning pursuant to any
Environmental Law.
“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange
agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price
hedging arrangement.
“Hedging Obligations” means the due and punctual payment and performance of any and all
obligations of each Loan Party (whether absolute or contingent and however and whenever created, arising,
evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor))
arising in respect of Hedging Agreements that (a) are owed to the Administrative Agent, the Arrangers or an
Affiliate of any of the foregoing, or to any Person that, at the time such obligations were incurred, was the
Administrative Agent, an Arranger or an Affiliate of any of the foregoing, (b) were owed on the Effective Date to
a Person that was a Lender or an Affiliate of a Lender as of the Effective Date or (c) are owed to a Person that was
a Lender or an Affiliate of a Lender at the time such obligations were incurred; provided that Hedging Obligations
shall not include any Excluded Swap Obligations.
“IBA” has the meaning assigned to it in Section 1.05.
“Increased Amount Date” has the meaning assigned to it in Section 2.22(b).
Commitment Increase.
“Incremental Lender” means any Lender or other financial institution with respect to a
“Indebtedness” of any Person means, 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
acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding (i) accounts payable incurred in the ordinary course of business, (ii) earn-outs, hold-backs and
similar deferred payment of consideration in acquisitions (but only to the extent that no payment is then owed
thereunder) and (iii) deferred compensation payable to directors, officers and employees of the Borrower or any
Subsidiary), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether
or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of
others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such
Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent
or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent
such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
Notwithstanding the foregoing, any Indebtedness that has been defeased in accordance with GAAP or defeased
pursuant to the deposit of cash or Permitted Investments (in an amount sufficient to satisfy all such obligations
relating to such Indebtedness at maturity or redemption, as applicable, and all payments of interest and premium,
if any) in a trust or account created or pledged for the benefit of the holders of such Indebtedness, and subject to
the other applicable terms of the instrument governing such Indebtedness, shall, to the extent so defeased, not
constitute or be deemed “Indebtedness”.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to
any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the
extent not otherwise described in (a) hereof, Other Taxes.
“Indemnitee” has the meaning assigned to it in Section 9.03(b).
“Ineligible Institution” has the meaning assigned to it in Section 9.04(b).
“Information” has the meaning assigned to it in Section 9.12.
“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing
in accordance with Section 2.08, which shall be substantially in the form attached hereto as Exhibit D (as amended
and restated by the First Amendment in the form attached thereto as Exhibit C) or any other form approved by the
Administrative Agent.
“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March,
June, September and December and the Maturity Date and (b) with respect to any Term Benchmark Loan, the last
day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Term
Benchmark Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day
of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period,
and (c) with respect to any Daily Simple SOFR Loan, each date that is on the numerically corresponding day in
each calendar month that is one month after the Borrowing of such Loan (or, if there is no such numerically
corresponding day in such month, then the last day of such month) and the Maturity Date.
“Interest Period” means with respect to any Term Benchmark Borrowing, the period commencing
on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one,
three or six months thereafter (in each case, subject to the availability for the Benchmark applicable to the relevant
Loan or Commitment), as the Borrower may elect; provided, that (i) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such
next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii)
no tenor that has been removed from this definition pursuant to Section 2.14(e) shall be available for specification
in such Borrowing Request or Interest Election Request. For purposes hereof, the date of a Borrowing initially
shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
“Investment” means, as to any Person, any direct or indirect acquisition or investment by such
Person, whether by means of (a) the purchase or other acquisition of Equity Interests or Indebtedness of another
Person, (b) a loan, advance or capital contribution (excluding accounts receivable, trade credit, advances to
customers, commission, travel, and similar advances to officers and employees, in each case made in the ordinary
course of business) to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other
debt or equity participation or interest in, another Person, including any partnership or joint venture interest in
such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or
substantially all of the property and assets or business of another Person or assets constituting a business unit, line
of business or division of such Person; provided, that Investments shall not include, in the case of the Borrower
and the Subsidiaries, intercompany loans (including guarantees), advances, or Indebtedness arising from cash
management, tax and/or accounting operations made in the ordinary course of business consistent with past
practices.
“IRS” means the United States Internal Revenue Service.
“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 by the International Swaps
and Derivatives Association, Inc. or such successor thereto.
“Issuing Bank” means JPMorgan Chase Bank, N.A., Truist Bank, Fifth Third Bank, National
Association, Citibank, N.A., Morgan Stanley Bank, N.A., MUFG Union Bank, N.A. and any other Lender that
agrees to act as an Issuing Bank, each in its capacity as the issuer of Letters of Credit hereunder, and its successors
in such capacity as provided in Section 2.06(i). Any Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such Affiliate (it being agreed that such
Issuing Bank shall, or shall cause such Affiliate to, comply with the requirements of Section 2.06 with respect to
such Letters of Credit). Each reference herein to the “Issuing Bank” in connection with a Letter of Credit or other
matter shall be deemed to be a reference to the relevant Issuing Bank with respect thereto.
“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time, plus (b) the aggregate amount of all LC Disbursements that have not yet
been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the LC Exposure at such time. For all purposes of this Agreement, if on any date
of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by
reason of the operation of Article 29(a) of the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the
applicable time) or Rule 3.13 or Rule 3.14 of the International Standby Practices, International Chamber of
Commerce Publication No. 590 (or such later version thereof as may be in effect at the applicable time) or similar
terms of the Letter of Credit itself, or if compliant documents have been presented but not yet honored, such Letter
of Credit shall be deemed to be “outstanding” and “undrawn” in the amount so remaining available to be drawn,
and the obligations of the Borrower and each Lender shall remain in full force and effect until the Issuing Bank
and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances
with respect to any Letter of Credit.
“Lender Parent” means, with respect to any Lender, any Person as to which such Lender is,
directly or indirectly, a subsidiary.
Borrower and the Transactions.
“Lender Presentation” means the Lender Presentation, dated March 25, 2021, relating to the
“Lender-Related Person” has the meaning assigned to it in Section 9.03(d).
“Lenders” means the Persons listed on Schedule 2.01A and any other Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a
party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term
“Lenders” includes the Issuing Banks.
“Letter of Credit” means any letter of credit issued and outstanding pursuant to this Agreement.
“Letter of Credit Agreement” has the meaning assigned to it in Section 2.06(b).
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the commitment of such
Issuing Bank to issue Letters of Credit hereunder. The initial amount of each Issuing Bank’s Letter of Credit
Commitment is set forth on Schedule 2.01C, or if an Issuing Bank has entered into an Assignment and
Assumption or has otherwise assumed a Letter of Credit Commitment after the Effective Date, the amount set
forth for such Issuing Bank as its Letter of Credit Commitment in the Register maintained by the Administrative
Agent. The Letter of Credit Commitment of an Issuing Bank may be modified from time to time by agreement
between such Issuing Bank and the Borrower, and notified to the Administrative Agent.
“Letter of Credit Sublimit” means $20,000,000.
liabilities of any kind.
“Liabilities” means any losses, claims (including intraparty claims), demands, damages or
“Lien” means, with respect to any asset, (a) any mortgage, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (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 and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such securities.
formation.
“LLC” means any Person that is a limited liability company under the laws of its jurisdiction of
“Loan Documents” means, collectively, this Agreement, including schedules and exhibits hereto,
the Guarantee Agreement, each Promissory Note, any Letter of Credit, the First Amendment and any other
document expressly designated by the Administrative Agent or a Lender and any Loan Party as a “Loan
Document”.
“Loan Parties” means the Borrower and each Guarantor.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or
financial condition, of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower and the
Guarantors (taken as a whole) to perform their payment obligations under the Loan Documents or (c) the rights
and remedies of the Lenders under this Agreement or any other Loan Document.
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Material
Subsidiaries in an aggregate principal amount exceeding $75,000,000.
“Material Subsidiary” means any Subsidiary of the Borrower (a) listed on Schedule 1.01A and (b)
which, after the Effective Date, owns assets that account for greater than 5.0% of Consolidated Total Assets as of
the date of the last financial statements delivered pursuant to this Agreement.
if such date is not a Business Day, the Maturity Date shall be the immediately preceding Business Day.
“Maturity Date” means the date which is 5 years after the Effective Date; provided, however, that,
“Maximum Rate” has the meaning assigned to it in Section 9.14.
“Moody’s” means Moody’s Investors Service, Inc. (or any successor thereto).
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on
such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business
Day, for the immediately preceding Business Day); provided, that if none of such rates are published for any day
that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00
a.m., New York City time on such day received by the Administrative Agent from a federal funds broker of
recognized standing selected by it, acting reasonably; provided, further, that if any of the aforesaid rates as so
determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Obligations” means the Loans and all other amounts owing by the Borrower to the Administrative
Agent, any Lender, any Affiliate of any of them, of every type and description (whether by reason of an extension
of credit, loan, guarantee, indemnification or otherwise), present or future, arising under this Agreement, any other
Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and
however acquired and whether or not evidenced by any note, guarantee or other instrument or for the payment of
money, including all fees, interest, charges, expenses, attorneys’ fees and disbursements and other sums
chargeable to the Borrower under this Agreement, any other Loan Document or otherwise with respect to any
Loan or Letter of Credit, including interest and fees that accrue after the commencement by or against the
Borrower or any Affiliate thereof of any proceeding under any debtor relief laws naming such Person as the debtor
in such proceeding, regardless of whether such interest and fees are allowed or allowable claims in such
proceeding.
“Organizational Document” shall mean (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws (including any unanimous shareholder declaration or agreement
applicable to such corporation), (b) with respect to any limited liability company, the certificate or articles of
formation or organization and operating or limited liability company agreement and (c) with respect to any
partnership, joint venture, trust or other form of business entity, the partnership, joint venture, trust or other
applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or
organization of such entity.
“Operating Lease and Rental Expense” means, for any period, all operating lease expense and all
other rental expense incurred by the Borrower and its Subsidiaries during such period but shall exclude lease
termination expenses and lease exit costs (whether accounted for as restructuring costs, lease expense or
otherwise) incurred during such period.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a
present or former connection between such Recipient and the jurisdiction imposing such Tax (other than
connections arising from such Recipient having executed, delivered, become a party to, performed its obligations
under, received payments under, received or perfected a security interest under, engaged in any other transaction
pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit or Loan
Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing
or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement
or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan
Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other
than an assignment made pursuant to Section 2.19).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal
funds and overnight eurodollar transactions denominated in Dollars by U.S.-managed banking offices of
depository institutions, as such composite rate shall be determined by the NYFRB as set forth on the Federal
Reserve Bank of New York’s Website from time to time, and published on the next succeeding Business Day by
the NYFRB as an overnight bank funding rate.
“Participant” has the meaning assigned to it in Section 9.04(c).
“Participant Register” has the meaning assigned to it in Section 9.04(c).
“Patriot Act” has the meaning assigned to it in Section 9.16.
“Payment” has the meaning assigned to it in Section 8.06(c).
“Payment Notice” has the meaning assigned to it in Section 8.06(c).
“PBGC” means the Pension Benefit Guaranty Corporation established under Section 4002 of
ERISA and any successor entity performing similar functions.
“Permitted Acquisition” means an Investment by any Loan Party in a Person that is engaged in a
Similar Business if, as a result of such Investment, (a) such Person becomes a Loan Party 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 substantially all of its assets to, or is liquidated into, a Loan Party and, in each case, any
Investment held by such Person; provided, that the Total Leverage Ratio calculated on a pro forma basis would be
no greater than the maximum Total Leverage Ratio permitted under Section 6.07.
“Permitted Encumbrances” means:
(a)
compliance with Section 5.04;
Liens imposed by law for Taxes that are not yet due or are being contested in
(b)
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s and
other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more
than sixty (60) days (or if more than 60 days overdue, are unfiled and no other action has been taken to enforce
such Liens) or are being contested in compliance with Section 5.04, in each case so long as such Liens do not
individually or in the aggregate have a Material Adverse Effect;
(c)
pledges and deposits made in the ordinary course of business in connection with (i)
workers’ compensation, unemployment insurance, retirement and other social security laws or regulations and (ii)
public utility services provided to the Borrower or any Subsidiary;
(d)
Liens arising out of pledges or deposits to secure (i) the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business and (ii) liability to insurance carriers under insurance or
self-insurance arrangements;
under Section 7.01(k);
(e)
judgment liens in respect of judgments that do not constitute an Event of Default
(f)
easements, zoning restrictions, rights-of-way and other similar encumbrances
affecting real property imposed by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the affected property or interfere with the
ordinary conduct of business of the Borrower and its Subsidiaries, taken as a whole;
(g)
leases, licenses, subleases or sublicenses (including any such agreements related to
intellectual property) granted to third parties in the ordinary course of business and not interfering in any material
respect with the ordinary conduct of business of the Borrower and its Subsidiaries, taken as a whole;
(h)
Liens in favor of a banking or other financial institution arising as a matter of law or
in the ordinary course of business under customary general terms and conditions encumbering deposits or other
funds maintained with a financial institution (including the right of set-off) and that are within the general
parameters customary in the banking industry or arising pursuant to such banking institution’s general terms and
conditions;
(l)
(m)
(o)
(p)
(i)
Liens on specific items of inventory or other goods (other than fixed or capital
assets) and proceeds thereof of any Person securing such Person’s obligations in respect of bankers’ acceptances
or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods in the ordinary course of business;
(j)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(k)
Liens deemed to exist in connection with Permitted Investments or encumbering
reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading
accounts, other brokerage accounts or merchant processing accounts incurred in the ordinary course of business
and not for speculative purposes;
arrangements for the sale of goods entered in the ordinary course of business;
Liens arising out of conditional sale, title retention, consignment or similar
intent or purchase agreement for an acquisition;
Liens on any cash earnest money deposits made in connection with any letter of
(n)
in the case of (i) any Subsidiary that is not a wholly owned Subsidiary of the
Borrower or (ii) the Equity Interests in any Person that is not a Subsidiary, any encumbrance or restriction,
including any put and call arrangements, related to Equity Interests in such Subsidiary or such other Person set
forth in the Organizational Documents of such Subsidiary or such other Person or any related joint venture,
shareholders’ or similar agreements and any Liens on the Equity Interests in such Person to secure Indebtedness
incurred by such Person;
leased to such Person in the ordinary course of such Person’s business;
financing statements with respect to a lessor’s rights in and to personal property
licenses permitted by this Agreement that are entered into in the ordinary course of business;
any interest or title of a lessor, sublessor, licensor or sublicensor under leases or
(q)
Liens that are contractual rights of set-off (i) relating to the establishment of
depository relations with banks or other financial institutions not given in connection with the issuance of
Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any Subsidiary to permit
satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the
Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower
or any Subsidiary in the ordinary course of business;
(r)
ground leases in respect of real property on which facilities owned or leased by the
Borrower or any of its Subsidiaries are located;
(s)
premiums with respect thereto;
Liens on insurance policies and the proceeds thereof securing the financing of the
(t)
Liens in connection with the sale or transfer of the Equity Interests in a Subsidiary
not prohibited under this Agreement and customary rights and restrictions contained in agreements relating to such
sale or transfer, in each case, pending the completion thereof; and
(u)
Liens on cash, cash equivalents or marketable securities of the Borrower or any
Subsidiary securing obligations of the Borrower or any Subsidiary under Swap Agreements not incurred for
speculative purposes.
“Permitted Investments” means:
(a)
direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of America, including treasuries and
government sponsored enterprises), in each case maturing within three (3) years from the date of acquisition
thereof;
(b)
investments in commercial paper maturing (i) within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from
Moody’s or (ii) within ninety (90) days from the date of acquisition thereof and rated, at such date of acquisition,
at least A-2 by S&P or at least P-2 by Moody’s;
(c)
investments in certificates of deposit, banker’s acceptances and time deposits
maturing within twelve (12) months from the date of acquisition thereof issued or guaranteed by or placed with,
and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which has a combined capital and surplus and
undivided profits of not less than $500,000,000;
(d)
fully collateralized repurchase agreements with a term of not more than thirty (30)
days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria
described in clause (c) above;
(e)
money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7
under the Investment Company Act of 1940, (ii) at the date of acquisition are rated AAA by S&P and Aaa by
Moody’s and (iii) have portfolio assets of at least $5,000,000,000; and
which (or the issuer of which) are rated at least A or A-1 by S&P or A2 or P-1 by Moody’s.
(f)
securities with maturities of three (3) years or less from the date of acquisition
“Person” means any natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an “employer” as defined in Section 3(5) of ERISA.
ERISA, as amended from time to time.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of
“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
Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative
Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly
announced or quoted as being effective.
“Projections” has the meaning assigned to it in Section 4.01(h).
“Promissory Note” has the meaning assigned to it in Section 2.10(e).
any such exemption may be amended from time to time.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as
interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be
“QFC Credit Support” has the meaning assigned to it in Section 9.18.
“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as
applicable.
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such
Benchmark is the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two U.S. Government Securities
Business Days preceding the date of such setting, (2) if such Benchmark is Daily Simple SOFR, then four
Business Days prior to such setting or (3) if such Benchmark is none of the Term SOFR Rate or Daily Simple
SOFR, the time determined by the Administrative Agent in its reasonable discretion.
“Register” has the meaning assigned to it in Section 9.04(b)(iv).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time
and all official rulings and interpretations thereunder or thereof.
and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time
and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time
and all official rulings and interpretations thereunder or thereof.
“Related Parties” means, with respect to any specified Person, (1) such Person’s Affiliates and the
controlling persons, (2) their respective directors, officers, employees or partners of such Persons described in
clause (1) and (3) the respective advisors, agents and other representatives of such Person or any of its controlling
person or Affiliates, in the case of this clause (3) acting at the instructions of such Person or its Related Parties
described in clause (2) of this definition.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NYFRB, or a
committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any
successor thereto.
“Representatives” has the meaning assigned to it in Section 9.12.
“Required Lenders” means, subject to Section 2.20, (a) at any time prior to the earlier of the Loans
becoming due and payable pursuant to Section 7.01 or the Commitments terminating or expiring, Lenders having
Revolving Credit Exposures and Unfunded Commitments representing more than 50.0% of the sum of the Total
Revolving Credit Exposure and Unfunded Commitments at such time, provided, that solely for purposes of
declaring the Loans to be due and payable pursuant to Section 7.01 the Unfunded Commitment of each Lender
shall be deemed to be zero; and (b) for all purposes after the Loans become due and payable pursuant to Section
7.01 or the Commitments expire or terminate, Lenders having Revolving Credit Exposures representing more than
50.0% of the sum of the Total Revolving Credit Exposure at such time.
“Requirements of Law” shall mean, as to any Person, the Organizational Documents of such
Person, and any law, treaty, rule, or regulation or determination of an arbitrator or a court or other 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.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial
Institution, a UK Resolution Authority.
Person.
“Responsible Officer” means the president, Financial Officer or other executive officer of any
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other
property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (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 of any such Equity Interests in the Borrower or
any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any
Subsidiary.
“Reuters” has the meaning assigned to it in the definition of “Dollar Equivalent.”
“Revaluation Date” means each of the following: (i) the date on which such Letter of Credit is
issued, (ii) the first Business Day of each calendar month and (iii) the date of any amendment of such Letter of
Credit that has the effect of increasing the face amount thereof.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the
outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure at such time.
“Revolving Loan” means a Loan made pursuant to Section 2.03.
“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC
business (or any successor thereto).
“Sale Leaseback” shall mean any arrangement with any Person providing for the leasing by the
Borrower or any Subsidiary of any real or tangible personal property, which property has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person in contemplation of such leasing.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject
or target of any Sanctions (at the First Amendment Effective Date, the so-called Donetsk People’s Republic, the
so-called Luhansk People’s Republic, the Crimea, Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran,
North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of
designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the
U.S. Department of State, the United Nations Security Council, the European Union, any European Union member
state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person
operating, organized or resident in a Sanctioned Country, (c) any government that is itself the subject or target of
Sanctions or (d) any Person owned 50% or more, individually or in the aggregate, by any such Person or Persons
described in the foregoing clauses (a), (b) or (c).
“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered
or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign
Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations
Security Council, the European Union, any European Union member state or His Majesty’s Treasury of the United
Kingdom.
“SEC” means the Securities and Exchange Commission of the United State of America.
“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined
in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act of 1933, as amended, as in
effect on the Effective Date.
“Similar Business” means any business in which the Borrower and its Subsidiaries are engaged on
the date of this Agreement or that is reasonably related, similar, incidental, complementary or ancillary thereto or
that is a reasonable extension thereof.
Administrator.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR
financing rate).
“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight
“SOFR Administrator’s Website” means
at
http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by
the SOFR Administrator from time to time.
the NYFRB’s website,
currently
“SOFR Determination Date” has the meaning specified in the definition of “Daily Simple SOFR”.
“SOFR Rate Day” has the meaning specified in the definition of “Daily Simple SOFR”.
“Solvent” means, as to any Person as of any date of determination, that on such date (a) the fair
value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities,
of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts, including contingent debts, as they become
absolute and matured taking into account refinancing alternatives, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities, including contingent debts and liabilities, beyond such Person’s ability
to pay such debts and liabilities as they mature and (d) such Person is not engaged in a business or a transaction,
and is not about to engage in a business or a transaction, for which such Person’s property would constitute an
unreasonably small capital. The amount of any contingent liability at any time shall be computed as the amount
that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited
liability company, partnership, association or other entity the accounts of which would be consolidated with those
of the parent in the parent’s consolidated financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership,
association or other 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, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled by the parent and/or one or more subsidiaries of the parent.
“Subsidiary” means any subsidiary of the Borrower.
“Supported QFC” has the meaning assigned to it in Section 9.18.
“Swap” has the meaning assigned to such term in Section 1a(47) of the Commodity Exchange Act.
“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative
transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any combination of these transactions;
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 the Borrower or the Subsidiaries shall be a Swap
Agreement.
any Swap Agreement.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings
(including backup withholding), value added taxes, or any other goods and services, use or sales taxes,
assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to
tax or penalties applicable thereto.
“Term Benchmark” when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the
Adjusted Term SOFR Rate.
SOFR Reference Rate.
“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term
“Term SOFR Rate” means, with respect to any Term Benchmark Borrowing and for any tenor
comparable to the applicable Interest Period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago
time, two U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the
applicable Interest Period, as such rate is published by the CME Term SOFR Administrator.
“Term SOFR Reference Rate” means, for any day and time (such day, the “Term SOFR
Determination Day”), with respect to any Term Benchmark Borrowing denominated in Dollars and for any tenor
comparable to the applicable Interest Period, the rate per annum published by the CME Term SOFR Administrator
and identified by the Administrative Agent as the forward-looking term rate based on SOFR. If by 5:00 pm (New
York City time) on such Term SOFR Determination Day, the “Term SOFR Reference Rate” for the applicable
tenor has not been published by the CME Term SOFR Administrator and a Benchmark Replacement Date with
respect to the Term SOFR Rate has not occurred, then, so long as such day is otherwise a U.S. Government
Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the
Term SOFR Reference Rate as published in respect of the first preceding U.S. Government Securities Business
Day for which such Term SOFR Reference Rate was published by the CME Term SOFR Administrator, so long as
such first preceding U.S. Government Securities Business Day is not more than five (5) U.S. Government
Securities Business Days prior to such Term SOFR Determination Day.
“Test Period” means, for any determination under this Agreement, the four consecutive fiscal
quarters of the Borrower most recently ended on or prior to such date of determination and for which financial
statements shall have been delivered (or were required to be delivered) to the Administrative Agent pursuant to
Section 5.01 (or, before the first delivery of financial statements pursuant to Section 5.01, the most recent period
of four fiscal quarters at the end of which financial statements are available).
“Total Leverage Ratio” means, as at the last day of any period, the ratio of (a) Consolidated Total
Debt on such day to (b) Consolidated EBITDA for such period.
amount of the Revolving Loans at such time and (b) the total LC Exposure at such time.
“Total Revolving Credit Exposure” means, at any time, the sum of (a) the outstanding principal
the Borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
“Transactions” means the execution, delivery and performance by the Borrower of this Agreement,
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on
such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted Term SOFR
Rate, the Alternate Base Rate or the Adjusted Daily Simple SOFR (subject to Section 2.14).
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA
Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority)
or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by
the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms,
and certain affiliates of such credit institutions or investment firms.
authority having responsibility for the resolution of any UK Financial Institution.
“UK Resolution Authority” means the Bank of England or any other public administrative
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding
the related Benchmark Replacement Adjustment.
“Unfunded Commitment” means, with respect to each Lender, the Commitment of such Lender
less its Revolving Credit Exposure.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday
or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed
income departments of its members be closed for the entire day for purposes of trading in United States
government securities.
Code.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the
“U.S. Special Resolution Regime” has the meaning assigned to it in Section 9.18.
“U.S. Tax Compliance Certificate” has the meaning assigned to it in Section 2.17(f)(ii)(B)(3).
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority,
the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In
Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in
the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable
Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of
any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of
that liability into shares, securities or obligations of that person or any other person, to provide that any such
contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in
respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of
those powers.
SECTION 1.02.Classification of Loans and Borrowings. For purposes of this Agreement, Loans
may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Term Benchmark Loan”)
or by Class and Type (e.g., a “Term Benchmark Revolving Loan”). Borrowings also may be classified and referred
to by Class (e.g., a “Borrowing”) or by Type (e.g., a “Term Benchmark Borrowing”).
SECTION 1.03.Terms Generally. The definitions of terms herein shall apply equally to 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”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to
any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any
restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions
on assignment set forth herein), (c) the words “herein”, “hereof” and “hereunder”, and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law, rule or regulation herein
shall, unless otherwise specified, refer to such law, rule or regulation as amended, modified or supplemented from
time to time (including by succession of comparable successor laws) and (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.
SECTION 1.04.Accounting Terms; GAAP; Pro Forma Calculations.
(a)
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, that if the
Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the
operation of
such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become effective until such notice shall
have been withdrawn or such provision amended in accordance herewith. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of
amounts and ratios referred to herein shall be made, without giving effect to (i) any election under Financial
Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard
having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at
“fair value”, as defined therein, (ii) any change in GAAP occurring after the date hereof as a result of the adoption
of any proposals set forth in the Proposed Accounting Standards Update, Leases (Topic 840), issued by the
Financial Accounting Standards Board on August 17, 2010, or any other proposals issued by the Financial
Accounting Standards Board in connection therewith, in each case if such change would require treating any lease
(or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement)
would not have been required to be so treated under GAAP as in effect on the date hereof and (iii) any treatment
of Indebtedness under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards
Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in
a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full
stated principal amount thereof.
(b)
For the purpose of calculating Consolidated EBITDA for any Test Period, (i) if
during such Test Period the Borrower or any Subsidiary shall have made any disposition, Consolidated EBITDA
for such Test Period shall be calculated after giving effect thereto on a pro forma basis, and (ii) if during such Test
Period the Borrower or any Subsidiary shall have made an acquisition, Consolidated EBITDA for such Test Period
shall be calculated after giving effect thereto on a pro forma basis; provided, that Borrower shall not be required to
calculate Consolidated EBITDA on a pro forma basis with respect to any acquisition and disposition if the
Borrower determines in its sole discretion that it does not have reasonably and readily identifiable information to
make such pro forma calculation. Notwithstanding the foregoing, if for SEC reporting purposes the Borrower is
required to prepare pro forma financial statements in connection with an acquisition or disposition of the Borrower
or its Subsidiaries, then the Borrower will calculate Consolidated EBITDA on a pro forma basis with respect to
such acquisition and/or disposition.
SECTION 1.05.Interest Rates; Benchmark Notification. The interest rate on a Loan denominated in
Dollars or an Alternative Currency may be derived from an interest rate benchmark that is, or may in the future
become, the subject of regulatory reform. March December June December June Upon the occurrence of a
Benchmark Transition Event, Section 2.14(b) provides a mechanism for determining an alternative rate of
interest. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any
liability with respect to, the administration, submission, performance or any other matter related to any interest
rate used in this Agreement, or with respect to any alternative or successor rate thereto, or replacement rate
thereof, including without limitation, whether the composition or characteristics of any such alternative, successor
or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the
existing interest rate being replaced or have the same volume or liquidity as did any existing interest rate prior to
its discontinuance or unavailability. The Administrative Agent and its affiliates and/or other related entities may
engage in transactions that affect the calculation of any interest rate used in this Agreement or any alternative,
successor or alternative rate (including any Benchmark Replacement) and/or any relevant adjustments thereto, in
each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or
services in its reasonable discretion to ascertain any interest rate used in this Agreement, any component thereof,
or rates referenced in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have
no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or
indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract
or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof)
provided by any such information source or service.
SECTION 1.06.Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter
of Credit at any time shall be deemed to be the amount of such Letter of Credit available to be drawn at such time;
provided, that with respect to any Letter of Credit that, by its terms or the terms of any Letter of Credit Agreement
related thereto, provides for one or more automatic increases in the available amount thereof, the amount of such
Letter of Credit shall be deemed to be the maximum amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum amount is available to be drawn at such time.
SECTION 1.07.Divisions. For all purposes under the Loan Documents, in connection with any
division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a)
if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different
Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b)
if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on
the first date of its existence by the holders of its Equity Interests at such time.
ARTICLE II
The Credits
SECTION 2.01.Commitments.
Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans
denominated in Dollars to the Borrower from time to time during the Availability Period in an aggregate principal
amount that will not result (after giving effect to any application of proceeds of such Borrowing pursuant to
Section 2.10) in (A) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (B) the
Total Revolving Credit Exposure exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02.Loans and Borrowings.
(a)
Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving
Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided,
that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure
to make Loans as required.
(b)
Subject to Section 2.14, each Borrowing shall be comprised entirely of ABR Loans
or Term Benchmark Loans as the Borrower may request in accordance herewith. Each Lender at its option may
make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan;
provided, that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
(c)
At the commencement of each Interest Period for any Term Benchmark Borrowing
that is made to the Borrower, such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided, that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total
Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.06(e). Borrowings of more than one Type and Class may be outstanding at the same time; provided, that
there shall not at any time be more than a total of 10 Term Benchmark Borrowings outstanding.
(d)
Notwithstanding any other provision of this Agreement, the Borrower shall not be
entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect
thereto would end after the Maturity Date.
Administrative Agent of such request by submitting a Borrowing Request (a) in the case of a Term Benchmark
SECTION 2.03.Requests for Borrowings. To request a Borrowing, the Borrower shall notify the
Borrowing, not later than 2:00 p.m., New York City time, three (3) U.S. Government Securities Business Days
before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m.,
New York City time, on the date of the proposed Borrowing; provided, that any such notice of an ABR Borrowing
to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be given not later
than 1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such Borrowing Request shall
be irrevocable and shall be signed by a Responsible Officer of a Borrower. Each such Borrowing Request shall
specify the following information in compliance with Section 2.02:
(i)
(ii)
(iii)
Borrowing;
the aggregate principal amount of the requested Borrowing;
the date of such Borrowing, which shall be a Business Day;
whether such Borrowing is to be an ABR Borrowing or a Term Benchmark
applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and
(iv)
in the case of a Term Benchmark Borrowing, the initial Interest Period to be
(v)
the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period is specified with respect to any requested Term Benchmark Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each
Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested
Borrowing.
SECTION 2.04.[Reserved].
SECTION 2.05.[Reserved].
SECTION 2.06.Letters of Credit.
(a)
General. Subject to the terms and conditions set forth herein, the Borrower may
request any Issuing Bank to issue Letters of Credit as the applicant thereof for the support of the Borrower’s or its
Subsidiaries’ obligations, in a form reasonably acceptable to such Issuing Bank, at any time and from time to time
during the Availability Period, in the aggregate amount up to but not exceeding the Letter of Credit Sublimit.
(b)
Notice of Issuance, Amendment, Extension; Certain Conditions. To request the
issuance of a Letter of Credit (or the amendment or extension of an outstanding Letter of Credit), the Borrower
shall hand deliver or fax (or transmit by electronic communication, if arrangements for doing so have been
approved by the applicable Issuing Bank) to an Issuing Bank selected by it and to the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment or extension, but in any event no less than
three (3) Business Days) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to
be amended or extended, and specifying the date of issuance, amendment or extension (which shall be a Business
Day), the date on which such Letter of Credit is to expire (which shall comply with clause (c) of this Section), the
amount and currency of such Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be reasonably necessary to enable the applicable Issuing Bank to prepare, amend or extend
such Letter of Credit. In addition, as a condition to any such Letter of Credit issuance, the Borrower shall have
entered into a continuing agreement (or other letter of credit agreement) for the issuance of letters of credit and/or
shall submit a letter of credit application, in each case, as required by the respective Issuing Bank and using such
Issuing Bank’s standard form (each, a “Letter of Credit Agreement”). In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any Letter of Credit Agreement, the
terms and conditions of this Agreement shall control. A Letter of Credit shall be issued, amended or extended only
if (and upon issuance, amendment or extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment or extension (i) (x) the aggregate undrawn
amount of all
outstanding Letters of Credit issued by any Issuing Bank at such time plus (y) the aggregate amount of all LC
Disbursements made by such Issuing Bank that have not yet been reimbursed by or on behalf of the Borrower at
such time shall not exceed its Letter of Credit Commitment, (ii) the LC Exposure shall not exceed the total Letter
of Credit Commitments, (iii) no Lender’s Revolving Credit Exposure shall exceed its Commitment and (iv) the
Total Revolving Credit Exposure shall not exceed the total Commitments. The Borrower may, at any time and
from time to time, reduce the Letter of Credit Commitment of any Issuing Bank with the consent of such Issuing
Bank; provided, that the Borrower shall not reduce the Letter of Credit Commitment of any Issuing Bank if, after
giving effect of such reduction, the conditions set forth in clauses (i) through (iv) above shall not be satisfied.
An Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
(i)
any order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any law applicable
to such Issuing Bank shall prohibit, or require that such Issuing Bank refrain from, the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter
of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise
compensated hereunder) not in effect on the Effective Date, or shall impose upon such Issuing Bank any
unreimbursed loss, cost or expense that was not applicable on the Effective Date and that such Issuing Bank in
good faith deems material to it;
(ii)
the issuance of such Letter of Credit would violate one or more policies of such
Issuing Bank applicable to letters of credit generally; or
(iii)
the Letter of Credit is denominated in a currency other than Dollars or an Alternative
Currency.
(c)
Expiration Date. Each Letter of Credit shall expire (or be subject to termination by
notice from the applicable Issuing Bank to the beneficiary thereof) at or prior to the close of business on the date
that is five (5) Business Days prior to the Maturity Date.
(d)
Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of
Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or
the Lenders, such Issuing Bank that issued such Letter of Credit hereby grants to each Lender, and each Lender
hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable
Percentage from time to time of the aggregate amount available to be drawn under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to
pay to the Administrative Agent, for the account of the respective Issuing Bank, such Lender’s Applicable
Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date
due as provided in clause (e) of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason, including after the Maturity Date. Each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this clause in respect of Letters of Credit is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including any amendment or extension of any Letter of Credit or
the occurrence and continuance of a Default or reduction or termination of the Commitments.
(e)
Reimbursement. Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the applicable Issuing Bank shall notify the Borrower and the
Administrative Agent thereof. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit,
the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 2:00 p.m., New York City time, first Business Day following the date that
such LC Disbursement was made; provided, that if such LC Disbursement is not less than $1,000,000, the
Borrower may, subject to the conditions to Borrowing set forth herein, request in accordance with Section 2.03
that such payment be financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by the resulting
ABR Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify
each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and
such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to
the applicable Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this clause, the Administrative Agent shall
distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant
to this clause to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this clause to reimburse an Issuing Bank for any LC
Disbursement (other than the funding of ABR Revolving Loans as contemplated above) shall not constitute a Loan
and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f)
Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as
provided in clause (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or
this Agreement, or any term or provision therein or herein, (ii) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the respective Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any
other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the
Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of
their respective Related Parties, shall have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating
to any Letter of Credit (including any document required to make a drawing thereunder), any error in
interpretation of technical terms, any error in translation or any consequence arising from causes beyond the
control of the respective Issuing Bank; provided, that the foregoing shall not be construed to excuse any Issuing
Bank from liability to the Borrower to the extent of any direct damages (as opposed to special, indirect,
consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent
permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise
care when determining whether drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on
the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its sole discretion, either
accept and make payment upon such documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment upon such documents if such
documents are not in strict compliance with the terms of such Letter of Credit.
(g)
Disbursement Procedures. The Issuing Bank for any Letter of Credit shall, promptly
following its receipt thereof, examine all documents purporting to represent a demand for payment under such
Letter of Credit issued by it. Such Issuing Bank shall promptly after such examination notify the Administrative
Agent and the Borrower by telephone (confirmed by fax or electronic mail) of such demand for payment if such
Issuing Bank has made or will make an LC Disbursement thereunder; provided, that any failure to give or delay in
giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders
of their obligations with respect to any such LC Disbursement.
(h)
Interim Interest. If the Issuing Bank for any Letter of Credit shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date
such LC Disbursement is made to but excluding the date that the reimbursement is due and payable at the rate per
annum then applicable to ABR Revolving Loans and such interest shall be due and payable on the date when such
reimbursement is payable; provided, that if the Borrower fails to reimburse such LC Disbursement when due
pursuant to clause (e) of this Section, then Section 2.13(d) shall apply. Interest accrued pursuant to this clause shall
be paid to the Administrative Agent for the account of the applicable Issuing Bank, except that interest accrued on
and after the date of payment by any Lender pursuant to clause (e) of this Section to reimburse such Issuing Bank
for such LC Disbursement shall be for the account of such Lender to the extent of such payment.
(i)
Replacement and Resignation of an Issuing Bank.
(i)
An Issuing Bank may be replaced at any time by written agreement among the
Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such
replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (x) the
successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with
respect to Letters of Credit to be issued by it thereafter and (y) references herein to the term “Issuing Bank” shall
be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing
Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit then outstanding and issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit or extend or otherwise amend any existing Letter of Credit.
(ii)
Subject to the appointment and acceptance of a successor Issuing Bank, any Issuing
Bank may resign as an Issuing Bank at any time upon thirty (30) days’ prior written notice to the Administrative
Agent, the Borrower and the Lenders, in which case, such resigning Issuing Bank shall be replaced in accordance
with Section 2.06(i)(i) above.
(j)
Cash Collateralization. If any Event of Default shall occur and be continuing, on the
Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50.0% of the
total LC Exposure) demanding the deposit of cash collateral pursuant to this clause, the Borrower shall deposit in
respect of each outstanding Letter of Credit issued for the Borrower’s account in an account with the
Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders (the “Collateral
Account”), an amount in Dollars equal to 103% of the LC Exposure attributable to such Letters of Credit as of
such date plus any accrued and unpaid interest thereon; provided, that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately due and payable, without demand
or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in
Section 7.01(h) or (i). Such deposit shall be held by the Administrative Agent as collateral for the payment and
performance of the obligations of the Borrower under this Agreement.
The Administrative Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which
investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk
and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate
in such account. Monies in such account shall be applied by the Administrative Agent to reimburse the applicable
Issuing Bank for LC Disbursements for which it has not been reimbursed, together with related fees, costs and
customary processing charges, and, to the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has
been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than
50.0% of the total LC Exposure), be applied to satisfy other Obligations. If the Borrower is required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the
extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all such
Events of Default have been cured or waived.
(k)
Letters of Credit Issued for Account of Subsidiaries. Notwithstanding that a Letter
of Credit issued or outstanding hereunder supports any obligations of, or is for the account of, a Subsidiary, or
states that a Subsidiary is the “account party,” “applicant,” “customer,” “instructing party,” or the like of or for
such Letter of Credit, and without derogating from any rights of the applicable Issuing Bank (whether arising by
contract, at law, in equity or otherwise) against such Subsidiary in respect of such Letter of Credit, the Borrower
(i) shall reimburse, indemnify and compensate the applicable Issuing Bank hereunder for such Letter of Credit
(including to reimburse any and all drawings thereunder) as if such Letter of Credit had been issued solely for the
account of the Borrower and (ii) irrevocably waives any and all defenses that might otherwise be available to it as
a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit (other
than the defense of payment and performance in full in cash). The Borrower hereby acknowledge that the issuance
of such Letters of Credit for their respective Subsidiaries inures to the benefit of the Borrower, and that the
Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.
SECTION 2.07.Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof solely by wire transfer of immediately available funds, by 2:00 p.m.,
New York City time (or, in the case of a notice for a same day ABR Borrowing, 3:00 p.m., New York City time),
to the account of the Administrative Agent most recently designated by it for such purpose by notice to the
Lenders. Except in respect of the provisions of this Agreement covering the reimbursement of Letters of Credit,
the Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so
received in the aforesaid account of the Administrative Agent to an account of the Borrower designated by the
Borrower in the applicable Borrowing Request; provided, that ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the Administrative
Agent to the Issuing Bank.
(b)
Unless the Administrative Agent shall have received notice from a Lender prior to
the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with clause (a) of this Section and may, in reliance upon such assumption,
make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower
severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available to the Borrower to but excluding
the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the NYFRB Rate
and a rate reasonably determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing.
SECTION 2.08.Interest Elections.
(a)
Each Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Term Benchmark Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Term Benchmark Borrowing, may elect Interest Periods therefor, all
as provided in this Section. The Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate
Borrowing.
(b)
To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by the time that a Borrowing Request would be required under Section 2.03
if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective
date of such election. Each such Interest Election Request shall be irrevocable and shall be signed by a
Responsible Officer of a Borrower.
(c)
compliance with Section 2.02:
Each Interest Election Request shall specify the following information in
(i)
the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);
(ii)
which shall be a Business Day;
the effective date of the election made pursuant to such Interest Election Request,
Borrowing; and
(iii)
whether the resulting Borrowing is to be an ABR Borrowing or a Term Benchmark
(iv)
if the resulting Borrowing is a Term Benchmark Borrowing, the Interest Period to
be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of
the term “Interest Period”.
If any such Interest Election Request requests a Term Benchmark Borrowing but does not specify an Interest
Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.
(d)
Promptly following receipt of an Interest Election Request, the Administrative
(e)
If the Borrower fails to deliver a timely Interest Election Request with respect to a
Term Benchmark Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing
is repaid as provided herein, at the end of such Interest Period, such Borrowing shall be converted to an
ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is
continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so
long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a
Term Benchmark Borrowing and (ii) unless repaid, each Term Benchmark Borrowing shall be converted to an
ABR Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.09.Termination and Reduction of Commitments.
(a)
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.
(b)
The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided, that (i) each reduction of the Commitments shall be in an amount that is an integral
multiple of $5,000,000 and not less than $25,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11,
(A) any Lender’s Revolving Credit Exposure would exceed its Commitment or (B) the Total Revolving Credit
Exposure would exceed the total Commitments.
(c)
The Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under clause (b) of this Section at least three (3) Business Days (or such lesser period as
the Administrative Agent agrees) prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be
irrevocable; provided, that a notice of termination of the Commitments delivered by the Borrower may state that
such notice is conditioned upon the occurrence of one or more events specified therein, in which case such notice
may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date)
if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each
reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective
Commitments.
SECTION 2.10.Repayment of Loans; Evidence of Debt.
for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date.
(a)
The Borrower hereby unconditionally promises to pay to the Administrative Agent
(b)
Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time to time
hereunder.
(c)
The Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.
(d)
The entries made in the accounts maintained pursuant to clause (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein absent
manifest error; provided, that the failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance
with the terms of this Agreement.
(e)
Any Lender may request that Loans made by it be evidenced by a promissory note
(a “Promissory Note”). In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory
note payable to such Lender and its registered assigns substantially in the form attached hereto as Exhibit G
hereto. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including
after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form.
SECTION 2.11.Prepayment of Loans.
(a)
The Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole or in part without premium or penalty (except as provided in Section 2.16) and any such
payment shall be applied as directed by Borrower, subject to prior notice in accordance with clause (b) of this
Section.
(b)
The Borrower shall notify the Administrative Agent by telephone (confirmed by fax
or electronic mail) of any prepayment of a Borrowing hereunder (i) in the case of prepayment of a Term
Benchmark Borrowing, not later than 2:00 p.m., New York City time, three (3) Business Days before the date of
prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 2:00 p.m., New York City time,
on the date of such prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid; provided, that any notice of prepayment
is delivered by the Borrower may state that such notice is conditioned upon the occurrence of one or more events
specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not satisfied. Promptly following receipt of
any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof.
Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance
of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued and unpaid
interest to the extent required by Section 2.13 and any break funding payments required by Section 2.16.
SECTION 2.12.Fees.
(a)
The Borrower agrees to pay to the Administrative Agent for the account of each
Lender, in accordance with its Applicable Percentage, a commitment fee, which shall accrue at the Commitment
Fee Rate on the daily amount by which the aggregate Commitments exceed the Total Revolving Credit Exposure
during the period from and including the Effective Date to but excluding the date on which such Commitment
terminates. Commitment fees accrued through and including the last day of March, June, September and
December of each year shall be payable in arrears on the 15th day following such last day and on the date on which
the Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment
fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
(b)
The Borrower agrees to pay (i) to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in each outstanding Letter of Credit, which shall accrue
on the daily maximum amount then available to be drawn under such Letter of Credit at the same Applicable Rate
used to determine the interest rate applicable to Term Benchmark Revolving Loans, during the period from and
including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates
and the date on which such Lender ceases to have any LC Exposure, and (ii) to each Issuing Bank for its own
account a fronting fee with respect to each Letter of Credit issued by such Issuing Bank, which shall accrue at the
rate of 0.125% per annum on the Dollar Equivalent of the daily maximum amount then available to be drawn
under such Letter of Credit, during the period from and including the Effective Date to but excluding the later of
the date of termination of the Commitments and the date on which there ceases to be any LC Exposure with
respect to Letters of Credit issued by such Issuing Bank, as well as such Issuing Bank’s standard fees with respect
to the issuance, amendment or extension of any Letter of Credit and other processing fees, and other standard costs
and charges, of such Issuing Bank relating to the Letters of Credit as from time to time in effect. Participation fees
and fronting fees accrued through and including the last day of March, June, September and December of each
year shall be payable in Dollars on the 15th day following such last day, commencing on the first such date to occur
after the Effective Date; provided, that all such fees shall be payable on the date on which the Commitments
terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on
demand. Any other fees payable to an Issuing Bank pursuant to this clause shall be payable within ten (10) days
after written demand therefor. All participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last
day).
(c)
The Borrower agrees to pay to the Administrative Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative
Agent.
(d)
All fees payable hereunder shall be paid on the dates due, in Dollars in immediately
available funds, to the Administrative Agent (or to an Issuing Bank, in the case of fees payable to it) for
distribution, in the case of commitment fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.13.Interest.
Base Rate plus the Applicable Rate.
(a)
The Loans comprising each ABR Borrowing shall bear interest at the Alternate
(b)
The Loans comprising each Term Benchmark Borrowing shall bear interest in the
case of a Term Benchmark Revolving Loan, at the Adjusted Term SOFR Rate for the Interest Period in effect for
such Borrowing plus the Applicable Rate.
(c)
[reserved].
(d)
Notwithstanding the foregoing, if any principal of or interest on any Loan or any
fee or other amount payable by the Borrower hereunder is not paid when due (after giving effect to any applicable
grace periods), whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest,
after
as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2.00%
plus the rate otherwise applicable to such Loan as provided in the preceding clauses of this Section or (ii) in the
case of any other amount, 2.00% per annum plus the rate applicable to ABR Loans as provided in clause (a) of this
Section.
(e)
Accrued interest on each Loan shall be payable in arrears on each Interest Payment
Date for such Loan and, in the case of Revolving Loans, upon termination of the applicable Commitments;
provided, that (i) interest accrued pursuant to clause (d) of this Section shall be payable on demand, (ii) in the
event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to
the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any conversion of any Term Benchmark
Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.
(f)
Interest computed by reference to the Term SOFR Rate or Daily Simple SOFR and
the Alternate Base Rate hereunder shall be computed on the basis of a year of 360 days. Interest computed by
reference to the Alternate Base Rate only at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year). In each case interest shall be payable
for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on
any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the
applicable date of determination. A determination of the applicable Alternate Base Rate, Adjusted Term SOFR
Rate, Term SOFR Rate, Adjusted Daily Simple SOFR or Daily Simple SOFR shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.14.
Alternate Rate of Interest.
(a)
Subject to clauses (b), (c), (d), (e) and (f) of this Section 2.14, if:
(i)
the Administrative Agent determines (which determination shall be conclusive
absent manifest error) (A) prior to the commencement of any Interest Period for a Term Benchmark Borrowing,
that adequate and reasonable means do not exist for ascertaining the Adjusted Term SOFR Rate (including
because the Term SOFR Reference Rate is not available or published on a current basis), for such Interest Period
or (B) at any time, that adequate and reasonable means do not exist for ascertaining the applicable Adjusted Daily
Simple SOFR; or
(ii)
the Administrative Agent is advised by the Required Lenders that (A) prior to the
commencement of any Interest Period for a Term Benchmark Borrowing, the Adjusted Term SOFR Rate for such
Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period or (B) at any time, Adjusted Daily
Simple SOFR will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone, telecopy or electronic mail as promptly as practicable thereafter and, until (x) the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect
to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request in accordance with the
terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section 2.03, any Interest
Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Term
Benchmark Borrowing and any Borrowing Request that requests a Term Benchmark Borrowing shall instead be
deemed to be an Interest Election Request or a Borrowing Request, as applicable, for (x) a Daily Simple SOFR
Borrowing so long as the Adjusted Daily Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or
(y) an ABR Borrowing if the Adjusted Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above;
provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then all other
Types of Borrowings shall be permitted. Furthermore, if any Term Benchmark Loan or Daily Simple SOFR
Loan is outstanding on the date of the Borrower’s receipt of the notice from the Administrative Agent referred to
in this Section 2.14(a) with respect to Adjusted Term SOFR or Adjusted Daily Simple SOFR, then until (x) the
Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist with respect to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request
in accordance with the terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section
2.03, any Term Benchmark Loan shall on the last day of the Interest Period applicable to such Loan, be converted
by the Administrative Agent to, and shall constitute, (x) a Daily Simple SOFR Borrowing so long as the Adjusted
Daily Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or (y) an ABR Loan if the Adjusted
Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above, on such day.
(b)
Notwithstanding anything to the contrary herein or in any other Loan Document
(and any Swap Agreement shall be deemed not to be a “Loan Document” for purposes of this Section 2.14), if a
Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference
Time in respect of any setting of the then-current Benchmark, then (x) if a Benchmark Replacement is determined
in accordance with clause (1) of the definition of “Benchmark Replacement” for such Benchmark Replacement
Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan
Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to,
or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a
Benchmark Replacement is determined in accordance with clause (2) of the definition of “Benchmark
Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such
Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or
after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark
Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party
to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such
time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.
(c)
Notwithstanding anything to the contrary herein or in any other Loan Document,
the Administrative Agent 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 Loan Document, any amendments
implementing such Benchmark Replacement Conforming Changes will become effective without any further
action or consent of any other party to this Agreement or any other Loan Document.
(d)
The Administrative Agent will promptly notify the Borrower and the Lenders of (i)
any occurrence of a Benchmark Transition Event, (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 a Benchmark pursuant to clause (f) below and (v) the commencement or conclusion of any Benchmark
Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or,
if applicable, any Lender (or group of Lenders) pursuant to this Section 2.14, 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 or any selection, will be conclusive and binding absent
manifest error and may be made in its or their sole discretion and without consent from any other party to this
Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.14.
(e)
Notwithstanding anything to the contrary herein or in any other Loan Document, at
any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current
Benchmark is a term rate (including the Term SOFR Rate) and either (A) any tenor for such Benchmark is not
displayed on a screen or other information service that publishes such rate from time to time as selected by the
Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such
Benchmark has provided a public statement or publication of information announcing that any tenor for such
Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of
“Interest Period” for any Benchmark settings at or after such time to remove such unavailable or non-
representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently
displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is
not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark
(including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest
Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(f)
Upon the Borrower’s receipt of notice of the commencement of a Benchmark
Unavailability Period, the Borrower may revoke any request for a Term Benchmark Borrowing or Daily Simple
SOFR Borrowing of, conversion to or continuation of Term Benchmark Loans to be made, converted or continued
during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any
request for a Term Benchmark Borrowing into a request for a Borrowing of or conversion to (A) a Daily Simple
SOFR Borrowing so long as the Adjusted Daily Simple SOFR is not the subject of a Benchmark Transition Event
or (B) an ABR Borrowing if the Adjusted Daily Simple SOFR is the subject of a Benchmark Transition
Event. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is
not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such
Benchmark, as applicable, will not be used in any determination of ABR. Furthermore, if any Term Benchmark
Loan or Daily Simple SOFR Loan is outstanding on the date of the Borrower’s receipt of notice of the
commencement of a Benchmark Unavailability Period with respect to a Benchmark applicable to such Term
Benchmark Loan or Daily Simple SOFR Loan, then until such time as a Benchmark Replacement is implemented
pursuant to this Section 2.14, any Term Benchmark Loan shall on the last day of the Interest Period applicable to
such Loan, be converted by the Administrative Agent to, and shall constitute, (x) a Daily Simple SOFR Borrowing
so long as the Adjusted Daily Simple SOFR is not the subject of a Benchmark Transition Event or (y) an ABR
Loan if the Adjusted Daily Simple SOFR is the subject of a Benchmark Transition Event, on such day.
SECTION 2.15.Increased Costs.
(a)
If any Change in Law shall:
(i)
impose, modify or deem applicable any reserve, special deposit, liquidity or similar
requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of,
deposits with or for the account of, or credit extended by, any Lender or Issuing Bank;
(ii)
impose on any Lender or Issuing Bank or the applicable offshore interbank market
any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or
any Letter of Credit or participation therein; or
(iii)
subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes
described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its
loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities
or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other
Recipient of making, continuing, converting or maintaining any Loan (or of maintaining its obligation to make any
such Loan) or to increase the cost to such Lender, such Issuing Bank or such other Recipient of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such
Lender, such Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender, such Issuing Bank or such other Recipient, as the case may be, such additional
amount or amounts as will compensate such Lender, such Issuing Bank or such other Recipient, as the case may
be, for such additional costs incurred or reduction suffered.
(b)
If any Lender or Issuing Bank determines that any Change in Law regarding capital
or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the
Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender,
or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or Issuing Bank or
such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into
consideration
such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company
with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or
Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing
Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.
(c)
A certificate of a Lender or Issuing Bank describing the Change in Law in
reasonable detail and setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or
its holding company, as the case may be, as specified in clause (a) or (b) of this Section including in reasonable
detail a description of the basis for such claim for compensation and an explanation of how such amount or
amounts were determined, shall be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such
certificate within thirty (30) days after receipt thereof.
(d)
Failure or delay on the part of any Lender or Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such
compensation; provided, that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant
to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender
or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided,
further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day
period referred to above shall be extended to include the period of retroactive effect thereof. Any claim made by a
Lender under this Section 2.15 shall be generally consistent with such Lender’s treatment of other customers of
such Lender that such Lender considers, in its reasonable discretion, to (i) be similarly situated to the Borrower
and (ii) have generally similar provisions in their credit agreements with such Lender.
SECTION 2.16.Break Funding Payments. In the event of (a) the payment of any principal of any
Term Benchmark Loan other than on the last day of an Interest Period applicable thereto (including as a result of
an Event of Default), (b) the conversion of any Term Benchmark Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Term Benchmark Loan on the
date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under
Section 2.11(b) and is revoked in accordance therewith) or (d) the assignment of any Term Benchmark Loan other
than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19, then, in any such event, the Borrower shall compensate each Lender (other than, in the case of a
claim for compensation based on the failure to borrow as specified in clause (c) above, any Lender whose failure
to make a Loan required to be made by it hereunder has resulted in such failure to borrow) for the loss, cost and
expense attributable to such event. A certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section 2.16, shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.
SECTION 2.17.Withholding of Taxes; Gross-Up.
(a)
Payments Free of Taxes. Any and all payments by or on account of any obligation
of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes,
except as required by applicable law. If any applicable law (as determined in the good faith discretion of an
applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a
withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding
and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party
shall be increased as necessary so that after such deduction or withholding has been made (including such
deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient
receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b)
Payment of Other Taxes by the Borrower. The Loan Parties shall timely pay to the
relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent
timely reimburse it for, Other Taxes.
(c)
Evidence of Payments. As soon as practicable after any payment of Taxes by any
Loan Party to a Governmental Authority pursuant to this Section, such Loan Party shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(d)
Indemnification by the Loan Parties. The Loan Parties shall jointly and severally
indemnify each Recipient, within ten (10) days after written demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under
this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such
Recipient and any reasonable and documented expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.
(e)
Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to
such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for
such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes
attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance
of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or
paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to setoff and apply any and all amounts at any time owing to such Lender under any Loan
Document or otherwise payable by the Administrative Agent to the Lender from any other source against any
amount due to the Administrative Agent under this clause (e).
(f)
Status of Lenders.
(i)
Any Lender that is entitled to an exemption from or reduction of withholding Tax
with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative
Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will
permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender,
if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two
sentences, the completion, execution and submission of such documentation (other than such documentation set
forth in Section 2.17(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost
or expense or would materially prejudice the legal or commercial position of such Lender.
(ii)
Without limiting the generality of the foregoing:
(A)
any Lender that is a U.S. Person shall deliver to the Borrower and the
Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and
from time to time
thereafter upon the reasonable request of the Borrower or the Administrative Agent), an executed copy of IRS
Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B)
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is
applicable:
(1)
in the case of a Foreign Lender claiming the benefits of an income tax treaty to
which the United States is a party (x) with respect to payments of interest under any Loan Document, an executed
copy of IRS Form W-8BEN-E or IRS Form W-8BEN establishing an exemption from, or reduction of, U.S.
federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other
applicable payments under any Loan Document, IRS Form W-8BEN-E or IRS Form W-8BEN establishing an
exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other
income” article of such tax treaty;
(2)
in the case of a Foreign Lender claiming that its extension of credit will generate
U.S. effectively connected income, an executed copy of IRS Form W-8ECI;
(3)
in the case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Section 881(c) of the Code, (x) a certificate substantially in the form attached hereto as Exhibit F-1
to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled
foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y)
an executed copy of IRS Form W-8BEN-E or IRS Form W-8BEN; or
(4)
to the extent a Foreign Lender is not the beneficial owner, an executed copy of IRS
Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E, IRS Form W-8BEN, a U.S. Tax
Compliance Certificate substantially in the form attached hereto as Exhibit F-2 or Exhibit F-3, IRS Form W-9,
and/or other certification documents from each beneficial owner, as applicable; provided, that if the Foreign
Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the
portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in
the form attached hereto as Exhibit F-4 on behalf of each such direct and indirect partner;
(C)
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other
form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal
withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction
required to be made; and
(D)
if a payment made to a Lender under any Loan Document would be subject to U.S.
federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at
such time or times reasonably requested by the Borrower or the Administrative Agent such documentation
prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the
Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and
withhold from such payment. Each Lender (or Participant) agrees that if any form or certification it previously
delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or
promptly notify the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender who
granted the participation) in writing of its legal inability to do so. Solely for purposes of this clause (D), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes
obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower
and the Administrative Agent in writing of its legal inability to do so.
(g)
Treatment of Certain Refunds. If any party determines, in its sole discretion
exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to
this Section (including by the payment of additional amounts pursuant to this Section), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this
Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to
such indemnified party the amount paid over pursuant to this clause (h) (plus any penalties, interest or other
charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to
repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this clause (g), in
no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this clause
(g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This clause shall not be construed to require any indemnified party to
make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.
(i) Survival. Each party’s obligations under this Section shall survive the resignation or replacement
of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Bank and the term “applicable law” includes FATCA.
(j)
Defined Terms. For purposes of this Section, the term “Lender” includes any Issuing
SECTION 2.18.Payments Generally; Pro Rata Treatment; Sharing of Setoffs
.
(a)
The Borrower shall make each payment or prepayment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable
under Section 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., New York City time, on the date when due or
the date fixed for any prepayment hereunder, in immediately available funds, without setoff, recoupment or
counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative
Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its offices at 383 Madison Avenue, New
York, New York, except payments to be made directly to Issuing Banks as expressly provided herein and except
that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto.
The Administrative Agent shall distribute any such payments received by it for the account of any other Person to
the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars.
(b)
At any time that payments are not required to be applied in the manner required by
Section 7.03, if at any time insufficient funds are received by and available to the Administrative Agent to pay
fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto
in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
(c)
If any Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its
Revolving Loans and participations in LC Disbursements and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Revolving Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in
LC Disbursements; provided, that (i) if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this clause shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans
or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary
or Affiliate thereof (as to which the provisions of this clause shall apply). The Borrower consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation
pursuant to the foregoing arrangements may exercise against the Borrower’s rights of setoff and counterclaim with
respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such
participation.
(d)
Unless the Administrative Agent shall have received, prior to any date on which
any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Banks pursuant to
the terms hereof or any other Loan Document (including any date that is fixed for prepayment by notice from the
Borrower to the Administrative Agent pursuant to Section 2.11(b)), notice from the Borrower that the Borrower
will not make such payment or prepayment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing Banks, as the case may be, the amount due. In such event, if the Borrower has not in fact
made such payment, then each of the Lenders or the Issuing Banks, as the case may be, severally agrees to repay
to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with
interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the NYFRB Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation.
(e)
If any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.06(b), 2.17(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof) (i) apply any amounts thereafter received by the Administrative Agent for the account
of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are
fully paid, and/or (ii) hold such amounts in a segregated account over which the Administrative Agent shall have
exclusive control as cash collateral for, and application to, any future funding obligations of such Lender under
any such Section, in the case of each of clause (i) and (ii) above, in any order as determined by the Administrative
Agent in its discretion.
SECTION 2.19.Mitigation Obligations; Replacement of Lenders.
(a)
If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a
different
lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Sections 2.15 or 2.17, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable and documented costs and
expenses incurred by any Lender in connection with any such designation or assignment.
(b)
If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, if any Lender becomes Defaulting Lender, or in connection with
any proposed amendment, modification, waiver or termination requiring the consent of all the Lenders or all
affected Lenders, the consent of the Required Lenders is obtained but the consent of any Lender whose consent is
required is not obtained, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04 or pursuant to procedures agreed upon by the Administrative
Agent and the Borrower), all its interests, rights (other than its existing rights to payments pursuant to Sections
2.15 or 2.17) and obligations under this Agreement and the other Loan Documents to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, that
(i) the Borrower shall have received the prior written consent of the Administrative Agent with respect to any
assignee that is not already a Lender hereunder (and if a Commitment is being assigned, the Issuing Banks), which
consent shall not unreasonably be withheld, (ii) subject to the Borrower’s rights with respect to Defaulting Lenders
hereunder, such Lender shall have received payment of an amount equal to the outstanding principal of its Loans
and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to apply. Each party hereto agrees that (i)
an assignment required pursuant to this clause may be effected pursuant to an Assignment and Assumption
executed by the Borrower, the Administrative Agent and the assignee (or, to the extent applicable, an agreement
incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to
which the Administrative Agent and such parties are participants), and (ii) the Lender required to make such
assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have
consented to and be bound by the terms thereof; provided, that following the effectiveness of any such assignment,
the other parties to such assignment agree to execute and deliver such documents necessary to evidence such
assignment as reasonably requested by the applicable Lender; provided, that any such documents shall be without
recourse to or warranty by the parties thereto.
SECTION 2.20.Defaulting Lenders.
Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a)
fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.12;
(b)
any payment of principal, interest, fees or other amounts received by the
Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity,
pursuant to Section 7.03 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant
to Section 9.08 shall be applied at such time or times as may be determined by the Administrative Agent as
follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent
hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any
Issuing Bank
hereunder; third, to cash collateralize LC Exposure with respect to such Defaulting Lender in accordance with this
Section; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of
any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and
the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s
potential future funding obligations with respect to Loans under this Agreement and (y) cash collateralize future
LC Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this
Agreement, in accordance with this Section; sixth, to the payment of any amounts owing to the Lenders or the
Issuing Banks as a result of any judgment of a court of competent jurisdiction obtained by any Lender or the
Issuing Banks against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations
under this Agreement or under any other Loan Document; seventh, so long as no Default or Event of Default
exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent
jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement or under any other Loan Document; and eighth, to such Defaulting
Lender or as otherwise directed by a court of competent jurisdiction; provided, that if (x) such payment is a
payment of the principal amount of any Loans or LC Disbursements in respect of which such Defaulting Lender
has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were
issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be
applied solely to pay the Loans of, and LC Disbursements owed to, all non-Defaulting Lenders on a pro rata basis
prior to being applied to the payment of any Loans of, or LC Disbursements owed to, such Defaulting Lender until
such time as all Loans and funded and unfunded participations in the Borrower’s obligations corresponding to
such Defaulting Lender’s LC Exposure are held by the Lenders pro rata in accordance with the Commitments
without giving effect to clause (d) below. Any payments, prepayments or other amounts paid or payable to a
Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral
pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender
irrevocably consents hereto.
(c)
the Commitment and Revolving Credit Exposure of such Defaulting Lender shall
not be included in determining whether the Required Lenders have taken or may take any action hereunder
(including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided, that
this clause (c) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other
modification requiring the consent of such Lender or each Lender affected thereby;
(d)
if any LC Exposure exists at the time such Lender becomes a Defaulting Lender
then:
(i)
all or any part of the LC Exposure of such Defaulting Lender shall be reallocated
among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the
extent that such reallocation does not, as to any non-Defaulting Lender, cause such non-Defaulting Lender’s
Revolving Credit Exposure to exceed its Commitment;
(ii)
if the reallocation described in clause (i) above cannot, or can only partially, be
effected, the Borrower shall within three (3) Business Days following notice by the Administrative Agent cash
collateralize for the benefit of the applicable Issuing Banks only the Borrower’s obligations corresponding to such
Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in
accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;
(iii)
if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting
Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;
(iv)
if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause
(i) above, then the fees payable to the Lenders pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted in
accordance with such non-Defaulting Lenders’ Applicable Percentages; and
(v)
if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated
nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any
Issuing Bank or any other Lender hereunder, all commitment fees that otherwise would have been payable to such
Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment that was utilized
by such LC Exposure) and letter of credit fees payable under Section 2.12(b) with respect to such Defaulting
Lender’s LC Exposure shall be payable to the Issuing Banks until and to the extent that such LC Exposure is
reallocated and/or cash collateralized; and
(e)
so long as such Lender is a Defaulting Lender, no Issuing Bank shall be required to
issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting
Lender’s then outstanding LC Exposure will be 100% covered by the Commitments and the Letter of Credit
Commitments, as applicable, of the non-Defaulting Lenders and/or cash collateral will be provided by the
Borrower in accordance with Section 2.20(d), and LC Exposure related to any newly issued or increased Letter of
Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.20(d)(i) (and such
Defaulting Lender shall not participate therein).
If (i) a Bankruptcy Event or a Bail-In Action with respect to a Lender Parent shall occur following
the date hereof and for so long as such event shall continue or (ii) any Issuing Bank has a good faith belief that any
Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender
commits to extend credit, no Issuing Bank shall be required to issue, amend or increase any Letter of Credit,
unless the Issuing Banks shall have entered into arrangements with the Borrower or such Lender, satisfactory to
such Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder.
In the event that each of the Administrative Agent, the Borrower and each Issuing Bank agrees that
a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then
the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on
such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent
shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable
Percentage.
SECTION 2.21.Exchange Rates.
(a)
No later than 1:00 P.M. (New York City time) on each Revaluation Date, the
Administrative Agent shall determine the Exchange Rate as of such Revaluation Date with respect to each
applicable Alternative Currency, provided, that upon receipt of a Borrowing Request pursuant to Section 2.03, the
Administrative Agent shall determine the Exchange Rate with respect to the relevant Alternative Currency on the
related Revaluation Date (it being acknowledged and agreed that the Administrative Agent shall use such
Exchange Rate for the purposes of determining compliance with Section 2.01 with respect to such Borrowing
Request). The Exchange Rates so determined shall become effective on the relevant Revaluation Date, shall
remain effective until the next succeeding Revaluation Date and shall for all purposes of this Agreement be the
Exchange Rates employed in converting any amounts between Dollars and any Alternative Currency.
(b)
No later than 5:00 P.M. (New York City time) on each Revaluation Date, the
Administrative Agent shall determine the aggregate amount of the Dollar Equivalents of the LC Exposure
denominated in any Alternative Currency then outstanding.
(c)
of an Exchange Rate hereunder.
The Administrative Agent shall promptly notify the Borrower of each determination
SECTION 2.22.Increase in Commitment.
(a)
The Borrower may, at its option any time before the Maturity Date, seek to increase
the Commitments (any such increase, a “Commitment Increase”) upon written notice to the Administrative
Agent; provided that, the aggregate principal amount of all Commitment Increases shall not exceed $250,000,000.
(b)
Any such notice delivered to the Administrative Agent in connection with a
Commitment Increase may be delivered at a time when no Default or Event of Default has occurred and is
continuing and shall specify (i) the amount of such Commitment Increase (which shall not be less than
$50,000,000 (unless otherwise agreed by the Administrative Agent in its reasonable discretion) or, if less, the
maximum amount of Commitment Increase remaining to be established hereunder) sought by the Borrower, (ii)
the date (each, an “Increased Amount Date”) on which the Borrower proposes that such Commitment Increase
shall be effective, which shall be a date not less than ten Business Days after the date on which such notice is
delivered to the Administrative Agent (unless otherwise agreed by the Administrative Agent in its reasonable
discretion) and (iii) the identity of each Incremental Lender to whom the Borrower proposes any portion of such
Commitment Increase be allocated and the amounts of such allocations. The Administrative Agent, subject to the
consent of the Borrower (which shall not be unreasonably withheld) may allocate the Commitment Increase
(which may be declined by any Lender (in its sole discretion)) on either a ratable basis to the Lenders or on a non
pro-rata basis to one or more Lenders and/or other Persons (other than Ineligible Institutions) reasonably
acceptable to each of the Administrative Agent, each Issuing Bank and the Borrower which have expressed a
desire to accept the Commitment Increase. The Administrative Agent will then notify each existing Lender and
Incremental Lender of such revised allocations of the Commitments, including the desired increase. No
Commitment Increase shall become effective until each of the Incremental Lenders extending such Commitment
Increase and the Borrower shall have delivered to the Administrative Agent a document in form reasonably
satisfactory to the Administrative Agent pursuant to which any such Incremental Lender states the amount of its
Commitment Increase and agrees to assume and accept the obligations and rights of a Lender hereunder, and the
Borrower accepts such new Commitments.
(c)
Notwithstanding the foregoing, no Commitment Increase shall be established unless
(i) no Default or Event of Default shall exist on such Increased Amount Date before or after giving effect to such
Commitment Increase; (ii) all fees and expenses, if any, owing in respect of such increase to the Administrative
Agent and the Lenders will have been paid; (iii) the Borrower shall be in pro forma compliance with each of the
covenants set forth in Section 6.07 and 6.08 as of the last day of the most recently ended Test Period after giving
effect to the making of any Revolving Loans pursuant to such Commitment Increase on the effective date and
other customary and appropriate pro forma adjustment events, including any acquisitions or dispositions after the
beginning of the relevant Test Period but on or prior to or simultaneous with the establishment of such
Commitment Increase; and (iv) the Borrower shall deliver or cause to be delivered any customary legal opinions
or other customary closing documents reasonably requested by the Administrative Agent in connection with any
such Commitment Increase.
(d)
Upon the effectiveness of any Commitment Increase of any Incremental Lender that
is not already a Lender pursuant to this Section 2.22(d), (i) such Incremental Lender shall be deemed to be a
“Lender” hereunder, and henceforth shall be entitled to all the rights of, and benefits accruing to, Lenders
hereunder and shall be bound by all agreements, acknowledgements and other obligations of Lenders hereunder
and (ii) Schedule 2.01A hereto shall be deemed to have been amended to reflect the Commitment of such
Incremental Lender. After giving effect to any Commitment Increase, all Loans and all such other credit exposure
shall be held ratably by the Lenders in proportion to their respective Commitments, as revised to reflect the
increase in the Commitments. The terms of any such Commitment Increase and the extensions of credit made
pursuant thereto shall be identical to those of the other Commitments and the extensions of credit made pursuant
thereto. Each Commitment Increase shall be deemed for all purposes a Commitment and each Loan made
thereunder shall be deemed, for all purposes, a Loan. The Administrative Agent may elect or decline to arrange
the increase in Commitment sought by the Borrower but is under no obligation to arrange or consummate any such
increase. The Borrower will cooperate with the Administrative Agent in such efforts.
(e)
In connection with any increase in the Commitments under this Section 2.22, the
Administrative Agent and the Borrower may, without the consent of any Lender, effect such technical amendments
to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the
Administrative Agent, to give effect to the provisions of this Section 2.22; provided that the Administrative
Agent shall post such amendment to the Lenders (which may be posted to an Approved Electronic Platform)
reasonably promptly after the effectiveness thereof.
ARTICLE III
Representations and Warranties
date the representations and warranties are required or deemed to be made pursuant to this Agreement, that:
The Borrower represents and warrants to the Lenders on the Effective Date and as of each other
SECTION 3.01.Organization; Powers. Each Loan Party is duly organized or formed, validly
existing and in good standing (to the extent such concept is applicable in the relevant jurisdiction) under the laws
of the jurisdiction of its organization or formation, has all requisite power and authority to carry on its business as
now conducted and is qualified to do business in, and is in good standing (to the extent such concept is applicable
in the relevant jurisdiction) in, every jurisdiction where such qualification is required, except, in each case, where
the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.02.
Authorization; Enforceability. The Transactions are within the Borrower’s
corporate or other organizational powers and have been duly authorized by all necessary corporate or other
organizational action. This Agreement has been duly executed and delivered by the Borrower and constitutes, and
each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of the Borrower or such Loan Party, as the case may be,
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03.
Governmental Approvals; No Conflicts. The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except
(i) any reports required to be filed by the Borrower with the SEC pursuant to the Securities Exchange Act of 1934,
(ii) those that may be required from time to time in the ordinary course of business that may be required to comply
with certain covenants contained in the Loan Documents or (iii) such as have been obtained or made and are in
full force and effect, (b) will not violate the charter, by-laws or other organizational documents of the Borrower or
any other Loan Party, (c) will not violate any applicable law or regulation of the Borrower or any other Loan Party
or any order of any Governmental Authority, (d) will not violate, terminate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any other Loan Party or its assets (any
such term, covenant, condition or provision, a “Contractual Requirement”) other than any such breach, default,
termination or creation or imposition of Lien and (e) will not result in the creation or imposition of, or the
requirement to create, any Lien on any asset of the Borrower or any other Loan Party, except in the case of clauses
(a), (c), (d) and (e) above for any such violations or defaults that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.04.
Financial Condition; No Material Adverse Effect.
(a)
The Borrower has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows as of and for the fiscal years ended December 31,
2019 and December 31, 2020, reported on by Ernst & Young LLP, independent public accountants, certified by its
chief financial officer. Such financial statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to normal year-end audit adjustments and the absence of certain
footnotes.
Borrower and its Subsidiaries, taken as a whole.
(b)
Since December 31, 2020, there has been no Material Adverse Effect on the
SECTION 3.05.
Properties.
(a)
Each Loan Party has good title to, or valid leasehold interests in, all its real and
personal property material to its business, except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for their intended purposes or where the
failure to have such title or interest would not reasonably be expected to have a Material Adverse Effect.
(b)
Each Loan Party owns, or is licensed to use, all trademarks, trade names,
copyrights, patents and other intellectual property material to its business, and the use thereof by such Loan Party,
to the best of knowledge of the Borrower, does not infringe upon the rights of any other Person, except as would
not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06.
Litigation and Environmental Matters.
(a)
There are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrower, threatened in writing against or
affecting the Borrower or any other Loan Party (i) as to which there is a reasonable expectation of an adverse
determination and that, if adversely determined, would reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters or as disclosed in filings made by the
Borrower with the SEC on or before the date hereof) or (ii) that involve this Agreement or the Transactions.
(b)
Except for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, neither
the Borrower nor any of other Loan Parties (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) to the
knowledge of the Borrower, have become subject to any Environmental Liability, (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
(c)
Since the date of this Agreement, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect, except as disclosed in filings made by the Borrower with the SEC on or before the date
hereof.
SECTION 3.07.
Compliance with Laws and Agreements. Each of the Loan Parties are in
compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property
and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do
so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
SECTION 3.08.
Investment Company Status. No Loan Party is an “investment company” as
SECTION 3.09.
Taxes. Each Loan Party has timely filed or caused to be filed all Tax returns
and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party,
as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10.
ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur,
would reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting
Standards Codification No. 715) did not, as of the date of the most recent financial statements reflecting such
amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards Codification No. 715) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans, except in each
case as would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.11.
Disclosure. Neither the Lender Presentation, the Projections nor any of the
other reports, financial statements, certificates or other written factual information (other than Projections,
forward-looking statements and information of a general economic or industry nature) furnished by or on behalf of
the Borrower or any other Loan Party to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so
furnished), when taken as a whole, contains as of the date such reports, financial statements, certificates or other
written information were so furnished, any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were made, not
materially misleading; provided, that with respect to projected financial information and other forward-looking
statements (including the Projections), the Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time; it being recognized by the Lenders that such
projections and other forward-looking statements are as to future events and are not to be viewed as facts and that
actual results during the period or periods covered by any such projections or other forward-looking statements
may differ significantly from the projected results and such differences may be material.
SECTION 3.12.
Anti-Corruption Laws and Sanctions. The Borrower has implemented and
maintains in effect policies and procedures reasonably designed to promote compliance by the Borrower, its
Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws, Anti-
Money Laundering Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their respective officers
and directors and to the knowledge of the Borrower its employees and agents, are in compliance with applicable
Anti-Corruption Laws, Anti-Money Laundering Laws and applicable Sanctions in all material respects. None of
(a) the Borrower, any Subsidiary, any of their respective directors or officers or to the knowledge of the Borrower
or such Subsidiary, employees, or (b) to the knowledge of the Borrower, any agent of the Borrower or any
Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is
a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or the Transactions will violate any Anti-
Corruption Law, Anti-Money Laundering Laws or applicable Sanctions.
SECTION 3.13.
Plan Assets; Prohibited Transactions. None of the Borrower or any of its
Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and,
assuming no “plan assets” are used by any Lender in making of any Loan and the issuance of any Letter of Credit
hereunder, neither the execution, delivery nor performance of the transactions contemplated under this Agreement,
including the making of any Loan and the issuance of any Letter of Credit hereunder, will give rise to a non-
exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
SECTION 3.14.
[Reserved].
SECTION 3.15.
Labor Matters. Except as, in the aggregate, would not reasonably be expected
to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its
Subsidiaries pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened; (b) hours worked
by and payment made to employees of Borrower and each of its Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters; and (c) all payments due from
Borrower or any of its Subsidiaries on account of employee health and welfare insurance have been paid or
accrued as a liability on the books of the relevant Person.
SECTION 3.16.
Subsidiaries. As of the Effective Date, Schedule 3.16 sets forth the name and
jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of
Equity Interests owned directly or indirectly by the Borrower.
SECTION 3.17.
Insurance. Each of the Borrower and the other Loan Parties maintains, with
financially sound and reputable insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses operating in the same or similar
locations.
SECTION 3.18.
Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used
only for general corporate purposes of the Borrower and its Subsidiaries (including Acquisitions, Investments and
Restricted Payments permitted hereunder). No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the regulations of the Federal Reserve Board, including
Regulations T, U and X. Letters of Credit will be issued only to support the Borrower and its Subsidiaries. The
Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure
that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds
of any Borrowing or Letter of Credit (x) in furtherance of an offer, payment, promise to pay, or authorization of
the payment or giving of money, or anything else of value, to any Person in violation of any applicable Anti-
Corruption Laws or Anti-Money Laundering Laws, (y) for the purpose of funding, financing or facilitating any
activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, except to the
extent permitted for a Person required to comply with applicable Sanctions, or (z) in any manner that would result
in the violation of any Sanctions applicable to any party hereto.
ARTICLE IV
Conditions
SECTION 4.01.
Effective Date. The obligations of the Lenders to make Loans and of the
Issuing Banks to issue Letters of Credit hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):
(a)
The Administrative Agent (or its counsel) shall have received (i) from each party
hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence
satisfactory to the Administrative Agent (which may include fax or electronic transmission of a signed signature
page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) from each party to the
Guarantee Agreement either (A) a counterpart of the Guarantee Agreement signed on behalf of such party or
(B) written evidence satisfactory to the Administrative Agent (which may include fax or electronic transmission of
a signed signature page of the Guarantee Agreement) that such party has signed a counterpart of the Guarantee
Agreement.
(b)
The Administrative Agent shall have received (i) a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Loan Parties and (ii) a written opinion (addressed to the Administrative
Agent and the Lenders and dated the Effective Date) of Berg Hill Greenleaf Ruscitti, Colorado counsel for the
Loan Parties, in each case, covering such other matters relating to the Loan Parties, this Agreement, the other Loan
Documents or the Transactions as the Administrative Agent shall reasonably request.
(c)
The Administrative Agent shall have received (i) a certificate of each Loan Party,
dated the Effective Date, with appropriate insertions and attachments, including the certificate of incorporation or
formation, as applicable, of each Loan Party certified by the relevant authority of the jurisdiction of organization
of such Loan Party, and (ii) a certificate of compliance, certificate of status or other applicable certificate of good
standing certificate (to the extent such concept is applicable in the relevant jurisdiction) as of a recent date for each
Loan Party from its jurisdiction of organization.
(d)
The Administrative Agent shall have received a certificate, dated the Effective Date
and signed by a Responsible Officer of the Borrower, confirming compliance with the conditions set forth in
clauses (a) and (b) of Section 4.02.
(e)
The Administrative Agent shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced at least two (2) Business Days prior to
the Effective Date, reimbursement or payment of all reasonable and documented out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder.
(f)
The Administrative Agent shall have received the audited financial statements and
the unaudited quarterly financial statements of the Borrower referred to in Section 3.04(a). The Administrative
Agent hereby acknowledges receipt of the financial statements required in this clause (f) with respect to the fiscal
years ended December 31, 2019 and December 31, 2020.
(g)
(i) The Administrative Agent shall have received, at least three (3) days prior to the
Effective Date, all documentation and other information regarding the Borrower requested in connection with
applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, to
the extent requested in writing of the Borrower at least ten (10) days prior to the Effective Date and (ii) to the
extent the Borrower qualifies as a “legal entity customer” under the requirements of the Beneficial Ownership
Regulation, at least three (3) days prior to the Effective Date, any Lender that has requested, in a written notice to
the Borrower at least ten (10) days prior to the Effective Date, a Beneficial Ownership Certification in relation to
the Borrower shall have received such Beneficial Ownership Certification (provided, that upon the execution and
delivery by such Lender of its signature page to this Agreement, the condition set forth in this clause (ii) shall be
deemed to be satisfied).
(h)
The Administrative Agent shall have received satisfactory financial statement
projections (the “Projections”) of the Borrower through and including the fiscal year ending December 31, 2025,
which shall be accompanied by a detailed description of the key assumptions used in preparing such Projections.
The Administrative Agent hereby acknowledges receipt of the Projections required in this clause (h) with respect
to the period through and including the fiscal year ending December 31, 2025.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and
such notice shall be conclusive and binding upon all parties hereto.
SECTION 4.02.
Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing (excluding, for the avoidance of doubt, any conversion or continuation of a Loan), and
of each Issuing Bank to issue, amend or extend any Letter of Credit, is subject to receipt of the request therefor in
accordance herewith and to the satisfaction of the following conditions:
(a)
The representations and warranties of the Borrower set forth in this Agreement shall
be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance,
amendment or extension of such Letter of Credit, as applicable; provided, that any representation and warranty (x)
that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after
giving effect to any qualification therein) in all respects and (y) which by its terms is made as of a specified date
shall be required to be true and correct in all material respects (or, in the case of any representation or warranty
qualified by “materiality,” “Material Adverse Effect” or similar language, in all respects) only as of such specified
date.
(b)
At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment or extension of such Letter of Credit, as applicable, no Default or Event of Default shall
have occurred and be continuing.
Each Borrowing (excluding any conversion or continuation of any existing Loan) and each
issuance, amendment or extension of a Letter of Credit shall be deemed to constitute a representation and warranty
by the Borrower on the date thereof as to the matters specified in clauses (a) and (b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on each
Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or
been terminated (or have been cash collateralized in accordance with Section 2.06), in each case, without any
pending draw, and all LC Disbursements shall have been reimbursed, the Borrower covenant and agree with the
Lenders that:
SECTION 5.01.
Financial Statements; Ratings Change and Other Information. The Borrower
will furnish to the Administrative Agent for transmission to each Lender:
(a)
within ninety (90) days after the end of each fiscal year of the Borrower
(commencing with the fiscal year ended December 31, 2021), its audited consolidated balance sheet and related
statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or
other independent public accountant firm of recognized national or regional standing reasonably acceptable to the
Administrative Agent (without a “going concern” or like qualification or exception (other than any qualification or
exception, that is expressly solely with respect to, or expressly resulting solely from, (i) an upcoming maturity date
under any Indebtedness under the Loan Documents or (ii) any actual or potential inability to satisfy a financial
maintenance covenant at such time or on a future date or in a future period) and without any qualification or
exception as to the scope of such audit in any material respects) to the effect that such consolidated financial
statements present fairly, in all material respects, the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b)
within forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year of the Borrower (commencing with the fiscal quarter ended June 30, 2021), its consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form
the figures as of the end of and for the corresponding period or periods of (or, in the case of the balance sheet, as
of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes (which certification requirement shall be deemed satisfied by the
execution by a Financial Officer of the certification required to be filed with the SEC pursuant to Item 601 of
Regulation S-K);
(c)
concurrently with any delivery of financial statements under clause (a) or (b) above,
a certificate executed by a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred
and, if a Default has occurred and, specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations of the Total Leverage Ratio demonstrating
compliance with Section 6.07, (iii) setting forth reasonably detailed calculations of the Consolidated Fixed Charge
Coverage Ratio demonstrating compliance with Section 6.08 and (iv) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04
and, if any such change has occurred, specifying the effect of such change on the financial statements
accompanying such certificate;
(d)
concurrently with any delivery of financial statements under clause (a) above,
customary management discussion and analysis of the important operational and financial developments during
the fiscal period covered by such financial statements (which shall be deemed satisfied by any management
discussion and analysis disclosed in filings made by the Borrower with the SEC); and
(e)
promptly following any request therefor, (x) such other information regarding the
operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the
terms of this Agreement, as the Administrative Agent or any Lender (through the Administrative Agent) may
reasonably request and (y) information and documentation reasonably requested by the Administrative Agent or
any Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules
and regulations, including the Patriot Act and the Beneficial Ownership Regulation; provided, that, with respect to
clause (x), none of the Borrower or any of the Subsidiaries will be required to provide information constituting
attorney work product, subject to attorney/client privilege or confidentiality obligations not created in
contemplation of this Agreement.
delivered electronically and, if so delivered, shall be deemed to have been delivered on the date on which such
Documents and information required to be delivered pursuant to Section 5.01(a), (b) or (d) may be
documents or information (i) are posted on the Borrower’s behalf on an Internet or intranet website, if any, to
which each Lender and the Administrative Agent have access (whether a commercial, third-party website or
whether made available by the Administrative Agent) or (ii) shall be available on the website of the SEC at
http://www.sec.gov.; provided, that: (A) upon written request by the Administrative Agent (or any Lender acting
through the Administrative Agent) to the Borrower, the Borrower shall deliver paper copies of such documents to
the Administrative Agent or such Lender and (B) the Borrower shall notify the Administrative Agent and each
Lender (by fax or electronic mail) of the posting of any such documents and provide to the Administrative Agent
by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have
no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for
delivery, and each Lender shall be solely responsible for timely accessing posted documents or requesting delivery
of paper copies of such document to it and maintaining its copies of such documents.
SECTION 5.02.
Notices of Material Events. The Borrower will furnish to the Administrative
Agent for distribution to each Lender prompt written notice of the following, promptly after a Responsible Officer
of the Borrower having knowledge thereof:
(a)
the occurrence of any Default or Event of Default;
(b)
the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any of its Material Subsidiaries,
including pursuant to any applicable Environmental Laws, that, if adversely determined, would reasonably be
expected to result in a Material Adverse Effect;
Events that have occurred, would reasonably be expected to result in a Material Adverse Effect;
(c)
the occurrence of any ERISA Event that, alone or together with any other ERISA
(d)
notice of any action arising under any Environmental Law or of any noncompliance
by the Borrower or any Subsidiary with any Environmental Law or any permit, approval, license or other
authorization required thereunder that, if adversely determined, would reasonably be expected to result in a
Material Adverse Effect;
(e)
or any Subsidiary;
any material change in accounting or financial reporting practices by the Borrower
(f)
[reserved];
(g)
a Material Adverse Effect; and
any other development that results in, or would reasonably be expected to result in,
(h)
any change in the information provided in the Beneficial Ownership Certification
delivered to such Lender that would result in a change to the list of beneficial owners identified in such
certification.
Documents and information required to be delivered pursuant to Section 5.02(b), (c) or (d) may be
delivered electronically and, if so delivered, shall be deemed to have been delivered on the date on which such
documents or information shall be available on the website of the SEC at http://www.sec.gov.; provided, that:
(A) upon written request by the Administrative Agent (or any Lender acting through the Administrative Agent) to
the Borrower, the Borrower shall deliver paper copies of such documents to the Administrative Agent or such
Lender and (B) the Borrower shall notify the Administrative Agent and each Lender (by fax or electronic mail) of
the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of such documents.
SECTION 5.03.
Existence; Conduct of Business. The Borrower will, and will cause each of its
Material Subsidiaries to, do or cause to be done all things reasonably necessary to preserve, renew and keep in full
force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the
conduct of its business, taken as a whole, (other than the preservation of the existence of the Borrower) except to
the extent that failure to do so, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect; provided, that the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03.
SECTION 5.04.
Payment of Taxes. The Borrower will, and will cause each of its Subsidiaries
to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.05.
[Reserved].
SECTION 5.06.
Books and Records; Inspection Rights. The Borrower will, and will cause
each of its Material Subsidiaries to, keep proper books of record and account in which full, true and correct entries
in all material respects, are made of all dealings and transactions in relation to its business and activities, and are in
conformity with GAAP. The Borrower will, and will cause each other Loan Party to, permit any representatives
designated by the Administrative Agent or any Lender, upon at least five (5) Business Days’ prior notice, to visit
and inspect, during normal business hours at reasonable times, its offices and other facilities, properties, to
examine and make extracts from its books and records, to discuss its affairs, finances and condition with its
officers and independent accountants (it being agreed that, the foregoing will be coordinated through the Borrower
and the Administrative Agent); provided, that unless an Event of Default has occurred and is continuing at the
time such inspection commences, only one visit or inspection shall be permitted in any 12 consecutive calendar
months. Notwithstanding anything to the contrary in this Section 5.06, none of the Borrower or any of its Material
Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or
discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-
financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or
their respective representatives) is prohibited by applicable law or any binding agreement not entered into in
contemplation of avoiding such inspection and disclosure rights, (iii) is subject to attorney-client or similar
privilege or constitutes attorney work product, or (iv) in respect of which the Borrower or any Material Subsidiary
owes confidentiality obligations to any third party not entered into in contemplation of avoiding such inspection
and disclosure rights.
SECTION 5.07.
Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it
or its property, except where the failure to do so, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and
procedures reasonably designed to promote compliance by the Borrower, its Subsidiaries and their respective
directors, officers, employees and agents with applicable Anti-Corruption Laws, Anti-Money Laundering Laws
and applicable Sanctions in all material respects.
SECTION 5.08.
[Reserved].
SECTION 5.09.
[Reserved].
SECTION 5.10.
Additional Guarantors. With respect to any new Material Subsidiary (other
than an Excluded Subsidiary) organized or acquired after the Effective Date by any Loan Party and any existing
Subsidiary that becomes a Material Subsidiary after the Effective Date that, promptly, but in any event within
sixty (60) days (or such longer period as may be agreed upon by the Administrative Agent), cause such Subsidiary
(a) to become a party to the Guarantee Agreement, (b) to deliver to the Administrative Agent such documents and
certificates as the Administrative Agent may reasonably request relating to the organization, existence and good
standing of such Subsidiary, the authorization of the entering into the Guarantee Agreement and the transactions
related thereto, all in form and substance satisfactory to the Administrative Agent and (c) if reasonably requested
by the Administrative Agent, to deliver to the Administrative Agent legal opinions relating to the
matters described above.
SECTION 5.11.
Line of Business.The Borrower will, and will cause any of its Subsidiaries to
refrain from entering into any business, either directly or through any Subsidiary, except for those businesses in
which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related,
similar, incidental, complementary or ancillary thereto or that is a reasonable extension thereof.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or been
terminated, in each case, without any pending draw, and all LC Disbursements shall have been reimbursed, the
Borrower covenants and agrees with the Lenders that:
to, create, incur, assume or permit to exist any Indebtedness, except:
SECTION 6.01.
Subsidiary Indebtedness. The Borrower will not permit any of its Subsidiaries
(a)
Indebtedness created under the Loan Documents;
(b)
Indebtedness existing on the date hereof and set forth on Schedule 6.01 and
refinancings, extensions, renewals or replacements of any such Indebtedness; provided, that the amount of such
Indebtedness is not increased at the time of such refinancing, extension, renewal or replacement except by an
amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized
thereunder;
(c)
(d)
Subsidiary;
Indebtedness of any Subsidiary to the Borrower or any other Subsidiary;
Guarantees by any Subsidiary of Indebtedness of the Borrower or any other
(e)
Indebtedness of any Subsidiary incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof; provided, that such Indebtedness is incurred prior to or within 270 days after such
acquisition or the completion of such construction or improvement;
(f)
Indebtedness of any Person that becomes a Subsidiary after the date hereof in
connection with a Permitted Acquisition; provided, that such initial Indebtedness exists at the time such Person
becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a
Subsidiary and any refinancings, extensions, renewals or replacements of such Indebtedness does not increase the
outstanding principal amount thereof (except by an amount equal to a reasonable premium or other reasonable
amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount
equal to any existing commitments unutilized thereunder);
(g)
Indebtedness of the Borrower or any Subsidiary as an account party in respect of
trade letters of credit;
(h)
other Indebtedness in an aggregate principal amount not to exceed the greater of
$400,000,000 and 7.5% of the Consolidated Total Assets at any time outstanding; provided that (i) such
Indebtedness shall have a final maturity no earlier than the Maturity Date, (ii) the weighted average life to
maturity of such Indebtedness shall be no shorter than that of the facility hereunder, (iii) such Indebtedness shall
have covenants no more restrictive on the Borrower and its Subsidiaries, when taken as a whole than the
covenants hereunder, as reasonably determined by the Borrower and (iv) the aggregate principal amount of
secured
Indebtedness permitted by this clause (h) shall not exceed the greater of $50,000,000 and 1.0% of the
Consolidated Total Assets; and
purposes).
(i)
Hedging Obligations (excluding Hedging Obligations entered into for speculative
SECTION 6.02.
Liens. The Borrower will not, and will not permit any of its Subsidiaries to,
create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it,
except:
(a)
Permitted Encumbrances;
(b)
any Lien on any property or asset of the Borrower or any Subsidiary existing on the
date hereof and set forth on Schedule 6.02 and any refinancings, extensions, renewals and replacements thereof;
provided, that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary, other
than improvements and accessions to the subject assets and proceeds thereof, and (ii) the amount of such Lien is
not increased at the time of such refinancing, extension, renewal or replacement except by an amount equal to a
reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection
with such refinancing and by an amount equal to any existing commitments unutilized thereunder;
(c)
any Lien existing on any property or asset prior to the acquisition thereof by the
Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the
date hereof prior to the time such Person becomes a Subsidiary; provided, that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien
shall secure only those obligations which it secures on the date of such acquisition or the date such Person
becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof (except by an amount equal to a reasonable premium or other reasonable
amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount
equal to any existing commitments unutilized thereunder);
(d)
Liens on fixed or capital assets (including Capital Lease Obligations and purchase
money Liens) acquired, constructed or improved by the Borrower or any Subsidiary; provided, that (i) such
security interests secure Indebtedness permitted by clause (e) of Section 6.01, (ii) the Indebtedness secured
thereby does not exceed 100.0% of the cost of acquiring, constructing or improving such fixed or capital assets
and (iii) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary;
(e)
Liens on cash collateral provided by the Borrower to an Issuing Bank in respect of
any cash collateralized Letter of Credit as contemplated by Section 2.06(j);
(f)
Liens on cash collateral or government securities to secure obligations under
Hedging Agreement; and
other obligations not to exceed the greater of $50,000,000 and 1.0% of the Consolidated Total Assets.
(g)
other Liens securing an aggregate principal amount of outstanding Indebtedness or
SECTION 6.03.
Fundamental Changes. (a) The Borrower will not, and will not permit any of
its Subsidiaries to, merge into or consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or otherwise Dispose of all or substantially all of the assets of the Borrower and its
Subsidiaries on a consolidated basis, or liquidate or dissolve, except that, if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge or
consolidate with or into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any
Person may merge or consolidate with or into any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, (iii) any Subsidiary may Dispose of its assets to the Borrower or to another Subsidiary and (iv) any
Subsidiary may liquidate or dissolve or if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided
that the Borrower will not merge into or consolidate with any other Person, except as permitted by clause (i)
above, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution).
fiscal quarters without providing prior written notice to the Administrative Agent.
(b) The Borrower will not change its method for determining (i) the end of its fiscal year or (ii) its
SECTION 6.04.
[Reserved].
SECTION 6.05.
Restricted Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except
(a) the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional
shares of its common stock, (b) Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests, (c) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans
or other benefit plans for management or employees of the Borrower and its Subsidiaries, (d) the Borrower and its
Subsidiaries may make any other Restricted Payment (other than Restricted Payments to repurchase Equity
Interests) not to exceed $25,000,000 in the aggregate in any fiscal year so long as no Event of Default has
occurred and is continuing prior to making such Restricted Payment or would arise after giving effect thereto;
provided that any unused amounts in any fiscal year may be carried over to the next fiscal year and (e) the
Borrower and its Subsidiaries may make any other Restricted Payment so long as (i) no Event of Default has
occurred and is continuing prior to making such Restricted Payment or would arise after giving effect thereto and
(ii) the Total Leverage Ratio does not exceed 2.50:1.00 after giving effect thereto on a pro forma basis.
SECTION 6.06.
Transactions with Affiliates. The Borrower will not, and will not permit any
of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise
acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, in
excess of $25,000,000, except
(a)
transactions at prices and on terms and conditions, when taken as a whole, not
materially less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties;
among two or more Subsidiaries) not involving any other Affiliate;
transactions between or among the Borrower and its Subsidiaries (or between or
(c)
transactions otherwise permitted under this Agreement;
incurred in connection with attending meetings of the governing body of the Borrower;
payment of directors’ fees and reimbursement of actual out-of-pocket expenses
(e)
employment arrangements with officers and other employees of the Borrower and
its Subsidiaries entered into in the ordinary course of business; and
(f)
transactions entered into in connection with any accounts receivable financing.
SECTION 6.07.
Total Leverage Ratio. The Borrower will not permit the Total Leverage Ratio
as of the last day of any Test Period to be greater than 3.00 to 1.00.
Consolidated Fixed Charge Coverage Ratio as of the last day of any Test Period to be less than 1.50 to 1.00.
SECTION 6.08.
Consolidated Fixed Charge Coverage Ratio. The Borrower will not permit the
SECTION 6.09.
[Reserved].
SECTION 6.10.
Sanctions. The Borrower will not request any Loan or Letter of Credit, and
the Loan Parties will not use, and will procure that their Subsidiaries and their respective directors, officers,
employees and agents will not use, the proceeds of the Loans or Letters of Credit (A) in furtherance of an offer,
payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any
(b)
(d)
Person in violation of any Anti-Corruption Laws, (B) to fund, finance or facilitate any activities, business or
transaction of or with any Sanctioned Person, or in any Sanctioned Country, except to the extent permitted for a
Person required to comply with applicable Sanctions, or (C) in any manner that would result in the violation of
any Sanctions applicable to any party hereto.
ARTICLE VII
Events of Default
Default”) shall occur:
SECTION 7.01.
Events of Default. If any of the following events (each, an “Event of
(a)
the Borrower shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or otherwise;
(b)
the Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in clause (a) of this Section 7.01) payable under this Agreement or any
other Loan Document, when and as the same shall become due and payable, and such failure shall continue
unremedied for a period of three (3) Business Days;
(c)
any representation or warranty made or deemed made by or on behalf of any Loan
Party in or in connection with this Agreement, any other Loan Document, or any amendment or modification
hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with this Agreement, any other Loan Document, or any
amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect
in any material respect (or, in the case of any representation or warranty qualified by “materiality,” “Material
Adverse Effect” or similar language, in any respect) when made or deemed made;
contained in Section 5.02(a), 5.03 (with respect to the Borrower’s existence) or in Article VI;
(d)
the Borrower shall fail to observe or perform any covenant, condition or agreement
(e)
the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Section 7.01) or any other
Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after notice thereof
from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);
(f)
the Borrower or any Loan Party that is a Material Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when
and as the same shall become due and payable, and such failure shall continue after any applicable grace period;
(g)
any default occurs in respect of any Material Indebtedness that results in such
Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the
giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g)(i) shall
not apply to any Indebtedness that becomes due as a result of any sale, lease, transfer or other disposition of
property or assets securing such Indebtedness;
(h)
an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Significant Subsidiary
or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part
of its assets, and, in any such case, such proceeding or petition shall continue undismissed, uncharged or
unbonded for sixty (60) consecutive days or an order or decree approving or ordering any of the foregoing shall be
entered;
(i)
the Borrower or any Significant Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution
of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this
Section 7.01, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets,
(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) take any action for the purpose of effecting any of the
foregoing;
generally to pay its debts as they become due;
(j)
the Borrower or any Material Subsidiary shall admit in writing its inability or fail
(k)
one or more judgments for the payment of money in an aggregate amount in excess
of $75,000,000 to the extent not covered by independent third-party insurance or indemnity (other than standard
deductibles) as to which the insurer or indemnitor has been notified of such judgment and has not denied coverage
thereof) shall be rendered against the Borrower, any Material Subsidiary or any combination thereof and the same
shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of
the Borrower or any Material Subsidiary to enforce any such judgment;
(l)
an ERISA Event shall have occurred that results in liability of the Borrower or any
Material Subsidiary, that when taken together with all other ERISA Events that have occurred, would reasonably
be expected to result in a Material Adverse Effect;
(m)
a Change in Control shall occur; or
(n)
any material provision of any Loan Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all
Obligations, ceases to be in full force and effect; or the Borrower or any other Person contests in writing the
validity or enforceability of any provision of any Loan Document; or the Borrower denies in writing that it has any
or further liability or obligation under any Loan Document, or purports in writing to revoke, terminate or rescind
any Loan Document.
SECTION 7.02.
Remedies Upon an Event of Default. If an Event of Default occurs (other than
an event with respect to the Borrower described in Sections 7.01(h) or 7.01(i)), and at any time thereafter during
the continuance of such Event of Default, the Administrative Agent may with the consent of the Required
Lenders, and shall at the request of the Required Lenders, by notice to the Borrower, take any or all of the
following actions, at the same or different times:
(a)
terminate any outstanding Commitments, and thereupon the Commitments shall
terminate immediately;
(b)
declare the Loans then outstanding to be due and payable in whole (or in part, in
which case any principal not so declared to be due and payable may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder and under any other Loan Document, shall
become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower;
and
(c)
require that the Borrower provides cash collateral as required in Section 2.06(j);
(d)
exercise on behalf of itself, the Lenders and the Issuing Banks all rights and
remedies available to it, the Lenders and the Issuing Banks under the Loan Documents and applicable law.
If an Event of Default described in Sections 7.01(h) or 7.01(i) occurs with respect to the Borrower,
the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with
accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder and under any other
Loan Document including any break funding payment, shall automatically become due and payable, and the
obligation of the Borrower to cash collateralize the LC Exposure as provided in clause (c) above shall
automatically become effective, in each case, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
SECTION 7.03.
Application of Payments. Notwithstanding anything herein to the contrary,
following the exercise of remedies provided for in Section 7.01 and notice thereof to the Administrative Agent by
the Borrower or the Required Lenders:
(a)
all payments received on account of the Obligations shall, subject to Section 2.20,
be applied by the Administrative Agent as follows:
(i)
first, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts payable to the Administrative Agent (including fees and disbursements and other
charges of counsel to the Administrative Agent payable under Section 9.03 and amounts pursuant to Section
2.12(c) payable to the Administrative Agent in its capacity as such);
(ii)
second, to payment of that portion of the Obligations constituting fees, expenses,
indemnities and other amounts (other than principal, reimbursement obligations in respect of LC Disbursements,
interest and Letter of Credit fees) payable to the Lenders and the Issuing Banks (including fees and disbursements
and other charges of counsel to the Lenders and the Issuing Banks payable under Section 9.03) arising under the
Loan Documents, ratably among them in proportion to the respective amounts described in this clause (ii) payable
to them;
(iii)
third, to payment of that portion of the Obligations constituting accrued and unpaid
Letter of Credit fees and charges and interest on the Loans and unreimbursed LC Disbursements, ratably among
the Lenders and the Issuing Banks in proportion to the respective amounts described in this clause (iii) payable to
them;
(iv)
fourth, (A) to payment of that portion of the Obligations constituting unpaid
principal of the Loans and unreimbursed LC Disbursements and (B) to cash collateralize that portion of LC
Exposure comprising the undrawn amount of Letters of Credit to the extent not otherwise cash collateralized by
the Borrower pursuant to Section 2.06 or 2.20, ratably among the Lenders and the Issuing Banks in proportion to
the respective amounts described in this clause (iv) payable to them; provided, that (x) any such amounts applied
pursuant to subclause (B) above shall be paid to the Administrative Agent for the ratable account of the applicable
Issuing Banks to cash collateralize Obligations in respect of Letters of Credit, (y) subject to Section 2.06 or 2.20,
amounts used to cash collateralize the aggregate amount of Letters of Credit pursuant to this clause (iv) shall be
used to satisfy drawings under such Letters of Credit as they occur and (z) upon the expiration of any Letter of
Credit (without any pending drawings), the pro rata share of cash collateral shall be distributed to the other
Obligations, if any, in the order set forth in this Section 7.03;
(v)
fifth, to the payment in full of all other Obligations, in each case ratably among the
Administrative Agent, the Lenders and the Issuing Banks based upon the respective aggregate amounts of all such
Obligations owing to them in accordance with the respective amounts thereof then due and payable; and
to the Borrower or as otherwise required by law; and
(vi)
finally, the balance, if any, after all Obligations have been indefeasibly paid in full,
(b)
if any amount remains on deposit as cash collateral after all Letters of Credit have
either been fully drawn or expired (without any pending drawings), such remaining amount shall be applied to the
other Obligations, if any, in the order set forth above.
ARTICLE VIII
The Administrative Agent
SECTION 8.01.
Authorization and Action. (a) Each Lender and each Issuing Bank hereby
irrevocably appoints the entity named as Administrative Agent in the heading of this Agreement and its successors
and assigns to serve as the administrative agent under the Loan Documents and each Lender and each Issuing
Bank authorizes the Administrative Agent to take such actions as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such
agreements and to exercise such powers as are reasonably incidental thereto. Without limiting the foregoing, each
Lender and each Issuing Bank hereby authorizes the Administrative Agent to execute and deliver, and to perform
its obligations under, each of the Loan Documents to which the Administrative Agent is a party, and to exercise all
rights, powers and remedies that the Administrative Agent may have under such Loan Documents.
(b)
As to any matters not expressly provided for herein and in the other Loan
Documents (including enforcement or collection), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the written instructions of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, pursuant to the terms in the Loan Documents), and, unless and
until revoked in writing, such instructions shall be binding upon each Lender and each Issuing Bank; provided,
however, that the Administrative Agent shall not be required to take any action that (i) the Administrative Agent
in good faith believes exposes it to liability unless the Administrative Agent receives an indemnification and is
exculpated in a manner satisfactory to it from the Lenders and the Issuing Banks with respect to such action or (ii)
is contrary to this Agreement or any other Loan Document or applicable law, including any action that may be in
violation of the automatic stay under any requirement of law relating to bankruptcy, insolvency or reorganization
or relief of debtors or that may effect a forfeiture, modification or termination of property of a Defaulting Lender
in violation of any requirement of law relating to bankruptcy, insolvency or reorganization or relief of debtors;
provided, further, that the Administrative Agent may seek clarification or direction from the Required Lenders
prior to the exercise of any such instructed action and may refrain from acting until such clarification or direction
has been provided. Except as expressly set forth in the Loan Documents, the Administrative Agent shall not have
any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower,
any Subsidiary or any Affiliate of any of the foregoing that is communicated to or obtained by the Person serving
as Administrative Agent or any of its Affiliates in any capacity. Nothing in this Agreement shall require the
Administrative Agent 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 it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(c)
In performing its functions and duties hereunder and under the other Loan
Documents, the Administrative Agent is acting solely on behalf of the Lenders and the Issuing Banks (except in
limited circumstances expressly provided for herein relating to the maintenance of the Register), and its duties are
entirely mechanical and administrative in nature. Without limiting the generality of the foregoing:
(i)
the Administrative Agent does not assume and shall not be deemed to have assumed
any obligation or duty or any other relationship as the agent, fiduciary or trustee of or for any Lender, Issuing
Bank or holder of any other obligation other than as expressly set forth herein and in the other Loan Documents,
regardless of whether a Default or an Event of Default has occurred and is continuing (and it is understood and
agreed that the use of the term “agent” (or any similar term) herein or in any other Loan Document with reference
to the Administrative Agent is not intended to connote any fiduciary duty or other implied (or express) obligations
arising under agency doctrine of any applicable law, and that such term is used as a matter of market custom and
is intended to create or reflect only an administrative relationship between contracting parties); additionally, each
Lender agrees that it will not assert any claim against the Administrative Agent based on an alleged breach of
fiduciary duty by the Administrative Agent in connection with this Agreement and/or the transactions
contemplated hereby; and
(ii)
nothing in this Agreement or any Loan Document shall require the Administrative
Agent to account to any Lender for any sum or the profit element of any sum received by the Administrative
Agent for its own account;
(d)
The Administrative Agent may perform any of its duties and exercise its rights and
powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may perform any of their respective
duties and exercise their respective rights and powers through their respective Related Parties. The exculpatory
provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent
and any such sub-agent, and shall apply to their respective activities pursuant to this Agreement. The
Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agent except to the
extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the
Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agent.
(e)
None of any Documentation Agent nor any Arranger shall have obligations or
duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability
hereunder or thereunder in such capacity, but all such persons shall have the benefit of the indemnities provided
for hereunder.
(f)
In case of the pendency of any proceeding with respect to any Loan Party under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, the
Administrative Agent (irrespective of whether the principal of any Loan or any reimbursement obligation in
respect of any LC Disbursement shall then be due and payable as herein expressed or by declaration or otherwise
and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be
entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(i)
to file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, LC Disbursements and all other Obligations that are owing and unpaid and to
file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing
Banks and the Administrative Agent (including any claim under Sections 2.12, 2.13, 2.15, 2.17 and 9.03) allowed
in such judicial proceeding; and
(ii)
to collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any
such proceeding is hereby authorized by each Lender and each Issuing Bank to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such
payments directly to the Lenders or the Issuing Banks, to pay to the Administrative Agent any amount due to it, in
its capacity as the Administrative Agent, under the Loan Documents (including under Section 9.03). Nothing
contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or
adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lender or Issuing Bank or to authorize the
Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.
(g)
The provisions of this Article are solely for the benefit of the Administrative Agent,
the Lenders and the Issuing Banks, and, except solely to the extent of the Borrower’s rights to consent pursuant to
and subject to the conditions set forth in this Article, none of the Borrower or any Subsidiary, or any of their
respective Affiliates, shall have any rights as a third party beneficiary under any such provisions.
SECTION 8.02.
Administrative Agent’s Reliance, Indemnification, Etc.
(a)
Neither the Administrative Agent nor any of its Related Parties shall be (i) liable to
any Lender for any action taken or omitted to be taken by such party, the Administrative Agent or any of its
Related Parties under or in connection with this Agreement or the other Loan Documents (x) with the consent of
or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary,
or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in
the Loan Documents) or (y) in the absence of its own gross negligence or willful misconduct (such absence to be
presumed unless otherwise determined by a court of competent jurisdiction by a final and non-appealable
judgment) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or
warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to or provided for in, or received by
the Administrative Agent under or in connection with, this Agreement or any other Loan Document (including, for
the avoidance of doubt, in connection with the Administrative Agent’s reliance on any Electronic Signature
transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed
signature page) or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder
or thereunder.
(b)
The Administrative Agent shall be deemed not to have knowledge of any (i) notice
of any of the events or circumstances set forth or described in Section 5.02 unless and until written notice thereof
stating that it is a “notice under Section 5.02” in respect of this Agreement and identifying the specific clause
under said Section is given to the Administrative Agent by the Borrower, or (ii) notice of any Default or Event of
Default unless and until written notice thereof (stating that it is a “notice of Default” or a “notice of an Event of
Default”) is given to the Administrative Agent by the Borrower, a Lender or an Issuing Bank. Further, the
Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate,
report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth in any Loan Document or the occurrence of
any Default or Event of Default, (iv) the sufficiency, validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth
in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items (which on their face
purport to be such items) expressly required to be delivered to the Administrative Agent or satisfaction of any
condition that expressly refers to the matters described therein being acceptable or satisfactory to the
Administrative Agent. Notwithstanding anything herein to the contrary, the Administrative Agent shall not be
liable for, or be responsible for any Liabilities, cost or expense suffered by the Borrower, any Subsidiary, any
Lender or any Issuing Bank as a result of, any determination of the Revolving Credit Exposure, any of the
component amounts thereof or any portion thereof attributable to each Lender or Issuing Bank, or any Exchange
Rate or Dollar Equivalent.
(c)
Without limiting the foregoing, the Administrative Agent (i) may treat the payee of
any promissory note as its holder until such promissory note has been assigned in accordance with Section 9.04,
(ii) may rely on the Register to the extent set forth in Section 9.04(b), (iii) may consult with legal counsel
(including counsel to the Borrower), independent public accountants and other experts selected by it, and shall not
be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts, (iv) makes no warranty or representation to any Lender or Issuing Bank and shall
not be responsible to any Lender or Issuing Bank for any statements, warranties or representations made by or on
behalf of any Loan Party in connection with this Agreement or any other Loan Document, (v) in determining
compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its
terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, may presume that such condition is
satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the
contrary from such Lender or Issuing Bank sufficiently in advance of the making of such Loan or the issuance of
such Letter of Credit and (vi) shall be entitled to rely on, and shall incur no liability under or in respect of this
Agreement or any other Loan Document by acting upon, any notice, consent, certificate or other instrument or
writing (which writing may
be a fax, any electronic message, Internet or intranet website posting or other distribution) or any statement made
to it orally or by telephone and believed by it to be genuine and signed or sent or otherwise authenticated by the
proper party or parties (whether or not such Person in fact meets the requirements set forth in the Loan Documents
for being the maker thereof).
SECTION 8.03.
Posting of Communications.
(a)
The Borrower agree that the Administrative Agent may, but shall not be obligated
to, make any Communications available to the Lenders and the Issuing Banks by posting the Communications on
IntraLinks™, DebtDomain, SyndTrak, ClearPar or any other electronic platform chosen by the Administrative
Agent to be its electronic transmission system (the “Approved Electronic Platform”).
(b)
Although the Approved Electronic Platform and its primary web portal are secured
with generally-applicable security procedures and policies implemented or modified by the Administrative Agent
from time to time (including, as of the Effective Date, a user ID/password authorization system) and the Approved
Electronic Platform is secured through a per-deal authorization method whereby each user may access the
Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders, each of the Issuing Banks and the
Borrower acknowledges and agrees that the distribution of material through an electronic medium is not
necessarily secure, that the Administrative Agent is not responsible for approving or vetting the representatives or
contacts of any Lender that are added to the Approved Electronic Platform, and that there may be confidentiality
and other risks associated with such distribution. Each of the Lenders, each of the Issuing Banks and the Borrower
hereby approves distribution of the Communications through the Approved Electronic Platform and understands
and assumes the risks of such distribution.
(c)
THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS
ARE PROVIDED “AS IS” AND “AS AVAILABLE”. THE APPLICABLE PARTIES (AS DEFINED BELOW)
DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE
ADEQUACY OF THE APPROVED ELECTRONIC PLATFORM AND EXPRESSLY DISCLAIM LIABILITY
FOR ERRORS OR OMISSIONS
IN THE APPROVED ELECTRONIC PLATFORM AND THE
COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS, IS MADE BY THE APPLICABLE PARTIES IN CONNECTION WITH THE COMMUNICATIONS
OR THE APPROVED ELECTRONIC PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE
AGENT, ANY ARRANGER, ANY DOCUMENTATION AGENT OR ANY OF THEIR RESPECTIVE
RELATED PARTIES (COLLECTIVELY, “APPLICABLE PARTIES”) HAVE ANY LIABILITY TO ANY
LOAN PARTY, ANY LENDER, ANY ISSUING BANK OR ANY OTHER PERSON OR ENTITY FOR
DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR
OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE AGENT’S
INTERNET OR THE APPROVED
TRANSMISSION OF COMMUNICATIONS THROUGH THE
ELECTRONIC PLATFORM.
“Communications” means, collectively, any notice, demand, communication, information,
document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the
transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing
Bank by means of electronic communications pursuant to this Section, including through an Approved Electronic
Platform.
(d)
Each Lender and each Issuing Bank agrees that notice to it (as provided in the next
sentence) specifying that Communications have been posted to the Approved Electronic Platform shall constitute
effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender and
Issuing Bank agrees (i) to notify the Administrative Agent in writing (which could be in the form of electronic
communication) from time to time of such Lender’s or Issuing Bank’s (as applicable) email address to which the
foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such
email address.
(e)
Each of the Lenders, each of the Issuing Banks and the Borrower agrees that the
Administrative Agent may, but (except as may be required by applicable law) shall not be obligated to, store the
Communications on the Approved Electronic Platform in accordance with the Administrative Agent’s generally
applicable document retention procedures and policies.
(f)
Nothing herein shall prejudice the right of the Administrative Agent, any Lender or
any Issuing Bank to give any notice or other communication pursuant to any Loan Document in any other manner
specified in such Loan Document.
SECTION 8.04.
The Administrative Agent Individually. With respect to its Commitment,
Loans, Letter of Credit Commitments and Letters of Credit, the Person serving as the Administrative Agent shall
have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities
as and to the extent set forth herein for any other Lender or Issuing Bank, as the case may be. The terms “Issuing
Banks”, “Lenders”, “Required Lenders” and any similar terms shall, unless the context clearly otherwise indicates,
include the Administrative Agent in its individual capacity as a Lender, Issuing Bank or as one of the Required
Lenders, as applicable. The Person serving as the Administrative Agent and its Affiliates may accept deposits
from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of banking, trust or other business with, the Borrower, any Subsidiary or any
Affiliate of any of the foregoing as if such Person was not acting as the Administrative Agent and without any
duty to account therefor to the Lenders or the Issuing Banks.
SECTION 8.05.
Successor Administrative Agent.
(a)
The Administrative Agent may resign at any time by giving thirty (30) days’ prior
written notice thereof to the Lenders, the Issuing Banks and the Borrower, whether or not a successor
Administrative Agent has been appointed. Upon receipt of any such notice of resignation, the Required Lenders
shall have the right, subject to the consent of the Borrower, to appoint a successor Administrative Agent; provided
that in no event shall any such successor Administrative Agent be a Defaulting Lender. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such
appointment, within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor
Administrative Agent, which shall be a bank with an office in New York, New York or an Affiliate of any such
bank. In either case, such appointment shall be subject to the prior written approval of the Borrower (which
approval may not be unreasonably withheld and shall not be required while an Event of Default has occurred and
is continuing). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative
Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers,
privileges and duties of the retiring Administrative Agent. Upon the acceptance of appointment as Administrative
Agent by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. Prior to any retiring Administrative Agent’s
resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be
reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the
Loan Documents.
(b)
Notwithstanding clause (a) of this Section, in the event no successor Administrative
Agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the
retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice
of the effectiveness of its resignation to the Lenders, the Issuing Banks and the Borrower, whereupon, on the date
of effectiveness of such resignation stated in such notice, (i) the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder and under the other Loan Documents and (ii) the Required Lenders shall
succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative
Agent; provided, that (A) all payments required to be made hereunder or under any other Loan Document to the
Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly
to such Person and (B) all notices and other communications required or contemplated to be given or made to the
Administrative Agent shall directly be given or made to each Lender and each Issuing Bank. Following the
effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article
VIII and Section 9.03, as well as any exculpatory, reimbursement and indemnification provisions set forth in any
other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the
retiring Administrative Agent was acting as Administrative Agent.
SECTION 8.06.
Acknowledgements of Lenders and Issuing Banks. (a) Each Lender represents
that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and that
it has, independently and without reliance upon the Administrative Agent, any Arranger, any Documentation
Agent or any other Lender, or any of the Related Parties of any of the foregoing, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement
as a Lender, and to make, acquire or hold Loans hereunder. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent, any Arranger, any Documentation Agent or
any other Lender, or any of the Related Parties of any of the foregoing, and based on such documents and
information (which may contain material, non-public information within the meaning of the United States
securities laws concerning the Borrower and their Affiliates) as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other
Loan Document or any related agreement or any document furnished hereunder or thereunder.
(b)
Each Lender, by delivering its signature page to this Agreement on the Effective
Date, or delivering its signature page to an Assignment and Assumption or any other Loan Document pursuant to
which it shall become a Lender hereunder, shall be deemed to have acknowledged receipt of, and consented to and
approved, each Loan Document and each other document required to be delivered to, or be approved by or
satisfactory to, the Administrative Agent or the Lenders on the Effective Date or the effective date of any such
Assignment and Assumption or any other document pursuant to which it shall have become a Lender hereunder.
(c)
(i) Each Lender and each Issuing Bank hereby agrees that (x) if the Administrative
Agent notifies such Lender or such Issuing Bank, as applicable, that the Administrative Agent has determined in
its sole discretion that any funds received by such Lender or such Issuing Bank, as applicable, from the
Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal,
interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such
Lender or such Issuing Bank (whether or not known to such Lender or such Issuing Bank), and demands the return
of such Payment (or a portion thereof), such Lender or such Issuing Bank shall promptly, but in no event later than
one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or portion
thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each
day from and including the date such Payment (or portion thereof) was received by such Lender or such Issuing
Bank to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules on interbank compensation
from time to time in effect, and (y) to the extent permitted by applicable law, such Lender and such Issuing Bank
shall not assert, and hereby waives, as to the Administrative Agent, any claim, counterclaim, defense or right of
set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the
return of any Payments received, including without limitation any defense based on “discharge for value” or any
similar doctrine. A notice of the Administrative Agent to any Lender or any Issuing Bank under this Section
8.06(c) shall be conclusive, absent manifest error.
(ii) Each Lender and each Issuing Bank hereby further agree that if it receives a Payment from the
Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that
specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such
Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on
notice, in each such case, that an error has been made with respect to such Payment. Each Lender and each
Issuing Bank agree that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may
have been sent in error, such Lender or such Issuing Bank, as applicable, shall promptly notify the Administrative
Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event
later than one Business Day thereafter, return to the Administrative Agent the amount of any such Payment (or
portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect
of each day from and including the date such Payment (or portion thereof) was received by such Lender or such
Issuing Bank to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and
a rate determined by the Administrative Agent in accordance with banking industry rules on interbank
compensation from time to time in effect.
(iii) The Borrower and each other Loan Party hereby agrees that (x) in the event an erroneous
Payment (or portion thereof) are not recovered from any Lender or any Issuing Bank that has received such
Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such
Lender or such Issuing Bank with respect to such amount and (y) an erroneous Payment shall not pay, prepay,
repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party except, in
each case, to the extent such erroneous Payment is, and solely with respect to the amount of such erroneous
Payment that is, comprised of funds of the Borrower or any other Loan Party.
(iv) Each party’s obligations under this Section 8.06(c) shall survive the resignation or replacement
of the Administrative Agent or any transfer of rights or obligations by, or the replacement of, a Lender, an Issuing
Bank, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations under any
Loan Document.
SECTION 8.07.
Guarantee Matters. Except with respect to the exercise of setoff rights in
accordance with Section 9.08 or with respect to a Lender’s right to file a proof of claim in an insolvency
proceeding, no Lender shall have any right individually to enforce any Guarantee of the Obligations, it being
understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by
the Administrative Agent on behalf of the Lenders in accordance with the terms thereof.
SECTION 8.08.
[Reserved].
SECTION 8.09.
Certain ERISA Matters.
(a)
Each Lender (x) represents and warrants, as of the date such Person became a
Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date
such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, and each Arranger
and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any
other Loan Party, that at least one of the following is and will be true:
(i)
such Lender is not using “plan assets” (within the meaning of the Plan Asset
Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the
Commitments,
(ii)
the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class
exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60
(a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class
exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class
exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption
for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s
entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the
Commitments and this Agreement,
(iii)
(A) such Lender is an investment fund managed by a “Qualified Professional Asset
Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the
investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the
Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of
and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the
requirements of subsections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender,
the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into,
participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this
Agreement, or
between the Administrative Agent, in its sole discretion, and such Lender.
(iv)
such other representation, warranty and covenant as may be agreed in writing
(b)
In addition, unless subclause (i) in the immediately preceding clause (a) is true with
respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in
subclause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the
date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender
party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative
Agent, and each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit
of the Borrower or any other Loan Party, that none of the Administrative Agent, or any Arranger, any
Documentation Agent or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender
(including in connection with the reservation or exercise of any rights by the Administrative Agent under this
Agreement, any Loan Document or any documents related to hereto or thereto).
(c)
The Administrative Agent, and each Arranger and Documentation Agent hereby
informs the Lenders that each such Person is not undertaking to provide investment advice or to give advice in a
fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial
interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest
or other payments with respect to the Loans, the Letters of Credit, the Commitments, this Agreement and any
other Loan Documents (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the
Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or
the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions
contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement
fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent fees or collateral
agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate
transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other
early termination fees or fees similar to the foregoing.
ARTICLE IX
Miscellaneous
SECTION 9.01.
Notices.
(a)
Except in the case of notices and other communications expressly permitted to be
given by telephone (and subject to clause (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 fax or electronic mail, as follows:
(i) if to the Borrower, to the Borrower at:
Chipotle Mexican Grill, Inc. 610
Newport Center DriveNewport Beach, CA 92660
Attention: Jack Hartung, Chief Financial Officer
Email: JHartung@chipotle.com
(ii) if to the Administrative Agent, to it at:
JPMorgan Chase Bank, N.A.
10 S Dearborn St.
Chicago, IL 60603
Attention: Alexis Johnson
Facsimile: 844-490-5663
Email:
Alexis.Johnson@chase.com and Jpm.agency.cri@jpmorgan.com
(iii) if to an Issuing Bank, to it at, in the case of JPMorgan Chase Bank, N.A.:
JPMorgan Chase Bank, N.A.
10 S Dearborn St.
Chicago, IL 60603
Attention:
Facsimile:
Email:
LC Team
214-307-6874
Chicago.LC.Agency.Activity.Team@jpmchase.com; and
(iv) if to any other Lender, to it at its address (or fax number or electronic mail address) set forth in
its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when
sent (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 Approved
Electronic Platforms, to the extent provided in clause (b) below, shall be effective as provided in said clause (b).
(b)
Notices and other communications to the Lenders and the Issuing Banks hereunder
may be delivered or furnished by using Approved Electronic Platforms pursuant to procedures approved by the
Administrative Agent; provided, that the foregoing shall not apply to notices pursuant to Article II unless
otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided, that approval of such procedures may be limited
to particular notices or communications.
(c)
Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available,
return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address
as described in the foregoing clause (i), of notification that such notice or communication is available and
identifying the website address therefor; provided, that for both clauses (i) and (ii) above, if such notice, email or
other communication is not sent during the normal business hours of the recipient, such notice or communication
shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.
Any party hereto may change its address or fax number for notices and other
communications hereunder by notice to the other parties hereto.
SECTION 9.02.
Waivers; Amendments.
exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise
No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in
(d)
(a)
of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies
of the Administrative Agent, the Issuing Banks and the Lenders hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent
to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by
clause (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of
a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.
(b)
Subject to Section 2.14(b) and Section 9.02(c) below, neither this Agreement nor
any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent
with the consent of the Required Lenders; provided, that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC
Disbursement or reduce the rate of interest thereon (other than interest accruing pursuant to Section 2.13(d) or a
waiver thereof), or reduce any fees payable hereunder, without the written consent of each Lender affected
thereby; provided that any modification, waiver or amendment to the financial covenant definitions or financial
ratios or any component thereof or the waiver of any other covenant shall not constitute an reduction of interest or
fees payable hereunder, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon (other than interest accruing pursuant to Section 2.13(d) or a
waiver thereof), or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.09(c) or 2.18(b) or (c) in a manner that would alter the ratable reduction of
Commitments or the pro rata sharing of payments required thereby, without the written consent of each Lender, (v)
change the payment waterfall provisions of Section 2.20(b) or 7.03 without the written consent of each Lender,
(vi) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder
or make any determination or grant any consent hereunder, without the written consent of each Lender or (vii)
release all or substantially all of the Guarantors from their obligations under the Guarantee Agreement (other than
pursuant to Section 9.19 hereof), in each case, without the written consent of each Lender; provided, further, that
no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the
Issuing Banks hereunder without the prior written consent of the Administrative Agent or the Issuing Banks, as the
case may be; and provided, further, that no such agreement shall amend or modify the provisions of Section 2.06
without the prior written consent of the Administrative Agent and the Issuing Banks. Notwithstanding the
foregoing, no consent with respect to any amendment, waiver or other modification of this Agreement shall be
required of any Defaulting Lender, except with respect to any amendment, waiver or other modification referred to
in clause (i), (ii) or (iii) of the first proviso of this clause (b) and then only in the event such Defaulting Lender
shall be affected by such amendment, waiver or other modification.
(c)
If the Administrative Agent and the Borrower acting together identify any
ambiguity, omission, mistake, inconsistency, typographical error or other defect in any provision of this
Agreement or any other Loan Document, then the Administrative Agent and the Borrower shall be permitted to
amend, modify or supplement such provision to cure such ambiguity, omission, mistake, inconsistency,
typographical error or other defect, and such amendment shall become effective without any further action or
consent of any other party to this Agreement.
SECTION 9.03.
Expenses; Limitation of Liability; Indemnity; etc..
(a)
Expenses. The Borrower shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, which shall be limited, in the case of legal fees
and expenses, to the reasonable and documented fees, disbursements and other charges of one primary counsel,
and, if reasonably necessary, one local counsel in each relevant jurisdiction, to such persons, taken as a whole
(and, solely in the case of an actual or potential conflict of interest where any person affected by such conflict
informs the Borrower of such conflict and thereafter retains its own counsel, one additional counsel for each
affected person, taken as a whole, and one additional local counsel for such affected person, taken as a whole, in
each relevant material jurisdiction (which may include a single firm of local counsel acting in multiple
jurisdictions)), in connection with the syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of
the provisions hereof or thereof, (ii) all reasonable and documented out-of-pocket expenses incurred by any
Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) all reasonable and documented out-of-pocket expenses incurred by the
Administrative Agent, any Issuing Bank or any Lender, including the fees, charges and disbursements of one
counsel for the Administrative Agent, any Issuing Bank or any Lender, taken as a whole, and, if reasonably
necessary, of a single local counsel and any specialist counsel in each relevant material jurisdiction and in the case
of an actual or potential conflict of interest where any person affected by such conflict informs the Borrower of
such conflict and thereafter retains its own counsel, of another primary counsel per applicable material jurisdiction
for such affected person taken as a whole) in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b)
Indemnity. The Borrower shall indemnify the Administrative Agent, each Arranger,
each Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all Liabilities and related
expenses, including expenses for any Indemnitee, which shall be limited, in the case of legal fees and expenses, to
the reasonable and documented out-of-pocket fees, disbursements and other charges of one primary counsel, and
one local counsel in each applicable jurisdiction, for the Administrative Agent, and not more than one outside
counsel, and if reasonably necessary, one local counsel in each applicable jurisdiction, for all of the other
Indemnitees taken as a whole (and, solely in the case of an actual or potential conflict of interest where any person
affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, one
additional counsel for each affected Indemnitee and one additional local counsel in each relevant material
jurisdiction (which may include a single firm of local counsel acting in multiple jurisdictions)), incurred by or
asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of or in
connection with (i) the execution or delivery of this Agreement, any other Loan Document, or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations
hereunder or thereunder or the consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by an Issuing Bank to
honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand
do not strictly comply with the terms of such Letter of Credit) or (iii) any actual or prospective claim, litigation,
investigation, arbitration or proceeding relating to any of the foregoing, whether or not such claim, litigation,
investigation, arbitration or proceeding is brought by the Borrower or any other Loan Party or its or their
respective equity holders, Affiliates, creditors or any other third-party and whether based on contract, tort or any
other theory and regardless of whether any Indemnitee is a party thereto; provided, that the foregoing indemnity
will not, as to any Indemnitee, apply to losses, claims, damages, liabilities or related expenses to the extent they
arise from (i) the willful misconduct, bad faith or gross negligence of such Indemnitee (or its Related Parties) as
determined in a final, non-appealable judgment of a court of competent jurisdiction, (ii) the breach in bad faith of
an Indemnitee’s funding obligations or any other material breach of its (or its Related Parties’) obligations
hereunder or any other Loan Document, as determined in a final, non-appealable judgment of a court of competent
jurisdiction or (iii) any disputes brought by an Indemnitee against any other Indemnitee that do not involve an act
or omission by the Borrower, its Subsidiaries or any of their respective Affiliates (other than any claims against an
Indemnitee in its capacity as the Administrative Agent or an Arranger). This Section 9.03(b) shall not apply with
respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.
(c)
Lender Reimbursement. Each Lender severally agrees to pay any amount required
to be paid by the Borrower under clause (a) or (b) of this Section 9.03 to the Administrative Agent and each
Issuing Bank, and each Related Party of any of the foregoing Persons (each, an “Agent Indemnitee”) (to the extent
not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to
their respective Applicable Percentage in effect on the date on which indemnification is sought under this Section
(or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with such Applicable Percentage immediately prior to such
date), from and against any and all Liabilities and related expenses, including the fees, charges and disbursements
of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on,
incurred by or asserted against such Agent Indemnitee in any way relating to or arising out of the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent
Indemnitee under or in connection with any of the foregoing; provided, that the unreimbursed expense or Liability
or related expense, as the case may be, was incurred by or asserted against such Agent Indemnitee in its capacity
as such; provided, further, that no Lender shall be liable for the payment of any portion of such Liabilities, costs,
expenses or disbursements that are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from such Agent Indemnitee’s gross negligence, bad faith or willful misconduct. The
agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(d)
Limitation of Liability. To the extent permitted by applicable law (i) the Borrower
shall not assert, and the Borrower hereby waives, any claim against the Administrative Agent, any Arranger, any
Documentation Agent, any Issuing Bank and any Lender, and any Related Party of any of the foregoing Persons
(each such Person being called a “Lender-Related Person”) for any Liabilities arising from the use by others of
information or other materials obtained through telecommunications, electronic or other information transmission
systems (including an Approved Electronic Platform or otherwise via the Internet) other than Liabilities that are
determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the
gross negligence, bad faith or willful misconduct of such Lender-Related Person (it being understood that all
information and materials so transmitted shall continue to be subject to the confidentiality provisions set forth
herein and in the Approved Electronic Platform), and (ii) no party hereto shall assert, and each such party hereby
waives, any Liabilities against any other party hereto, on any theory of liability, for special, indirect, exemplary,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or
thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided, that nothing in
this clause (d)(ii) shall relieve the Borrower of any obligation they may have to indemnify an Indemnitee, as
provided in this Section 9.03, against special, indirect, exemplary, consequential or punitive damages asserted
against such Indemnitee by a third party.
(e)
All amounts due under this Section 9.03 shall be payable promptly after written
demand therefor (together with reasonable documentation supporting such reimbursement request).
SECTION 9.04.Successors and Assigns.
(a)
The provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of an
Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and void), (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with this Section and (iii) as provided
by the terms of this Agreement. Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including
any Affiliate of an Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in clause (c)
of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative
Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b)
(i) Subject to the conditions set forth in clause (b)(ii) below, any Lender may assign
to one or more Persons (other than an Ineligible Institution) all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment, participations in Letters of Credit and the Loans at the
time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A)
the Borrower; provided, that the Borrower shall be deemed to have consented to an
assignment of all or a portion of the Revolving Loans and Commitments unless the Borrower shall have objected
thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice
thereof; provided, that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a
Lender, an Approved Fund or, if an Event of Default under Sections 7.01(h) or 7.01(i) with respect to the
Borrower has occurred and is continuing, any other assignee;
(B)
the Administrative Agent; provided, that no consent of the Administrative Agent
shall be required for an assignment of any Commitment to an assignee that is a Lender (other than a Defaulting
Lender) with a Commitment immediately prior to giving effect to such assignment; and
(C)
(ii)
each Issuing Bank.
Assignments shall be subject to the following additional conditions:
(A)
except in the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the
amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise
consent; provided, that no such consent of the Borrower shall be required if an Event of Default under Sections
7.01(h) or 7.01(i) with respect to the Borrower has occurred and is continuing;
(B)
each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement; provided, that this clause shall not be
construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;
(C)
the parties to each assignment shall execute and deliver to the Administrative
Agent (x) an Assignment and Assumption or (y) to the extent applicable, an agreement incorporating an
Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the
Administrative Agent and the parties to the Assignment and Assumption are participants, together with a
processing and recordation fee of $3,500; and
(D)
the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-
level information (which may contain material non-public information about the Borrower, the Loan Parties and
their Related Parties or their respective securities) will be made available and who may receive such information
in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state
securities laws.
For the purposes of this Section 9.04(b), the terms “Approved Fund” and “Ineligible Institution”
have the following meanings:
“Approved Fund” means any Person (other than a natural person) that is engaged in making,
purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its
business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.
“Ineligible Institution” means (a) a natural person, (b) a Defaulting Lender or its Lender Parent, (c)
a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or
relative(s) thereof or (d) the Borrower or any of their Affiliates; provided, that with respect to clause (c), such
company, investment vehicle or trust shall not constitute an Ineligible Institution if it (x) has not been established
for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is
not such natural person or a relative thereof, having significant experience in the business of making or purchasing
commercial loans, and (z) has assets greater than $25,000,000 and a significant part of its activities consist of
making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business.
(iii)
Subject to acceptance and recording thereof pursuant to clause (b)(iv) of this
Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to
the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in accordance with clause (c) of this Section.
(iv)
The Administrative Agent, acting for this purpose as a non-fiduciary agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal
amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and
the Borrower, the Administrative Agent, the Issuing Banks and the Lenders shall treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, any Issuing
Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v)
Upon its receipt of (x) a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee or (y) to the extent applicable, an agreement incorporating an Assignment
and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent
and the parties to the Assignment and Assumption are participants, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee
referred to in clause (b) of this Section and any written consent to such assignment required by clause (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register; provided, that if either the assigning Lender or the assignee shall have failed to
make any payment required to be made by it pursuant to Sections 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(c), the
Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the
information therein in the Register unless and until such payment shall have been made in full, together with all
accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this clause.
(c)
Any Lender may, without the consent of, or notice to, the Borrower, the
Administrative Agent or the Issuing Banks, sell participations to one or more banks or other entities (a
“Participant”), other than an Ineligible Institution, in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided, that
(A) such Lender’s obligations under this Agreement shall remain unchanged; (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations; and (C) the Borrower, the
Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or
instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided,
that such agreement or instrument may provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such
Participant. The Borrower agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and
2.17 (subject to the requirements and limitations therein, including the requirements under Sections 2.17(f) (it
being understood that the documentation required under Section 2.17(f) shall be delivered to the participating
Lender and the information)) to the same extent as if it were a Lender and had acquired its interest by assignment
pursuant to clause (b) of this Section; provided, that such Participant (A) agrees to be subject to the provisions of
Section 2.19 as if it were an assignee under clause (b) of this Section; and (B) shall not be entitled to receive any
greater payment under Section 2.15 or 2.17, with respect to any participation, than its participating Lender would
have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a
Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a
participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the
Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender; provided, that
such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on
which it enters the name and address of each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”);
provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register
(including the identity of any Participant or any information relating to a Participant’s interest in any
Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) to any Person except to
the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other
obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in
the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose
name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity
as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(d)
Any Lender may at any time pledge or assign a security interest in all or any portion
of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to
secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of
a security interest; provided, that no such pledge or assignment of a security interest shall release a Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05.Survival. All covenants, agreements, representations and warranties made by the
Borrower herein and in the other Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Documents shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may
have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on
any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or been terminated. The provisions of
Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision
hereof.
may be executed in counterparts (and by different parties hereto on different counterparts), each of
SECTION 9.06.Counterparts; Integration; Effectiveness; Electronic Execution. (a) This Agreement
which shall constitute an original, but all of which when taken together shall constitute a single contract. This
Agreement, the other Loan Documents and any separate letter agreements with respect to (i) fees payable to the
Administrative Agent and (ii) the reductions of the Letter of Credit Commitment of any Issuing Bank constitute
the entire contract among the parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts 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 the
parties hereto and their respective successors and assigns.
(b)
Delivery of an executed counterpart of a signature page of (x) this Agreement, (y)
any other Loan Document and/or (z) any document, amendment, approval, consent, information, notice
(including, for the avoidance of doubt, any notice delivered pursuant to Section 9.01), certificate, request,
statement, disclosure or authorization related to this Agreement, any other Loan Document and/or transactions
contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted
by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature
page shall be effective as delivery of a manually executed counterpart of this Agreement, such other Loan
Document or such Ancillary Document, as applicable.. The words “execution,” “signed,” “signature,” “delivery,”
and words of like import in or relating to this Agreement, any other Loan Document and/or any Ancillary
Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form
(including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual
executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually
executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may
be; provided that nothing herein shall require the Administrative Agent to accept Electronic Signatures in any
form or format without its prior written consent and pursuant to procedures approved by it; provided further,
without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept any Electronic
Signature, the Administrative Agent and each of the Lenders shall be entitled to rely on such Electronic Signature
purportedly given by or on behalf of the Borrower or any other Loan Party without further verification thereof and
without any obligation to review the appearance or form of any such Electronic Signature and (ii) upon the request
of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by a manually
executed counterpart. Without limiting the generality of the foregoing, the parties hereto, as applicable, hereby (i)
agree that, for all purposes, including without limitation, in connection with any workout, restructuring,
enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders and
the Loan Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that
reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any
other Loan Document and/or any Ancillary Document shall have the same legal effect, validity, and enforceability
as any paper original, (ii) agree that the Administrative Agent and each of the Lenders may, at its option, create
one or more copies of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an
imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s
business, and destroy the original paper document (and all such electronic records shall be considered an original
for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (iii) waive any
argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan
Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement,
such other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature
pages thereto and (iv) waive any claim against any Lender-Related Person for any Liabilities arising solely from
the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions
by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature
page, including any Liabilities arising as a result of the failure of the Borrower to use any available security
measures in connection with the execution, delivery or transmission of any Electronic Signature.
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
SECTION 9.07.Severability. Any provision of this Agreement held to be invalid, illegal or
illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions
hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08.Right of Setoff. If an Event of Default shall have occurred and be continuing, each
Lender, each Issuing Bank, and each of their respective Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held, and other obligations at any time owing, by such Lender, such
Issuing Bank or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such
Lender or such Issuing Bank or their respective Affiliates, irrespective of whether or not such Lender, Issuing
Bank or Affiliate shall have made any demand under this Agreement or any other Loan Document and although
such obligations of the Borrower may be contingent or unmatured or are owed to a branch office or Affiliate of
such Lender or such Issuing Bank different from the branch office or Affiliate holding such deposit or obligated on
such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff,
(x) all amounts so setoff shall be paid over immediately to the Administrative Agent for further application in
accordance with the provisions of Section 2.20 and, pending such payment, shall be segregated by such Defaulting
Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing
Banks, and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a
statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised
such right of setoff. The rights of each Lender, each Issuing Bank and their respective Affiliates under this Section
are in addition to other rights and remedies (including other rights of setoff) that such Lender, such Issuing Bank
or their respective Affiliates may have. Each Lender and Issuing Bank agrees to notify the Borrower and the
Administrative Agent promptly after any such setoff and application; provided, that the failure to give such notice
shall not affect the validity of such setoff and application.
SECTION 9.09.Governing Law; Jurisdiction; Consent to Service of Process.
(a)
This Agreement and the other Loan Documents shall be construed in accordance
with and governed by the law of the State of New York.
(b)
Each of the Lenders and the Administrative Agent hereby irrevocably and
unconditionally agrees that, notwithstanding the governing law provisions of any applicable Loan Document, any
claims brought against the Administrative Agent by any Lender relating to this Agreement, any other Loan
Document or the consummation or administration of the transactions contemplated hereby or thereby shall be
construed in accordance with and governed by the law of the State of New York.
(c)
Each of the parties hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New
York sitting in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of
the State of New York sitting in the Borough of Manhattan), and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions
relating hereto or thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may (and any
such claims, cross-claims or third party claims brought against the Administrative Agent or any of its Related
Parties may only) be heard and determined in such Federal (to the extent permitted by law) or New York State
court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent,
any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement
against the Borrower, any Loan Party or its properties in the courts of any jurisdiction.
(d)
Each of the parties hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying
of
venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in
any court referred to in clause (c) of this Section. 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.
(e)
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 09.10. 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 ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11.Headings. Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.
SECTION 9.12.Confidentiality. Each of the Administrative Agent, the Issuing Banks and the
Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may
be disclosed (a) to its and its Affiliates, officers, directors, employees, legal counsel, independent auditors,
professionals and other experts or agents (collectively, “Representatives”) on a “need-to-know” basis and who are
informed of the confidential nature of such Information and agree to keep Information of this type confidential on
terms similar to those contained herein (provided that such Administrative Agent, Issuing Bank or Lender shall be
responsible for the compliance of their Representatives, Affiliates and Representatives of its Affiliates with this
section), (b) upon the request or demand of any Governmental Authority having jurisdiction over the
Administrative Agent, Issuing Bank or Lender or any of their Affiliates or upon the good faith determination by
counsel that such information should be disclosed in light of ongoing oversight or review of such Administrative
Agent, Issuing Bank or Lender by any such Governmental Authority having jurisdiction over such Administrative
Agent, Issuing Bank or Lender or its Affiliates (in which case the Administrative Agent, Issuing Bank or Lender
shall, except with respect to any ordinary course audit or examination conducted by accountants or any regulatory
authority exercising examination or regulatory authority, promptly notify you, in advance, to the extent lawfully
permitted to do so), (c) in any legal, judicial, or administrative proceeding or other compulsory process or
otherwise as required by applicable law, rule or regulations or as requested by a Governmental Authority (in which
case the Administrative Agent, Issuing Bank or Lender shall, except with respect to any routine or ordinary course
audit or examination conducted by accountants or any regulatory authority exercising examination or regulatory
authority, promptly notify you, in advance, to the extent lawfully permitted to do so), (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or
any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder or under any other
Loan Document, (f) subject to an agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and their obligations, (g) on a confidential basis to (1) subject to the
Borrower’s prior approval of the Information proposed to be disclosed any rating agency in connection with rating
the Borrower or its Subsidiaries or the credit facilities provided for herein or (2) the CUSIP Service Bureau or any
similar agency in connection with the issuance and monitoring of identification numbers
with respect to the credit facilities provided for herein, (h) with the consent of the Borrower or (i) to the extent
such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis from a source
other than the Borrower. For the purposes of this Section, “Information” means all information received from the
Borrower relating to the Borrower or their business, other than any such information that is available to the
Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the
Borrower and other than information pertaining to this Agreement routinely provided by arrangers to data service
providers, including league table providers, that serve the lending industry. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered to have complied with its obligation
to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.
SECTION 9.13.Material Non-Public Information.
(a) EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN
SECTION 9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL
NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR
ITS SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES
REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL
HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE
PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
(b) ALL
INFORMATION,
INCLUDING REQUESTS FOR WAIVERS AND
AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT
PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE
SYNDICATE-LEVEL
INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC
INFORMATION ABOUT THE BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED
PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS
TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS
ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION
THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS
COMPLIANCE PROCEDURES AND APPLICABLE LAW.
SECTION 9.14.Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate
(the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding
such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the NYFRB Rate to the date of repayment, shall have been
received by such Lender.
SECTION 9.15.No Fiduciary Duty, etc.
(a)
The Borrower acknowledge and agree, and acknowledges its Subsidiaries’
understanding, that no Credit Party will have any obligations except those obligations expressly set forth herein
and in the other Loan Documents and each Credit Party is acting solely in the capacity of an arm’s length
contractual counterparty to the Borrower with respect to the Loan Documents and the transactions contemplated
herein and therein and not as a financial advisor or a fiduciary to, or an agent of, the Borrower or any other person.
The Borrower agree that they will not assert any claim against any Credit Party based on an alleged breach of
fiduciary duty by such
Credit Party in connection with this Agreement and the transactions contemplated hereby. Additionally, the
Borrower acknowledge and agree that no Credit Party is advising the Borrower as to any legal, tax, investment,
accounting, regulatory or any other matters in any jurisdiction. The Borrower shall consult with their own advisors
concerning such matters and shall be responsible for making its own independent investigation and appraisal of
the transactions contemplated herein or in the other Loan Documents, and the Credit Parties shall have no
responsibility or liability to the Borrower with respect thereto.
(b)
The Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’
understanding, that each Credit Party, together with its Affiliates, is a full service securities or banking firm
engaged in securities trading and brokerage activities as well as providing investment banking and other financial
services. In the ordinary course of business, any Credit Party may provide investment banking and other financial
services to, and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other
securities and financial instruments (including bank loans and other obligations) of, the Borrower and other
companies with which the Borrower may have commercial or other relationships. With respect to any securities
and/or financial instruments so held by any Credit Party or any of its customers, all rights in respect of such
securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its
sole discretion.
(c)
In addition, the Borrower acknowledges and agrees, and acknowledges its
Subsidiaries’ understanding, that each Credit Party and its affiliates may be providing debt financing, equity
capital or other services (including financial advisory services) to other companies in respect of which the
Borrower may have conflicting interests regarding the transactions described herein and otherwise. No Credit
Party will use confidential information obtained from the Borrower by virtue of the transactions contemplated by
the Loan Documents or its other relationships with the Borrower in connection with the performance by such
Credit Party of services for other companies, and no Credit Party will furnish any such information to other
companies. The Borrower also acknowledge that no Credit Party has any obligation to use in connection with the
transactions contemplated by the Loan Documents, or to furnish to the Borrower, confidential information
obtained from other companies.
SECTION 9.16.USA PATRIOT Act. Each Lender that is subject to the requirements of the USA
PATRIOT Act of 2001 (the “Patriot Act”) hereby notifies the Borrower that pursuant to the requirements of the
Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Patriot Act.
SECTION 9.17.Acknowledgement and Consent to Bail-In of Affected Financial Institutions
. Notwithstanding anything to the contrary in any Loan Document or in any other agreement,
arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any
Affected Financial Institution arising under any Loan Document may be subject to the Write-Down and
Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and
agrees to be bound by:
the application of any Write-Down and Conversion Powers by the applicable
Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that
is an Affected Financial Institution; and
(a)
(b)
(i)
the effects of any Bail-In Action on any such liability, including, if applicable:
a reduction in full or in part or cancellation of any such liability;
(ii)
a conversion of all, or a portion of, such liability into shares or other instruments of
ownership in such Affected Financial Institution, its parent entity, or a bridge institution that may be issued to it or
otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of
any rights with respect to any such liability under this Agreement or any other Loan Document; or
Write-Down and Conversion Powers of the applicable Resolution Authority.
(iii)
the variation of the terms of such liability in connection with the exercise of the
SECTION 9.18.Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan
Documents provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or
instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the
parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance
Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution
Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable
notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the
laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes
subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the
benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such
QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from
such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special
Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and
rights in property) were governed by the laws of the United States or a state of the United States. In the event a
Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special
Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC
or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no
greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the
Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United
States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with
respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported
QFC or any QFC Credit Support.
SECTION 9.19.Releases of Guarantees.
(a)
A Guarantor shall automatically be released and discharged in full from its
obligations under the Guarantee Agreement upon the consummation of any transaction permitted by this
Agreement as a result of which such Guarantor ceases to be a Subsidiary. In connection with any termination or
release pursuant to this Section, the Administrative Agent shall (and is hereby irrevocably authorized by each
Lender to) execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan
Party shall reasonably request to evidence such termination or release. Any execution and delivery of documents
pursuant to this Section shall be without recourse to or warranty by the Administrative Agent.
(b)
Further, the Administrative Agent may (and is hereby irrevocably authorized by
each Lender to), upon the request of the Borrower, release any Guarantor from its obligations under the Guaranty
if, as of the time such Guarantor is released and immediately after giving effect thereto, the Guaranty of such
Guarantor is not required by Section 5.10.
(c)
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of
notice to or consent of any Lender except as expressly required by Section 9.02) to take any action requested by
the Borrower having the effect of releasing any guarantee obligations (i) to the extent necessary to permit
consummation of any transaction not prohibited by any Loan Document or that has been consented to in
accordance with Section 9.02, or (ii) under the circumstances described in clause (c) below.
(d)
At such time as the Loans, the reimbursement obligations in respect of LC
Disbursements and the other obligations under the Loan Documents shall have been paid in full, the Commitments
have been terminated and no Letters of Credit shall be outstanding (or any Letters of Credit that are outstanding
shall have
been cash collateralized or backstopped in a manner reasonably acceptable to the Issuing Bank thereof), the
Guarantees and all obligations (other than those expressly stated to survive such termination) of the
Administrative Agent and each Loan Party under the Guarantee Agreement shall automatically terminate, all
without delivery of any instrument or performance of any act by any Person.
[Remainder of Page Left Intentionally Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered by their respective authorized officers as of the day and year first above written.
CHIPOTLE MEXICAN GRILL,
INC.,
as the Borrower
By
Name:
Title:
JPMORGAN CHASE BANK,
N.A.,
individually and as
Administrative Agent
By
Name:
Title:
],
[
By
Name:
Title:
SCHEDULE 2.01A
Commitments
Lender
JPMorgan Chase Bank, N.A.
Truist Bank
Fifth Third Bank, National Association
Citibank, N.A.
Bank of America, N.A.
Morgan Stanley Bank, N.A.
MUFG Union Bank, N.A
Royal Bank of Canada
Wells Fargo Bank, National Association
Commitment
$75,000,000.00
$75,000,000.00
$75,000,000.00
$75,000,000.00
$50,000,000.00
$37,500,000.00
$37,500,000.00
$37,500,000.00
$37,500,000.00
Total:
$500,000,000.00
Schedule 2.01C
Letter of Credit Commitments
Issuing Bank
Letter of Credit
Commitment
JPMorgan Chase Bank, N.A.
Truist Bank
Fifth Third Bank, National Association
Citibank, N.A.
Morgan Stanley Bank, N.A.
MUFG Union Bank, N.A
$4,000,000.00
$4,000,000.00
$4,000,000.00
$4,000,000.00
$2,000,000.00
$2,000,000.00
Total:
$20,000,000.00
Summary report:
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532
CHIPOTLE MEXICAN GRILL, INC.
EXECUTIVE OFFICER SEVERANCE PLAN
ARTICLE I
PURPOSE
Exhibit 10.25
This Chipotle Mexican Grill, Inc. Executive Officer Severance Plan (the “Plan”) was established by
the Company on February 6, 2024 (the “Effective Date”) to provide Participants with the opportunity to
receive certain severance protections for qualifying terminations of employment that are not in connection
with a change in control of the Company. The Plan, as set forth herein, is primarily intended to help retain
qualified executives, maintain a stable work environment and provide economic security to eligible
executives in the event of qualifying terminations of employment. Capitalized terms used but not otherwise
defined herein have the meanings set forth in ARTICLE II.
The Plan is intended is intended to be “a plan which is unfunded and maintained by an employer
primarily for the purpose of providing deferred compensation for a select group of management or highly
compensation employees,” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
ARTICLE II
DEFINITIONS
“Accrued Compensation” means: (i) Base Salary accrued by the Participant through, but not paid
to the Participant as of, the Qualifying Termination Date and (ii) any annual bonus under the Annual
Incentive Plan earned by the Participant for a prior year but not paid to the Participant as of the Qualifying
Termination Date.
“Administrator” means the Compensation Committee, provided that the Board in its discretion
may determine to act as Administrator under the Plan.
“Annual Incentive Plan” means the Company’s annual cash incentive bonus program.
“Base Salary” means the Participant’s annual base salary as in effect immediately prior to the
Qualifying Termination Date or, if higher, as in effect immediately prior to the occurrence of an event or
circumstance constituting Good Reason.
“Board” means the Board of Directors of the Company.
“Cause” shall have the same meaning as such term is defined under the Incentive Plan, unless
otherwise provided in a Participant’s effective employment agreement or other similar written agreement
with respect to the termination of Participant’s employment with the Company.
“Chief Executive Officer” means the Chief Executive Officer of Chipotle Mexican Grill, Inc.
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the
Code shall be deemed to include a reference to any regulations promulgated thereunder.
“Company” means Chipotle Mexican Grill, Inc., a Delaware corporation, and, except as the context
otherwise requires, its affiliates and Subsidiaries and any successor by merger, acquisition, consolidation or
otherwise that assumes the obligations of the Company under the Plan.
“Compensation Committee” means the Compensation, People and Culture Committee of the
Board.
“Effective Date” has the meaning set forth in ARTICLE I.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities and Exchange Act of 1934, as amended.
“Excise Tax” means any excise tax imposed under Section 4999 of the Code.
“Good Reason” shall have the same meaning as such term is defined under the Incentive Plan,
unless otherwise provided in a Participant’s effective employment agreement or other similar written
agreement with respect to the termination of Participant’s employment with the Company.
“Incentive Plan” shall mean the Chipotle Mexican Grill, Inc. 2022 Stock Incentive Plan or any
successor plan.
“Option” means an option to purchase shares of the Company’s common stock, $0.01 par value per
share, including stock appreciation rights that settle in shares of the Company’s common stock.
“Other Severance” has the meaning set forth in Section 3.02.
“Participant” means each individual who is an “executive officer” of the Company, within the
meaning of Rule 3b-7 under the Exchange Act, as determined immediately prior to the individual’s
termination of employment with the Company without respect to any demotion or other action that
constitutes “Good Reason,” or as otherwise determined by the Administrator.
“Plan” has the meaning set forth in ARTICLE I.
“Qualifying Termination” means the termination of a Participant’s employment either by the
Company without Cause (excluding, for the avoidance of doubt, a termination by the Company due to the
Participant’s death or disability) or due to a resignation by the Participant for Good Reason. A Participant’s
employment shall be deemed to have continued, and a Qualifying Termination shall not have occurred, upon
a transfer of the Participant’s employment between the Company and any of its Subsidiaries, or between any
two Subsidiaries of the Company.
“Qualifying Termination Date” means the date on which a Participant incurs a Qualifying
Termination.
“Release Agreement” means the Separation and General Release Agreement provided by the
Company substantially in the form attached hereto as Exhibit A.
“Section 409A” means Section 409A of the Code and the rules other guidance promulgated
thereunder.
“Severance Amount” has the meaning set forth in Section 3.01(a).
“Severance Multiple” means (i) two (2) with respect to the Chief Executive Officer and (ii) one and
one-half (1.5) with respect to each other Participant.
“Severance Period” means (i) twenty-four (24) months with respect to the Chief Executive Officer
and (ii) eighteen (18) months with respect to each other Participant.
“Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act of
1933, as amended.
“Target Annual Bonus” means, with respect to any Participant, such Participant’s annual target
bonus opportunity under the Annual Incentive Plan in effect immediately prior to such Participant’s
Qualifying Termination Date (or, in the event of the Participant’s resignation for Good Reason, the annual
target bonus opportunity in effect immediately prior to the condition giving rise to such resignation if such
annual target bonus opportunity is higher than the annual target bonus opportunity in effect immediately
prior to such Participant’s Qualifying Termination Date).
“Total Payments” has the meaning set forth in Section 5.01.
ARTICLE III
SEVERANCE
Section 3.01 Severance Following Qualifying Termination.
(a)
Severance Amount. If a Participant incurs a Qualifying Termination, then, subject to the
Participant’s execution and nonrevocation of the Release Agreement, the Company shall provide the
Participant with an amount equal to the product of the Severance Multiple and the sum of the Participant’s
(i) Base Salary and (ii) Target Annual Bonus (the “Severance Amount”). Subject to Section 8.13, the
Severance Amount shall be paid in substantially equal installments over the Severance Period, payable in
accordance with the Company’s normal payroll practices, and shall commence on the first regularly
scheduled payroll date that occurs immediately following the sixtieth (60th) day following the Qualifying
Termination Date (such date, the “Payment Commencement Date”). Notwithstanding the foregoing, the
portion of the severance amount provided under this Section 3.01 that is payable on the Payment
Commencement Date shall include a lump-sum amount equal to the portion of the severance amount that
would have been payable commencing on the Qualifying Termination Date and ending on the Payment
Commencement Date.
(b)
Pro-Rated Bonus. If a Participant incurs a Qualifying Termination, then, subject to the
Participant’s execution and nonrevocation of the Release Agreement, the Company shall provide the
Participant with an amount equal to the pro-rated portion of the Participant’s annual bonus under the Annual
Incentive Plan, based on actual performance for the year in which the Qualifying Termination Date occurs
and prorated based on the number of days the Participant was employed during the year of termination prior
to the Qualifying Termination Date divided by the total number of days in such year, paid in a single lump
sum no later than March 15th of the year immediately following the year in which the Qualifying
Termination Date occurs.
(c)
Payment in Lieu of Benefits Continuation. If a Participant incurs a Qualifying
Termination, then, subject to the Participant’s execution and nonrevocation of the Release Agreement, in lieu
of a contribution by the Company to, or a reimbursement to Participant for, any coverage premiums and any
other expenses payable by Participant during the Participant’s Severance Period under all group health plans
maintained by the Company in which Participant and Participant’s spouse and other dependents were
participating immediately prior to the Qualifying Termination Date, the Company shall pay to Participant an
amount equal to the employer portion of the cost of such coverage premiums and
expenses otherwise payable during the Severance Period, which payment shall be taxable as wages to the
Participant. Such amount shall be paid to Participant in a single lump sum on the Payment Commencement
Date. Following the Qualifying Termination Date, (i) Participant shall not be entitled to participate in any
Company employee benefit plans, other than to receive COBRA or similar continuation coverage as
required by law and to receive any vested benefits under Company retirement plans, or as provided under the
terms of an applicable Company employee benefit plan or as required by applicable law and (ii) Participant
shall not be entitled to reimbursement for fringe benefits, including without limitation, dues and expenses
related to club memberships, automobile expenses, expenses for professional services and other similar
perquisites incurred on or after the Qualifying Termination Date.
(d)
Accrued Compensation. The Company shall pay the Accrued Compensation to each
Participant who incurs a Qualifying Termination as soon as practicable following the Qualifying Termination
Date, but in any event before the earlier to occur of (y) the payment date required by applicable law and (z)
March 15th immediately following the year in which the Qualifying Termination Date occurs. In addition,
each Participant who incurs a Qualifying Termination will receive any unpaid reimbursable business
expenses incurred by the Participant prior to the Qualifying Termination Date in accordance with the
Company’s policies, paid in accordance with such policies, and any benefits accrued by Executive or in
which Executive has vested under any of the Company’s retirement benefit plans, paid or provided in
accordance with the terms of such benefit plans.
Section 3.02 Other Severance Payments. In the event that the Company is obligated by law or
contract to pay a Participant other severance pay, a termination indemnity, notice pay, or similar payments or
benefits, or if the Company is obligated by law to provide advance notice of separation and the Participant
continues to receive payments and benefit during such notice period (“Other Severance”), then the
Severance Amount otherwise payable to such Participant shall be reduced by the amount of any such Other
Severance actually paid to the Participant (but not below zero).
Section 3.03 Coordination of Benefits. If a Participant becomes eligible to receive severance
payments and benefits under the Chipotle Mexican Grill, Inc. Change in Control Severance Plan, then the
Participant shall not be eligible to receive the Severance Amount, or any other payments or benefits
provided for under this Plan. Notwithstanding anything set forth herein to the contrary, to the extent that any
severance payable under a plan or agreement covering a Participant as of the date such Participant becomes
eligible to participate in this Plan constitutes deferred compensation under Section 409A, then to the extent
required to avoid accelerated taxation and/or tax penalties under Section 409A, the portion of the benefits
payable hereunder equal to such other amount shall instead be provided in the form set forth in such other
plan or agreement.
ARTICLE IV
EQUITY AWARDS
Section 4.01
Equity Awards.
(a)
Vesting: Time-Based Awards. In the event that a Participant incurs a Qualifying
Termination, then, subject to the Participant’s execution and nonrevocation of the Release Agreement, each
then-outstanding, unvested Company equity award granted to such Participant under the Incentive Plan that
vests solely with respect to continued employment (“Time-Based Awards”) shall vest and become
exercisable on the Qualifying Termination Date in a pro-rated amount based on the portion of the vesting
period prior to the Qualifying Termination Date, which is calculated as the number of days from
the grant date of the applicable Time-Based Award through and including the Qualifying Termination Date
divided by the total number of days in the applicable vesting period.
(b)
Vesting: Performance-Based Awards. In the event that a Participant incurs a Qualifying
Termination, then, subject to the Participant’s execution and nonrevocation of the Release Agreement, each
then-outstanding, unvested Company equity award granted to such Participant under the Incentive Plan that
vests at least in part based on the achievement of performance-based metrics (“Performance-Based
Awards”) shall remain outstanding and vest and become exercisable, or be forfeited, based on actual
performance at the end of the applicable performance period, in a pro-rated amount based on the number of
days from the first day of the performance period of the applicable Performance-Based Award through and
including the Qualifying Termination Date divided by the number of days in the applicable performance
period.
(c)
Option Exercise Period. In the event that a Participant incurs a Qualifying Termination,
then, subject to the Participant’s execution and nonrevocation of the Release Agreement, each then-
outstanding Option granted to such Participant under the Incentive Plan that is either already vested and
exercisable immediately prior to the Qualifying Termination Date or that vests and becomes exercisable in
accordance with Section 4.01(a) or Section 4.01(b) shall, once vested and exercisable, continue to be
exercisable and shall expire on the earlier to occur of (i) the first (1st) anniversary of the Qualifying
Termination Date (or, in the case of Options that constitute Performance-Based Awards that vest in
accordance with Section 4.01(b), the first (1st) anniversary of the last day of the applicable performance
period) and (ii) the expiration date of such Option.
(d)
Forfeiture. Each then-outstanding equity award held by a Participant that is unvested on
the Participant’s Qualifying Termination Date and that does not time-vest in accordance with the Time-
Based Vesting Schedule shall be forfeited as of the Qualifying Termination Date and, with respect to
Performance-Based Awards that do not fully vest in accordance with Section 4.01(b), such Performance-
Based Awards shall be deemed to have been forfeited upon the end of the applicable performance period
once performance has been determined.
(e)
Settlement of Awards. Time-Based Awards shall be settled in accordance with the
Incentive Plan and the applicable award agreement but no later than sixty (60) days following the applicable
vesting date and Performance-Based Awards shall be settled in accordance with the terms of the Incentive
Plan and the applicable award agreement but no later than March 15th following the end of the applicable
performance period. Notwithstanding anything in this Section 4.01 to the contrary, if all or a portion of an
Company equity award subject to accelerated vesting under the terms of this Section 4.01 constitutes
deferred compensation under Section 409A, then to the extent required to avoid accelerated taxation and/or
tax penalties under Section 409A, such awards shall vest at the time(s) provided in this Section 4.01, but
settlement, distribution or payment, as the case may be, shall be made on the earliest possible date that
would not subject such awards to taxation and/or tax penalties under Section 409A.
(f)
Coordination of Benefits. If a Participant becomes eligible to receive severance payments
and benefits under the Chipotle Mexican Grill, Inc. Change in Control Severance Plan, then the Participant
shall not be eligible to receive the benefits set forth above in Sections 4.01(a) through (e), or any other
payments or benefits provided for under this Plan, and all Company equity awards granted to the Participant
that are outstanding immediately prior to the Qualifying Termination shall be governed by the Chipotle
Mexican Grill, Inc. Change in Control Severance Plan. Notwithstanding Sections 4.01(a) through (e), with
respect to any Company equity award granted to a Participant that is outstanding immediately prior to a
Qualifying Termination, (i) if any written agreement between the Participant and the Company with respect
to the termination of a Participant’s employment with the Company and which is in effect on the Qualifying
Termination Date, or the terms of the Incentive Plan and any applicable
award agreement, provides for greater vesting benefits or a greater exercise period upon a Qualifying
Termination than as set forth in Sections 4.01 (a) through (e), then the greater vesting benefits and/or greater
exercise period of such plan or agreement shall apply in lieu of the applicable provisions set forth in Sections
4.01(a) through (e) and (ii) there shall be no duplication of vesting benefits or exercise period between the
application of Sections 4.01(a) through (e) and the provisions of the Incentive Plan, any applicable award
agreement or any other written agreement between the Participant and the Company.
ARTICLE V
SECTION 280G
Section 5.01
Treatment of Payments. Notwithstanding any other provision of the Plan to
the contrary, in the event that any payment or benefit received or to be received by the Participant (whether
pursuant to the terms of the Plan or any other plan, arrangement or agreement) (all such payments and
benefits, including the severance benefits payable hereunder, being hereinafter referred to as the “Total
Payments”) would be subject (in whole or part), to the Excise Tax, then, after taking into account any
reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan,
arrangement or agreement, the severance benefits payable hereunder shall be reduced to the extent necessary
so that no portion of the Total Payments is subject to the Excise Tax but only if (a) the net amount of such
Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments and after taking into account the phase out of itemized deductions and
personal exemptions attributable to such reduced Total Payments) is greater than or equal to (b) the net
amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state
and local income taxes on such Total Payments and the amount of Excise Tax to which the Participant would
be subject in respect of such unreduced Total Payments and after taking into account the phase out of
itemized deductions and personal exemptions attributable to such unreduced Total Payments).
Section 5.02
Ordering of Reduction. In the case of a reduction in the Total Payments
pursuant to Section 5.01, the Total Payments shall be reduced in the following order: (i) payments that are
payable in cash the full amount of which are treated as parachute payments under Treasury Regulation
Section 1.280G-1, Q&A 24(a) shall be reduced (if necessary, to zero), with amounts that are payable last
reduced first; (ii) payments and benefits due in respect of any equity the full amount of which are treated as
parachute payments under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest values
reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) shall
next be reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury
Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced first, shall next be
reduced; (iv) payments and benefits due in respect of any equity valued at less than full value under Treasury
Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values are determined
under Treasury Regulation Section 1.280G-1, Q&A 24) shall next be reduced; and (v) all other non-cash
benefits not otherwise described in clauses (ii) or (iv) shall be next reduced pro-rata.
Section 5.03
Additional Payments. If the Participant receives reduced payments and
benefits by reason of this ARTICLE V, and it is established pursuant to a determination of a court of
competent jurisdiction which is not subject to review or as to which the time to appeal has expired, or
pursuant to an Internal Revenue Service proceeding, that the Participant could have received a greater
amount without resulting in any Excise Tax, then the Company shall thereafter pay the Participant the
aggregate additional amount which could have been paid without resulting in any Excise Tax as soon as
reasonably practicable.
ARTICLE VI
CLAIMS PROCEDURES
Section 6.01
Initial Claims. A Participant who believes that the Participant is entitled to a
payment under the Plan that has not been received may submit a written claim for benefits to the Plan within
one hundred and twenty (120) days after the Participant’s Qualifying Termination Date. Claims should be
addressed and sent to:
Chipotle Mexican Grill, Inc.
610 Newport Center Drive
Newport Beach, CA 92660
Attention: Corporate Secretary
If the Participant’s claim is denied, in whole or in part, the Participant shall be furnished with
written notice of the denial within ninety (90) days after the Administrator’s receipt of the Participant’s
written claim, unless special circumstances require an extension of time for processing the claim, in which
case a period not to exceed one hundred and eighty (180) days shall apply. If such an extension of time is
required, written notice of the extension shall be furnished to the Participant before the termination of the
initial ninety (90)-day period and shall describe the special circumstances requiring the extension, and the
date on which a decision is expected to be rendered. If written notice of denial of the claim for benefits is
not furnished within the specified time, the claim shall be deemed to be denied. The Participant shall then
be permitted to appeal the denial in accordance with Section 6.02 below. Written notice of the denial of the
Participant’s claim shall contain the following information:
(a)
(b)
based;
the specific reason or reasons for the denial of the Participant’s claim;
references to the specific Plan provisions on which the denial of the Participant’s claim was
(c)
a description of any additional information or material required by the Administrator to
reconsider the Participant’s claim (to the extent applicable) and an explanation of why such material or
information is necessary; and
(d)
a description of the Plan’s review procedures and time limits applicable to such procedures,
including a statement of the Participant’s right to bring a civil action under Section 502(a) of ERISA
following a benefit claim denial on review.
Section 6.02
Appeal of Denied Claims. If the Participant’s claim is denied (or deemed
denied) in whole or in part and the Participant wishes to submit a request for a review of the denied claim,
the Participant or the Participant’s authorized representative must follow the procedures described below:
(a)
Upon receipt of the denied claim, the Participant (or the Participant’s authorized
representative) may file a request for review of the claim in writing with the Administrator. This request for
review must be filed no later than sixty (60) days after the Participant has received written notification of the
denial (or no later than sixty (60) days after the claim is deemed denied).
(b)
The Participant has the right to submit in writing to the Administrator any comments,
documents, records or other information relating to the Participant’s claim for benefits.
(c)
The Participant has the right to be provided with, upon request and free of charge,
reasonable access to and copies of all pertinent documents, records and other information that is relevant to
the Participant’s claim for benefits.
(d)
A request for review must set forth all of the grounds on which it is based, all facts in
support of the request and any other matters that the Participant feels are pertinent.
(e)
The review of the denied claim shall take into account all comments, documents, records
and other information that the Participant submitted relating to the Participant’s claim, without regard to
whether such information was submitted or considered in the initial denial of the Participant’s claim.
(f)
The Administrator may require the Participant to submit additional facts, documents or
other material as the Administrator may find necessary or appropriate in making the Administrator’s review.
Section 6.03
Administrator’s Response to Appeal. The Administrator shall provide the
Participant with written notice of its decision within sixty (60) days after the Administrator’s receipt of the
Participant’s written claim for review. There may be special circumstances which require an extension of
this sixty (60)-day period. In any such case, the Administrator shall notify the Participant in writing within
the sixty (60)-day period and the final decision shall be made no later than one hundred and twenty (120)
days after the Administrator’s receipt of the Participant’s written claim for review. This notice of extension
shall describe the special circumstances necessitating the additional time and the date by which the
Administrator is to render the Administrator’s decision on review. The Administrator’s decision on the
Participant’s claim for review shall take into account all comments, documents, records and other
information submitted by the applicant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination, shall be communicated to the Participant in
writing and shall clearly state:
(a)
(b)
based;
the specific reason or reasons for the denial of the Participant’s claim;
reference to the specific Plan provisions on which the denial of the Participant’s claim is
(c)
a statement that the Participant is entitled to receive, upon request and free of charge,
reasonable access to, and copies of, the Plan and all documents, records and other information relevant to the
Participant’s claim for benefits; and
(d)
a statement describing the Participant’s right to bring a civil action under Section 502(a) of
ERISA.
Any notices and decisions by the Administrator under this Section 6.03 may be furnished
electronically in accordance with Department of Labor Regulation 2520.104b-1(c)(1).
Section 6.04
Exhaustion of Administrative Remedies. The exhaustion of these claims
procedures is mandatory for resolving every claim and dispute arising under the Plan. As to such claims and
disputes:
(a)
no claimant shall be permitted to commence any legal action to recover benefits or to
enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any other
provision of law, whether or not statutory, until these claims procedures have been exhausted in their
entirety; and
(b)
in any such legal action, all explicit and implicit determinations by the Administrator
(including, but not limited to, determinations as to whether the claim, or a request for a review of a denied
claim, was timely filed) shall be afforded the maximum deference permitted by law.
Section 6.05
Arbitration. No Participant may bring any legal action to recover benefits
under the Plan until the Participant has exhausted the internal administrative claims and appeals process
described above. No legal action may be commenced at all, unless commenced no later than one year
following the issuance of a final decision on the claim for benefits, or the expiration of the appeal decision
period if no decision is issued. This one-year statute of limitations on suits for all benefits available under
the Plan shall apply in any forum where such legal action is initiated. Upon Participant’s exhaustion of the
provisions set forth above, any Participant with a continuing dispute arising out of or relating to this Plan or
the adoption, breach, termination or validity thereof, will be settled by binding arbitration by a single
arbitrator in accordance with the commercial arbitration rules of the American Arbitration Association. The
arbitration proceedings will be located in Newport Beach, California. The arbitrator is not empowered to
award damages in excess of compensatory damages and no party shall be entitled to any damages in excess
of compensatory damages. Judgment upon any arbitration award may be entered into any court having
jurisdiction thereof and the parties consent to the jurisdiction of any court of competent jurisdiction located
in the State of California. BY PARTICIPATING IN THIS PLAN, PARTICIPANT WAIVES ANY
RIGHT THAT PARTICIPANT MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY
PROVIDED HEREIN, A COURT TRIAL OF ANY CLAIM ALLEGED BY PARTICIPANT.
ARTICLE VII
ADMINISTRATION, AMENDMENT AND TERMINATION
Section 7.01
Administration. For purposes of ERISA, the Administrator shall be the
“named fiduciary” with respect to the operation and administration of the Plan. The Administrator has the
exclusive right, power and authority, in its sole and absolute discretion, to administer and interpret the Plan.
The Administrator has all powers reasonably necessary to carry out its responsibilities under the Plan
including (but not limited to) the sole and absolute discretionary authority to:
(a)
(b)
(c)
administer the Plan according to its terms and to interpret Plan policies and procedures;
establish rules, forms, and procedures for the administration of the Plan;
resolve and clarify inconsistencies, ambiguities and omissions in the Plan and among and
between the Plan and other related documents;
(d)
take all actions and make all decisions regarding questions of eligibility and entitlement to
benefits, and benefit amounts;
(e)
make, amend, interpret, and enforce all appropriate rules and regulations for the
administration of the Plan;
(f)
(g)
process and approve or deny all claims for benefits; and
decide or resolve any and all questions of fact, interpretation, definition, computation or
administration arising in connection with the operation of the Plan, including, but not limited to, the
eligibility to participate in the Plan and the amount of benefits paid under the Plan.
The decision of the Administrator on any disputes arising under the Plan, including (but not limited
to) questions of construction, interpretation and administration shall be final, conclusive and binding on all
persons having an interest in or under the Plan. The Administrator may delegate any of its duties hereunder
to such person or persons from time to time as it may designate. Any such delegation shall be in writing.
Section 7.02
Amendment and Termination. The Plan may be amended or terminated by
the Administrator at any time, provided that no such amendment or termination may materially impair the
rights of a Participant whose Qualifying Termination Date previously occurred.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01
At-Will Employment. The Plan does not alter the status of each Participant as
an at-will employee of the Company. Nothing contained herein shall be deemed to give any Participant the
right to remain employed by the Company or to interfere with the rights of the Company to terminate the
employment of any Participant at any time, with or without Cause.
Section 8.02
Effect on Other Plans, Agreements and Benefits.
(a)
Each Participant who incurs a Qualifying Termination shall remain entitled to any vested
benefits to which the Participant would otherwise be entitled under the terms and conditions of the
Company’s tax-qualified retirement plans, non-qualified deferred compensation plans and group health plans
and nothing contained in the Plan is intended to waive or relinquish the Participant’s vested rights in such
benefits.
(b)
Any severance benefits payable to a Participant under the Plan shall not be counted as
compensation for purposes of determining benefits under any other benefit policies or plans of the Company,
except to the extent expressly provided therein.
Section 8.03
Severability. The invalidity or unenforceability of any provision of the Plan
shall not affect the validity or enforceability of any other provision of the Plan. If any provision of the Plan
is held by a court of competent jurisdiction to be illegal, invalid, void or unenforceable, such provision shall
be deemed modified, amended and narrowed to the extent necessary to render such provision legal, valid and
enforceable, and the other remaining provisions of the Plan shall not be affected but shall remain in full force
and effect.
Section 8.04
Headings and Subheadings. Headings and subheadings contained in the Plan
are intended solely for convenience and no provision of the Plan is to be construed by reference to the
heading or subheading of any section or paragraph.
Section 8.05
Unfunded Obligations. The amounts to be paid to Participants under the Plan
are unfunded obligations of the Company. The Company is not required to segregate any monies or other
assets from its general funds with respect to these obligations. Participants shall not have any preference or
security interest in any assets of the Company other than as a general unsecured creditor. No employee
contributions to the Plan are required or permitted.
Section 8.06
Successors. The Plan shall be binding upon any successor to the Company, its
assets, its businesses or its interest, in the same manner and to the same extent that the Company would be
obligated under the Plan if no succession had taken place. In the case of any transaction in which a
successor would not by the foregoing provision or by operation of law be bound by the Plan, the Company
shall require any successor to the Company to expressly assume the Plan in writing and honor the
obligations of the Company hereunder, in the same manner and to the same extent that the Company would
be required to perform if no succession had taken place.
Section 8.07
Transfer and Assignment. Without the prior consent of the Company,
neither a Participant nor any other person shall have any right to sell, assign, transfer, pledge, anticipate or
otherwise encumber, transfer, hypothecate or convey any amounts payable under the Plan prior to the date
that such amounts are paid, except that, in the case of a Participant’s death, such amounts shall be paid to the
Participant’s beneficiaries.
Section 8.08
Waiver. Any party’s failure to enforce any provision or provisions of the
Plan shall not in any way be construed as a waiver of any such provision or provisions, nor prevent any party
from thereafter enforcing each and every other provision of the Plan.
Section 8.09
Governing Law. THE PLAN SHALL BE DEEMED TO BE MADE IN
CALIFORNIA, AND, TO THE EXTENT NOT PREEMPTED BY ERISA OR OTHER FEDERAL
LAW, THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THE
PLAN IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS OF CALIFORNIA
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW. By participating in the Plan,
each Participant and the Company and its Subsidiaries hereby irrevocably consent to, and agree not to object
or assert any defense or challenge to, the jurisdiction and venue of the state and federal courts located in
Santa Ana, California, and agree that any claim which, subject to ARTICLE VI above, may be brought in a
court of law or equity may be brought in any such Santa Ana, California court. To the extent benefits
provided under ARTICLE IV are subject to interpretation under Delaware law due to the administration of
the Incentive Plan, then, if necessary and solely to the extent necessary to administer the Incentive Plan, such
governing law provision shall be deemed to supersede this Section 8.09.
Section 8.10
Clawback. Any amounts payable under the Plan are subject to any policy
(whether in existence as of the Effective Date or later adopted) established by the Company providing for
clawback or recovery of amounts that were paid to the Participant. The Company shall make any
determination for clawback or recovery in its sole discretion and in accordance with any applicable law or
regulation. Notwithstanding any provisions in this Plan to the contrary, the Administrator may, in its sole
and absolute discretion, in the event of Participant’s material breach of a material obligation of Participant to
the Company pursuant to any award or agreement between Participant and the Company, including a
material breach of the Release Agreement or a determination that an event of Cause has occurred, regardless
of whether such determination happened prior to or following the Qualifying Termination Date, to the fullest
extent permitted by law: (i) terminate the right of such Participant to receive any payment or benefit under
this Plan, and (ii) seek the clawback or recovery of any payment paid to such Participant under this Plan,
including through the exercise of rights of set-off, forfeiture or cancellation with respect to any other awards,
benefits or payments otherwise due to Participant from the Company, to the extent the Administrator in its
sole discretion deems appropriate after considering the relevant facts and circumstances. Any termination,
clawback and/or recovery of a Participant’s payments and benefits under this Plan shall be in addition and
without prejudice to any other remedies that the Company might elect to assert.
Section 8.11
Withholding. The Company shall have the right to withhold from any
amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any
withholding tax obligation it may have under any applicable law or regulation.
Section 8.12
ERISA. The Plan is intended is intended to be “a plan which is unfunded
and maintained by an employer primarily for the purpose of providing deferred compensation for a select
group of management or highly compensation employees,” within the meaning of Sections 201(2), 301(a)(3)
and 401(a)(1) of ERISA such that it will be, among other things, exempt from the reporting and disclosure
requirements of Part 1 of Title I of ERISA. In the event that the Plan does not meet the requirements of
unfunded plan maintained by an employer primarily for the purpose of providing deferred compensation for
a select group of management or highly compensation employees, as described above with respect to any
category of Participant, the Plan is intended to constitute a “severance pay arrangement” within the meaning
of Section 3(2)(B)(i) of ERISA so as to be excepted from the definitions of “employee pension benefit plan”
and “pension plan” set forth under section 3(2) of ERISA, and is intended to meet the descriptive
requirements of a plan constituting a “severance pay plan” within
the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations §
2510.3−2(b).
Section 8.13
Section 409A. The intent of the parties is that payments and benefits under
this Plan be exempt from, or comply with, Section 409A, and accordingly, to the maximum extent permitted,
this Plan shall be interpreted and administered to be in accordance therewith. Notwithstanding anything
contained herein to the contrary, the Participant shall not be considered to have terminated employment with
the Company for purposes of any payments under this Plan which are subject to Section 409A until the
Participant would be considered to have incurred a “separation from service” from the Company within the
meaning of Section 409A. Each amount to be paid or benefit to be provided under this Plan shall be
construed as a separate identified payment for purposes of Section 409A, and any payments described in this
Plan that are due within the “short term deferral period” as defined in Section 409A shall not be treated as
deferred compensation unless applicable law requires otherwise. Without limiting the foregoing and
notwithstanding anything contained herein to the contrary, to the extent required in order to avoid
accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and
benefits that would otherwise be provided pursuant to this Plan during the six (6)-month period immediately
following a Participant’s separation from service shall instead be paid on the first business day after the date
that is six (6) months following the Participant’s separation from service (or, if earlier, death). To the extent
required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts reimbursable to the
Participant under this Plan shall be paid to the Participant on or before the last day of the year following the
year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind
benefits provided) during any one year may not effect amounts reimbursable or provided in any subsequent
year. The Company makes no representation that any or all of the payments described in this Plan shall be
exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from
applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and
penalties incurred under Section 409A.
* * *
EXHIBIT A
FORM OF SEPARATION AND GENERAL RELEASE AGREEMENT
THIS SEPARATION AND GENERAL RELEASE AGREEMENT (this “Release”) is
entered into as of the first date on the signature page hereto (which shall be no earlier than the
Qualifying Termination Date (defined below)), by and between Chipotle Mexican Grill, Inc. (the
“Company”) and [ ● ] (“Executive”). Executive and the Company are individually referred to
herein as a “Party” and collectively as the “Parties.”
WHEREAS, Executive has served as the Company’s [●];
R E C I T A L S
WHEREAS, Executive’s employment with the Company and any other position Executive
may hold with the Company or any of its subsidiaries or affiliates terminated as of [ ● ] (the
“Qualifying Termination Date”);
WHEREAS, the Parties now wish to document and make arrangements pertaining to the
termination of their employment relationship and to resolve, fully and finally, all outstanding
matters between them; and
WHEREAS, Executive’s execution and non-revocation of this Release is a condition for
receiving payments and benefits under the Chipotle Mexican Grill, Inc. Executive Officer
Severance Plan (the “Plan”), as described in Section 3 of this Release.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
hereinafter, and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
AGREEMENT
1. EXECUTIVE’S SEPARATION. Executive’s last day of employment with the Company
is the Qualifying Termination Date. As of the Qualifying Termination Date, Executive irrevocably
resigns from all director, officer or other positions with the Company and its subsidiaries currently
held by Executive, including as [●]. Executive agrees to execute any and all documents necessary
to effect such resignations including the resignation letter set forth in Appendix A. Executive agrees
that, following the Qualifying Termination Date, Executive will not represent Executive to be
associated in any capacity with the Company or any of its subsidiaries or affiliates.
Notwithstanding Executive’s resignation from all positions held by Executive, Executive shall
continue to be entitled to all indemnification and liability insurance benefits provided to Executive
as an employee or officer of the Company or of any of its subsidiaries or affiliates pursuant to [the
Indemnification Agreement dated as of [ ● ] between Executive and the Company and]1 the
Company’s Amended and Restated Bylaws and applicable law.
______________________________
1 Note to Draft: To include if applicable.
2. ACCRUED COMPENSATION. The Company shall pay or provide to Executive the
Accrued Compensation (as defined in the Plan) and other benefits set forth in Section 3.01(d) of the
Plan. Executive’s entitlement to the Accrued Compensation is in no way conditioned on Executive
executing this Release. Executive acknowledges that that there is no accrued or unpaid vacation
payable to Executive under the Company’s unlimited paid time off policy.
3. CONSIDERATION. In consideration of the terms, representations and releases contained
in this Release, and subject to (x) Executive timely executing and not revoking this Release and (y)
Executive’s continued compliance with the covenants and obligations arising under or referred to in
this Release, Executive shall receive the payments and benefits set forth below at the time and in
the form set forth below:
a.
In satisfaction of the payments and benefits set forth in Section 3.01(a) of the Plan,
cash severance in the aggregate amount of $[ ● ] (the “Severance Amount”), which represents
[CEO: 2.0] [OTHER EXECUTIVES: 1.5] times the sum of (i) Executive’s base salary in effect
immediately prior to the Qualifying Termination Date of $[ ● ] and (ii) Executive’s target annual
bonus of $[ ● ]. The Severance Amount shall be paid in substantially equal installments over a
period of [CEO: twenty-four (24) months] [OTHER EXECUTIVES: eighteen (18) months]
following the Qualifying Termination Date in accordance with the Company’s regular payroll
practices, commencing with the first regular payroll next following the sixtieth (60th) day after the
Qualifying Termination Date (the “Payment Commencement Date”). The first payment shall
include the regular installment and catch up any additional installment amounts that would have
been made during the sixty (60) day period.
b.
In satisfaction of the payments and benefits set forth in Section 3.01(b) of the Plan, a
lump sum amount equal to the pro-rated portion of Executive’s annual bonus under the Company’s
annual cash incentive program, paid no later than March 15th of the year immediately following the
year in which the Qualifying Termination Date occurs.
c.
In satisfaction of the payments and benefits set forth in Section 3.01(c) of the Plan, a
lump sum payment of $[●] in lieu of subsidized benefits continuation under the Company’s group
health plans, paid on the Payment Commencement Date.
d.
In satisfaction of the payments and benefits set forth in Section 4.01 of the Plan,
attached as Appendix B is a summary of outstanding Company equity awards held by Executive as
of the date of this Release (“LTI Awards”) illustrating the treatment contemplated by Section 4.01
of the Plan. Any LTI Awards that vest shall be distributed to or be exercisable by Executive in
accordance with the applicable terms and conditions of the Plan and the underlying Company
equity plan and award agreements. Executive shall not be entitled to receive any other award under
the Company’s equity plan or other long-term incentive program.
Executive acknowledges and agrees that under the terms of this Release, Executive is
receiving consideration beyond that to which Executive would otherwise be entitled upon a
termination of employment for any reason or no reason and which, but for the mutual covenants set
forth herein and therein, the Company would not otherwise be obligated to provide.
4. RELEASE AND WAIVER.
a.
In exchange for the consideration described in Section 3 above, Executive, on
Executive’s own behalf and on behalf of Executive’s respective heirs, family members,
representatives, executors, agents, and assigns, hereby forever waives, releases and discharges the
Company and its past, present and future parents, subsidiaries, affiliates, successors, and assigns, as
well as each of its and their respective past, present and future officers, directors, employees,
agents, investors, attorneys, members, equityholders, partners, joint venturers, administrators,
affiliates, benefit plans, plan administrators, insurers and trustees (collectively, the “Company
Released Parties”) from and against any and all claims, charges, complaints, liens, demands,
causes of action, obligations, damages, fees, expenses and liabilities, known or unknown,
suspected or unsuspected, that Executive had, now has, or may hereafter claim to have against
the Company Released Parties arising out of or relating in any way to Executive’s employment
with, or separation from, the Company or any of its affiliates, or otherwise relating to any of the
Company Released Parties from the beginning of time to the date Executive signs this Release
(collectively, “Claims”). The Executive’s release of Claims specifically extends to, without
limitation, any and all Claims for wrongful termination, breach of an express or implied contract,
breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud,
misrepresentation, defamation, slander, infliction of emotional distress, disability, discrimination,
harassment, retaliation, failure to accommodate, loss of future earnings, and any claims under any
applicable state, federal, or local statutes, ordinances, and regulations, including, but not limited to,
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1963, as amended, the Fair Labor
Standards Act, as amended, the Americans with Disabilities Act of 1990, as amended, the
Rehabilitation Act of 1973, as amended, the Employee Retirement Income Security Act of 1974, as
amended, the Worker Adjustment and Retraining Notification Act, as amended, Section 806 of the
Sarbanes-Oxley Act, the Dodd-Frank Act, the Family and Medical Leave Act, as amended, and the
California Family Rights Act, as amended, the Age Discrimination in Employment Act, as
amended (“ADEA”), the Older Workers Benefit Protection Act, as amended (the “OWBPA”), the
California Labor Code and Wage Orders, the California Family Rights Act, as amended, the
California Fair Employment and Housing Act, as amended, California Business & Professions
Code Section 17200, and the California Constitution, each as amended and including their
implementing regulations, as well as any and all Claims for attorneys’ fees; provided, however,
that the Executive’s release of Claims does not waive, release or otherwise discharge (i) any claim
or cause of action arising from a breach by the Company of this Release, (ii) any claim relating to
directors’ and officers’ liability insurance coverage or any right of indemnification under the
Company’s organizational documents or otherwise or (iii) any claim that cannot legally be waived.
b.
For the purpose of implementing a full and complete release, Executive understands
and agrees that this Release is intended to include all claims, if any, which Executive may have and
which Executive does not now know or suspect to exist in Executive’s favor against the Company
Released Parties and this Release extinguishes those claims. Accordingly, Executive expressly
waives all rights afforded by Section 1542 of the Civil Code of the State of California (“Section
1542”) and any similar statute or regulation in any other applicable jurisdiction. Section 1542 states
as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE
CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF
KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
c.
This Release shall not prevent Executive from filing a charge with the Equal
Employment Opportunity Commission (or similar state or local agency) or participating in any
investigation conducted by the Equal Employment Opportunity Commission (or similar state or
local agency); provided, however, that Executive acknowledges and agrees that any claims by
Executive for personal relief in connection with such a charge or investigation (such as
reinstatement or monetary damages) hereby are barred. For the avoidance of doubt, this Release
shall not in any manner prevent Executive from filing a charge or claim with the Securities and
Exchange Commission (SEC) and Executive’s ability to seek or receive an SEC whistleblower
award as provided under Section 21F of the Securities Exchange Act of 1934 for information
provided to the SEC concerning suspected violations of law.
5. TAX MATTERS; CODE SECTION 409A COMPLIANCE. The Company shall have the
right to withhold from any amount payable hereunder any Federal, state and local taxes in order for
the Company to satisfy any withholding tax obligation it may have under any applicable law or
regulation and other applicable payroll deductions. This Release as well as payments and benefits
under this Release are intended to be exempt from, or to the extent subject thereto, to comply with
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and,
accordingly, to the maximum extent permitted, the Release shall be interpreted in accordance
therewith. Notwithstanding anything contained herein to the contrary, Executive shall not be
considered to have terminated employment with the Company for purposes of any payments under
this Release which are subject to Section 409A until Executive has incurred a “separation from
service” from the Company within the meaning of Section 409A. Each amount to be paid or benefit
to be provided under this Release shall be construed as a separate identified payment for purposes
of Section 409A. Without limiting the foregoing and notwithstanding anything contained herein to
the contrary, to the extent required in order to avoid an accelerated or additional tax under Section
409A, amounts that would otherwise be payable and benefits that would otherwise be provided
pursuant to this Release during the six (6)-month period immediately following Executive’s
separation from service shall instead be paid on the first business day after the date that is six (6)
months following Executive’s separation from service (or, if earlier, Executive’s date of death). To
the extent required to avoid an accelerated or additional tax under Section 409A, amounts
reimbursable to Executive shall be paid to Executive on or before the last day of the year following
the year in which the expense was incurred and the amount of expenses eligible for reimbursement
(and in kind benefits provided to Executive) during one year may not affect amounts reimbursable
or provided in any subsequent year. The Company makes no representation that any or all of the
payments described in this Release will be exempt from or comply with Section 409A and makes
no undertaking to preclude Section 409A from applying to any such payment. Executive shall be
solely responsible for the payment of any taxes and penalties incurred under Section 409A.
Executive further agrees that: (i) Executive shall be solely responsible for all federal, state, and/or
local tax liability, if any, arising from payment of the Severance Amount and other benefits
provided for herein (the “Separation Benefits”), including any interest or penalties associated with
tax liability, and Executive will not look to or seek from the Company compensation for any such
tax liability or related costs; (ii) no tax advice has been provided to Executive whatsoever by the
Company or its attorneys; and (iii) should any taxing authority seek
to recover from the Company any taxes, interest or penalties deemed to be due as a result of the
Separation Benefits, Executive shall indemnify, defend and hold harmless the Company and its
successors and assigns from and against any and all such claims for taxes, interest or penalties.
6. REPRESENTATIONS. Executive and the Company make the following representations,
each of which is an important consideration to the other Party’s willingness to enter into this
Release:
a.
Executive acknowledges that the Company is not entering into this Release because
it believes that Executive has any cognizable legal Claim against the Company Released Parties
and that by entering into this Release neither Party admits any liability or wrongdoing of any kind.
If Executive elects not to sign this Release, the fact that this Release was offered will not be
understood as an indication that the Company Released Parties believed Executive was treated
unlawfully in any respect.
b.
Executive has delivered to the Company, and shall not keep in Executive’s
possession, recreate, or deliver to anyone else, any and all Company property, including, but not
limited to, Confidential Information (as defined below), as well as all devices and equipment
belonging to the Company (including computers, handheld electronic devices, telephone
equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks,
reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches,
materials, photographs, charts, any other documents and property, and reproductions of any and all
of the aforementioned items that were developed by Executive pursuant to his employment with the
Company, obtained by Executive in connection with Executive’s employment with the Company,
or otherwise belonging to the Company, its successors, or assigns. If Executive has used any
personal cellular phone, tablet, personal or laptop computer or other electronic device, email or
storage account or system to conduct work for or on behalf of the Company, Executive agrees to
provide reasonable access to the Company to ensure that all Confidential Information and other
materials belonging to the Company have been removed.
c. Executive has complied and shall continue to apply with the restrictive covenants set
forth in this Release and all restrictive covenant agreements between Executive and the Company,
which shall be incorporated by reference into this Release.
d. Executive has not made any claims or allegations to the Company related to sexual
assault or abuse, sexual harassment, or sex discrimination, and none of the payments set forth in
this Release are related to sexual abuse, sexual harassment or sex discrimination.
e.
Executive has not engaged in any violation of the Company’s Code of Ethics or
policies under the Company’s Employee Handbook (collectively, “C and E Policies”) or unlawful
conduct relating to the business of the Company, and is not aware of any violations of C and E
Policies or unlawful conduct relating to the business of the Company that you have not previously
reported.
f.
Executive and the Company each represent and warrant to the other that each has the
capacity and authority to enter into this Release and to be bound by its terms.
g. Executive was represented by independent legal counsel in connection with
Executive’s consideration of this Release.
7. COOPERATION. Subject to Sections 4(c) and 10(d) of this Release, Executive agrees
that Executive will cooperate with the Company, including executing documents and providing
requested information, as may reasonably be required to give effect to the provisions of this
Release or for the Company to comply with applicable laws. Executive further agrees that, subject
to Executive’s rights under Sections 4(c) and 10(d) of this Release and applicable law, Executive
will cooperate with the Company concerning reasonable requests for information about the
business of the Company or any of its affiliates or Executive’s involvement and participation
therein; the transition of duties to others within the Company; the defense, prosecution or
investigation of any claims or actions now in existence or which may be brought in the future
against or on behalf of the Company or its affiliates which relate to events or occurrences that
transpired while Executive was employed by the Company, and in connection with any audit,
investigation or review by any federal, state, or local regulatory, quasi-regulatory or self-governing
authority, or any internal investigation, relating to such events or occurrences, other than any such
charges or claims brought by or on behalf of Executive against the Company or any of its affiliates;
provided, however, that the nothing in this Section 7 is intended to restrict or limit Executive from
exercising his or her protected rights arising under Sections 4(c) and 10(d) or applicable law, or
restrict or limit Executive from providing truthful information in response to a subpoena, other
legal process or valid governmental inquiry. Without limiting the foregoing, Executive’s
cooperation shall include, but not be limited to, being reasonably available to meet and speak with
officers and employees of the Company, its affiliates and/or its counsel at reasonable times and
locations, executing accurate and truthful documents including declarations, testifying in
connection with any and all legal proceedings at the request of the Company and without the need
for a subpoena, and taking such other actions as may reasonably be requested by the Company
and/or its counsel to effectuate the foregoing. The Parties shall cooperate in good faith to schedule
any meetings or discussions pursuant to this Section 7 so as not to conflict with Executive’s other
obligations.
8. NON-DISPARAGEMENT. Subject to Section 10(d), Executive agrees not to engage in
any form of conduct or make any public or private statements or representations that disparage or
otherwise impair the reputation, goodwill or commercial interest (“Disparaging Conduct”) of the
Company, its respective past, present, and future subsidiaries or affiliates, or any of their respective
directors, officers, employees, shareholders, or representatives (collectively, “Chipotle Covered
Entity”); disrupts or impairs any operations of any Chipotle Covered Entity; harms any Chipotle
Covered Entity’s reputation with customers, suppliers, shareholders, or the public; or interferes
with any Chipotle Covered Entity’s contractual relationships.
9. NON-SOLICITATION. Executive agrees that for a period of twelve (12) months
immediately following the Qualifying Termination Date, Executive shall not, directly or indirectly,
for Executive or on behalf of any third party (other than the Company and its subsidiaries) solicit,
induce, recruit or encourage any of the employees of the Company or any of its subsidiaries (i) who
reported directly to Executive, (ii) who reported directly to one of Executive’s direct reports or (iii)
with whom Executive worked on substantive projects during the twelve (12) months immediately
preceding the Qualifying Termination Date, to leave their employment with
Company or any of its subsidiaries, or to join any competitor to the Company or any of its
subsidiaries.
10. CONFIDENTIAL INFORMATION.
a.
Executive acknowledges that the business(es) of the Company and its subsidiaries
are highly competitive and that, during the period of Executive’s employment with the Company,
the Company provided Executive with access to Confidential Information, as defined below,
relating to the business of the Company. Executive further acknowledges that Confidential
Information has been developed at considerable time, expense and effort by or on behalf of
Company, is unique and constitutes valuable property of the Company, and that the Confidential
Information provides the Company with a very valuable competitive advantage. Executive further
acknowledges that Executive was provided with access to Confidential Information at the outset of
Executive’s employment with Company, during the term of Executive’s employment at Company,
and that Executive has continuing knowledge of such Confidential Information.
b.
The term “Confidential Information” as used herein means and includes any and all
data or information and documentation relating to the Company’s business that is not generally
known to the public or readily obtainable from outside sources. Confidential Information includes,
by way of example and without limitation, the following: financial information, including but not
limited to earnings, assets, debts, prices, cost information, budgets, sales and profit projections or
other financial data; marketing information, including but not limited to details about ongoing or
proposed marketing strategies, marketing forecasts, or information about impending transactions;
product information, including but not limited to development plans, product designs, product costs
and pricing policies; information regarding actual or potential customers; employee information,
compensation strategy and information and recruiting plans; diversity statistics and strategy; pay
equity information, analysis and plans; employment law compliance, collective bargaining
activities and strategies and investigations of employee misconduct; executive compensation plans,
strategy and analyses; and Board of Directors and Compensation Committee deliberations and
discussions. Executive acknowledges that such information is confidential whether or not such
information is labeled as such by the Company.
c.
Subject to Section 10(d), commencing on the Qualifying Termination Date and at all
times thereafter, except as authorized in writing by the Company, Executive agrees that Executive
shall not directly or indirectly use, divulge, furnish or make accessible to any person or entity any
Confidential Information for as long as such information remains non-public, but instead shall keep
all Confidential Information strictly and absolutely confidential. [Executive shall also comply with
the terms of the Company’s Employee Confidentiality Agreement previously executed by
Executive in [●].]2.
________________
2 Note to Draft: To include if applicable.
d.
Notwithstanding the foregoing, nothing in this Release (including but not limited to
Sections 7, 8, 10 and 11 of this Release) is intended or shall prevent, impede or interfere with
Executive’s non-waivable rights, without prior notice to the Company, to (i) voluntarily
communicate with or provide information or documents to, initiate a charge or claim with, testify
before, comply with a subpoena from, or assist or otherwise participate in any manner with an
investigation or proceeding conducted by, any government agency, legislative body, or self-
regulatory organization, including making reports of possible violations of federal law or regulation
to any governmental agency or entity in accordance with the provisions of and rules promulgated
under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the
Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal
law or regulation, (ii) disclose any information (including, without limitation, information of a
confidential or proprietary nature) to a court or other administrative or legislative body in response
to a subpoena, court order or written request, provided that Executive first promptly notifies (to the
extent legally permissible) the Company and, with respect to any subpoena, court order or written
request on behalf of any non-governmental person, uses commercially reasonable efforts to
cooperate with any effort by the Company to seek to challenge the subpoena, court order or written
request on behalf of any non-governmental person or obtain a protective order limiting its
disclosure, or other appropriate remedy, participate in investigations, respond to a subpoena, court
order or written request, or testify in proceedings regarding the Company’s past or future conduct,
or engage in any future activities protected under federal, state or local law, including
whistleblower statutes, (iii) recover a whistleblower award as provided under Section 21F of the
Securities and Exchange Act of 1934, or (iv) discuss or disclose information about unlawful acts in
the workplace, such as harassment or discrimination or any other conduct that Executive has reason
to believe is unlawful. Further, pursuant to 18 U.S.C. § 1833(b), Executive will not be held
criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade
secret of the Company that (I) is made (A) in confidence to a federal, state, or local government
official, either directly or indirectly, or to your attorney and (B) solely for the purpose of reporting
or investigating a suspected violation of law; or (II) is made in a complaint or other document that
is filed under seal in a lawsuit or other proceeding. If Executive files a lawsuit for retaliation by the
Company for reporting a suspected violation of law, Executive may disclose the trade secret to
Executive’s attorney and use the trade secret information in the court proceeding, if Executive (i)
files any document containing the trade secret under seal, and (ii) does not disclose the trade secret,
except pursuant to court order. While Executive is encouraged to bring any such possible violation
to the attention of the Company, Executive does not need the prior authorization of the Company to
make any such reports or disclosures to these entities.
11. REMEDIES. If Executive breaches this Release or materially fails to comply with or
otherwise materially breaches any of the promises, representations or releases in this Release, in
addition to all other legal and equitable remedies available to the Company in the event of a breach,
(a) the Company may immediately stop any payments or benefits otherwise owing to Executive
under this Release and may seek additional relief or remedy as provided under applicable law, and
(b) Executive will be responsible for payment of all reasonable attorneys’ fees and costs that the
Company incurred in the course of enforcing the terms of this Release, including demonstrating the
existence of a breach and any other contract enforcement efforts. Any such
cessation of payments or benefits shall not limit, restrict or otherwise affect Executive’s release of
Claims or any other obligations of Executive set forth in this Release, or Executive’s continuing
obligations under any restrictive covenants agreement with the Company.
12. REASONABLENESS OF RESTRICTIONS. Executive acknowledges: (i) that the
scope and duration of the restrictions on Executive’s activities under Sections 8 through 10 of this
Release are reasonable and necessary to protect the legitimate business interests of the Company;
(ii) that the Company provided Executive with access to Confidential Information and specialized
training at the outset of Executive’s employment with Company, and during the course of
Executive’s employment with the Company; (c) that Executive will be reasonably able to earn a
living without violating the terms of this Release; and (d) the restrictions in this Release, along with
the release provisions in Sections 4 and 21 served as a material inducement to the Company to
agree to the consideration provisions contained in Sections 3 of this Release.
13. GOVERNING LAW. This Release and the performance hereof shall be construed and
governed in accordance with the laws of the State of California, and the Parties waive the
application of conflicts of laws provisions or principles of any state or jurisdiction.
14. SEVERABILITY. In the event that any provision or any portion of any provision hereof
or any surviving agreement made a part hereof becomes or is declared by a court of competent
jurisdiction or arbitrator to be illegal, unenforceable, or void, this Release shall continue in full
force and effect without said provision or portion of provision.
15. SUCCESSORS AND ASSIGNS. Executive agrees that this Release shall be binding
upon, and pass to the benefit of, the successors and assigns of the Company. Any payments and
benefits due to the Executive hereunder shall be payable to his estate or representative in the event
of his death or disability.
16. AMENDMENTS. This Release may not be amended or modified other than by a
written instrument signed by an authorized representative of the Company and Executive.
17. DESCRIPTIVE HEADINGS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of this Release.
18. COUNTERPARTS. This Release may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.
Facsimile, electronic and .pdf signatures will suffice as original signatures.
19. THIRD PARTY BENEFICIARIES. Each Company Released Party is intended to be a
third-party beneficiary of this Release, and this Release may be enforced by each such Company
Release Party in accordance with the terms hereof in respect of the rights granted to such Company
Released Party hereunder.
20. ENTIRE AGREEMENT. This Release sets forth
the entire agreement and
understanding of the Parties relating to the subject matter hereof and, except for the agreements
referenced herein or as otherwise provided herein, supersedes all prior discussions, agreements and
understandings of every kind and nature between the Parties hereto and neither of the Parties
shall be bound by any term or condition other than as expressly set forth or provided for in this
Release. This Release may only be amended or modified in a writing signed by Executive and an
authorized representative of the Company.
21. KNOWING AND VOLUNTARY ACKNOWLEDGMENT; SPECIFIC RELEASE OF
ADEA CLAIMS. Executive specifically agrees and acknowledges that:
a.
Executive has read this Release in its entirety and understands all of its terms;
b.
Executive has been advised to consult with an attorney before executing this
Release, and has consulted with such counsel as Executive believed was necessary before signing
this Release;
c.
Executive knowingly, freely, and voluntarily assents to all of this Release’s terms
and conditions including, without limitation, the waiver, release, and covenants;
d.
Executive is signing this Release, including the waiver and release, in exchange for
good and valuable consideration in addition to anything of value to which Executive is otherwise
entitled;
Executive is not waiving or releasing rights or claims that may arise after the
Executive signs this Release; and
Executive understands that the waiver and release in this Release is being requested
in connection with Executive’s separation of employment from the Company.
e.
f.
Executive understands and acknowledges that Executive is waiving and releasing claims
under the ADEA, as amended, and its implementing regulations, and Executive has been informed
and understands and agrees that Executive has twenty-one (21) calendar days after receipt of this
Release (the “Review Period”) to consider whether to sign it and that any changes to this Release
do not restart the running of the Review Period. Executive has been informed and understands and
agrees that Executive may revoke this Release at any time during the seven (7) calendar days after
this Release is signed and returned to the Company (the “Revocation Period”), in which case none
of the provisions of the Executive’s release of Claims will have any effect. Executive acknowledges
and agrees that if Executive wishes to revoke the Executive’s release of Claims, Executive must do
so in writing, and such revocation must be signed by Executive and received by the Chief Legal
Officer and General Counsel of the Company no later than the seventh (7th) day after Executive
has signed and returned this Release. Executive acknowledges and agrees that, in the event
Executive either fails to sign within the Review Period or revokes this Release during the
Revocation Period, Executive shall have no right to receive the consideration set forth in Section 3
of this Release. This Release, and the Executive’s release of Claims, shall be effective upon the
eighth (8th) calendar day following the date that Executive executes this Release (the “Effective
Date”); provided that Executive does not revoke or attempt to revoke Executive’s acceptance of
this Release prior to such date in accordance with the provisions herein.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the Parties have executed this Release as of the first date set forth below
(which shall be no earlier than the Qualifying Termination Date).
CHIPOTLE MEXICAN GRILL, INC.
[EXECUTIVE NAME]
By:
Its:
Date:
Date:
APPENDIX A
[DATE]
Chipotle Mexican Grill, Inc.
610 Newport Center Drive
Suite 1400
Newport Beach, CA 92660
To Whom it may Concern:
I hereby irrevocably resign, effective as of [DATE], from all positions and offices I hold with the Company
or any of its subsidiaries or affiliates, including as [POSITION].
Very truly yours
[NAME]
APPENDIX B
[EXECUTIVE NAME] Outstanding Equity Awards as of [●]
Award Type and Name
Grant
Date
Total
Outstanding
[YEAR] SOSAR *
[YEAR] PSU **
[●]
[●]
[●]
[●]
[●]
[●]
[●]
Vested as of
the
Qualifying
Termination
Date
[●]
n/a
[●]
Remain
Outstanding
Subject to
Performance
Forfeited
n/a
[●]
[●]
[●]
[●]
[●]
________________________
* SOSARs that are vested as of the Qualifying Termination Date shall be exercisable by
Executive in accordance with the terms and conditions of the Plan.
** Annual PSUs that are not forfeited as of the Qualifying Termination Date and continue to vest
shall be earned or forfeited based on the Company’s actual performance during the applicable
performance period in accordance with the terms and conditions of the PSU award agreement
and the applicable equity plan.
Exhibit 10.26
CHIPOTLE MEXICAN GRILL, INC.
610 Newport Center Drive
Newport Beach, CA 92260
February 6, 2024
Brian Niccol
c/o Chipotle Mexican Grill, Inc.
610 Newport Center Drive
Newport Beach, CA 92660
Dear Brian:
On February 6, 2024, the Compensation, People and Culture Committee of the Board of Directors
(the “Compensation Committee”) of Chipotle Mexican Grill, Inc. approved an Executive Officer
Severance Plan (the “Plan”), which provides severance benefits to Chipotle’s executive officers in
the event an executive officer’s employment is terminated either by Chipotle without “Cause” or
due to the executive officer’s resignation for “Good Reason.” The Plan also provides for pro rata
vesting of outstanding equity awards held by a terminated executive officer who qualifies under the
Plan based on the portion of the vesting period (or, in the case of performance-based awards, the
portion of the performance period) that has elapsed prior to the termination date, subject to actual
performance in the case of performance-based awards, and provides that time-based SOSARs will
remain exercisable until the earlier of 12 months after the termination date or the expiration date of
the award. All capitalized terms that are not defined in this letter have the meeting ascribed to them
in the Plan.
To honor the spirit of the offer letter that the Board of Directors extended to you in March 2018
when you agreed to join Chipotle, the Compensation Committee has agreed to the following
treatment of any equity award held by you in the event you experience a Qualifying Termination:
1. Time-Based Awards held by you on the Qualifying Termination Date will vest on the
Qualifying Termination Date in a pro-rated amount based on the number of days from the
grant date of the applicable Award through and including the first (1st) anniversary of the
Qualifying Termination Date divided by the total number of days in the applicable vesting
period; and
2. Performance-Based Awards held by you on the Qualifying Termination Date will remain
outstanding and continue to vest and become exercisable, or be forfeited, based on
Chipotle’s actual performance through the end of the applicable performance period, in a
pro-rated amount, with the proration calculated based on the number of days from the first
day of the applicable performance period through and including the first (1st) anniversary of
the Qualifying Termination Date divided by the total number of days in the performance
period of the applicable equity award.
Brian Niccol
February 6, 2024
Page 2
Except as set forth above, all other equity awards held by you will be forfeited and canceled as of
the Qualifying Termination Date, and you will not be eligible to receive any new equity awards
granted by Chipotle after the Qualifying Termination Date.
Except for the terms expressly contained in this letter agreement, all other terms and conditions of
the Plan, including the condition precedent that you execute and not revoke a Release Agreement
prior to receiving the benefits stated above, apply without modification.
Sincerely,
/s/ Patricia Fili-Krushel,
Chair of the Compensation, People and Culture Committee
SIGNIFICANT SUBSIDIARIES OF CHIPOTLE MEXICAN GRILL, INC.
Following is a list of subsidiaries of Chipotle Mexican Grill, Inc., excluding certain subsidiaries that, in the
aggregate as a single subsidiary, do not constitute a significant subsidiary.
Exhibit 21.1
Subsidiary Name
Jurisdiction of Formation
Chipotle Mexican Grill Canada Corp.
Nova Scotia, Canada
Chipotle Mexican Grill France SAS
Chipotle Mexican Grill Germany GMBH
Chipotle Mexican Grill of Berwyn Heights, LLC
Chipotle Mexican Grill of Colorado, LLC
Chipotle Mexican Grill of Kansas, LLC
Chipotle Mexican Grill of Maryland, LLC
Chipotle Mexican Grill Texas Holdings, LLC
Chipotle Mexican Grill U.S. Finance Co., LLC
France
Germany
Maryland
Colorado
Kansas
Maryland
Colorado
Colorado
Chipotle Mexican Grill UK Limited
United Kingdom
Chipotle Services, LLC
Chipotle Ventures, LLC
CMG Concessions, LLC
CMG Licensing, LLC
CMG of Prince Georges, LLC
CMG Pepper, LLC
CMG Strategy Co., LLC
CMGGC, LLC
EMEA Tortilla, Ltd.
N793WF Lease, LLC
PL Restaurant LLC
Colorado
Delaware
Colorado
Delaware
Maryland
Colorado
Colorado
Florida
United Kingdom
New Jersey
Colorado
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-204380) pertaining to the Amended and Restated
Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and
(2) Registration Statement (Form S-8 No. 333-226376) pertaining to the Amended and Restated
Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan, and
(3) Registration Statement (Form S-3 No. 333-236966) of Chipotle Mexican Grill, Inc., and
(4) Registration Statement (Form S-8 No. 333-265047) pertaining to the Chipotle Mexican Grill, Inc.
2022 Stock Incentive Plan, and
(5) Registration Statement (Form S-8 No. 333-265048) pertaining to the Chipotle Mexican Grill, Inc.
Employee Stock Purchase Plan;
of our reports dated February 7, 2024, with respect to the consolidated financial statements of Chipotle
Mexican Grill, Inc. and the effectiveness of internal control over financial reporting of Chipotle Mexican Grill,
Inc. included in this Annual Report (Form 10-K) of Chipotle Mexican Grill, Inc. for the year ended
December 31, 2023.
/s/ Ernst & Young LLP
Irvine, California
February 7, 2024
CERTIFICATION
Exhibit 31.1
I, Brian R. Niccol, certify that:
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
I have reviewed this annual report on Form 10-K of Chipotle Mexican Grill, Inc.;
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 7, 2024
/s/ Brian R. Niccol
Brian R. Niccol
Chairman and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
Exhibit 31.2
I, John R. Hartung, certify that:
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
I have reviewed this annual report on Form 10-K of Chipotle Mexican Grill, Inc.;
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 7, 2024
/s/ John R. Hartung
John R. Hartung
Chief Financial and Administrative Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Brian R.
Niccol, the Chairman and Chief Executive Officer of Chipotle Mexican Grill, Inc. (the “Registrant”) and John R.
Hartung, the Chief Financial and Administrative Officer of the Registrant, each hereby certifies that, to the best of his
knowledge:
1. The Registrant’s Annual Report on Form 10-K for the period ended December 31, 2023, to which this Certification
is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of
the Registrant at the end of the period covered by the Periodic Report and results of operations of the Registrant for
the periods covered by the Periodic Report.
Date: February 7, 2024
/s/ Brian R. Niccol
Brian R. Niccol
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ John R. Hartung
John R. Hartung
Chief Financial and Administrative Officer
(Principal Financial Officer)
Exhibit 97.1
Policy Title:
Last Revised:
Policy Owner:
Scope:
Purpose
Executive Compensation Recovery Policy
December 2023
Board of Directors
Applies to Chipotle’s Section 16 Executive Officers
The New York Stock Exchange (“NYSE”) requires listed companies to implement policies for
recovery (i.e., “clawback”) of erroneously awarded incentive-based compensation, implementing Section
10D of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), which was added by
Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This Executive
Compensation Recovery Policy (this “Policy”) implements the listing standards required by the NYSE for
clawback of erroneously awarded incentive compensation and also sets forth other circumstances under
which Chipotle Mexican Grill, Inc. (the “Company”) and its applicable subsidiaries (together with the
Company, the “Company Group”) may recoup or forfeit Erroneously Awarded Compensation that is
received by current and former Executive Officers.
Scope
This Policy applies to all current and former Executive Officers of the Company. For purposes of
this Policy, “Executive Officer” means each “officer” of the Company as defined under Rule 16a-1(f)
under Section 16 of the Exchange Act, which shall be deemed to include any individuals identified by the
Board of Directors of the Company (the “Board”) as executive officers pursuant to Item 401(b) of
Regulation S-K under the Exchange Act.
Statement of Policy
This Policy has two distinct sections – Section 1 requires recovery of Erroneously Awarded
Compensation due to certain accounting restatements, and Section 2 permits recovery of compensation due
to certain egregious conduct.
1.
Clawback Due to Accounting Restatement
This section of the Policy is intended to implement Section 303A.14 of the NYSE Listed
Company Manual and Rule 10D-1 of the Securities Exchange Act, and in the event of any conflict or
ambiguity, the definitions and requirements of Section 303A.14 and Rule 10D‑1 shall govern.
Clawback Requirement. In the event of a Restatement, any Erroneously Awarded Compensation
received during the Lookback Period prior to a Restatement (a) that is then-outstanding but has not yet
been paid shall be automatically and immediately forfeited and (b) that has been paid to any person shall
be subject to reasonably prompt repayment to the Company Group in accordance with the “Means of
Repayment” section of this Policy.
Means of Repayment. In the event that the Board determines that any person shall repay any
Erroneously Awarded Compensation, the Board shall provide written notice to such person by email or
certified mail to the physical address on file with the Company Group for such person, and the person
shall satisfy such repayment in a manner and on such terms as required by the Board, and the Company
Group shall be entitled to set off the repayment amount against any amount owed to the person by the
Company Group, to require the forfeiture of any award granted by the Company Group to the person, or
to take any and all necessary actions to reasonably promptly recoup the repayment amount from the
person, in each case, to the fullest extent permitted under applicable law, including without limitation,
Section 409A of the U.S. Internal Revenue Code and the regulations and guidance thereunder. If the
Board does not specify a repayment timing in the written notice described above, the applicable person
shall be required to repay the Erroneously Awarded Compensation to the Company Group by wire, cash
or cashier’s check no later than thirty (30) days after receipt of such notice.
No Indemnification. The Company Group is prohibited from indemnifying, insuring or
reimbursing any current or former Executive Officer against the loss by such person of Erroneously
Awarded Compensation in accordance with this Policy, nor shall any such person receive any
advancement of expenses for disputes related to any loss of compensation by such person in accordance
with this Policy, and no person shall be paid or reimbursed by the Company Group for any premiums
paid by such person for any third-party insurance policy covering potential recovery obligations under
this Policy. For this purpose, “indemnification” includes any modification to current compensation
arrangements or other means that would amount to de facto indemnification (for example, providing the
person a new cash award which would be cancelled to effect the recovery of any Erroneously Awarded
Compensation). In no event shall the Company Group be required to award any person an additional
payment if any Restatement would result in a higher incentive compensation payment.
Definitions. For purposes of this Policy, the following definitions apply:
·
·
“Erroneously Awarded Compensation” is Incentive-Based Compensation received by a current or
former Executive Officer that exceeds the amount of Incentive-Based Compensation that the
Executive Officer otherwise would have received had such compensation been determined based
on the Restatement, computed without regard to any taxes paid (e.g., on a gross basis, not after-
tax). For Incentive-Based Compensation based on stock price or total shareholder return, where
the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation
directly from the information in a Restatement:
o the amount of Erroneously Awarded Compensation shall be based on a reasonable
estimate of the effect of the Restatement on the stock price or total shareholder return
upon which the Incentive-Based Compensation was received; and
o the Company shall maintain documentation of the determination of that reasonable
estimate and provide such documentation to the NYSE.
“Financial Reporting Measures” are measures that are determined and presented in accordance
with the accounting principles used in preparing the Company’s financial statements, and any
measure that is derived wholly or in part from such measures. Financial Reporting Measures may
consist of GAAP or non-GAAP financial measures (as defined under Regulation G of the
·
·
·
Exchange Act and Item of Regulation S-K under the Exchange Act), stock price or total
shareholder return.
“Incentive-Based Compensation” is any compensation that is granted, earned or vested based
wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based
Compensation is deemed “received” in the Company’s fiscal period during which the Financial
Reporting Measure specified in the applicable award agreement or plan, or otherwise relating to
the Incentive-Based Compensation, is attained, even if the payment or grant of the Incentive-
Based Compensation occurs after the end of that period. Section 1 of this Policy applies solely to
all Incentive-Based Compensation received by a person:
o after they became an Executive Officer;
o who served as an Executive Officer at any time during the performance period for that
o while the Company had a class of securities listed on a national securities exchange or a
Incentive-Based Compensation;
national securities association; and
o on or after October 2, 2023.
“Lookback Period” means the three completed fiscal years (plus any transition period of less than
nine months that is within or immediately following the three completed fiscal years and that
results from a change in the Company’s fiscal year) immediately preceding the date on which the
Company is required to prepare a Restatement for a given reporting period, with such date being
the earlier of: (i) the date the Board, a committee of the Board, or the officer or officers of the
Company authorized to take such action if Board action is not required, concludes, or reasonably
should have concluded, that the Company is required to prepare a Restatement, or (ii) the date a
court, regulator or other legally authorized body directs the Company to prepare a Restatement.
Recovery of any Erroneously Awarded Compensation under the Policy is not dependent on if or
when the Restatement is actually filed.
“Restatement” means a required accounting restatement of any Company financial statement due
to the Company’s material noncompliance with any financial reporting requirement under the
U.S. securities laws, including (a) to correct an error in previously issued financial statements that
is material to the previously issued financial statements (commonly referred to as a “Big R”
restatement) or (b) to correct an error in previously issued financial statements that is not material
to previously issued financial statements, but that would result in a material misstatement if either
the error was left uncorrected in the current report, or the error correction was recognized in the
current period (commonly referred to as “little r” restatements). For clarity, a Restatement does
not include an “out-of-period adjustment” – a situation where the error is immaterial to the
previously issued financial statements and the correction of the error is also immaterial to the
current period – or changes to prior period financial statements that do not arise due to error
corrections, such as retrospective revisions to financial statements due to changes in accounting
principles or segments.
Exceptions to Clawback Requirement. The Company Group shall recover Erroneously Awarded
Compensation in compliance with this Policy except to the extent that one of the three conditions set forth
below have been met, and the Board has decided that recovery would be impracticable:
·
·
·
the direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to
be recovered; however, before reaching this conclusion, the Company Group must make a
reasonable attempt to recover such Erroneously Awarded Compensation, document such
reasonable attempt to recover, and provide that documentation to the NYSE;
recovery would violate home country law where that law was adopted prior to November 28, 2022;
however, before reaching this conclusion, the Company must obtain an opinion of home country
counsel, acceptable to the NYSE, that recovery would result in such a violation, and must provide
such opinion to the NYSE; or
recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are
broadly available to employees of the registrant, to fail to meet the requirements of 26 U.S.C.
401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
2.
Forfeiture Due to Egregious Conduct
The Board may require an Executive Officer to forfeit any unpaid, unearned or
unexercised Covered Compensation if the Board determines, in its sole discretion, that the Executive
Officer has engaged in Covered Conduct, even if such conduct does not result in termination of the
Executive Officer’s employment.
·
·
“Covered Compensation” means cash and/or equity-based compensation that was granted to any
Executive Officer, excluding severance benefits awarded [under the Chipotle Mexican Grill, Inc.
Change in Control Severance Plan or other change in control plan or agreement of the Company
Group].
“Covered Conduct” means any one of the following:
o any act or omission that would constitute “Cause” under the terms of the Chipotle
Mexican Grill, Inc. 2022 Stock Incentive Plan (the “Stock Plan”) (or any award agreement
issued thereunder, if the term is separately defined) or other applicable agreement or plan
of the Company Group;
o the material breach of a written policy applicable to the Executive Officer, including, but
not limited to, the Company’s Code of Ethics;
o egregious misconduct by the Executive Officer including, but not limited to, fraud,
criminal activities, falsification of Company Group records, theft, violent acts or threats of
violence, or a violation of law, unethical conduct or inappropriate behavior that causes
substantial financial or reputational harm to the Company Group or exposes the Company
Group to substantial legal liability; or
o the commission of an act or omission that causes the Executive Officer or the Company
Group to be in violation of federal or state securities laws, rules or regulations.
To the fullest extent permitted under applicable law, including without limitation, Section 409A of
the U.S. Internal Revenue Code and the regulations and guidance thereunder, the Board may seek
forfeiture of Covered Compensation in any manner it chooses, including by seeking cash payment from the
Executive Officer, withholding unpaid compensation, set-off (from unpaid compensation, against
planned future grants or otherwise), or rescinding or canceling unvested or vested but unexercised equity
awards.
The Board may consider the costs and benefits of seeking recoupment and, based on that
consideration, exercise discretion in the application and operation of this Section 2.
Administrative Provisions
All determinations of the Board pursuant to this Policy shall be final, conclusive and binding.
Any discretionary determinations of the Board under this Policy, if any, need not be uniform with respect
to all persons, and may be made selectively amongst persons, whether or not such persons are similarly
situated.
Upon a Change in Control (as defined in the Stock Plan), this Policy will be of no further force or
effect unless (i) prior to such Change in Control, the Board expressly authorizes the continuation of this
Policy or, (ii) with respect to Section 1, continuation of the Policy is required by Section 303A.14 of the
NYSE Listed Company Manual (or rules of another applicable national security exchange or national
securities association) and Rule 10D-1 of the Securities Exchange Act.
The provisions in this Policy are intended to be applied to the fullest extent of the law. To the
extent that any provision of this Policy is found to be unenforceable or invalid under any applicable law,
such provision will be applied to the maximum extent permitted and shall automatically be deemed
amended in a manner consistent with its objectives to the extent necessary to conform to applicable
law. The invalidity or unenforceability of any provision of this Policy shall not affect the validity or
enforceability of any other provision of this Policy. Recoupment of erroneously awarded compensation
under this Policy is not dependent upon the Company Group satisfying any conditions in this Policy,
including any requirements to provide applicable documentation to the NYSE.
The rights of the Company Group under this Policy to seek forfeiture or reimbursement are in
addition to, and not in lieu of, any rights of recoupment, or remedies or rights other than recoupment, that
may be available to the Company Group pursuant to the terms of any law, government regulation or stock
exchange listing requirement or any other policy, code of conduct, employee handbook, employment
agreement, equity award agreement, or other plan or agreement of the Company Group (together, the
“Clawback Policies”). Any compensation that is recouped or recovered from or reimbursed or forfeited by
any current or former Executive Officer pursuant to the Clawback Policies, will not be subject to
duplicative recoupment, recovery, reimbursement or forfeiture under this Policy.
The Board, based upon the recommendation of the Compensation, People and Culture Committee,
may amend this Policy at any time for any reason, including as required to comply with the rules of the
Securities and Exchange Commission and the NYSE. The exercise by the Board of any rights pursuant to
this Policy shall be without prejudice to any other rights that the Company Group or the Board may have
with respect to any Executive Officer subject to this Policy.
CHIPOTLE MEXICAN GRILL, INC.
EXECUTIVE COMPENSATION RECOVERY POLICY
ACKNOWLEDGMENT, CONSENT AND AGREEMENT
I acknowledge that I have received and reviewed a copy of the Chipotle Mexican Grill, Inc. Executive
Compensation Recovery Policy (as may be amended from time to time, the “Policy”) and I have been
given an opportunity to ask questions about the Policy and review it with my counsel. I knowingly,
voluntarily and irrevocably consent to and agree to be bound by and subject to the Policy’s terms and
conditions, including that I will return any Erroneously Awarded Compensation that is required to be
repaid in accordance with the Policy. I further acknowledge, understand and agree that (i) the
compensation that I receive, have received or may become entitled to receive from the Company Group is
subject to the Policy, and the Policy may affect such compensation and (ii) I have no right to
indemnification, insurance payments or other reimbursement by or from the Company Group for any
compensation that is subject to recoupment and/or forfeiture under the Policy. Capitalized terms used but
not defined herein have the meanings set forth in the Policy.
Signed:
Print Name:
Date: