Wendy's Co 10-Q for FY2023 Q2
Wendy's Co (WEN)
10-Q
2023-08-09
For: 2023-07-02
View Original
Added on
April 11, 2026
About this 10-Q
Wendy's Co filed this 10-Q on August 9, 2023, covering the quarter ended July 2, 2023 (FY2023 Q2).
Headline figures
Quarter ended July 2, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $561.57M
- up 4.4% from $537.78M a year earlier
- Net income
- $59.63M
- up 23.8% from net income of $48.15M a year earlier
- Diluted EPS
- $0.28
- up 27.3% from $0.22 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended July 2, 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: 1-2207
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(614 ) 764-3100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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.
☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
There were 209,288,141 shares of The Wendy’s Company common stock outstanding as of August 2, 2023.
THE WENDY’S COMPANY AND SUBSIDIARIES
INDEX TO FORM 10-Q
| Page | |||||
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Par Value)
| July 2, 2023 | January 1, 2023 | ||||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts and notes receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Advertising funds restricted assets | |||||||||||
| Total current assets | |||||||||||
| Properties | |||||||||||
| Finance lease assets | |||||||||||
| Operating lease assets | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets | |||||||||||
| Investments | |||||||||||
| Net investment in sales-type and direct financing leases | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Current portion of finance lease liabilities | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Advertising funds restricted liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term finance lease liabilities | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Deferred franchise fees | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Common stock held in treasury, at cost; | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
4
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Sales | $ | $ | $ | $ | |||||||||||||||||||
| Franchise royalty revenue and fees | |||||||||||||||||||||||
| Franchise rental income | |||||||||||||||||||||||
| Advertising funds revenue | |||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Franchise support and other costs | |||||||||||||||||||||||
| Franchise rental expense | |||||||||||||||||||||||
| Advertising funds expense | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) | |||||||||||||||||||||||
| Amortization of cloud computing arrangements | |||||||||||||||||||||||
| System optimization losses (gains), net | ( | ( | |||||||||||||||||||||
| Reorganization and realignment costs | |||||||||||||||||||||||
| Impairment of long-lived assets | |||||||||||||||||||||||
| Other operating income, net | ( | ( | ( | ( | |||||||||||||||||||
| Operating profit | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Loss on early extinguishment of debt | ( | ||||||||||||||||||||||
| Investment (loss) income, net | ( | ( | ( | ||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
6
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In Thousands)
| Common Stock | Additional Paid-In Capital | Retained Earnings | Common Stock Held in Treasury | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends | ( | ( | |||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||||||||||||||
Common stock issued upon exercises of stock options | |||||||||||||||||||||||||||||||||||
Common stock issued upon vesting of restricted shares | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Balance at April 2, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends | ( | ( | |||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||||||||||||||
Common stock issued upon exercises of stock options | |||||||||||||||||||||||||||||||||||
Common stock issued upon vesting of restricted shares | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Balance at July 2, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
7
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED
(In Thousands)
| Common Stock | Additional Paid-In Capital | Retained Earnings | Common Stock Held in Treasury | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||
| Balance at January 2, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||
| Cash dividends | ( | ( | |||||||||||||||||||||||||||||||||
| Repurchases of common stock, including accelerated share repurchase | ( | ||||||||||||||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||||||||||||||
Common stock issued upon exercises of stock options | |||||||||||||||||||||||||||||||||||
Common stock issued upon vesting of restricted shares | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Balance at April 3, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||||||||||||||
| Cash dividends | ( | ( | |||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||||||||||||||
Common stock issued upon exercises of stock options | ( | ||||||||||||||||||||||||||||||||||
Common stock issued upon vesting of restricted shares | ( | ( | |||||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Balance at July 3, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
8
THE WENDY’S COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| Six Months Ended | |||||||||||
| July 2, 2023 | July 3, 2022 | ||||||||||
| (Unaudited) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) | |||||||||||
| Amortization of cloud computing arrangements | |||||||||||
| Share-based compensation | |||||||||||
| Impairment of long-lived assets | |||||||||||
| Deferred income tax | |||||||||||
| Non-cash rental expense, net | |||||||||||
| Change in operating lease liabilities | ( | ( | |||||||||
| Net receipt of deferred vendor incentives | |||||||||||
| System optimization losses (gains), net | ( | ||||||||||
| Distributions received from joint ventures, net of equity in earnings | |||||||||||
| Long-term debt-related activities, net | |||||||||||
| Cloud computing arrangements expenditures | ( | ( | |||||||||
| Changes in operating assets and liabilities and other, net | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Franchise development fund | ( | ( | |||||||||
| Dispositions | |||||||||||
| Notes receivable, net | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from long-term debt | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Repayments of finance lease liabilities | ( | ( | |||||||||
| Deferred financing costs | ( | ||||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Dividends | ( | ( | |||||||||
| Proceeds from stock option exercises | |||||||||||
| Payments related to tax withholding for share-based compensation | ( | ( | |||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Net cash (used in) provided by operations before effect of exchange rate changes on cash | ( | ||||||||||
| Effect of exchange rate changes on cash | ( | ||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
9
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of July 2, 2023, the results of our operations for the three and six months ended July 2, 2023 and July 3, 2022 and cash flows for the six months ended July 2, 2023 and July 3, 2022. The results of operations for the six months ended July 2, 2023 are not necessarily indicative of the results to be expected for the full 2023 fiscal year. The Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (the “Form 10-K”).
The principal 100% owned subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 17 for further information.
We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods.
Our significant interim accounting policies include the recognition of advertising funds expense in proportion to advertising funds revenue.
(2) Revenue
Disaggregation of Revenue
The following tables disaggregate revenue by segment and source:
| Wendy’s U.S. | Wendy’s International | Global Real Estate & Development | Total | ||||||||||||||||||||
Three Months Ended July 2, 2023 | |||||||||||||||||||||||
| Sales at Company-operated restaurants | $ | $ | $ | $ | |||||||||||||||||||
| Franchise royalty revenue | |||||||||||||||||||||||
| Franchise fees | |||||||||||||||||||||||
| Franchise rental income | |||||||||||||||||||||||
| Advertising funds revenue | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
Three Months Ended July 3, 2022 | |||||||||||||||||||||||
| Sales at Company-operated restaurants | $ | $ | $ | $ | |||||||||||||||||||
| Franchise royalty revenue | |||||||||||||||||||||||
| Franchise fees | |||||||||||||||||||||||
| Franchise rental income | |||||||||||||||||||||||
| Advertising funds revenue | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
10
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
| Wendy’s U.S. | Wendy’s International | Global Real Estate & Development | Total | ||||||||||||||||||||
Six Months Ended July 2, 2023 | |||||||||||||||||||||||
| Sales at Company-operated restaurants | $ | $ | $ | $ | |||||||||||||||||||
| Franchise royalty revenue | |||||||||||||||||||||||
| Franchise fees | |||||||||||||||||||||||
| Franchise rental income | |||||||||||||||||||||||
| Advertising funds revenue | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
Six Months Ended July 3, 2022 | |||||||||||||||||||||||
| Sales at Company-operated restaurants | $ | $ | $ | $ | |||||||||||||||||||
| Franchise royalty revenue | |||||||||||||||||||||||
| Franchise fees | |||||||||||||||||||||||
| Franchise rental income | |||||||||||||||||||||||
| Advertising funds revenue | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
Contract Balances
The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:
| July 2, 2023 (a) | January 1, 2023 (a) | ||||||||||
Receivables, which are included in “Accounts and notes receivable, net” (b) | $ | $ | |||||||||
Receivables, which are included in “Advertising funds restricted assets” | |||||||||||
| Deferred franchise fees (c) | |||||||||||
_______________
(a)Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s condensed consolidated statements of operations.
(b)Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”
(c)The current portion of deferred franchise fees is included in “Accrued expenses and other current liabilities” and the long-term portion of deferred franchise fees is included in “Deferred franchise fees” and totaled $10,510 and $89,729 , respectively, as of July 2, 2023, and $8,977 and $90,231 , respectively, as of January 1, 2023.
Significant changes in deferred franchise fees are as follows:
| Six Months Ended | |||||||||||
| July 2, 2023 | July 3, 2022 | ||||||||||
| Deferred franchise fees at beginning of period | $ | $ | |||||||||
Revenue recognized during the period | ( | ( | |||||||||
| New deferrals due to cash received and other | |||||||||||
| Deferred franchise fees at end of period | $ | $ | |||||||||
11
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
Anticipated Future Recognition of Deferred Franchise Fees
The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:
| Estimate for fiscal year: | |||||
| 2023 (a) | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| $ | |||||
_______________
(a)Represents franchise fees expected to be recognized for the remainder of 2023, which includes development-related franchise fees expected to be recognized over a duration of one year or less.
(3) System Optimization Losses (Gains), Net
The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of January 1, 2017, the Company achieved its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5 % of the total system. While the Company has no plans to move its ownership away from approximately 5 % of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base and drive new restaurant development. During the six months ended July 2, 2023 and July 3, 2022, the Company facilitated 88 and 46 Franchise Flips, respectively.
Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs.” All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”
The following is a summary of the disposition activity recorded as a result of our system optimization initiative:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Post-closing adjustments on sales of restaurants (a) | $ | $ | $ | $ | |||||||||||||||||||
| (Loss) gain on sales of other assets, net (b) | ( | ( | |||||||||||||||||||||
| System optimization (losses) gains, net | $ | ( | $ | $ | ( | $ | |||||||||||||||||
_______________
(a)Represents the recognition of deferred gains as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.
(b)During the six months ended July 2, 2023, the Company received net cash proceeds of $280 primarily from the sale of surplus and other properties. During the three and six months ended July 3, 2022, the Company received net cash proceeds of $690 and $858 , respectively, primarily from the sale of surplus and other properties.
The Company also received cash proceeds of $63 and $158 during the three and six months ended July 3, 2022, respectively, related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.
12
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
Assets Held for Sale
As of July 2, 2023 and January 1, 2023, the Company had assets held for sale of $1,379 and $1,661 , respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”
(4) Reorganization and Realignment Costs
The following is a summary of the initiatives included in “Reorganization and realignment costs:”
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Organizational redesign | $ | $ | $ | $ | |||||||||||||||||||
| Other reorganization and realignment plans | |||||||||||||||||||||||
| Reorganization and realignment costs | $ | $ | $ | $ | |||||||||||||||||||
Organizational Redesign
In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). As a result of the Organizational Redesign Plan, the Company expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to incur total costs of approximately $11,000 to $13,000 related to the Organizational Redesign Plan. During the six months ended July 2, 2023, the Company recognized costs totaling $7,407 , which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3,500 to $5,500 , comprised of (1) severance and related employee costs of approximately $2,500 , (2) recruitment and relocation costs of approximately $800 , (3) third-party and other costs of approximately $300 and (4) share-based compensation of approximately $1,000 . The Company expects costs related to the Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the total costs to be recognized during 2023.
The following is a summary of the costs recorded as a result of the Organizational Redesign Plan:
| Three Months Ended | Six Months Ended | ||||||||||
| July 2, 2023 | July 2, 2023 | ||||||||||
| Severance and related employee costs | $ | $ | |||||||||
| Recruitment and relocation costs | |||||||||||
| Third-party and other costs | |||||||||||
| Share-based compensation (a) | |||||||||||
| Total organizational redesign | $ | $ | |||||||||
_______________
(a)Primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan.
13
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
As of July 2, 2023, the accruals for the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $3,038 and $117 , respectively. The table below presents a rollforward of our accruals for the Organizational Redesign Plan.
Balance January 1, 2023 | Charges | Payments | Balance July 2, 2023 | ||||||||||||||||||||
| Severance and related employee costs | $ | $ | $ | ( | $ | ||||||||||||||||||
| Recruitment and relocation costs | ( | ||||||||||||||||||||||
| Third-party and other costs | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
Other Reorganization and Realignment Plans
Costs incurred under the Company’s other reorganization and realignment plans were not material during the six months ended July 2, 2023 and July 3, 2022. The Company does not expect to incur any material additional costs under these plans.
(5) Investments
The following is a summary of the carrying value of our investments:
| July 2, 2023 | January 1, 2023 | ||||||||||
| Equity method investments | $ | $ | |||||||||
| Other investments in equity securities | |||||||||||
| $ | $ | ||||||||||
Equity Method Investments
Wendy’s has a 50 % share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons® brand (Tim Hortons is a registered trademark of Tim Hortons USA Inc.). The Company has significant influence over this investee. Such investment is accounted for using the equity method, under which our results of operations include our share of the income of the investee in “Other operating income, net.”
14
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
Presented below is activity related to our investment in TimWen included in our condensed consolidated financial statements:
| Six Months Ended | |||||||||||
| July 2, 2023 | July 3, 2022 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Equity in earnings for the period | |||||||||||
| Amortization of purchase price adjustments (a) | ( | ( | |||||||||
| Distributions received | ( | ( | |||||||||
Foreign currency translation adjustment included in “Other comprehensive income (loss)” and other | ( | ||||||||||
| Balance at end of period | $ | $ | |||||||||
_______________
(a)Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21
Other Investments in Equity Securities
During 2021, the Company made an investment in equity securities of $10,000 and, during the six months ended July 3, 2022, recognized a gain of $2,107 as a result of an observable price change for a similar investment of the same issuer. During the three and six months ended July 2, 2023, the Company recorded impairment charges of $6,827 and $10,389 , respectively, for the difference between the estimated fair value and the carrying value of the investment.
(6) Long-Term Debt
Long-term debt consisted of the following:
| July 2, 2023 | January 1, 2023 | ||||||||||
| Series 2022-1 Class A-2 Notes: | |||||||||||
| $ | $ | ||||||||||
| Series 2021-1 Class A-2 Notes: | |||||||||||
| Series 2019-1 Class A-2 Notes: | |||||||||||
| Series 2018-1 Class A-2 Notes: | |||||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||
| Less amounts payable within one year | ( | ( | |||||||||
| Total long-term debt | $ | $ | |||||||||
_______________
15
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(7) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:
•Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.
•Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
•Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.
Financial Instruments
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:
| July 2, 2023 | January 1, 2023 | ||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | Fair Value Measurements | |||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | Level 1 | ||||||||||||||||||||||||
| Other investments in equity securities (a) | Level 2 | ||||||||||||||||||||||||||||
| Financial liabilities (b) | |||||||||||||||||||||||||||||
| Series 2022-1 Class A-2-I Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2022-1 Class A-2-II Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2021-1 Class A-2-I Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2021-1 Class A-2-II Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2019-1 Class A-2-I Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2019-1 Class A-2-II Notes | Level 2 | ||||||||||||||||||||||||||||
| Series 2018-1 Class A-2-II Notes | Level 2 | ||||||||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||||||||
_______________
(a)The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which was based on observable price changes.
(b)The fair values were based on quoted market prices in markets that are not considered active markets.
16
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts. Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.
Non-Recurring Fair Value Measurements
Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.
Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) the deterioration in operating performance of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications. The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance.
Total impairment losses may also include the impact of remeasuring long-lived assets held for sale. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 8 for further information on impairment of our long-lived assets.
| Fair Value Measurements | |||||||||||||||||||||||
| July 2, 2023 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Held and used | $ | $ | $ | $ | |||||||||||||||||||
| Held for sale | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| January 1, 2023 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Held and used | $ | $ | $ | $ | |||||||||||||||||||
| Held for sale | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
(8) Impairment of Long-Lived Assets
The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications and (3) closing Company-operated restaurants and classifying such surplus properties as held for sale.
The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:”
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Company-operated restaurants | $ | $ | $ | $ | |||||||||||||||||||
| Restaurants leased or subleased to franchisees | |||||||||||||||||||||||
| Surplus properties | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
17
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(9) Income Taxes
The Company’s effective tax rate for the three months ended July 2, 2023 and July 3, 2022 was 24.4 % and 26.4 %, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21 % for the three months ended July 2, 2023 primarily due to state income taxes, including discrete changes to state deferred income taxes.
The Company’s effective tax rate for the six months ended July 2, 2023 and July 3, 2022 was 25.9 % and 26.4 %, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21 % for the six months ended July 2, 2023 primarily due to state income taxes, including discrete changes to state deferred income taxes, and a one-time adjustment to our foreign deferred income taxes related to prior periods.
There were no 582 due to lapses of statutes of limitations.
The current portion of refundable income taxes was $14,562 and $3,236 as of July 2, 2023 and January 1, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no
(10) Net Income Per Share
The calculation of basic and diluted net income per share was as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
| Weighted average basic shares outstanding | |||||||||||||||||||||||
Dilutive effect of stock options and restricted shares | |||||||||||||||||||||||
| Weighted average diluted shares outstanding | |||||||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
Basic net income per share for the three and six months ended July 2, 2023 and July 3, 2022 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding. Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of 4,420 and 4,476 for the three and six months ended July 2, 2023, respectively, and 5,538 and 4,417 for the three and six months ended July 3, 2022, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.
18
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(11) Stockholders’ Equity
Dividends
During each of the first and second quarters of 2023, the Company paid dividends per share of $.25 .125
Repurchases of Common Stock
In January 2023, our Board of Directors authorized a repurchase program for up to $500,000 of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the six months ended July 2, 2023, the Company repurchased 4,023 shares under the January 2023 Authorization with an aggregate purchase price of $88,254 , of which $1,380 was accrued as of July 2, 2023, and excluding excise tax of $683 and commissions of $56 . As of July 2, 2023, the Company had $411,746 of availability remaining under the January 2023 Authorization. Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 706 shares under the January 2023 Authorization with an aggregate purchase price of $15,163 , excluding applicable excise tax and commissions of $10 .
In February 2022, our Board of Directors authorized a repurchase program for up to $100,000 of our common stock through February 28, 2023, when and if market conditions warranted and to the extent legally permissible (the “February 2022 Authorization”). In April 2022, the Company’s Board of Directors approved an increase of $150,000 to the February 2022 Authorization, resulting in an aggregate authorization of $250,000 that was set to expire on February 28, 2023. During the six months ended July 3, 2022, the Company repurchased 2,759 shares under the February 2022 Authorization with an aggregate purchase price of $51,911 , excluding commissions of $39 . In connection with the January 2023 Authorization, the remaining portion of the February 2022 Authorization was canceled.
In February 2020, our Board of Directors authorized a repurchase program for up to $100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible (the “February 2020 Authorization”). In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization by one year, through February 28, 2022. In addition, the Board of Directors approved increases totaling $200,000 to the February 2020 Authorization, resulting in an aggregate authorization of $300,000 that continued to expire on February 28, 2022. In November 2021, the Company entered into an accelerated share repurchase agreement (the “2021 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the February 2020 Authorization. Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of $125,000 in cash and received an initial delivery of 4,910 shares of common stock, representing an estimated 85 % of the total shares expected to be delivered under the 2021 ASR Agreement. In February 2022, the Company completed the 2021 ASR Agreement and received an additional 715 shares of common stock. The total number of shares of common stock ultimately purchased by the Company under the 2021 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the 2021 ASR Agreement, less an agreed upon discount. In total, 5,625 shares were delivered under the 2021 ASR Agreement at an average purchase price of $22.22 per share. With the completion of the 2021 ASR Agreement in February 2022 as described above, the Company completed the February 2020 Authorization.
Accumulated Other Comprehensive Loss
The following table provides a rollforward of accumulated other comprehensive loss, which is entirely comprised of foreign currency translation:
| Six Months Ended | |||||||||||
| July 2, 2023 | July 3, 2022 | ||||||||||
| Balance at beginning of period | $ | ( | $ | ( | |||||||
Foreign currency translation | ( | ||||||||||
| Balance at end of period | $ | ( | $ | ( | |||||||
19
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(12) Leases
Nature of Leases
The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At July 2, 2023, Wendy’s and its franchisees operated 7,115 Wendy’s restaurants. Of the 414 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 159 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 111 restaurants. Wendy’s also owned 488 and leased 1,189 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.
Company as Lessee
The components of lease cost are as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Finance lease cost: | |||||||||||||||||||||||
| Amortization of finance lease assets | $ | $ | $ | $ | |||||||||||||||||||
| Interest on finance lease liabilities | |||||||||||||||||||||||
| Operating lease cost | |||||||||||||||||||||||
| Variable lease cost (a) | |||||||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Total operating lease cost (b) | |||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||||||||
_______________
(a)Includes expenses for executory costs of $10,172 and $9,245 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $20,020 and $18,853 for the six months ended July 2, 2023 and July 3, 2022, respectively, for which the Company is reimbursed by sublessees.
(b)Includes $32,329 and $32,071 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $62,927 and $60,996 for the six months ended July 2, 2023 and July 3, 2022, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,546 and $7,479 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $15,411 and $14,773 for the six months ended July 2, 2023 and July 3, 2022, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.
20
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
Company as Lessor
The components of lease income are as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Sales-type and direct-financing leases: | |||||||||||||||||||||||
| Selling profit | $ | $ | $ | $ | |||||||||||||||||||
| Interest income (a) | |||||||||||||||||||||||
| Operating lease income | |||||||||||||||||||||||
| Variable lease income | |||||||||||||||||||||||
| Franchise rental income (b) | $ | $ | $ | $ | |||||||||||||||||||
_______________
(a)Included in “Interest expense, net.”
(b)Includes sublease income of $42,961 and $43,689 recognized during the three months ended July 2, 2023 and July 3, 2022, respectively, and $85,912 and $86,854 recognized during the six months ended July 2, 2023 and July 3, 2022, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,115 and $9,250 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $19,893 and $18,785 for the six months ended July 2, 2023 and July 3, 2022, respectively.
(13) Supplemental Cash Flow Information
The following table includes supplemental non-cash investing and financing activities:
| Six Months Ended | |||||||||||
| July 2, 2023 | July 3, 2022 | ||||||||||
| Supplemental non-cash investing and financing activities: | |||||||||||
| Capital expenditures included in accounts payable | $ | $ | |||||||||
| Finance leases | |||||||||||
The following table includes a reconciliation of cash, cash equivalents and restricted cash:
| July 2, 2023 | January 1, 2023 | ||||||||||
| Reconciliation of cash, cash equivalents and restricted cash at end of period: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Restricted cash, included in Advertising funds restricted assets | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
21
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
(14) Transactions with Related Parties
Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.
TimWen Lease and Management Fee Payments
A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada. Wendy’s paid TimWen $10,140 and $9,601 under these lease agreements during the six months ended July 2, 2023 and July 3, 2022, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $121 and $111 during the six months ended July 2, 2023 and July 3, 2022, respectively, which has been included as a reduction to “General and administrative.”
Transactions with Yellow Cab
Certain family members and affiliates of Mr. Nelson Peltz, our Chairman, and Mr. Peter May, our Senior Vice Chairman, as well as Mr. Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”) and operating companies managed by Yellow Cab, a Wendy’s franchisee, that as of July 2, 2023 owned and operated 83 Wendy’s restaurants. During the six months ended July 2, 2023 and July 3, 2022, the Company recognized $7,411 and $6,476 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities. As of July 2, 2023 and January 1, 2023, $1,130 and $1,125 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”
Transactions with AMC
In February 2023, Ms. Kristin Dolan, a director of the Company, was appointed as the Chief Executive Officer of AMC Networks Inc. (“AMC”). During the six months ended July 2, 2023, the Company purchased approximately $1,200 of advertising time from a subsidiary of AMC. As of July 2, 2023, approximately $850 was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”
(15) Guarantees and Other Commitments and Contingencies
Except as described below, the Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations.
Franchisee Image Activation Incentive Programs
To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new restaurants. In February 2023, Wendy’s announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants (referred to as the “Pacesetter” program). Wendy’s previously offered and will continue to offer a restaurant development incentive program that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying new restaurants (referred to as the “Groundbreaker” program). Wendy’s U.S. and Canadian franchisees may elect either the Pacesetter program or the Groundbreaker program when committing to new multi-unit development agreements or adding incremental commitments to existing development agreements. Wendy’s also provides franchisees with the option of an early 20 -year or 25 -year renewal of their franchise agreement upon completion of reimaging utilizing certain approved Image Activation reimage designs.
Lease Guarantees
Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $95,523 as of July 2, 2023. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of July 2, 2023. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the
22
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of July 2, 2023.
Letters of Credit
As of July 2, 2023, the Company had outstanding letters of credit with various parties totaling $28,847 . Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Variable Funding Senior Secured Notes, Class A-1. We do not expect any material loss to result from these letters of credit.
(16) Legal and Environmental Matters
(17) Segment Information
Revenues by segment are as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Wendy’s U.S. | $ | $ | $ | $ | |||||||||||||||||||
| Wendy’s International | |||||||||||||||||||||||
| Global Real Estate & Development | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
23
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
The following table reconciles profit by segment to the Company’s consolidated income before income taxes:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||||||||||
| Wendy’s U.S. (a) | $ | $ | $ | $ | |||||||||||||||||||
| Wendy’s International (b) | |||||||||||||||||||||||
| Global Real Estate & Development | |||||||||||||||||||||||
| Total segment profit | $ | $ | |||||||||||||||||||||
| Unallocated franchise support and other costs | |||||||||||||||||||||||
| Advertising funds surplus (deficit) | ( | ( | |||||||||||||||||||||
| Unallocated general and administrative (c) | ( | ( | ( | ( | |||||||||||||||||||
| Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of cloud computing arrangements | ( | ( | |||||||||||||||||||||
| System optimization (losses) gains, net | ( | ( | |||||||||||||||||||||
| Reorganization and realignment costs | ( | ( | ( | ( | |||||||||||||||||||
| Impairment of long-lived assets | ( | ( | ( | ( | |||||||||||||||||||
| Unallocated other operating income, net | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Loss on early extinguishment of debt | ( | ||||||||||||||||||||||
| Investment (loss) income, net | ( | ( | ( | ||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | |||||||||||||||||||
_______________
(a)Wendy’s U.S. includes advertising funds expense of $2,766 and $5,322 for the three and six months ended July 3, 2022, respectively, related to the Company’s funding of incremental advertising.
(b)Wendy’s International includes advertising funds expense of $658 and $1,206 for the three and six months ended July 2, 2023, respectively, and $1,084 and $1,922 for the three and six months ended July 3, 2022, respectively, related to the Company’s funding of incremental advertising. In addition, Wendy’s International includes other international-related advertising deficit of $479 and $1,324 for the three and six months ended July 2, 2023, respectively, and $880 and $1,522 for the three and six months ended July 3, 2022, respectively.
(c)Includes corporate overhead costs, such as employee compensation and related benefits.
(18) New Accounting Standards
New Accounting Standards
Common-Control Lease Arrangements
In March 2023, the Financial Accounting Standards Board (“FASB”) issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control. The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the useful life of the improvements to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The standard is effective beginning with our 2024 fiscal year. The Company does not expect the guidance to have a material impact on our condensed consolidated financial statements.
24
THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per Share Amounts)
New Accounting Standards Adopted
Reference Rate Reform
In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions to current reference rate reform guidance to ease the financial reporting burdens related to the market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. During the three months ended July 2, 2023, certain of the Company’s subsidiaries executed amendments to the 2021-1 Variable Funding Senior Secured Notes, Class A-1 and the U.S. advertising fund revolving line of credit to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”), plus any applicable margin. In connection with these contract amendments, the Company adopted the reference rate reform guidance during the second quarter of 2023. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
Business Combinations
In October 2021, the FASB issued an amendment to improve the accounting for revenue contracts with customers acquired in a business combination. The amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with current revenue recognition guidance as if the acquirer had originated the contracts. The Company adopted this amendment during the first quarter of 2023. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (the “Form 10-K”). There have been no material changes as of July 2, 2023 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II. Other Information” of this report. You should consider our forward-looking statements in light of the risks discussed in “Item 1A. Risk Factors” in “Part II. Other Information” of this report and our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”).
The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s restaurant system in the United States (the “U.S.”) and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used herein, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to the ownership or franchising of the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand.
Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic share, and the third largest globally with 7,115 restaurants in the U.S. and 32 foreign countries and U.S. territories as of July 2, 2023.
Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator® and sides such as seasoned potatoes.
The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance. See “Results of Operations” below and Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information.
The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods.
26
Executive Overview
Our Business
As of July 2, 2023, the Wendy’s restaurant system was comprised of 7,115 restaurants, with 5,993 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 403 were operated by the Company and 5,590 were operated by a total of 216 franchisees. In addition, at July 2, 2023, there were 1,122 Wendy’s restaurants in operation in 32 foreign countries and U.S. territories. Of the international restaurants, 1,111 were operated by a total of 105 franchisees and 11 were operated by the Company in the United Kingdom (the “U.K.”).
The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of July 2, 2023.
Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather.
Wendy’s long-term growth opportunities include delivering accelerated global growth through (1) driving strong same-restaurant sales momentum across all dayparts, (2) accelerating our implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through global restaurant expansion.
Key Business Measures
We track our results of operations and manage our business using the following key business measures, which includes a non-GAAP financial measure:
•Same-Restaurant Sales - We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. Restaurants temporarily closed for more than one week are excluded from same-restaurant sales. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes.
•Restaurant Margin - We define restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry.
Restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs.
•Systemwide Sales - Systemwide sales is a non-GAAP financial measure, which includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.
The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.
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Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary economy. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary.
The Company believes its presentation of same-restaurant sales, restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.
The non-GAAP financial measure discussed above does not replace the presentation of the Company’s financial results in accordance with GAAP. Because all companies do not calculate non-GAAP financial measures in the same way, this measure as used by other companies may not be consistent with the way the Company calculates such measure.
Second Quarter Financial Highlights
•Revenue increased 4.4% to $561.6 million in the second quarter of 2023 compared with $537.8 million in the second quarter of 2022;
•Global same-restaurant sales increased 5.1%, U.S. same-restaurant sales increased 4.9% and international same-restaurant sales increased 7.2% compared with the second quarter of 2022. On a two-year basis, global same-restaurant sales increased 8.8%;
•Global Company-operated restaurant margin was 16.5% in the second quarter of 2023, an increase of 200 basis points compared with the second quarter of 2022; and
•Net income increased 23.7% to $59.6 million in the second quarter of 2023 compared with $48.2 million in the second quarter of 2022.
Year-to-Date Financial Highlights
•Revenue increased 6.2% to $1.1 billion in the first six months of 2023 compared with $1.0 billion in the first six months of 2022;
•Global same-restaurant sales increased 6.5%, U.S. same-restaurant sales increased 6.0% and international same-restaurant sales increased 10.3% compared with the first six months of 2022. On a two-year basis, global same-restaurant sales increased 9.6%;
•Global Company-operated restaurant margin was 15.2% in the first six months of 2023, an increase of 210 basis points compared with the first six months of 2022; and
•Net income increased 16.2% to $99.5 million in the first six months of 2023 compared with $85.6 million in the first six months of 2022.
Global Same-Restaurant Sales
Wendy’s long-term growth opportunities include driving strong same-restaurant sales momentum across all dayparts through our ownable core products, exciting menu innovation, compelling value offerings and improvements in speed, consistency and accuracy in our restaurants. Global same-restaurant sales increased 5.1% in the second quarter of 2023 and increased 8.8% on a two-year basis. Global same-restaurant sales increased 6.5% in the first six months of 2023 and increased 9.6% on a two-year basis.
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Digital
Wendy’s long-term growth opportunities include accelerated implementation of consumer-facing digital platforms and technologies. The Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program in the U.S. and Canada and establishing delivery agreements with third-party vendors. The Company is also partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth. During the second quarter of 2023, the Company revised its definition of digital sales to reflect our full digital portfolio by including in-restaurant mobile scans, in addition to our previously included delivery, mobile order and kiosk digital channels. Under the revised definition, the Company’s digital business represented approximately 12.7% and 10.9% of global systemwide sales during the six months ended July 2, 2023 and July 3, 2022, respectively.
New Restaurant Development
Wendy’s long-term growth opportunities include expanding the Company’s footprint through global restaurant expansion. To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, in addition to our $100.0 million build to suit development fund. In February 2023, the Company announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants. In addition, the Company has development agreements in place with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe. During the six months ended July 2, 2023, the Company and its franchisees added 20 net new restaurants across the Wendy’s system.
Organizational Redesign
In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). As a result of the Organizational Redesign Plan, the Company expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to incur total costs of approximately $11 million to $13 million related to the Organizational Redesign Plan, of which approximately $9 million to $11 million will be cash expenditures. The cash expenditures are expected to continue into 2025, with approximately two-thirds of the total cash expenditures occurring in 2023. Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the six months ended July 2, 2023, the Company recognized costs totaling $7.4 million, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3.5 million to $5.5 million, comprised of (1) severance and related employee costs of approximately $2.5 million, (2) recruitment and relocation costs of approximately $0.8 million, (3) third-party and other costs of approximately $0.3 million and (4) share-based compensation of approximately $1.0 million. The Company expects costs related to the Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the total costs to be recognized during 2023.
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Results of Operations
The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the second quarter and the first six months of 2023 and 2022.
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||
| Sales | $ | 240.7 | $ | 230.9 | $ | 9.8 | $ | 468.6 | $ | 440.1 | $ | 28.5 | |||||||||||||||||||||||
| Franchise royalty revenue and fees | 153.1 | 143.4 | 9.7 | 294.8 | 272.4 | 22.4 | |||||||||||||||||||||||||||||
| Franchise rental income | 58.0 | 58.6 | (0.6) | 115.8 | 116.5 | (0.7) | |||||||||||||||||||||||||||||
| Advertising funds revenue | 109.8 | 104.9 | 4.9 | 211.2 | 197.4 | 13.8 | |||||||||||||||||||||||||||||
| 561.6 | 537.8 | 23.8 | 1,090.4 | 1,026.4 | 64.0 | ||||||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||
| Cost of sales | 201.0 | 197.3 | 3.7 | 397.5 | 382.3 | 15.2 | |||||||||||||||||||||||||||||
| Franchise support and other costs | 13.8 | 9.9 | 3.9 | 27.0 | 21.7 | 5.3 | |||||||||||||||||||||||||||||
| Franchise rental expense | 32.4 | 32.1 | 0.3 | 63.0 | 61.0 | 2.0 | |||||||||||||||||||||||||||||
| Advertising funds expense | 109.6 | 111.0 | (1.4) | 211.3 | 208.8 | 2.5 | |||||||||||||||||||||||||||||
| General and administrative | 62.7 | 61.6 | 1.1 | 125.0 | 124.0 | 1.0 | |||||||||||||||||||||||||||||
| Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) | 33.5 | 33.4 | 0.1 | 67.0 | 66.7 | 0.3 | |||||||||||||||||||||||||||||
| Amortization of cloud computing arrangements | 2.3 | — | 2.3 | 3.8 | — | 3.8 | |||||||||||||||||||||||||||||
| System optimization losses (gains), net | — | (0.2) | 0.2 | — | (3.7) | 3.7 | |||||||||||||||||||||||||||||
| Reorganization and realignment costs | 0.7 | 0.2 | 0.5 | 7.5 | 0.6 | 6.9 | |||||||||||||||||||||||||||||
| Impairment of long-lived assets | 0.1 | 1.9 | (1.8) | 0.5 | 2.5 | (2.0) | |||||||||||||||||||||||||||||
| Other operating income, net | (3.8) | (5.7) | 1.9 | (6.0) | (8.7) | 2.7 | |||||||||||||||||||||||||||||
| 452.3 | 441.5 | 10.8 | 896.6 | 855.2 | 41.4 | ||||||||||||||||||||||||||||||
| Operating profit | 109.3 | 96.3 | 13.0 | 193.8 | 171.2 | 22.6 | |||||||||||||||||||||||||||||
| Interest expense, net | (31.1) | (32.1) | 1.0 | (62.8) | (58.5) | (4.3) | |||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | — | (1.3) | — | (1.3) | |||||||||||||||||||||||||||||
| Investment (loss) income, net | (6.8) | — | (6.8) | (10.4) | 2.1 | (12.5) | |||||||||||||||||||||||||||||
| Other income, net | 7.5 | 1.2 | 6.3 | 14.9 | 1.4 | 13.5 | |||||||||||||||||||||||||||||
| Income before income taxes | 78.9 | 65.4 | 13.5 | 134.2 | 116.2 | 18.0 | |||||||||||||||||||||||||||||
| Provision for income taxes | (19.3) | (17.2) | (2.1) | (34.7) | (30.6) | (4.1) | |||||||||||||||||||||||||||||
| Net income | $ | 59.6 | $ | 48.2 | $ | 11.4 | $ | 99.5 | $ | 85.6 | $ | 13.9 | |||||||||||||||||||||||
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| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | % of Total Revenues | 2022 | % of Total Revenues | 2023 | % of Total Revenues | 2022 | % of Total Revenues | ||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 240.7 | 42.9 | % | $ | 230.9 | 42.9 | % | $ | 468.6 | 43.0 | % | $ | 440.1 | 42.9 | % | |||||||||||||||||||||||||||||||
Franchise royalty revenue and fees: | |||||||||||||||||||||||||||||||||||||||||||||||
| Franchise royalty revenue | 132.1 | 23.5 | % | 125.0 | 23.2 | % | 254.3 | 23.3 | % | 236.8 | 23.1 | % | |||||||||||||||||||||||||||||||||||
| Franchise fees | 21.0 | 3.7 | % | 18.4 | 3.5 | % | 40.5 | 3.7 | % | 35.6 | 3.4 | % | |||||||||||||||||||||||||||||||||||
| Total franchise royalty revenue and fees | 153.1 | 27.2 | % | 143.4 | 26.7 | % | 294.8 | 27.0 | % | 272.4 | 26.5 | % | |||||||||||||||||||||||||||||||||||
Franchise rental income | 58.0 | 10.3 | % | 58.6 | 10.9 | % | 115.8 | 10.6 | % | 116.5 | 11.4 | % | |||||||||||||||||||||||||||||||||||
Advertising funds revenue | 109.8 | 19.6 | % | 104.9 | 19.5 | % | 211.2 | 19.4 | % | 197.4 | 19.2 | % | |||||||||||||||||||||||||||||||||||
Total revenues | $ | 561.6 | 100.0 | % | $ | 537.8 | 100.0 | % | $ | 1,090.4 | 100.0 | % | $ | 1,026.4 | 100.0 | % | |||||||||||||||||||||||||||||||
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | % of Sales | 2022 | % of Sales | 2023 | % of Sales | 2022 | % of Sales | ||||||||||||||||||||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||||||||||||||||||||||||||
| Food and paper | $ | 75.8 | 31.5 | % | $ | 76.3 | 33.0 | % | $ | 149.6 | 31.9 | % | $ | 144.6 | 32.9 | % | |||||||||||||||||||||||||||||||
| Restaurant labor | 75.3 | 31.3 | % | 73.0 | 31.6 | % | 148.9 | 31.8 | % | 143.5 | 32.6 | % | |||||||||||||||||||||||||||||||||||
Occupancy, advertising and other operating costs | 49.9 | 20.7 | % | 48.0 | 20.9 | % | 99.0 | 21.1 | % | 94.2 | 21.4 | % | |||||||||||||||||||||||||||||||||||
| Total cost of sales | $ | 201.0 | 83.5 | % | $ | 197.3 | 85.5 | % | $ | 397.5 | 84.8 | % | $ | 382.3 | 86.9 | % | |||||||||||||||||||||||||||||||
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | % of Sales | 2022 | % of Sales | 2023 | % of Sales | 2022 | % of Sales | ||||||||||||||||||||||||||||||||||||||||
| Company-operated restaurant margin: | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | $ | 40.6 | 17.3 | % | $ | 34.2 | 15.0 | % | $ | 73.3 | 16.0 | % | $ | 58.9 | 13.6 | % | |||||||||||||||||||||||||||||||
| Global | 39.7 | 16.5 | % | 33.6 | 14.5 | % | 71.1 | 15.2 | % | 57.8 | 13.1 | % | |||||||||||||||||||||||||||||||||||
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The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.
| Second Quarter | Six Months | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Key business measures: | |||||||||||||||||||||||
U.S. same-restaurant sales: | |||||||||||||||||||||||
| Company-operated | 3.1 | % | 2.9 | % | 5.2 | % | 2.9 | % | |||||||||||||||
| Franchised | 5.0 | % | 2.2 | % | 6.1 | % | 1.6 | % | |||||||||||||||
Systemwide | 4.9 | % | 2.3 | % | 6.0 | % | 1.7 | % | |||||||||||||||
| International same-restaurant sales (a) | 7.2 | % | 15.2 | % | 10.3 | % | 14.7 | % | |||||||||||||||
Global same-restaurant sales: | |||||||||||||||||||||||
| Company-operated | 3.3 | % | 2.9 | % | 5.3 | % | 2.9 | % | |||||||||||||||
| Franchised (a) | 5.3 | % | 3.7 | % | 6.6 | % | 3.1 | % | |||||||||||||||
| Systemwide (a) | 5.1 | % | 3.7 | % | 6.5 | % | 3.1 | % | |||||||||||||||
| Systemwide sales (b): | |||||||||||||||||||||||
| U.S. Company-operated | $ | 234.9 | $ | 227.9 | $ | 457.5 | $ | 434.4 | |||||||||||||||
| U.S. franchised | 2,949.7 | 2,772.6 | 5,671.9 | 5,278.2 | |||||||||||||||||||
U.S. systemwide | 3,184.6 | 3,000.5 | 6,129.4 | 5,712.6 | |||||||||||||||||||
| International Company-operated | 5.8 | 3.0 | 11.1 | 5.7 | |||||||||||||||||||
| International franchised (a) | 455.1 | 416.3 | 868.3 | 773.0 | |||||||||||||||||||
| International systemwide (a) | 460.9 | 419.3 | 879.4 | 778.7 | |||||||||||||||||||
| Global systemwide (a) | $ | 3,645.5 | $ | 3,419.8 | $ | 7,008.8 | $ | 6,491.3 | |||||||||||||||
_______________
(a)Excludes Argentina due to the impact of that country’s highly inflationary economy.
(b)During the second quarter of 2023 and 2022, global systemwide sales increased 6.9% and 5.6%, respectively, U.S. systemwide sales increased 6.1% and 3.5%, respectively, and international systemwide sales increased 12.7% and 22.7%, respectively, on a constant currency basis. During the first six months of 2023 and 2022, global systemwide sales increased 8.4% and 4.9%, respectively, U.S. systemwide sales increased 7.3% and 3.0%, respectively, and international systemwide sales increased 16.6% and 21.1%, respectively, on a constant currency basis.
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| Second Quarter | |||||||||||||||||||||||||||||
| U.S. Company-operated | U.S. Franchised | International Company-operated | International Franchised | Systemwide | |||||||||||||||||||||||||
| Restaurant count: | |||||||||||||||||||||||||||||
Restaurant count at April 2, 2023 | 403 | 5,586 | 11 | 1,095 | 7,095 | ||||||||||||||||||||||||
| Opened | 1 | 18 | — | 22 | 41 | ||||||||||||||||||||||||
| Closed | (1) | (14) | — | (6) | (21) | ||||||||||||||||||||||||
Restaurant count at July 2, 2023 | 403 | 5,590 | 11 | 1,111 | 7,115 | ||||||||||||||||||||||||
| Six Months | |||||||||||||||||||||||||||||
| U.S. Company-operated | U.S. Franchised | International Company-operated | International Franchised | Systemwide | |||||||||||||||||||||||||
Restaurant count at January 1, 2023 | 403 | 5,591 | 12 | 1,089 | 7,095 | ||||||||||||||||||||||||
| Opened | 2 | 37 | — | 41 | 80 | ||||||||||||||||||||||||
| Closed | (2) | (38) | (1) | (19) | (60) | ||||||||||||||||||||||||
Restaurant count at July 2, 2023 | 403 | 5,590 | 11 | 1,111 | 7,115 | ||||||||||||||||||||||||
| Sales | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Sales | $ | 240.7 | $ | 230.9 | $ | 9.8 | $ | 468.6 | $ | 440.1 | $ | 28.5 | |||||||||||||||||||||||
The increase in sales during the second quarter and the first six months of 2023 was primarily due to (1) a 3.3% and 5.3% increase in global Company-operated same-restaurant sales of $6.5 million and $21.4 million, respectively, and (2) net new restaurant development of $4.1 million and $8.2 million, respectively. Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count.
| Franchise Royalty Revenue and Fees | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Franchise royalty revenue | $ | 132.1 | $ | 125.0 | $ | 7.1 | $ | 254.3 | $ | 236.8 | $ | 17.5 | |||||||||||||||||||||||
| Franchise fees | 21.0 | 18.4 | 2.6 | 40.5 | 35.6 | 4.9 | |||||||||||||||||||||||||||||
| $ | 153.1 | $ | 143.4 | $ | 9.7 | $ | 294.8 | $ | 272.4 | $ | 22.4 | ||||||||||||||||||||||||
Franchise royalty revenue during the second quarter of 2023 increased $7.1 million, of which (1) $6.4 million was due to a 5.3% increase in global franchise same-restaurant sales and (2) $2.5 million was due to net new restaurant development. Franchise royalty revenue during the first six months of 2023 increased $17.5 million, of which (1) $15.3 million was due to a 6.6% increase in global franchise same-restaurant sales and (2) $5.1 million was due to net new restaurant development. Franchise same-restaurant sales during the second quarter and the first six months of 2023 increased due to higher average check, partially offset by a decrease in customer count.
The increase in franchise fees during the second quarter and the first six months of 2023 was primarily due to (1) an increase in fees as a result of Franchise Flips and other development-related fees of $1.5 million and $1.9 million, respectively, and (2) higher fees for providing information technology services to franchisees of $1.0 million and $1.9 million, respectively.
| Franchise Rental Income | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Franchise rental income | $ | 58.0 | $ | 58.6 | $ | (0.6) | $ | 115.8 | $ | 116.5 | $ | (0.7) | |||||||||||||||||||||||
The decrease in franchise rental income during the second quarter and the first six months of 2023 was primarily due to the impact of assigning certain leases to franchisees.
33
| Advertising Funds Revenue | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Advertising funds revenue | $ | 109.8 | $ | 104.9 | $ | 4.9 | $ | 211.2 | $ | 197.4 | $ | 13.8 | |||||||||||||||||||||||
The increase in advertising funds revenue during the second quarter and the first six months of 2023 was primarily due to an increase in franchise same-restaurant sales in the U.S. and Canada.
| Cost of Sales, as a Percent of Sales | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Food and paper | 31.5 | % | 33.0 | % | (1.5) | % | 31.9 | % | 32.9 | % | (1.0) | % | |||||||||||||||||||||||
| Restaurant labor | 31.3 | % | 31.6 | % | (0.3) | % | 31.8 | % | 32.6 | % | (0.8) | % | |||||||||||||||||||||||
| Occupancy, advertising and other operating costs | 20.7 | % | 20.9 | % | (0.2) | % | 21.1 | % | 21.4 | % | (0.3) | % | |||||||||||||||||||||||
| 83.5 | % | 85.5 | % | (2.0) | % | 84.8 | % | 86.9 | % | (2.1) | % | ||||||||||||||||||||||||
The decrease in cost of sales, as a percent of sales, during the second quarter and the first six months of 2023 was primarily due to higher average check. This impact was partially offset by (1) higher commodity costs, (2) an increase in restaurant labor rates, (3) a decrease in customer count and (4) the impact of the Company’s investments to support the entry into the U.K. market and additional inflationary pressures in the U.K.
| Franchise Support and Other Costs | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Franchise support and other costs | $ | 13.8 | $ | 9.9 | $ | 3.9 | $ | 27.0 | $ | 21.7 | $ | 5.3 | |||||||||||||||||||||||
The increase in franchise support and other costs during the second quarter and the first six months of 2023 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.
| Franchise Rental Expense | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Franchise rental expense | $ | 32.4 | $ | 32.1 | $ | 0.3 | $ | 63.0 | $ | 61.0 | $ | 2.0 | |||||||||||||||||||||||
The increase in franchise rental expense during the second quarter and the first six months of 2023 was primarily due to the impact of assigning fewer leases to franchisees during 2023 compared with 2022.
| Advertising Funds Expense | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Advertising funds expense | $ | 109.6 | $ | 111.0 | $ | (1.4) | $ | 211.3 | $ | 208.8 | $ | 2.5 | |||||||||||||||||||||||
On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The Company expects advertising funds expense to be lower than advertising funds revenue by approximately $3.0 million for 2023, which includes the amount by which advertising funds expense exceeded advertising funds revenue in prior years (excluding the Company’s funding of incremental advertising) of approximately $5.0 million, partially offset by the Company’s incremental funding of advertising in Canada of approximately $2.0 million.
The decrease in advertising funds expense during the second quarter was due to a decrease in the Company’s funding of incremental advertising, partially offset by an increase in franchise same-restaurant sales in the U.S. and Canada. The increase in advertising funds expense during the first six months of 2023 was due to an increase in franchise same-restaurant sales in the U.S. and Canada, partially offset by a decrease in the Company’s funding of incremental advertising.
34
| General and Administrative | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 (a) | Change | 2023 | 2022 (a) | Change | ||||||||||||||||||||||||||||||
| Incentive compensation | $ | 7.6 | $ | 6.7 | $ | 0.9 | $ | 15.1 | $ | 12.9 | $ | 2.2 | |||||||||||||||||||||||
| Professional fees | 14.7 | $ | 15.0 | (0.3) | 29.6 | 28.5 | 1.1 | ||||||||||||||||||||||||||||
| Employee compensation and benefits | 31.2 | 30.8 | 0.4 | 65.0 | 64.0 | 1.0 | |||||||||||||||||||||||||||||
| Share-based compensation | 5.4 | 6.1 | (0.7) | 9.3 | 12.5 | (3.2) | |||||||||||||||||||||||||||||
| Other, net | 3.8 | 3.0 | 0.8 | 6.0 | 6.1 | (0.1) | |||||||||||||||||||||||||||||
| $ | 62.7 | $ | 61.6 | $ | 1.1 | $ | 125.0 | $ | 124.0 | $ | 1.0 | ||||||||||||||||||||||||
_______________
(a)Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.
The increase in general and administrative expenses during the second quarter of 2023 was primarily due to an increase in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2023 versus 2022.
The increase in general and administrative expenses during the first six months of 2023 was primarily due to (1) an increase in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2023 versus 2022, (2) higher professional fees, reflecting higher information technology-related costs and (3) higher employee compensation and benefits. These increases were partially offset by lower share-based compensation.
| Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Restaurants | $ | 21.1 | $ | 21.3 | $ | (0.2) | $ | 42.0 | $ | 43.1 | $ | (1.1) | |||||||||||||||||||||||
| Technology support, corporate and other | 12.4 | 12.1 | 0.3 | 25.0 | 23.6 | 1.4 | |||||||||||||||||||||||||||||
| $ | 33.5 | $ | 33.4 | $ | 0.1 | $ | 67.0 | $ | 66.7 | $ | 0.3 | ||||||||||||||||||||||||
The increase in depreciation and amortization during the second quarter and the first six months of 2023 was primarily due to depreciation and amortization for technology investments and new restaurant assets, partially offset by assets becoming fully depreciated.
| Amortization of Cloud Computing Arrangements | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Amortization of cloud computing arrangements | $ | 2.3 | $ | — | $ | 2.3 | $ | 3.8 | $ | — | $ | 3.8 | |||||||||||||||||||||||
Amortization of cloud computing arrangements primarily represents amortization of assets associated with the Company’s enterprise resource planning (“ERP”) system implementation completed in the third quarter of 2022.
| System Optimization Losses (Gains), Net | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| System optimization losses (gains), net | $ | — | $ | (0.2) | $ | 0.2 | $ | — | $ | (3.7) | $ | 3.7 | |||||||||||||||||||||||
System optimization losses (gains), net for the first six months of 2022 were primarily comprised of post-closing adjustments on previous sales of restaurants. See Note 3 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.
35
| Reorganization and Realignment Costs | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Organizational redesign | $ | 0.7 | $ | — | $ | 0.7 | $ | 7.4 | $ | — | $ | 7.4 | |||||||||||||||||||||||
| Other reorganization and realignment plans | — | 0.2 | (0.2) | 0.1 | 0.6 | (0.5) | |||||||||||||||||||||||||||||
| $ | 0.7 | $ | 0.2 | $ | 0.5 | $ | 7.5 | $ | 0.6 | $ | 6.9 | ||||||||||||||||||||||||
During the first six months ended July 2, 2023, the Company recognized costs totaling $7.4 million under the Organizational Redesign Plan, which primarily included severance and related employee costs of $5.6 million and share-based compensation of $1.0 million. See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.
Costs incurred under the Company’s other reorganization and realignment plans were not material during the three and six months ended July 2, 2023 and July 3, 2022. The Company does not expect to incur any material additional costs under these plans.
| Impairment of Long-Lived Assets | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Impairment of long-lived assets | $ | 0.1 | $ | 1.9 | $ | (1.8) | $ | 0.5 | $ | 2.5 | $ | (2.0) | |||||||||||||||||||||||
The decrease in impairment of long-lived assets during the second quarter and the first six months of 2023 was primarily due to higher impairment charges in the prior year as a result of the deterioration in operating performance of certain Company-operated restaurants.
| Other Operating Income, Net | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Lease buyout | $ | 0.1 | $ | (1.3) | $ | 1.4 | (0.1) | (2.1) | $ | 2.0 | |||||||||||||||||||||||||
| Gains on sales-type leases | (1.1) | (1.7) | 0.6 | (1.2) | (2.2) | 1.0 | |||||||||||||||||||||||||||||
| Other, net | (2.8) | (2.7) | (0.1) | (4.7) | (4.4) | (0.3) | |||||||||||||||||||||||||||||
| $ | (3.8) | $ | (5.7) | $ | 1.9 | $ | (6.0) | $ | (8.7) | $ | 2.7 | ||||||||||||||||||||||||
The decrease in other operating income, net during the second quarter and the first six months of 2023 was primarily due to (1) lower lease buyout activity and (2) lower gains on sales-type leases.
| Interest Expense, Net | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Interest expense, net | $ | 31.1 | $ | 32.1 | $ | (1.0) | $ | 62.8 | $ | 58.5 | $ | 4.3 | |||||||||||||||||||||||
The decrease in interest expense, net during the second quarter of 2023 was primarily due to the impact of repurchasing $31.6 million in principal of the Company’s 7% debentures during the first quarter of 2023. The increase in interest expense, net during the first six months of 2023 was primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022, partially offset by the impact of repurchasing $31.6 million in principal of the Company’s 7% debentures during the first quarter of 2023.
36
| Loss on Early Extinguishment of Debt | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | $ | — | $ | — | $ | — | $ | 1.3 | $ | — | $ | 1.3 | |||||||||||||||||||||||
During the first quarter of 2023, the Company incurred a loss on early extinguishment of debt of $1.3 million due to the repurchase of $31.6 million in principal of the Company’s 7% debentures.
| Investment (Loss) Income, Net | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Investment (loss) income, net | $ | (6.8) | $ | — | $ | (6.8) | $ | (10.4) | $ | 2.1 | $ | (12.5) | |||||||||||||||||||||||
During the second quarter and the first six months of 2023, the Company recorded a loss of $6.8 million and $10.4 million, respectively, due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities. During the first six months of 2022, the Company recognized a gain of $2.1 million on an investment in equity securities as a result of an observable price change.
| Other Income, Net | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Other income, net | $ | 7.5 | $ | 1.2 | $ | 6.3 | $ | 14.9 | $ | 1.4 | $ | 13.5 | |||||||||||||||||||||||
The increase in other income, net during the second quarter and the first six months of 2023 was primarily due to interest income earned on our cash equivalents, which increased as a result of cash received from our debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.
| Provision for Income Taxes | Second Quarter | Six Months | |||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Income before income taxes | $ | 78.9 | $ | 65.4 | $ | 13.5 | $ | 134.2 | $ | 116.2 | $ | 18.0 | |||||||||||||||||||||||
Provision for income taxes | (19.3) | (17.2) | (2.1) | (34.7) | (30.6) | (4.1) | |||||||||||||||||||||||||||||
Effective tax rate on income | 24.4 | % | 26.4 | % | (2.0) | % | 25.9 | % | 26.4 | % | (0.5) | % | |||||||||||||||||||||||
Our effective tax rates for the second quarter and the first six months of 2023 and 2022 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The decrease in the effective tax rate for the second quarter of 2023 compared with the second quarter of 2022 was primarily due to a decrease in the tax effects of our foreign operations and additional net income from our national advertising funds which are not subject to tax. The decrease in the effective tax rate for the first six months of 2023 compared with the first six months of 2022 was primarily due to (1) net income from our national advertising funds not subject to tax, (2) a decrease in the tax effects of our foreign operations and (3) an increase in the benefit from share-based compensation. These benefits were partially offset by a one-time adjustment to our foreign deferred income taxes related to prior periods.
37
Segment Information
See Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.
Wendy’s U.S.
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Sales | $ | 234.9 | $ | 227.9 | $ | 7.0 | $ | 457.5 | $ | 434.4 | $ | 23.1 | |||||||||||||||||||||||
| Franchise royalty revenue | 114.9 | 108.9 | 6.0 | 221.3 | 206.8 | 14.5 | |||||||||||||||||||||||||||||
| Franchise fees | 17.5 | 16.0 | 1.5 | 34.6 | 31.4 | 3.2 | |||||||||||||||||||||||||||||
| Advertising fund revenue | 101.5 | 97.6 | 3.9 | 196.3 | 185.2 | 11.1 | |||||||||||||||||||||||||||||
| Total revenues | $ | 468.8 | $ | 450.4 | $ | 18.4 | $ | 909.7 | $ | 857.8 | $ | 51.9 | |||||||||||||||||||||||
| Segment profit | $ | 142.9 | $ | 127.0 | $ | 15.9 | $ | 268.2 | $ | 231.8 | $ | 36.4 | |||||||||||||||||||||||
The increase in Wendy’s U.S. revenues during the second quarter and the first six months of 2023 was primarily due to an increase in same-restaurant sales. Same-restaurant sales increased during the second quarter and the first six months of 2023 primarily due to higher average check, partially offset by a decrease in customer count.
The increase in Wendy’s U.S. segment profit during the second quarter and the first six months of 2023 was primarily due to (1) higher revenues, (2) lower cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K. market) and (3) a decrease in the recognition of the Company’s funding of incremental advertising.
Wendy’s International
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Sales | $ | 5.8 | $ | 3.0 | $ | 2.8 | $ | 11.1 | $ | 5.7 | $ | 5.4 | |||||||||||||||||||||||
| Franchise royalty revenue | 17.2 | 16.1 | 1.1 | 33.0 | 30.0 | 3.0 | |||||||||||||||||||||||||||||
| Franchise fees | 1.4 | 1.2 | 0.2 | 3.0 | 2.4 | 0.6 | |||||||||||||||||||||||||||||
| Advertising fund revenue | 8.3 | 7.2 | 1.1 | 14.9 | 12.3 | 2.6 | |||||||||||||||||||||||||||||
| Total revenues | $ | 32.7 | $ | 27.5 | $ | 5.2 | $ | 62.0 | $ | 50.4 | $ | 11.6 | |||||||||||||||||||||||
| Segment profit | $ | 8.5 | $ | 9.4 | $ | (0.9) | $ | 16.0 | $ | 14.8 | $ | 1.2 | |||||||||||||||||||||||
The increase in Wendy’s International revenues during the second quarter and the first six months of 2023 was primarily due to (1) net new restaurant development in the U.K. and (2) an increase in same-restaurant sales. Same-restaurant sales increased during the second quarter and the first six months of 2023 due to (1) higher average check and (2) an increase in customer count.
The decrease in Wendy’s International segment profit during the second quarter of 2023 was primarily due to (1) an increase in franchise support and other costs and (2) the Company’s investments to support the entry into the U.K. market and additional inflationary pressures in the U.K. These changes were partially offset by higher revenues.
The increase in Wendy’s International segment profit during the first six months of 2023 was primarily due to higher revenues. This increase was partially offset by (1) higher franchise support and other costs and (2) the Company’s investments to support the entry into the U.K. market and inflationary pressures in the U.K.
38
Global Real Estate & Development
| Second Quarter | Six Months | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Franchise fees | $ | 2.1 | $ | 1.3 | $ | 0.8 | $ | 2.8 | $ | 1.8 | $ | 1.0 | |||||||||||||||||||||||
| Franchise rental income | 58.0 | 58.6 | (0.6) | 115.8 | 116.5 | (0.7) | |||||||||||||||||||||||||||||
| Total revenues | $ | 60.1 | $ | 59.9 | $ | 0.2 | $ | 118.6 | $ | 118.3 | $ | 0.3 | |||||||||||||||||||||||
| Segment profit | $ | 26.5 | $ | 27.3 | $ | (0.8) | $ | 51.6 | $ | 54.9 | $ | (3.3) | |||||||||||||||||||||||
The increase in Global Real Estate & Development revenues during the second quarter and the first six months of 2023 was primarily due to higher fees as a result of Franchise Flips and other development-related fees.
The decrease in Global Real Estate & Development segment profit during the second quarter and the first six months of 2023 was primarily due to (1) lower gains on sales-type leases and (2) an increase in franchise rental expense. These changes were partially offset by higher revenues.
Liquidity and Capital Resources
Cash Flows
Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our securitized financing facility. Our principal uses of cash are operating expenses, capital expenditures, repurchases of common stock, dividends to stockholders and repurchases of debt.
Our anticipated cash requirements for the remainder of 2023, exclusive of operating cash flow requirements, consist principally of:
•capital expenditures of approximately $45.0 million to $55.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $75.0 million to $85.0 million;
•cash dividends aggregating approximately $104.6 million as discussed below in “Dividends;”
•stock repurchases under the Company’s January 2023 Authorization as discussed below in “Stock Repurchases;” and
•debt repurchases of up to $43.4 million as discussed below in “Long-Term Debt, Including Current Portion.”
Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.
We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.
The table below summarizes our cash flows from operating, investing and financing activities for the first six months of 2023 and 2022:
| Six Months | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 141.5 | $ | 98.2 | $ | 43.3 | |||||||||||
| Investing activities | (28.9) | (28.8) | (0.1) | ||||||||||||||
| Financing activities | (246.3) | 362.7 | (609.0) | ||||||||||||||
| Effect of exchange rate changes on cash | 2.1 | (2.4) | 4.5 | ||||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (131.6) | $ | 429.7 | $ | (561.3) | |||||||||||
39
Operating Activities
Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $141.5 million and $98.2 million in the first six months of 2023 and 2022, respectively. The change was primarily due to (1) higher net income, adjusted for non-cash expenses, and (2) a decrease in payments for incentive compensation. These changes were partially offset by an increase in cash paid for income taxes.
Investing Activities
Cash used in investing activities was $28.9 million and $28.8 million in the first six months of 2023 and 2022, respectively. The change was primarily due to lower proceeds from notes receivable of $1.1 million, partially offset by a decrease in expenditures associated with the Company’s franchise development fund of $0.9 million.
Financing Activities
Cash (used in) provided by financing activities was $(246.3) million and $362.7 million in the first six months of 2023 and 2022, respectively. The first six months of 2023 was primarily comprised of (1) dividends of $105.7 million, (2) repurchases of common stock of $86.9 million and (3) long-term debt activities of $46.4 million, reflecting the impact of repurchases of the Company’s 7% debentures during the first quarter of 2023. The first six months of 2022 was primarily comprised of long-term debt activities of $477.6 million, reflecting the impact of the completion of the Company’s debt financing transaction during the first quarter of 2022, partially offset by (1) dividends of $53.5 million and (2) repurchases of common stock of $52.0 million.
Long-Term Debt, Including Current Portion
During the six months ended July 2, 2023, Wendy’s repurchased $31.6 million in principal of its 7% debentures at par value.
We may from time to time seek to repurchase additional portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise. In December 2022, our Board of Directors authorized debt repurchases of up to $25.0 million and, in February 2023, our Board of Directors authorized additional debt repurchases of up to $50.0 million through February 2024, resulting in total debt repurchase authorizations of up to $75.0 million. As of July 2, 2023, the Company had completed the December 2022 debt repurchase authorization and had $43.4 million remaining under the February 2023 authorization. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Whether or not to repurchase any additional debt and the size and timing of any such repurchases will be determined at our discretion.
Except as described above, there were no material changes to the Company’s debt obligations since January 1, 2023. The Company was in compliance with its debt covenants as of July 2, 2023. See Note 6 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations.
Dividends
On March 15, 2023 and June 15, 2023, the Company paid quarterly cash dividends per share of $.25, aggregating $105.7 million. On August 9, 2023, the Company announced a dividend of $.25 per share to be paid on September 15, 2023 to stockholders of record as of September 1, 2023. If the Company pays regular quarterly cash dividends for the remainder of 2023 at the same rate as declared in the third quarter of 2023, the Company’s total cash requirement for dividends for the remainder of 2023 will be approximately $104.6 million based on the number of shares of its common stock outstanding at August 2, 2023. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.
Stock Repurchases
In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). In connection with the January 2023 Authorization, the remaining portion of the previous February 2022 authorization for $250.0 million was canceled. During the six months ended July 2, 2023, the Company repurchased
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4.0 million shares under the January 2023 Authorization with an aggregate purchase price of $88.3 million, of which $1.4 million was accrued as of July 2, 2023, and excluding excise tax of $0.7 million and commissions of $0.1 million. As of July 2, 2023, the Company had $411.7 million of availability remaining under the January 2023 Authorization. Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 0.7 million shares under the January 2023 Authorization with an aggregate purchase price of $15.2 million, excluding applicable excise tax and commissions.
Cloud Computing Arrangements
In addition to the anticipated cash requirements for capital expenditures noted above in “Cash Flows,” the Company expects to spend approximately $30.0 million during 2023 on cloud computing arrangements (“CCA”), primarily related to the Company’s human capital management system implementation. The Company’s cash expenditures related to CCA amounted to $16.8 million during the six months ended July 2, 2023.
General Inflation, Commodities and Changing Prices
Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during the six months ended July 2, 2023, and we expect this to continue throughout the remainder of 2023. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and product mix. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases.
Seasonality
Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
During the three months ended July 2, 2023, certain of the Company’s subsidiaries executed amendments to the 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”) and the U.S. advertising fund revolving line of credit to transition from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”), plus any applicable margin. The Company continues to be exposed to interest rate increases under its Class A-1 Notes, its U.S. advertising fund revolving line of credit and certain other lines of credit; however, the Company had no outstanding borrowings under such lines of credit as of July 2, 2023.
Except as described above, there were no significant changes from the information contained in the Company’s Form 10-K for the fiscal year ended January 1, 2023.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of July 2, 2023. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that as of July 2, 2023, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting
There were no changes in the internal control over financial reporting of the Company during the second quarter of 2023 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.
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PART II. OTHER INFORMATION
Special Note Regarding Forward-Looking Statements and Projections
This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. Many important factors could affect our future results and cause those results to differ materially from those expressed in or implied by our forward-looking statements. Such factors include, but are not limited to, the following:
•the impact of competition or poor customer experiences at Wendy’s restaurants;
•adverse economic conditions or disruptions, including in regions with a high concentration of Wendy’s restaurants;
•changes in discretionary consumer spending and consumer tastes and preferences;
•the disruption to our business from the COVID-19 pandemic and the impact of the pandemic on our results of operations, financial condition and prospects;
•impacts to our corporate reputation or the value and perception of our brand;
•the effectiveness of our marketing and advertising programs and new product development;
•our ability to manage the accelerated impact of social media;
•our ability to protect our intellectual property;
•food safety events or health concerns involving our products;
•our ability to deliver accelerated global sales growth and achieve or maintain market share across our dayparts;
•our ability to achieve our growth strategy through new restaurant development and our Image Activation program;
•our ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives;
•risks associated with leasing and owning significant amounts of real estate, including environmental matters;
•risks associated with our international operations, including our ability to execute our international growth strategy;
•changes in commodity and other operating costs;
•shortages or interruptions in the supply or distribution of our products and other risks associated with our independent supply chain purchasing co-op;
•the impact of increased labor costs or labor shortages;
•the continued succession and retention of key personnel and the effectiveness of our leadership and organizational structure;
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•risks associated with our digital commerce strategy, platforms and technologies, including our ability to adapt to changes in industry trends and consumer preferences;
•our dependence on computer systems and information technology, including risks associated with the failure or interruption of our systems or technology or the occurrence of cyber incidents or deficiencies;
•risks associated with our securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on our ability to raise additional capital, the impact of our overall debt levels and our ability to generate sufficient cash flow to meet our debt service obligations and operate our business;
•risks associated with our capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments;
•risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues;
•risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates;
•conditions beyond our control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events;
•risks associated with our organizational redesign; and
•other risks and uncertainties affecting us and our subsidiaries referred to in our Annual Report on Form 10-K filed with the SEC on March 1, 2023 (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the SEC.
In addition to the factors described above, there are risks associated with our predominantly franchised business model that could impact our results, performance and achievements. Such risks include our ability to identify, attract and retain experienced and qualified franchisees, our ability to effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. Our predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes.
All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that we currently deem immaterial may become material, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by federal securities laws, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties.
Item 1. Legal Proceedings.
The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.
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Item 1A. Risk Factors.
In addition to the information contained in this report, you should carefully consider the risk factors disclosed in our Form 10-K, which could materially affect our business, financial condition or future results. Except as described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information with respect to repurchases of shares of our common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the second quarter of 2023:
Issuer Repurchases of Equity Securities
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (2) | ||||||||||
| April 3, 2023 through May 7, 2023 | 1,181,296 | $22.00 | 1,170,672 | $435,470,503 | ||||||||||
| May 8, 2023 through June 4, 2023 | 543,082 | $22.86 | 540,310 | $423,121,514 | ||||||||||
| June 5, 2023 through July 2, 2023 | 545,111 | $22.01 | 517,788 | $411,745,914 | ||||||||||
| Total | 2,269,489 | $22.21 | 2,228,770 | $411,745,914 | ||||||||||
(1)Includes 40,719 shares of common stock reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the fair market value of the Company’s common stock on the vesting or exercise date of such awards, as set forth in the applicable plan document.
(2)In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible.
Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 0.7 million shares under the January 2023 Authorization with an aggregate purchase price of $15.2 million, excluding applicable excise tax and commissions.
Item 5. Other Information.
On May 17, 2023, the Company filed a Form 8-K announcing the voting results from its 2023 Annual Meeting of Stockholders, including with respect to the advisory resolution on the frequency of future advisory votes on executive compensation. In light of such voting results, the Company will hold an advisory vote on the executive compensation of the Company’s named executive officers every year until the next required advisory vote on the frequency of advisory votes on executive compensation.
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Item 6. Exhibits.
| EXHIBIT NO. | DESCRIPTION | ||||
| 10.1 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 101 | The following financial information from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2023 formatted in Inline eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. | ||||
| 104 | The cover page from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2023, formatted in Inline XBRL and contained in Exhibit 101. | ||||
_______________
| * | Filed herewith. | ||||
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SIGNATURES
Pursuant to the requirements 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.
THE WENDY’S COMPANY (Registrant) | |||||
| Date: August 9, 2023 | By: /s/ Gunther Plosch | ||||
| Gunther Plosch | |||||
| Chief Financial Officer | |||||
| (On behalf of the registrant) | |||||
| Date: August 9, 2023 | By: /s/ Suzanne M. Thuerk | ||||
| Suzanne M. Thuerk | |||||
| Chief Accounting Officer | |||||
| (Principal Accounting Officer) | |||||
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Exhibit 10.1
FIRST AMENDMENT TO CLASS A-1 NOTE PURCHASE AGREEMENT
This First Amendment to the Class A-1 Note Purchase Agreement, dated as of May 23, 2023 (this “Amendment”), is by and among WENDY’S FUNDING, LLC, a Delaware limited liability company (the “Master Issuer”), QUALITY IS OUR RECIPE, LLC, WENDY’S PROPERTIES, LLC, WENDY’S SPV GUARANTOR, LLC, each as a guarantor (collectively, the “Guarantors” and each a “Guarantor”), WENDY’S INTERNATIONAL, LLC, as manager (the “Manager”), and COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH (the “Administrative Agent”) and acknowledged and agreed to by the Committed Note Purchasers, the Funding Agents, the Swingline Lender and the L/C Provider.
RECITALS
WHEREAS, Section 9.01 of the Class A-1 Note Purchase Agreement (the “Existing Class A-1 NPA”), dated as of June 22, 2021, by and among the Master Issuer, the Guarantors, the Manager, the Conduit Investors thereto, the Committed Note Purchasers thereto, the Funding Agents thereto and the Administrative Agent, provides, among other things, that the parties may amend the Existing Class A-1 NPA in writing signed by the Manager, the Master Issuer and the Administrative Agent with the written consent of the Required Investor Groups (or, in the case of certain amendments, each Investor, the Funding Agents, the Swingline Lender and/or the L/C Provider);
WHEREAS, the Advances, Swingline Loans and Unreimbursed L/C Drawings under the Existing Class A-1 NPA may accrue interest based on the London Interbank Offered Rate for U.S. Dollars (“LIBOR”) in accordance with the terms of the Existing Class A-1 NPA;
WHEREAS, the parties have determined that all Available Tenors of LIBOR will cease to be available after June 30, 2023 and have agreed that LIBOR should be replaced with Term SOFR for purposes of the Existing Class A-1 NPA;
WHEREAS, the parties hereto desire to amend the Existing Class A-1 NPA as set forth in this Amendment; and
WHEREAS, the Master Issuer has authorized the execution and delivery of this Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Amendment hereby agree as follows:
Section 1.1 Amendments to the Existing Class A-1 NPA. As of the Effective Date (as defined below), the Existing Class A-1 NPA is hereby amended by deleting the stricken text (indicated in the same manner as the following example: stricken text) and inserting the double underlined text (indicated in the same manner as the following example: double-underlined text) in the Existing Class A-1 NPA attached as Exhibit A to this Amendment (the “Amended Class A-1 NPA”).
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Section 1.2 Effect on Class A-1 NPA. Upon the date hereof (i) the Existing Class A-1 NPA shall be amended in accordance herewith and (ii) the parties shall be bound by the Amended Class A-1 NPA as so amended. Except as expressly set forth or contemplated in this Amendment, the terms and conditions of the Class A-1 NPA shall remain in place and shall not be altered, amended, waived or changed in any manner whatsoever, except by any further amendment made in accordance with the terms of the Existing Class A-1 NPA as amended in the form of the Amended Class A-1 NPA by this Amendment.
Section 1.3 Capitalized Terms. Capitalized terms used and not otherwise defined herein have the meanings set forth or incorporated by reference in the Amended Class A-1 NPA.
Section 1.4 Conditions to Effectiveness. This Amendment shall become effective as of June 30, 2023 (the “Effective Date”).
Section 1.5 Representations and Warranties. Each of the Master Issuer, the Manager and each Guarantor hereby represents and warrants that: (a) this Amendment constitutes a legal, valid and binding obligation of such Person, enforceable against it in accordance with its terms, except as limited by debtor relief laws and equitable principles; (b) upon the Effective Date (both before and after giving effect to this Amendment), no Event of Default or Default shall exist; (c) the representations and warranties set forth in the Existing Class A-1 NPA and the other Related Documents are true and correct (i) if not qualified as to materiality or Material Adverse Effect, in all material respects and (ii) if qualified as to materiality or Material Adverse Effect, in all respects as of the date originally made and as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date); and (d) the execution, delivery and performance by the Master Issuer, the Manager and each Guarantor of this Amendment is within its limited liability company or corporate powers, have been duly authorized by all necessary actions, and do not and will not contravene (i) the organizational documents of the Master Issuer, the Manager or such Guarantor or (ii) any law or regulation or any contractual restriction binding on or affecting their respective assets or property.
Section 1.6 Reaffirmation of Guarantees and Security Interests. The Master Issuer and each Guarantor hereby acknowledges its receipt of a copy of this Amendment and its review of the terms and conditions hereof and consents to the terms and conditions of this Amendment and the transactions contemplated thereby. The Master Issuer and each Guarantor hereby (a) affirms and confirms, as applicable, its guarantees, pledges, grants and other undertakings under the Amended Class A-1 NPA and (b) agrees that (i) the Amended Class A-1 NPA shall continue to be in full force and effect and (ii) all guarantees, pledges, grants and other undertakings thereunder shall continue to be in full force and effect and shall accrue to the benefit of the applicable secured party or parties thereunder.
Section 1.7 Existing Eurodollar Advances. Notwithstanding anything to the contrary contained herein or in any other Related Document, (i) all Advances outstanding as of June 30, 2023 that are Eurodollar Advances (as defined in the Existing Class A-1 NPA immediately prior to the effectiveness of this Amendment, the “Existing Eurodollar Rate Advances”) shall continue to accrue interest based on the Eurodollar Funding Rate and their applicable existing Eurodollar Interest Accrual Periods (as each such term is defined in the Existing Class A-1 NPA
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immediately prior to the effectiveness of this Amendment for purposes of this Section 1.6) (provided, that in no event shall the Master Issuer incur or continue an Advance based on the Eurodollar Funding Rate after June 30, 2023), and thereafter, all Existing Eurodollar Rate Advances shall either be SOFR Advances or Base Rate Advances as determined in accordance with the Amended Class A-1 NPA and (ii) subject to any express limitations set forth in the immediately preceding clause (i), the terms of the Existing Class A-1 NPA as in effect immediately prior to the effectiveness of this Amendment in respect of the administration of Eurodollar Rate Advances (solely with respect to the Existing Eurodollar Rate Advances) shall remain in effect from and after the date hereof until the end of the then-existing Interest Accrual Period for such Eurodollar Rate Advances, in each case, solely for purposes of administering the Existing Eurodollar Rate Advances (including, without limitation, with respect to the payment of interest accrued thereon and other subject matter set forth in Article III of the Existing Class A-1 NPA).
Section 1.8 Miscellaneous
(a) Survival and Interpretation of Existing Documents. Except as expressly provided in this Amendment, all of the terms, provisions, covenants, agreements, representations and warranties and conditions of the Existing Class A-1 NPA and the other Related Documents shall be and remain in full force and effect as written, unmodified hereby and are hereby ratified by the Master Issuer, the Manager and each Guarantor. In the event of any conflict between the terms, provisions, covenants, representations and warranties and conditions of this Amendment and the Existing Class A-1 NPA, this Amendment shall control.
(b) Further Assurances. The Master Issuer, the Manager and each Guarantor each agrees to execute such other documents, instruments and agreements and take such further actions reasonably requested by the Administrative Agent to effectuate the provisions of this Amendment.
(c) Severability. Any term or provision of this Amendment that is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without rendering invalid, illegal or unenforceable the remaining terms and provisions of this Amendment or affecting the validity, legality or enforceability of any of the terms or provisions of this Amendment in any other jurisdiction. If any provision of this Amendment is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as would be enforceable.
(d) Governing Law. This Amendment and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Amendment and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the jurisdiction that governs the Existing Class A-1 NPA in accordance with the terms thereof.
(e) Waiver of Jury Trial. AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL, EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
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LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AMENDMENT, THE OTHER AMENDED DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COMMITTED NOTE PURCHASERS TO EXTEND CREDIT TO THE MASTER ISSUER.
(f) Entire Agreement. This Amendment and the Existing Class A-1 NPA (as amended hereby) and the other Related Documents embody the entire agreement and understanding between the parties and supersede all prior agreements and understandings relating to the subject matter hereof. Any exhibits or annexes attached hereto are hereby incorporated herein by reference and made a part hereof.
(g) Binding Effect, Beneficiaries. This Amendment shall be binding upon and inure to the benefit of the parties to the Existing Class A-1 NPA and each other applicable Related Document and their respective heirs, executors, administrators, successors, legal representatives and assigns, and no other party shall derive any rights or benefits herefrom.
(h) Construction. This Amendment shall be construed without regard to any presumption or other rule requiring construction against the party drafting this Amendment.
(i) Notices. All notices relating to this Amendment shall be delivered in the manner and subject to the provisions set forth in the Existing Class A-1 NPA.
(j) Governing Law. This Amendment is governed by and shall be construed in accordance with the laws of the State of New York. This Amendment may be executed (by electronic mail, facsimile or otherwise) in any number of counterparts, all of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(k) Electronic Signatures and Transmission. For purposes of this Amendment, any reference to “written” or “in writing” means any form of written communication, including, without limitation, electronic signatures, and any such written communication may be transmitted by Electronic Transmission. “Electronic Transmission” means any form of communication not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process. Any requirement in the Indenture that a document is to be signed or authenticated by “manual signature” or similar language shall not be deemed to prohibit signature to be by facsimile or electronic signature and shall not be deemed to prohibit delivery thereof by Electronic Transmission. The recipient of the Electronic Transmission will be required to complete a one-time registration process.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties hereto have caused this Amendment to be duly executed by its respective duly authorized officer as of the day and year first written above.
WENDY’S FUNDING, LLC, as Master Issuer
By: /s/ Trevor D. Morse
Name: Trevor D. Morse
Title: Senior Director – Treasurer
Name: Trevor D. Morse
Title: Senior Director – Treasurer
QUALITY IS OUR RECIPE, LLC, as Guarantor
By: /s/ Trevor D. Morse
Name: Trevor D. Morse
Title: Senior Director – Treasurer
Name: Trevor D. Morse
Title: Senior Director – Treasurer
WENDY’S PROPERTIES, LLC, as Guarantor
By: /s/ Trevor D. Morse
Name: Trevor D. Morse
Title: Senior Director – Treasurer
Name: Trevor D. Morse
Title: Senior Director – Treasurer
WENDY’S SPV GUARANTOR, LLC, as Guarantor
By: /s/ Trevor D. Morse
Name: Trevor D. Morse
Title: Senior Director – Treasurer
Name: Trevor D. Morse
Title: Senior Director – Treasurer
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WENDY’S INTERNATIONAL, LLC, as Manager
By: /s/ Trevor D. Morse
Name: Trevor D. Morse
Title: Senior Director – Treasurer
Name: Trevor D. Morse
Title: Senior Director – Treasurer
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COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, as Administrative Agent
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Erin M. Scott
Name: Erin M. Scott
Title: Executive Director
Name: Erin M. Scott
Title: Executive Director
Acknowledged and Agreed to by:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Committed Note Purchaser
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
as Committed Note Purchaser
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Erin M. Scott
Name: Erin M. Scott
Title: Executive Director
Name: Erin M. Scott
Title: Executive Director
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as related Funding Agent
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
as related Funding Agent
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Erin M. Scott
Name: Erin M. Scott
Title: Executive Director
Name: Erin M. Scott
Title: Executive Director
7
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Swingline Lender
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
as Swingline Lender
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Erin M. Scott
Name: Erin M. Scott
Title: Executive Director
Name: Erin M. Scott
Title: Executive Director
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as L/C Provider
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
as L/C Provider
By: /s/ Jinyang Wang
Name: Jinyang Wang
Title: Executive Director
By: /s/ Erin M. Scott
Name: Erin M. Scott
Title: Executive Director
Name: Erin M. Scott
Title: Executive Director
8
Exhibit A
[See attached.]
9
Exhibit A
CLASS A-1 NOTE PURCHASE AGREEMENT
(SERIES 2021-1 VARIABLE FUNDING SENIOR NOTES, CLASS A-1)
dated as of June 22, 2021
among
WENDY’S FUNDING, LLC,
as Master Issuer,
as Master Issuer,
QUALITY IS OUR RECIPE, LLC,
WENDY’S PROPERTIES, LLC,
WENDY’S SPV GUARANTOR, LLC,
each as a Guarantor,
WENDY’S INTERNATIONAL, LLC,
as Manager,
as Manager,
CERTAIN CONDUIT INVESTORS,
each as a Conduit Investor,
each as a Conduit Investor,
CERTAIN FINANCIAL INSTITUTIONS,
each as a Committed Note Purchaser,
each as a Committed Note Purchaser,
CERTAIN FUNDING AGENTS,
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as L/C Provider,
as L/C Provider,
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Swingline Lender,
as Swingline Lender,
and
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Administrative Agent
as Administrative Agent
10
TABLE OF CONTENTS
| Page | |||||||||||
| ARTICLE I DEFINITIONS | 16 | ||||||||||
| Section 1.01 | Definitions | 16 | |||||||||
| Section 1.02 | Defined Terms | 16 | |||||||||
| Section 1.03 | Benchmark Calculation | 34 | |||||||||
| ARTICLE II PURCHASE AND SALE OF SERIES 2021-1 CLASS A-1 NOTES | 1435 | ||||||||||
| Section 2.01 | The Initial Advance Notes | 1435 | |||||||||
| Section 2.02 | Advances | 1435 | |||||||||
| Section 2.03 | Borrowing Procedures | 1637 | |||||||||
| Section 2.04 | The Series 2021-1 Class A-1 Notes | 1940 | |||||||||
| Section 2.05 | Reduction in Commitments | 1940 | |||||||||
| Section 2.06 | Swingline Commitment | 2243 | |||||||||
| Section 2.07 | L/C Commitment | 2546 | |||||||||
| Section 2.08 | L/C Reimbursement Obligations | 2950 | |||||||||
| Section 2.09 | L/C Participations | 3152 | |||||||||
| ARTICLE III INTEREST AND FEES | 3254 | ||||||||||
| Section 3.01 | Interest | 3254 | |||||||||
| Section 3.02 | Fees | 3456 | |||||||||
| Section 3.03 | EurodollarSOFR Lending Unlawful | 3456 | |||||||||
| Section 3.04 | Deposits UnavailableBenchmark Replacement | 3557 | |||||||||
| Section 3.05 | Increased Costs, etc | 3559 | |||||||||
| Section 3.06 | Funding Losses | 3659 | |||||||||
| Section 3.07 | Increased Capital or Liquidity Costs | 3760 | |||||||||
| Section 3.08 | Taxes | 3761 | |||||||||
| Section 3.09 | Change of Lending Office | 4064 | |||||||||
| Section 3.10 | Benchmark Replacement SettingReaffirmation | 4165 | |||||||||
| ARTICLE IV OTHER PAYMENT TERMS | 4468 | ||||||||||
| Section 4.01 | Time and Method of Payment (Amounts Distributed by the Administrative Agent) | 4468 | |||||||||
| Section 4.02 | Order of Distributions (Amounts Distributed by the Trustee of the Paying Agent) | 4569 | |||||||||
| Section 4.03 | L/C Cash Collateral | 4569 | |||||||||
| Section 4.04 | Alternative Arrangements with Respect to Letters of Credit | 4670 | |||||||||
| ARTICLE V THE ADMINISTRATIVE AGENT AND THE FUNDING AGENTS | 4671 | ||||||||||
| Section 5.01 | Authorization and Action of the Administrative Agent | 4671 | |||||||||
| Section 5.02 | Delegation of Duties | 4771 | |||||||||
| Section 5.03 | Exculpatory Provisions | 4771 | |||||||||
| Section 5.04 | Reliance | 4772 | |||||||||
11
| Section 5.05 | Non-Reliance on the Administrative Agent and Other Purchasers | 4872 | |||||||||
| Section 5.06 | The Administrative Agent in its Individual Capacity | 4872 | |||||||||
| Section 5.07 | Successor Administrative Agent; Defaulting Administrative Agent | 4873 | |||||||||
| Section 5.08 | Authorization and Action of Funding Agents | 5074 | |||||||||
| Section 5.09 | Delegation of Duties | 5075 | |||||||||
| Section 5.10 | Exculpatory Provisions | 5075 | |||||||||
| Section 5.11 | Reliance | 5175 | |||||||||
| Section 5.12 | Non-Reliance on the Funding Agent and Other Purchasers | 5175 | |||||||||
| Section 5.13 | The Funding Agent in its Individual Capacity | 5176 | |||||||||
| Section 5.14 | Successor Funding Agent | 5176 | |||||||||
| ARTICLE VI REPRESENTATIONS AND WARRANTIES | 5276 | ||||||||||
| Section 6.01 | The Master Issuer and Guarantors | 5276 | |||||||||
| Section 6.02 | The Manager | 5478 | |||||||||
| Section 6.03 | Lender Parties | 5478 | |||||||||
| ARTICLE VII CONDITIONS | 5579 | ||||||||||
| Section 7.01 | Conditions to Issuance and Effectiveness | 5579 | |||||||||
| Section 7.02 | Conditions to Initial Extensions of Credit | 5579 | |||||||||
| Section 7.03 | Conditions to Each Extension of Credit | 5680 | |||||||||
| ARTICLE VIII COVENANTS | 5781 | ||||||||||
| Section 8.01 | Covenants | 5781 | |||||||||
| ARTICLE IX MISCELLANEOUS PROVISIONS | 5983 | ||||||||||
| Section 9.01 | Amendments | 5983 | |||||||||
| Section 9.02 | No Waiver; Remedies | 6084 | |||||||||
| Section 9.03 | Binding on Successors and Assigns | 6084 | |||||||||
| Section 9.04 | Survival of Agreement | 6185 | |||||||||
| Section 9.05 | Payment of Costs and Expenses; Indemnification | 6186 | |||||||||
| Section 9.06 | Characterization as Related Document; Entire Agreement | 6489 | |||||||||
| Section 9.07 | Notices | 6489 | |||||||||
| Section 9.08 | Severability of Provisions | 6489 | |||||||||
| Section 9.09 | Tax Characterization | 6489 | |||||||||
| Section 9.10 | No Proceedings; Limited Recourse | 6589 | |||||||||
| Section 9.11 | Confidentiality | 6690 | |||||||||
| Section 9.12 | GOVERNING LAW; CONFLICTS WITH INDENTURE | 6691 | |||||||||
| Section 9.13 | JURISDICTION | 6792 | |||||||||
| Section 9.14 | WAIVER OF JURY TRIAL | 6792 | |||||||||
| Section 9.15 | Counterparts | 6792 | |||||||||
| Section 9.16 | Third-Party Beneficiary | 6792 | |||||||||
| Section 9.17 | Assignment | 6792 | |||||||||
12
| Section 9.18 | Defaulting Investors | 7095 | |||||||||
| Section 9.19 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 98 | |||||||||
| Section 9.20 | Patriot Act | 98 | |||||||||
13
SCHEDULES AND EXHIBITS
SCHEDULE I Investor Groups and Commitments
SCHEDULE II Notice Addresses for Lender Parties, Agents, Master Issuer and Manager
SCHEDULE III Additional Closing Conditions
SCHEDULE IV Letters of Credit
SCHEDULE I Investor Groups and Commitments
SCHEDULE II Notice Addresses for Lender Parties, Agents, Master Issuer and Manager
SCHEDULE III Additional Closing Conditions
SCHEDULE IV Letters of Credit
EXHIBIT A-1 Form of Advance Request
EXHIBIT A-2 Form of Swingline Loan Request
EXHIBIT B Form of Assignment and Assumption Agreement
EXHIBIT C Form of Investor Group Supplement
EXHIBIT D Form of Purchaser’s Letter
EXHIBIT A-2 Form of Swingline Loan Request
EXHIBIT B Form of Assignment and Assumption Agreement
EXHIBIT C Form of Investor Group Supplement
EXHIBIT D Form of Purchaser’s Letter
14
CLASS A-1 NOTE PURCHASE AGREEMENT
THIS CLASS A-1 NOTE PURCHASE AGREEMENT, dated as of June 22, 2021 (as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof, this “Agreement”), is made by and among:
(a) WENDY’S FUNDING, LLC, a Delaware limited liability company (the “Master Issuer”),
(b) QUALITY IS OUR RECIPE, LLC, a Delaware limited liability company, WENDY’S PROPERTIES, LLC, a Delaware limited liability company, and WENDY’S SPV GUARANTOR, LLC, a Delaware limited liability company (each, a “Guarantor” and, collectively, the “Guarantors”),
(c) WENDY’S INTERNATIONAL, LLC, an Ohio limited liability company, as the manager (the “Manager”),
(d) the several commercial paper conduits listed on Schedule I as Conduit Investors and their respective permitted successors and assigns (each, a “Conduit Investor” and, collectively, the “Conduit Investors”),
(e) the several financial institutions listed on Schedule I as Committed Note Purchasers and their respective permitted successors and assigns (each, a “Committed Note Purchaser” and, collectively, the “Committed Note Purchasers”),
(f) for each Investor Group, the financial institution entitled to act on behalf of the Investor Group set forth opposite the name of such Investor Group on Schedule I as Funding Agent and its permitted successors and assigns (each, the “Funding Agent” with respect to such Investor Group and, collectively, the “Funding Agents”),
(g) COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, as L/C Provider,
(h) COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, as Swingline Lender, and
(i) COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, in its capacity as administrative agent for the Conduit Investors, the Committed Note Purchasers, the Funding Agents, the L/C Provider and the Swingline Lender (together with its permitted successors and assigns in such capacity, the “Administrative Agent”).
BACKGROUND
1. Contemporaneously with the execution and delivery of this Agreement, the Master Issuer and Citibank, N.A., as Trustee, are entering into the Series 2021-1 Supplement, of even date herewith (as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms thereof, the “Series 2021-1
15
Supplement”), to the Base Indenture, dated as of June 1, 2015 (as the same may be amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms thereof, the “Base Indenture” and, together with the Series 2021-1 Supplement and any other supplement to the Base Indenture, the “Indenture”), by and between the Master Issuer and the Trustee, pursuant to which the Master Issuer will issue the Series 2021-1 Class A-1 Notes (as defined in the Series 2021-1 Supplement) in accordance with the Indenture.
2. The Master Issuer wishes to (a) issue the Series 2021-1 Class A-1 Advance Notes to each Funding Agent on behalf of the Investors in the related Investor Group, and obtain the agreement of the applicable Investors to make loans from time to time (each, an “Advance” or a “Series 2021-1 Class A-1 Advance” and, collectively, the “Advances” or the “Series 2021-1 Class A-1 Advances”) that will constitute the purchase of Series 2021-1 Class A-1 Outstanding Principal Amounts on the terms and conditions set forth in this Agreement; (b) issue the Series 2021-1 Class A-1 Swingline Note to the Swingline Lender and obtain the agreement of the Swingline Lender to make Swingline Loans on the terms and conditions set forth in this Agreement; and (c) issue the Series 2021-1 Class A-1 L/C Note to the L/C Provider and obtain the agreement of the L/C Provider to provide Letters of Credit on the terms and conditions set forth in this Agreement. L/C Obligations in connection with Letters of Credit issued pursuant to the Series 2021-1 Class A-1 L/C Note will constitute purchases of Series 2021-1 Class A-1 Outstanding Principal Amounts upon the incurrence of such L/C Obligations. The Series 2021-1 Class A-1 Advance Notes, the Series 2021-1 Class A-1 Swingline Note and the Series 2021-1 Class A-1 L/C Note constitute Series 2021-1 Class A-1 Notes. The Manager has joined in this Agreement to confirm certain representations, warranties and covenants made by it in favor of the Trustee and the Noteholders in the Related Documents for the benefit of each Lender Party.
ARTICLE I
DEFINITIONS
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement and unless the context requires a different meaning, capitalized terms used but not defined herein (including the preamble and the recitals hereto) shall have the meanings assigned to such terms in the Series 2021-1 Supplemental Definitions List attached to the Series 2021-1 Supplement as Annex A thereto or in the Base Indenture Definitions List attached to the Base Indenture as Annex A thereto, as applicable. Unless otherwise specified herein, all Article, Exhibit, Section or Subsection references herein shall refer to Articles, Exhibits, Sections or Subsections of this Agreement.
Section 1.02 Defined terms.
“Acquiring Committed Note Purchaser” has the meaning set forth in Section 9.17(a).
“Acquiring Investor Group” has the meaning set forth in Section 9.17(c).
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if
16
Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Person” has the meaning set forth in Section 3.05.
“Aggregate Unpaids” has the meaning set forth in Section 5.01.
“Anti-Corruption Laws” means the laws, rules, and regulations of the jurisdictions applicable to the Master Issuer or any Guarantor or its subsidiaries from time to time concerning or relating to bribery or corruption, including the U.S. Foreign Corrupt Practices Act of 1977, as amended.
“Anti-Terrorism Laws” means any laws, regulations, or orders of any Governmental Authority of the United States, the United Nations, the United Kingdom, the European Union or the Netherlands relating to terrorism financing or money laundering, including, but not limited to, the International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq.), the Trading With the Enemy Act (50 U.S.C. § 5 et seq.), the International Security Development and Cooperation Act (22 U.S.C. § 2349aa-9 et seq.), the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (the “USA Patriot Act”), and any rules or regulations promulgated pursuant to or under the authority of any of the foregoing.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, anythe tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“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).
17
“Base Rate” means, for purposes of the Series 2021-1 Class A-1 Notes, on any day, a rate per annum equal to the sum of (a) (1.00% plus (b) the greater of (i) the greatest of (A) the Prime Rate in effect on such day, (B)ii) the Federal Funds Rate in effect on such day plus 0.50% and (C) the Eurodollar Funding Rate for a Eurodollar Interest Accrual Period of one (1) monthiii) Adjusted Term SOFR in effect on such day plus 0.50% plus (b) 1.00%; provided, that any change in the Base Rate due to a change in the Prime Rate or, the Federal Funds Rate or Adjusted Term SOFR shall be effective as of the opening of business on the effective day of such change in the Prime Rate or, the Federal Funds Rate or Adjusted Term SOFR, respectively; provided, further, that changes in any rate of interest calculated by reference to the Base Rate shall take effect simultaneously with each change in the Base Rate; provided, further, that the Base Rate will in no event be higher than the maximum rate permitted by applicable law.
“Base Rate Advance” means an Advance that bears interest at the Base Rate during such time as it bears interest at such rate, as provided in this Agreement.
“Base Rate Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Benchmark” means, initially, the Eurodollar FundingTerm SOFR Reference Rate; provided that if a replacement of the Benchmark Transition Event has occurred pursuant to Section 3.10with respect to the Term SOFR Reference 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. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof pursuant to Section 3.04(a).
“Benchmark Cessation Changes” means any replacement of a Benchmark hereunder and all documents, instruments, and amendments executed, delivered or otherwise implemented or effected (automatically or otherwise) after the date hereof in accordance with or in furtherance of Section 3.10.
“Benchmark Replacement” means, for any Available Tenor:
(1) For purposes Section 3.10(a)“Benchmark Replacement” means with respect to any Benchmark Transition Event, the first alternative set forth in the order below that can be determined by the Administrative Agent:
(a) Daily Simple SOFR, and (a) the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, and 0.71513% (71.513 basis points) for an Available Tenor of twelve-months’ duration; provided, that if any Available Tenor of the Eurodollar Funding Rate does not correspond to an Available Tenor of Term SOFR, the Benchmark Replacement for such Available Tenor of the Eurodollar Funding Rate shall be the closest corresponding Available Tenor (based on length) for Term SOFR and if such Available Tenor
18
of the Eurodollar Funding Rate equally corresponds to two Available Tenors of Term SOFR, the corresponding tenor of Term SOFR with the shorter duration shall apply, or
(b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of the Eurodollar Funding Rate with a SOFR-based rate having approximately the same length as the relevant interest payment period specified in clause (a) of this Section (which spread adjustment, for the avoidance of doubt, shall be 0.11448% (11.448 basis points); and
(2) For purposes of Section 3.10(b), the sum of: (ax) the alternate benchmark rate, including any rate selected pursuant to an Other Rate Opt-in Election, and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been agreed that has been selected by the Administrative Agent and the Master Issuer in good faith as the replacement for such Available Tenor of such Benchmark 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, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such timeand (y) the related Benchmark Replacement Adjustment; provided that, if thesuch Benchmark Replacement as so determined pursuant to clause (1) or (2) above would be less than the Floor, thesuch Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Related Documents.
Notwithstanding the foregoing, the Administrative Agent may (in its sole discretion) determine that a Benchmark Replacement pursuant to clause (a) or (b) paragraph (1) of this definition is not administratively feasible and shall not be applied, and that either paragraph (1)(b) (to the extent applicable) or paragraph (2) shall automatically be deemed to apply by providing notice to the Master Issuer and Investors at least 5 Business Days prior to the effective date for the Benchmark Replacement.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an 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 Master Issuer giving due consideration to (a) 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 or (b) 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.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definitions of “Base Rate”, “CP Funding Rate”, “Eurodollar Advance”, “Eurodollar Business
19
Day”, “Eurodollar Funding Rate”, “Eurodollar Funding Rate (Reserve Adjusted)”, “Eurodollar Interest Period”, “Eurodollar Rate”, “Eurodollar Reserve Percentage”, “Eurodollar Tranche” and “Series 2020-1 Class A-1 Note Rate” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) 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
(b) in the applicability and length of lookback periods, the applicability of breakage provisions and other technical, administrative or operational matters) that the Administrative Agent, in consultation with the Master Issuer, decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement 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 Replacement exists, in such other manner of administration as the Administrative Agent, in consultation with the Master Issuer, decides is reasonably necessary in connection with the administration of this Agreement and the other Related Documents).case of clause (c) 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 or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness, non-compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such clause (c) 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, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) 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 the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) 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
20
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);
“Benchmark Transition Event” means with respect to any then-current Benchmark other than the Eurodollar Funding Rate, the occurrence of (b) a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, thethe regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the (or the published component used in the calculation thereof), the Federal Reserve SystemBoard, the Federal Reserve Bank of New York, 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, announcing or stating that (a) such (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease on a specified date 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 (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored. (or such component thereof); or
(c) 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) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Related Document in accordance with Section 3.04 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Related Document in accordance with Section 3.04.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Rule.
“Beneficial Ownership Rule” means 31 C.F.R. § 1010.230.
21
“Borrowing” has the meaning set forth in Section 2.02(c).
“Change in Law” means (a) any law, rule or regulation or any change therein or in the interpretation or application thereof (whether or not having the force of law), in each case, adopted, issued or occurring after the Closing Date or (b) any request, guideline or directive (whether or not having the force of law) from any government or political subdivision or agency, authority, bureau, central bank, commission, department or instrumentality thereof, or any court, tribunal, grand jury or arbitrator, or any accounting board or authority (whether or not a Governmental Authority) which is responsible for the establishment or interpretation of national or international accounting principles, in each case, whether foreign or domestic (each, an “Official Body”) charged with the administration, interpretation or application thereof, or the compliance with any request or directive of any Official Body (whether or not having the force of law) made, issued or occurring after the Closing Date; provided, however, for purposes of this definition, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all regulations, requests, guidelines or directives issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and been adopted subsequent to the date hereof.
“Commercial Paper” means, with respect to any Conduit Investor, the promissory notes issued in the commercial paper market by or for the benefit of such Conduit Investor.
“Commitments” means the obligations of each Committed Note Purchaser included in each Investor Group to fund Advances pursuant to Section 2.02(a) and to participate in Swingline Loans and Letters of Credit pursuant to Sections 2.06 and 2.08, respectively, in an aggregate stated amount up to its Commitment Amount.
“Commitment Amount” means, as to each Committed Note Purchaser, the amount set forth on Schedule I opposite such Committed Note Purchaser’s name as its Commitment Amount or, in the case of a Committed Note Purchaser that becomes a party to this Agreement pursuant to an Assignment and Assumption Agreement or Investor Group Supplement, the amount set forth therein as such Committed Note Purchaser’s Commitment Amount, in each case, as such amount may be (i) reduced pursuant to Section 2.05 or (ii) increased or reduced by any Assignment and Assumption Agreement or Investor Group Supplement entered into by such Committed Note Purchaser in accordance with the terms of this Agreement.
“Commitment Percentage” means, on any date of determination, with respect to any Investor Group, the ratio, expressed as a percentage, which such Investor Group’s Maximum Investor Group Principal Amount bears to the Series 2021-1 Class A-1 Notes Maximum Principal Amount on such date.
“Commitments” means the obligations of each Committed Note Purchaser included in each Investor Group to fund Advances pursuant to Section 2.02(a) and to participate in Swingline Loans and Letters of Credit pursuant to Sections 2.06 and 2.08, respectively, in an aggregate stated amount up to its Commitment Amount.
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“Commitment Term” means the period from and including the Closing Date to but excluding the earlier of (a) the Commitment Termination Date and (b) the date on which the Commitments are terminated or reduced to zero in accordance with this Agreement.
“Commitment Termination Date” means the Series 2021-1 Anticipated Repayment Date.
“Committed Note Purchaser Percentage” means, on any date of determination, with respect to any Committed Note Purchaser in any Investor Group, the ratio, expressed as a percentage, which the Commitment Amount of such Committed Note Purchaser bears to such Investor Group’s Maximum Investor Group Principal Amount on such date.
“Conduit Assignee” means, with respect to any Conduit Investor, any commercial paper conduit whose Commercial Paper is rated by at least two of the Specified Rating Agencies and is rated at least “A-1” from Standard & Poor’s, “P-1” from Moody’s and/or “F1” from Fitch, as applicable, that is administered by the Funding Agent with respect to such Conduit Investor or any Affiliate of such Funding Agent, in each case, designated by such Funding Agent to accept an assignment from such Conduit Investor of the Investor Group Principal Amount or a portion thereof with respect to such Conduit Investor pursuant to Section 9.17(b).
“Confidential Information” has the meaning set forth in Section 9.11.
“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate”, “CP Funding Rate”, “SOFR Interest Accrual Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 3.06 and other technical, administrative or operational matters) that the Administrative Agent, in consultation with the Master Issuer, decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides in its reasonable discretion that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines in its reasonable discretion and in consultation with the Master Issuer that no market practice for the administration of any such rate 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 Related Documents).
“CP Advance” means an Advance that bears interest at the CP Rate during such time as it bears interest at such rate, as provided in this Agreement.
“CP Funding Rate” means, with respect to each Conduit Investor, for any day during any Interest Accrual Period, for any portion of the Advances funded or maintained through the issuance of Commercial Paper by such Conduit Investor, the per annum rate equivalent to the weighted average cost (as determined by the related Funding Agent, and which shall include
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(without duplication) the fees and commissions of placement agents and dealers, incremental carrying costs incurred with respect to Commercial Paper maturing on dates other than those on which corresponding funds are received by such Conduit Investor, other borrowings by such Conduit Investor and any other costs associated with the issuance of Commercial Paper) of or related to the issuance of Commercial Paper that are allocated, in whole or in part, by such Conduit Investor or its related Funding Agent to fund or maintain such Advances for such Interest Accrual Period (and which may also be allocated in part to the funding of other assets of the Conduit Investor); provided, however, that if any component of any such rate is a discount rate, in calculating the “CP Funding Rate” for such Advances for such Interest Accrual Period, the related Funding Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum.
“CP Rate” means, on any day during any Interest Accrual Period, an interest rate per annum equal to the sum of (i) the CP Funding Rate for such Interest Accrual Period plus (ii) 1.50%; provided that the CP Rate will in no event be higher than the maximum rate permitted by applicable law.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which willmay include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans at such times; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative AgentInvestor Groups, then the Administrative Agent may establish another convention in its reasonable discretion.
“Defaulting Administrative Agent Event” has the meaning set forth in Section 5.07(b).
“Defaulting Investor” means any Investor that has (a) failed to make a payment required to be made by it under the terms of this Agreement within one (1) Business Day of the day such payment is required to be made by such Investor thereunder, (b) notified the Administrative Agent in writing that it does not intend to make any payment required to be made by it under the terms of this Agreement within one (1) Business Day of the day such payment is required to be made by such Investor thereunder or (c) become the subject of an Event of Bankruptcy.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, including an Other Rate Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Investors, so long as the Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Investors, written notice of objection to such Early Opt-in Election from the Required Investor Groups.
“Early Opt-in Election” means the occurrence of:
(1) a notification by the Administrative Agent to (or the request by the Master Issuer to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time
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contain (as a result of amendment or as originally executed) (x) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate or (y) a term benchmark rate other than a forward looking term based SOFR rate is used as a benchmark rate in lieu of USD LIBOR (and, in each case, such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2) the joint election by the Administrative Agent and the Master Issuer to trigger a fallback from the Eurodollar Funding Rate and the provision by the Administrative Agent of written notice of such election to the Investors.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Conduit Investor” means, at any time, any Conduit Investor whose Commercial Paper at such time is rated by at least two of the Specified Rating Agencies and is rated at least “A-1” from Standard & Poor’s, “P-1” from Moody’s and/or “F1” from Fitch, as applicable.
“Eurodollar Advance” means an Advance that bears interest at the Eurodollar Rate during such time as it bears interest at such rate, as provided in this Agreement.
“Eurodollar Business Day” means any Business Day on which dealings are also carried on in the London interbank market and banks are open for business in London.
“Eurodollar Funding Rate” means, for any Eurodollar Interest Accrual Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two (2) Eurodollar Business Days prior to the beginning of such Eurodollar Interest Accrual Period by reference to the London interbank offered rate administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for U.S. Dollars for a period equal in length to such Eurodollar Interest Accrual Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on either of such Reuters pages, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “Eurodollar Funding Rate” shall be the
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rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined by the Administrative Agent to be the average of the offered rates for deposits in U.S. Dollars in the amount of $1,000,000 for a period of time comparable to such Eurodollar Interest Accrual Period which are offered by three leading banks in the London interbank market at approximately 11:00 a.m. (London time) on the date that is two (2) Eurodollar Business Days prior to the beginning of such Eurodollar Interest Accrual Period as selected by the Administrative Agent (unless the Administrative Agent is unable to obtain such rates from such banks, in which case it will be deemed that a Eurodollar Funding Rate cannot be ascertained for purposes of Section 3.04). In respect of any Eurodollar Interest Accrual Period that is less than one (1) month in duration and if no Eurodollar Funding Rate is otherwise determinable with respect thereto in accordance with the preceding sentence of this definition, the Eurodollar Funding Rate shall be determined through the use of straight-line interpolation by reference to two rates calculated in accordance with the preceding sentence, one of which shall be determined as if the maturity of the U.S. Dollar deposits referred to therein were the period of time for which rates are available next shorter than the Eurodollar Interest Accrual Period and the other of which shall be determined as if such maturity were the period of time for which rates are available next longer than the Eurodollar Interest Accrual Period.
“Eurodollar Funding Rate (Reserve Adjusted)” means, for any Eurodollar Interest Accrual Period, an interest rate per annum (rounded upward to the nearest 1/100th of 1%) determined pursuant to the following formula:
| Eurodollar Funding Rate | = | Eurodollar Funding Rate | ||||||
| (Reserve Adjusted) | 1.00 - Eurodollar Reserve Percentage | |||||||
The Eurodollar Funding Rate (Reserve Adjusted) for any Eurodollar Interest Accrual Period will be determined by the Administrative Agent on the basis of the Eurodollar Reserve Percentage in effect two (2) Eurodollar Business Days before the first day of such Eurodollar Interest Accrual Period.
“Eurodollar Interest Accrual Period” means, with respect to any Eurodollar Advance, the period commencing on and including the Eurodollar Business Day such Advance first becomes a Eurodollar Advance in accordance with Section 3.01(b) and ending on but excluding a date, as elected by the Master Issuer pursuant to such Section 3.01(b), which is (i) one (1) month subsequent to such date, (ii) two (2) months subsequent to such date, (iii) three (3) months subsequent to such date or (iv) six (6) months subsequent to such date; provided, however, that no Eurodollar Interest Accrual Period may end subsequent to the second Business Day before the Quarterly Calculation Date occurring immediately prior to the then-current Series 2021-1 Class A-1 Anticipated Repayment Date and upon the occurrence and during the continuation of any Rapid Amortization Period or any Event of Default, any Eurodollar Interest Accrual Period with respect to the Eurodollar Advances of all Investor Groups may be terminated at the end of the then-current Eurodollar Interest Accrual Period (or, if the Class A-1 Notes have been accelerated in accordance with Section 9.2 of the Base Indenture, immediately), at the election of the
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Administrative Agent or Investor Groups holding in the aggregate more than 50% of the Eurodollar Tranche, by notice to the Master Issuer, the Manager, the Control Party and the Funding Agents, and upon such election the Eurodollar Advances in respect of which interest was calculated by reference to such terminated Eurodollar Interest Accrual Period shall be converted to Base Rate Advances.
“Eurodollar Rate” means, on any day during any Eurodollar Interest Accrual Period, an interest rate per annum equal to the sum of (i) the Eurodollar Funding Rate (Reserve Adjusted) for such Eurodollar Interest Accrual Period plus (ii) 1.50%; provided that the Eurodollar Rate will in no event be higher than the maximum rate permitted by applicable law.
“Eurodollar Reserve Percentage” means, for any Eurodollar Interest Accrual Period, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to liabilities or assets constituting “Eurocurrency Liabilities,” as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Eurodollar Interest Accrual Period.
“Eurodollar Tranche” means any portion of the Series 2021-1 Class A-1 Outstanding Principal Amount funded or maintained with Eurodollar Advances.
“FATCA” means (a) 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) and any current or future Treasury regulations thereunder or official interpretations thereof, (b) any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the United States and any other jurisdiction with the purpose (in either case) of facilitating the implementation of (a) above, or (c) any agreement pursuant to the implementation of paragraphs (a) or (b) above with the U.S. Internal Revenue Service or any other Governmental Authority in the United States.
“Federal Funds Rate” means, for any specified period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the overnight federal funds rates as published in Federal Reserve Board Statistical Release H.15(519) or any successor or substitute publication selected by the Administrative Agent (or, if such day is not a Business Day, for the next preceding Business Day), or if, for any reason, such rate is not available on any day, the rate determined, in the reasonable opinion of the Administrative Agent, to be the rate at which overnight federal funds are being offered in the national federal funds market at 9:00 a.m. (Eastern time).
“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 Eurodollar Funding Rate. As of the Series 2021-1 Closing Date, “Floor” means 0.0%.
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“Floor” means 0.0%.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System.
“Increase” has the meaning set forth in Section 2.1(a) of the Series 2021-1 Supplement.
“Interest Reserve Letter of Credit” means any letter of credit issued hereunder for the benefit of the Trustee and the Senior Noteholders or the Senior Subordinated Noteholders, as applicable.
“Investor” means any one of the Conduit Investors and the Committed Note Purchasers and “Investors” means the Conduit Investors and the Committed Note Purchasers collectively.
“Investor Group” means (i) for each Conduit Investor, collectively, such Conduit Investor, the related Committed Note Purchaser(s) set forth opposite the name of such Conduit Investor on Schedule I (or, if applicable, set forth for such Conduit Investor in the Assignment and Assumption Agreement or Investor Group Supplement pursuant to which such Conduit Investor or Committed Note Purchaser becomes a party thereto), any related Program Support Provider(s) and the related Funding Agent (which shall constitute the Series 2021-1 Class A-1 Noteholder for such Investor Group) and (ii) for each other Committed Note Purchaser that is not related to a Conduit Investor, collectively, such Committed Note Purchaser, any related Program Support Provider(s) and the related Funding Agent (which shall constitute the Series 2021-1 Class A-1 Noteholder for such Investor Group).
“Investor Group Increase Amount” means, with respect to any Investor Group, for any Business Day, the portion of the Increase, if any, actually funded by such Investor Group on such Business Day.
“Investor Group Principal Amount” means, with respect to any Investor Group, (a) when used with respect to the Closing Date, an amount equal to (i) such Investor Group’s Commitment Percentage of the Series 2021-1 Class A-1 Initial Advance Principal Amount, plus (ii) such Investor Group’s Commitment Percentage of the Series 2021-1 Class A-1 Outstanding Subfacility Amount outstanding on the Closing Date, and (b) when used with respect to any other date, an amount equal to (i) the Investor Group Principal Amount with respect to such Investor Group on the immediately preceding Business Day (excluding any Series 2021-1 Class A-1 Outstanding Subfacility Amount included therein), plus (ii) the Investor Group Increase Amount with respect to such Investor Group on such date, minus (iii) the amount of principal payments made to such Investor Group on the Series 2021-1 Class A-1 Advance Notes on such date, plus (iv) such Investor Group’s Commitment Percentage of the Series 2021-1 Class A-1 Outstanding Subfacility Amount outstanding on such date.
“L/C Commitment” means the obligation of the L/C Provider to provide Letters of Credit pursuant to Section 2.07, in an aggregate Undrawn L/C Face Amount, together with any Unreimbursed L/C Drawings, at any one time outstanding not to exceed $70,000,000, as such amount may be reduced or increased pursuant to Section 2.07(f) or reduced pursuant to Section 2.05(b).
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“L/C Obligations” means, at any time, an amount equal to the sum of (i) any Undrawn L/C Face Amounts outstanding at such time and (ii) any Unreimbursed L/C Drawings outstanding at such time.
“L/C Provider” means Coöperatieve Rabobank U.A., New York Branch, and its permitted successors and assigns in such capacity.
“L/C Reimbursement Amount” has the meaning set forth in Section 2.08(a).
“Lender Party” means any Investor, the Swingline Lender or the L/C Provider and “Lender Parties” means the Investors, the Swingline Lender and the L/C Provider, collectively.
“LIBOR Successor Rate” has the meaning set forth in Section 3.04(b).
“LIBOR Successor Rate Conforming Changes” has the meaning set forth in Section 3.04(b).
“Margin Stock” means “margin stock” as defined in Regulation U of the F.R.S. Board, as amended from time to time.
“Maximum Investor Group Principal Amount” means, as to each Investor Group existing on the Closing Date, the amount set forth on Schedule I to this Agreement as such Investor Group’s Maximum Investor Group Principal Amount or, in the case of any other Investor Group, the amount set forth as such Investor Group’s Maximum Investor Group Principal Amount in the Assignment and Assumption Agreement or Investor Group Supplement by which the members of such Investor Group become parties to this Agreement, in each case, as such amount may be (i) reduced pursuant to Section 2.05 of this Agreement or (ii) increased or reduced by any Assignment and Assumption Agreement or Investor Group Supplement entered into by the members of such Investor Group in accordance with the terms of this Agreement.
“Non-Excluded Taxes” has the meaning set forth in Section 3.08(a).
“Non-Funding Committed Notes Purchaser” has the meaning set forth in Section 2.02(a).
“Official Body” has the meaning set forth in the definition of “Change in Law.”
“Other Rate Opt-in Election” means the Administrative Agent and the Borrower have jointly elected to replace LIBOR pursuant to clause (1)(y) and (2) of the definition of Early Opt-in Election.
“Program Support Agreement” means, with respect to any Investor, any agreement entered into by any Program Support Provider in respect of any Commercial Paper and/or Series 2021-1 Class A-1 Note of such Investor providing for the issuance of one or more letters of credit for the account of such Investor, the issuance of one or more insurance policies for which such Investor is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, the sale by such Investor to any Program Support Provider of the Series 2021-1 Class A-1 Notes (or portions thereof or interests therein) and/or the making of loans and/
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or other extensions of credit to such Investor in connection with such Investor’s securitization program, together with any letter of credit, insurance policy or other instrument issued thereunder or guaranty thereof (but excluding any discretionary advance facility provided by a Committed Note Purchaser).
“Program Support Provider” means, with respect to any Investor, any financial institutions and any other or additional Person now or hereafter extending credit or having a commitment to extend credit to or for the account of, and/or agreeing to make purchases from, such Investor in respect of such Investor’s Commercial Paper and/or Series 2021-1 Class A-1 Note, and/or agreeing to issue a letter of credit or insurance policy or other instrument to support any obligations arising under or in connection with such Investor’s securitization program as it relates to any Commercial Paper issued by such Investor, and/or holding equity interests in such Investor, in each case pursuant to a Program Support Agreement, and any guarantor of any such Person.
“Reimbursement Obligation” means the obligation of the Master Issuer to reimburse the L/C Provider pursuant to Section 2.08 for amounts drawn under Letters of Credit.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Required Investor Groups” means the Investor Groups holding more than (i) if no single Investor Group holds more than 50% of the Commitments, 50% of the Commitments or (ii) if a single Investor Group holds more than 50% of the Commitments, two-thirds of the Commitments (provided, in either case, that the Commitment of any Defaulting Investor shall be disregarded in the determination of whether such threshold percentage of Commitments has been met).
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Resolution Authority” an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Sale Notice” has the meaning set forth in Section 9.18(b).
“Sanctions” means any sanctions administered by or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, the Netherlands, or other relevant sanctions authority.
“Sanctioned Person” has the meaning set forth in Section 6.01(j).
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“Sale Notice” has the meaning set forth in Section 9.18(b).
“Series 2021-1 Class A-1 Allocated Payment Reduction Amount” has the meaning set forth in Section 2.05(b)(iv).
“Series 2021-1 Class A-1 Notes Other Amounts” means, as of any date of determination, the aggregate unpaid Breakage Amount, Indemnified Liabilities, Agent Indemnified Liabilities, Increased Capital Costs, Increased Costs, Increased Tax Costs, Pre-Closing Costs, Other Post-Closing Expenses and Out-of-Pocket Expenses then due and payable. For purposes of the Base Indenture, the “Series 2021-1 Class A-1 Notes Other Amounts” shall be deemed to be “Class A-1 Notes Other Amounts.”
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR” means a rate per annum equal to the secured overnight financing rate for such Business Day published by Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).“SOFR Interest Accrual Period” means, as to any SOFR Advance, the period commencing on the date of such Advance and ending on the numerically corresponding day in the calendar month that is one (1), three (3) or six (6) months thereafter (subject to the availability thereof), as specified by the Master Issuer; provided that (i) if any SOFR Interest Accrual Period would end on a day other than a Business Day, such Interest Accrual 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 SOFR Interest Accrual Period shall end on the immediately preceding Business Day, (ii) any SOFR Interest Accrual 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 SOFR Interest Accrual Period) shall end on the last Business Day of the last calendar month of such SOFR Interest Accrual Period, (iii) no SOFR Interest Accrual Period shall extend beyond the Rated Maturity Date and (iv) no tenor that has been removed from this definition pursuant to the terms hereof shall be available for specification in any Advance Request. For purposes hereof, the date of an Advance initially shall be the date on which such Advance is made and thereafter shall be the effective date of the most recent conversion or continuation of such Advance.
“Solvent” means with respect to any Person as of any date of determination, (i) the fair value of the assets of such Person will exceed its debts and liabilities, including contingent liabilities; (ii) the present fair saleable value of the property of such Person will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities as such debts and other liabilities become absolute and matured; (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay such debts and liabilities as they mature; and (iv) such Person will not have unreasonably small capital with
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which to conduct the business in which it is engaged as such business is presently conducted and is proposed to be conducted after such date of determination, and no Event of Bankruptcy has occurred with respect to such Person.
“Specified Rating Agencies” means any of Standard & Poor’s, Moody’s or Fitch, as applicable.
“Swingline Commitment” means the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 2.06 in an aggregate principal amount at any one time outstanding not to exceed $25,000,000, as such amount may be reduced or increased pursuant to Section 2.06(i) or reduced pursuant to Section 2.05(b).
“Swingline Lender” means Coöperatieve Rabobank U.A., New York Branch, and its permitted successors and assigns in such capacity.
“Swingline Loan Request” has the meaning set forth in Section 2.06(b).
“Swingline Participation Amount” has the meaning set forth in Section 2.06(f).
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Term SOFR Adjustment” means, 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available 6 Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, and 0.71513% (71.513 basis points) for an Available Tenor of twelve-months’ duration.
“Term SOFR Notice” means a notification by the Administrative Agent to the Investors and the Master Issuer of the occurrence of a Term SOFR Transition Event.
“Term SOFR Transition Event Effective Date” means, with respect to a Term SOFR Transition Event, the date that is thirty (30) days after the date a Term SOFR Notice is provided to the Investors and the Master Issuer pursuant to Section 3.10(a).
(a) for any calculation with respect to a SOFR Advance, the Term SOFR Reference Rate for a tenor comparable to the applicable SOFR Interest Accrual Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such SOFR Interest Accrual Period, as such rate is published by the SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such
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Term SOFR Reference Rate for such tenor was published by the SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
“Term SOFR Transition Event” means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the administration of Term SOFR is administratively feasible for the Administrative Agent in its sole discretion, and (c) a Benchmark Transition Event, Other Rate Opt-in Election or an Early Opt-in Election, as applicable, has previously occurred resulting in a Benchmark Replacement in accordance with Section 3.10(a). (b) for any calculation with respect to an Base Rate Advance on any day, the Term SOFR Reference Rate for a tenor of three (3) months on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Base Rate Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Base Rate Term SOFR Determination Day.
“Term SOFR Adjustment” means, 0.10% (10 basis points) for Available Tenors of one-month’s, three-months’ or six-months’ duration.
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“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.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Undrawn L/C Face Amounts” means, at any time, the aggregate then undrawn and unexpired face amount of any Letters of Credit outstanding at such time.
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“Unreimbursed L/C Drawings” means, at any time, the aggregate amount of any L/C Reimbursement Amounts that have not then been reimbursed pursuant to Section 2.08.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income department of its members be closed for the entire day for purposes of trading in United States government securities.
“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 1.03 Benchmark Calculation
None of the Administrative Agent or any Funding Agent warrants or accepts any responsibility for, and shall not have any liability with respect to, the continuation of, administration of, submission of, calculation of, or any other matter related to “Base Rate”, “SOFR”, “Term SOFR”, “Term SOFR Reference Rate” or “Adjusted Term SOFR”, any component definition thereof or rates referenced in the definition thereof or any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, (i) any then-current Benchmark or any Benchmark Replacement, (ii) any alternative, successor or replacement rate implemented pursuant to Section 3.04, whether upon the occurrence of a Benchmark Transition Event and (iii) the effect, implementation or composition of any Conforming Changes, including without limitation, (A) whether the composition or characteristics of any such alternative, successor or replacement reference rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as the Base Rate, the existing Benchmark or any subsequent Benchmark Replacement prior to its discontinuance or unavailability (including Adjusted Term SOFR, the Term SOFR Reference Rate or any other Benchmark), and (B) the impact or effect of such alternative, successor or replacement reference rate or Conforming Changes on any other financial products or agreements in effect or offered by or to the Master Issuer, any Guarantor or Investor or any of their respective Affiliates). The Administrative Agent may select information sources or services in its reasonable discretion to ascertain any Base Rate, Term SOFR Reference Rate, Term SOFR, Adjusted Term SOFR or any Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Master Issuer, the Manager, any Investor, Funding Agents, Program Support Providers or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or
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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. The Administrative Agent and its affiliates or other related entities may engage in transactions unrelated to this Agreement that affect the calculation of Base Rate, Term SOFR Reference Rate, Term SOFR, Adjusted Term SOFR or any Benchmark, any alternative, successor or replacement rate (including any Benchmark Replacement) and any relevant adjustments thereto, in each case, in a manner adverse to the Master Issuer.
ARTICLE II
PURCHASE AND SALE OF SERIES 2021-1 CLASS A-1 NOTES
PURCHASE AND SALE OF SERIES 2021-1 CLASS A-1 NOTES
Section 2.01 The Initial Advance Notes.
(a) On the terms and conditions set forth in the Indenture and this Agreement, and in reliance on the covenants, representations and agreements set forth herein and therein, the Master Issuer shall issue and shall request the Trustee to authenticate (in the case of Series 2021-1 Class A-1 Advance Notes in the form of definitive notes) or register as described in Section 4.1(e) of the Series 2021-1 Supplement (in the case of Uncertificated Notes) the initial Series 2021-1 Class A-1 Advance Notes, which the Master Issuer shall deliver to each Funding Agent on behalf of the Investors in the related Investor Group on the Closing Date. Such Series 2021-1 Class A-1 Advance Note for each Investor Group shall be dated the their date of authentication or, if an Uncertificated Note, registration, shall be registered in the name of the related Funding Agent or its nominee, as agent for the related Investors, or in such other name or nominee as such Funding Agent may request, shall have a maximum principal amount equal to the Maximum Investor Group Principal Amount for such Investor Group, shall have an initial outstanding principal amount equal to such Investor Group’s Commitment Percentage of the Series 2021-1 Class A-1 Initial Advance Principal Amount, and (other than any Uncertificated Notes) shall be duly authenticated in accordance with the provisions of the Indenture.
(b) Each Series 2021-1 Class A-1 Noteholder shall, acting solely for this purpose as an agent of the Master Issuer, maintain a register on which it enters the name and address of each related Lender Party (and, if applicable, Program Support Provider) and the applicable portions of the Series 2021-1 Class A-1 Outstanding Principal Amount (and stated interest) with respect to such Series 2021-1 Class A-1 Noteholder of each Lender Party (and, if applicable, Program Support Provider) that has an interest in such Series 2021-1 Class A-1 Noteholder’s Series 2021-1 Class A-1 Notes (the “Series 2021-1 Class A-1 Notes Register”), provided that no Series 2021-1 Class A-1 Noteholder shall have any obligation to disclose all or any portion of the Series 2021-1 Class A-1 Notes Register to any Person except to the extent such that such disclosure is necessary to establish that such Series 2021-1 Class A-1 Notes are in registered form for U.S. federal income tax purposes.
Section 2.02 Advances.
(a) Subject to the terms and conditions of this Agreement and the Indenture, each Eligible Conduit Investor, if any, may and, if such Conduit Investor determines
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that it will not make (or it does not in fact make) an Advance or any portion of an Advance, its related Committed Note Purchaser(s) shall or, if there is no Eligible Conduit Investor with respect to any Investor Group, the Committed Note Purchaser(s) with respect to such Investor Group shall, upon the Master Issuer’s request delivered in accordance with the provisions of Section 2.03 and the satisfaction of all conditions precedent thereto (or under the circumstances set forth in Sections 2.05, 2.06 or 2.08), make Advances from time to time during the Commitment Term; provided that such Advances shall be made ratably by each Investor Group based on their respective Commitment Percentages and the portion of any such Advance made by any Committed Note Purchaser in such Investor Group shall be its Committed Note Purchaser Percentage of the Advances to be made by such Investor Group (or the portion thereof not being made by any Conduit Investor in such Investor Group); provided, further, that if, as a result of any Committed Note Purchaser (a “Non-Funding Committed Note Purchaser”) failing to make any previous Advance that such Non-Funding Committed Note Purchaser was required to make, outstanding Advances are not held ratably by each Investor Group based on their respective Commitment Percentages and among the Committed Note Purchasers within each Investor Group based on their respective Committed Note Purchaser Percentages at the time a request for Advances is made, (x) such Non-Funding Committed Note Purchaser shall make all of such Advances until outstanding Advances are held ratably by each Investor Group based on their respective Commitment Percentages and among the Committed Note Purchasers within each Investor Group based on their respective Committed Note Purchaser Percentages and (y) further Advances shall be made ratably by each Investor Group based on their respective Commitment Percentages and the portion of any such Advance made by any Committed Note Purchaser in such Investor Group shall be its Committed Note Purchaser Percentage of the Advances to be made by such Investor Group (or the portion thereof not being made by any Conduit Investor in such Investor Group); provided, further, that the failure of a Non-Funding Committed Note Purchaser to make Advances pursuant to the immediately preceding proviso shall not, subject to the immediately following proviso, relieve any other Committed Note Purchaser of its obligation hereunder, if any, to make Advances in accordance with Section 2.03(b)(i); provided, further, that, subject, in the case of clause (i) below, to Section 2.03(b)(ii), no Advance shall be required or permitted to be made by any Investor on any date to the extent that, after giving effect to such Advance, (i) the related Investor Group Principal Amount would exceed the related Maximum Investor Group Principal Amount or (ii) the Series 2021-1 Class A-1 Outstanding Principal Amount would exceed the Series 2021-1 Class A-1 Maximum Principal Amount.
(b) Notwithstanding anything herein or in any other Related Document to the contrary, at no time will a Conduit Investor be obligated to make Advances hereunder. If at any time any Conduit Investor is not an Eligible Conduit Investor, such Conduit Investor shall promptly notify the Administrative Agent (who shall promptly notify the related Funding Agent and the Master Issuer) thereof.
(c) Each of the Advances to be made on any date shall be made as part of a single borrowing (each such single borrowing being a “Borrowing”). The Advances made as part of the initial Borrowing on the Closing Date, if any, will be evidenced by the Series 2021-1 Class A-1 Advance Notes issued in connection herewith and will constitute purchases of Series 2021-1 Class A-1 Initial Advance Principal Amounts corresponding to the amount of such
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Advances. All of the other Advances will constitute Increases evidenced by the Series 2021-1 Class A-1 Advance Notes issued in connection herewith and will constitute purchases of Series 2021-1 Class A-1 Outstanding Principal Amounts corresponding to the amount of such Advances.
(d) Section 2.2(b) of the Series 2021-1 Supplement specifies the procedures to be followed in connection with any Voluntary Decrease of the Series 2021-1 Class A-1 Outstanding Principal Amount. Each such Voluntary Decrease in respect of any Advances shall be either (i) in an aggregate minimum principal amount of $100,000 and integral multiples of $100,000 in excess thereof or (ii) in such other amount necessary to reduce the Series 2021-1 Class A-1 Outstanding Principal Amount to zero.
(e) Subject to the terms of this Agreement and the Series 2021-1 Supplement, the aggregate principal amount of the Advances evidenced by the Series 2021-1 Class A-1 Advance Notes may be increased by Borrowings or decreased by Voluntary Decreases from time to time.
(f) Notwithstanding anything herein or in any other Related Document to the contrary, no Lender Party shall be obligated to make an Advance hereunder until such time as the Administrative Agent and the Lender Parties have received the following, in form and substance satisfactory to the Administrative Agent and the Lender Parties in their sole discretion:
Lien search results in each applicable jurisdiction with respect to each of Wendy’s Digital, LLC, Wendy’s Old Fashioned Hamburgers of New York, LLC, Wendy’s Restaurants of New York, LLC, Oldemark LLC and the Manager in each case through the Closing Date.
A certificate of the Manager confirming that the lien in favor of the Trustee upon the assets contributed by each of Wendy’s Digital, LLC, Wendy’s Old Fashioned Hamburgers of New York, LLC, Wendy’s Restaurants of New York, LLC and Oldemark LLC pursuant to a Contribution Agreement is a first priority lien.
Section 2.03 Borrowing Procedures.
(a) Whenever the Master Issuer wishes to make a Borrowing, the Master Issuer shall (or shall cause the Manager on its behalf to) notify the Administrative Agent (who shall promptly, and in any event by 4:00 p.m. (Eastern time) on the same Business Day as its receipt of the same, notify each Funding Agent of its pro rata share thereof (or other required share, as required pursuant to Section 2.02(a)) and notify the Trustee, the Control Party, the Swingline Lender and the L/C Provider in writing of such Borrowing) by written notice in the form of an Advance Request delivered to the Administrative Agent no later than 12:00 p.m. (Eastern time) one (1) Business Day (or, in the case of any EurodollarSOFR Advances for purposes of Section 3.01(b), three (3) EurodollarU.S. Government Securities Business Days) prior to the date of Borrowing (unless a shorter period is agreed upon by the Administrative Agent and the L/C Provider, the L/C Issuing Bank, the Swingline Lender or the Funding Agents, as applicable), which date of Borrowing shall be a Business Day during the Commitment Term. Each such notice shall be irrevocable and shall in each case refer to this Agreement and specify
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(i) the Borrowing date, (ii) the aggregate amount of the requested Borrowing to be made on such date, (iii) the amount of outstanding Swingline Loans and Unreimbursed L/C Drawings (if applicable) to be repaid with the proceeds of such Borrowing on the Borrowing date, which amount shall constitute all outstanding Swingline Loans and Unreimbursed L/C Drawings outstanding on the date of such notice that are not prepaid with other funds of the Master Issuer available for such purpose, and (iv) sufficient instructions for application of the balance, if any, of the proceeds of such Borrowing on the Borrowing date (which proceeds shall be made available to the Master Issuer). Requests for any Borrowing may not be made in an aggregate principal amount of less than $100,000 or in an aggregate principal amount that is not an integral multiple of $100,000 in excess thereof (except as otherwise provided herein with respect to Borrowings for the purpose of repaying then-outstanding Swingline Loans or Unreimbursed L/C Drawings). The Master Issuer agrees that Borrowings shall be made automatically (to the extent not deemed made pursuant to Sections 2.05(b)(i), 2.05(b)(ii) or 2.08), without the requirement of providing an Advance Request, but subject to the requirements set forth in Section 7.03, upon notice of any drawing under a Letter of Credit and one time per month, the timing of which shall be determined by the Administrative Agent in its discretion, if any Swingline Loans are outstanding, in each case, in an amount at least sufficient to repay in full all Unreimbursed L/C Drawings or Swingline Loans, as the case may be, outstanding on the date of the applicable automatic Borrowing. Subject to the provisos to Section 2.02(a), each Borrowing shall be ratably allocated among the Investor Groups’ respective Maximum Investor Group Principal Amounts. Each Funding Agent shall promptly advise its related Conduit Investor, if any, of any notice given pursuant to this Section 2.03(a) and shall promptly thereafter (but in no event later than 10:00 a.m. (Eastern time) on the date of Borrowing) notify the Administrative Agent, the Master Issuer and the related Committed Note Purchaser(s) whether such Conduit Investor has determined to make all or any portion of the Advances in such Borrowing that are to be made by its Investor Group. On the date of each Borrowing and subject to the other conditions set forth herein and in the Series 2021-1 Supplement (and, if requested by the Administrative Agent, confirmation from the Swingline Lender and the L/C Provider, as applicable, as to (x) the amount of outstanding Swingline Loans and Unreimbursed L/C Drawings to be repaid with the proceeds of such Borrowing on the Borrowing date, (y) the Undrawn L/C Face Amount of all Letters of Credit then outstanding and (z) the principal amount of any other Swingline Loans or Unreimbursed L/C Drawings then outstanding), the applicable Investors in each Investor Group shall make available to the Administrative Agent the amount of the Advances in such Borrowing that are to be made by such Investor Group by wire transfer in U.S. Dollars of such amount in same day funds no later than 10:00 a.m. (Eastern time) on the date of such Borrowing, and upon receipt thereof the Administrative Agent shall make such proceeds available by 3:00 p.m. (Eastern time), first, to the Swingline Lender and the L/C Provider for application to repayment of the amount of outstanding Swingline Loans and Unreimbursed L/C Drawings as set forth in the applicable Advance Request, if applicable, ratably in proportion to such respective amounts, and, second, to the Master Issuer, as instructed in the applicable Advance Request.
(b) (i) The failure of any Committed Note Purchaser to make the Advance to be made by it as part of any Borrowing shall not relieve any other Committed Note Purchaser (whether or not in the same Investor Group) of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Committed Note Purchaser shall be
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responsible for the failure of any other Committed Note Purchaser to make the Advance to be made by such other Committed Note Purchaser on the date of any Borrowing and (ii) in the event that one or more Committed Note Purchasers fails to make its Advance by 11:00 a.m. (Eastern time) on the date of such Borrowing, the Administrative Agent shall notify each of the other Committed Note Purchasers not later than 1:00 p.m. (Eastern time) on such date, and each of the other Committed Note Purchasers shall make available to the Administrative Agent a supplemental Advance in a principal amount (such amount, the “reference amount”) equal to the lesser of (a) the aggregate principal Advance that was unfunded multiplied by a fraction, the numerator of which is the Commitment Amount of such Committed Note Purchaser and the denominator of which is the aggregate Commitment Amounts of all Committed Note Purchasers (less the aggregate Commitment Amount of the Committed Note Purchasers failing to make Advances on such date) and (b) the excess of (i) such Committed Note Purchaser’s Commitment Amount over (ii) the product of such Committed Note Purchaser’s related Investor Group Principal Amount multiplied by such Committed Note Purchaser’s Committed Note Purchaser Percentage (after giving effect to all prior Advances on such date of Borrowing) (provided that a Committed Note Purchaser may (but shall not be obligated to), on terms and conditions to be agreed upon by such Committed Note Purchaser and the Master Issuer, make available to the Administrative Agent a supplemental Advance in a principal amount in excess of the reference amount; provided, however, that no such supplemental Advance shall be permitted to be made to the extent that, after giving effect to such Advance, the Series 2021-1 Class A-1 Outstanding Principal Amount would exceed the Series 2021-1 Class A-1 Maximum Principal Amount). Such supplemental Advances shall be made by wire transfer in U.S. Dollars in same day funds no later than 3:00 p.m. (Eastern time) one (1) Business Day following the date of such Borrowing, and upon receipt thereof the Administrative Agent shall immediately make such proceeds available, first, to the Swingline Lender and the L/C Provider for application to repayment of the amount of outstanding Swingline Loans and Unreimbursed L/C Drawings as set forth in the applicable Advance Request, if applicable, ratably in proportion to such respective amounts, and, second, to the Master Issuer, as instructed in the applicable Advance Request. If any Committed Note Purchaser which shall have so failed to fund its Advance shall subsequently pay such amount, the Administrative Agent shall apply such amount pro rata to repay any supplemental Advances made by the other Committed Note Purchasers pursuant to this Section 2.03(b).
(c) Unless the Administrative Agent shall have received notice from a Funding Agent prior to the date of any Borrowing that an applicable Investor in the related Investor Group will not make available to the Administrative Agent such Investor’s share of the Advances to be made by such Investor Group as part of such Borrowing, the Administrative Agent may (but shall not be obligated to) assume that such Investor has made such share available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Administrative Agent may (but shall not be obligated to), in reliance upon such assumption, make available to the Swingline Lender, the L/C Provider and/or the Master Issuer, as applicable, on such date a corresponding amount, and shall, if such corresponding amount has not been made available by the Administrative Agent, make available to the Swingline Lender, the L/C Provider and/or the Master Issuer, as applicable, on such date a corresponding amount once such Investor has made such portion available to the Administrative Agent. If and to the extent that any Investor shall not have so made such amount available to the Administrative
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Agent, such Investor and the Master Issuer jointly and severally agree to repay (without duplication) to the Administrative Agent on the next Weekly Allocation Date such corresponding amount (in the case of the Master Issuer, in accordance with the Priority of Payments), together with interest thereon, for each day from the date such amount is made available to the Master Issuer until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Master Issuer, the interest rate applicable at the time to the Advances comprising such Borrowing and (ii) in the case of such Investor, the Federal Funds Rate. If such Investor is required by law to deduct any withholding taxes from the amount paid to the Administrative Agent under this Section 2.03(c), the sum payable by the Investor shall be increased as necessary so that after such deduction has been made, the Administrative Agent receives an amount equal to the sum it would have received had no such deduction been made. If such Investor shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Investor’s Advance as part of such Borrowing for purposes of this Agreement.
Section 2.04 The Series 2021-1 Class A-1 Notes. On each date an Advance or Swingline Loan is made or a Letter of Credit is issued hereunder, and on each date the outstanding amount thereof is reduced, a duly authorized officer, employee or agent of the related Series 2021-1 Class A-1 Noteholder shall make appropriate notations in its books and records of the amount, evidenced by the related Series 2021-1 Class A-1 Advance Note, Series 2021-1 Class A-1 Swingline Note or Series 2021-1 Class A-1 L/C Note, of such Advance, Swingline Loan or Letter of Credit, as applicable, and the amount of such reduction, as applicable. The Master Issuer hereby authorizes each duly authorized officer, employee and agent of such Series 2021-1 Class A-1 Noteholder to make such notations on the books and records as aforesaid and every such notation made in accordance with the foregoing authority shall be prima facie evidence of the accuracy of the information so recorded; provided, however, that in the event of a discrepancy between the books and records of such Series 2021-1 Class A-1 Noteholder and the Note Register, (x) such discrepancy shall be resolved by such Series 2021-1 Class A-1 Noteholder, the Control Party and the Trustee, in consultation with the Master Issuer (provided that such consultation with the Master Issuer will not in any way limit or delay such Series 2021-1 Class A-1 Noteholder’s, the Control Party’s and the Trustee’s ability to resolve such discrepancy), and such resolution shall control in the absence of manifest error and the Note Register shall be corrected as appropriate and (y) until any such discrepancy is resolved pursuant to clause (x), the Note Register shall control; provided, further, that the failure of any such notation to be made, or any finding that a notation is incorrect, in any such records shall not limit or otherwise affect the obligations of the Master Issuer under this Agreement or the Indenture.
Section 2.05 Reduction in Commitments.
(a) The Master Issuer may, upon three (3) Business Days’ notice to the Administrative Agent (who shall promptly notify the Trustee, the Control Party, each Funding Agent and each Investor), effect a permanent reduction in the Series 2021-1 Class A-1 Maximum Principal Amount and a corresponding reduction in each Commitment Amount and Maximum Investor Group Principal Amount on a pro rata basis; provided that (i) any such reduction will be limited to the undrawn portion of the Commitments, although any such reduction may be combined with a Voluntary Decrease effected pursuant to and in accordance with Section 2.2(b)
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of the Series 2021-1 Supplement, (ii) any such reduction must be in a minimum amount of $1,000,000, (iii) after giving effect to such reduction, the Series 2021-1 Class A-1 Maximum Principal Amount equals or exceeds $5,000,000, unless reduced to zero, and (iv) no such reduction shall be permitted if, after giving effect thereto, (x) the aggregate Commitment Amounts would be less than the Series 2021-1 Class A-1 Outstanding Principal Amount (excluding any Undrawn L/C Face Amounts with respect to which cash collateral is held by the L/C Provider pursuant to Section 4.03(b)) or (y) the aggregate Commitment Amounts would be less than the sum of the Swingline Commitment and the L/C Commitment. Any reduction made pursuant to this Section 2.05(a) shall be made ratably among the Investor Groups on the basis of their respective Maximum Investor Group Principal Amounts.
(b) If any of the following events shall occur, then the Commitment Amounts shall be automatically reduced on the dates and in the amounts set forth below with respect to the applicable event and the other consequences set forth below with respect to the applicable event shall ensue (and the Master Issuer shall give the Trustee, the Control Party, each Funding Agent and the Administrative Agent prompt written notice thereof):
(i) (A) if the Outstanding Principal Amount of the Series 2021-1 Class A-1 Notes has not been paid in full or otherwise refinanced in full (which refinancing may also include an extension thereof) by the Business Day immediately preceding the Series 2021-1 Class A-1 Anticipated Repayment Date, on such Business Day, (x) the principal amount of all then-outstanding Swingline Loans and Unreimbursed L/C Drawings shall be repaid in full with proceeds of Advances made on such date (and the Master Issuer shall be deemed to have delivered such Advance Requests under Section 2.03 as may be necessary to cause such Advances to be made), and (y) the Swingline Commitment and the L/C Commitment shall both be automatically and permanently reduced to zero; and (B) upon a Series 2021-1 Class A-1 Notes Amortization Event, (x) the Commitments with respect to all undrawn Commitment Amounts shall automatically and permanently terminate and the corresponding portions of the Series 2021-1 Class A-1 Maximum Principal Amount and the Maximum Investor Group Principal Amounts shall be automatically and permanently reduced by a corresponding amount (with respect to the Maximum Investor Group Principal Amounts, on a pro rata basis) and (y) each payment of principal on the Series 2021-1 Class A-1 Outstanding Principal Amount occurring following such Series 2021-1 Class A-1 Notes Amortization Event shall result automatically and permanently in a dollar-for-dollar reduction of the Series 2021-1 Class A-1 Maximum Principal Amount and a corresponding reduction in each Maximum Investor Group Principal Amount on a pro rata basis;
(ii) if a Rapid Amortization Event occurs prior to the Series 2021-1 Class A-1 Anticipated Repayment Date, then (A) on the date such Rapid Amortization Event occurs, the Commitments with respect to all undrawn Commitment Amounts shall automatically terminate, which termination shall be deemed to have occurred immediately following the making of Advances pursuant to clause (B) below, and the corresponding portions of the Series 2021-1 Class A-1 Maximum Principal Amount and the Maximum Investor Group Principal Amounts shall be automatically reduced by a corresponding amount (with respect to the Maximum Investor Group Principal Amounts, on a pro rata basis); (B) no later than the second
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Business Day after the occurrence of such Rapid Amortization Event, the principal amount of all then-outstanding Swingline Loans and Unreimbursed L/C Drawings (to the extent not repaid pursuant to Section 2.08(a) or Section 4.03(b)) shall be repaid in full with proceeds of Advances (and the Master Issuer shall be deemed to have delivered such Advance Requests under Section 2.03 as may be necessary to cause such Advances to be made) and the Swingline Commitment and the L/C Commitment shall be automatically reduced to zero and by such amount of Unreimbursed L/C Drawings, respectively; and (C) each payment of principal (which, for the avoidance of doubt, shall include cash collateralization of Undrawn L/C Face Amounts pursuant to Sections 4.02(b), 4.03(a), 4.03(b) and 9.18(c)(ii)) on the Series 2021-1 Class A-1 Outstanding Principal Amount occurring on or after the date of such Rapid Amortization Event (excluding the repayment of any outstanding Swingline Loans and Unreimbursed L/C Drawings with proceeds of Advances pursuant to clause (B) above) shall result automatically in a dollar-for-dollar reduction of the Series 2021-1 Class A-1 Maximum Principal Amount and a corresponding reduction in each Maximum Investor Group Principal Amount on a pro rata basis; provided that if such Rapid Amortization Event shall cease to be in effect pursuant to Section 9.1(e) of the Base Indenture, then the Commitments, Swingline Commitment, L/C Commitment, Series 2021-1 Class A-1 Maximum Principal Amount and the Maximum Investor Group Principal Amounts shall be restored to the amounts in effect immediately prior to the occurrence of such Rapid Amortization Event;
(iii) [Reserved];
(iv) if payments in connection with Indemnification, Asset Disposition and Insurance/Condemnation Payment Amounts are allocated to and deposited in the Series 2021-1 Class A-1 Distribution Account in accordance with Section 3.6(j) of the Series 2021-1 Supplement at a time when either (i) no Senior Notes other than Series 2021-1 Class A-1 Notes are Outstanding or (ii) if a Series 2021-1 Class A-1 Notes Amortization Period is continuing, then (x) the aggregate Commitment Amount shall be automatically and permanently reduced on the date of such deposit by an amount (the “Series 2021-1 Class A-1 Allocated Payment Reduction Amount”) equal to the amount of such deposit, and each Committed Note Purchaser’s Commitment Amount shall be reduced on a pro rata basis of such Series 2021-1 Class A-1 Allocated Payment Reduction Amount based on each Committed Note Purchaser’s Commitment Amount, (y) the corresponding portions of the Series 2021-1 Class A-1 Maximum Principal Amount and the Maximum Investor Group Principal Amounts shall be automatically and permanently reduced on a pro rata basis based on each Investor Group’s Maximum Investor Group Principal Amount by a corresponding amount on such date (and, if after giving effect to such reduction the aggregate Commitment Amounts would be less than the sum of the Swingline Commitment and the L/C Commitment, then the aggregate amount of the Swingline Commitment and the L/C Commitment shall be reduced by the amount of such difference, with such reduction to be allocated between them in accordance with the written instructions of the Master Issuer delivered prior to such date; provided that after giving effect thereto the aggregate amount of the Swingline Loans and the L/C Obligations do not exceed the Swingline Commitment and the L/C Commitment, respectively, as so reduced; provided, further, that in the absence of such instructions, such reduction shall be allocated first to the Swingline Commitment and then to the L/C Commitment) and (z) the Series 2021-1 Class A-1 Outstanding Principal
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Amount shall be repaid or prepaid (which, for the avoidance of doubt, shall include cash collateralization of Undrawn L/C Face Amounts pursuant to Sections 4.02(b), 4.03(a), 4.03(b) and 9.18(c)(ii)) in an aggregate amount equal to such Series 2021-1 Class A-1 Allocated Payment Reduction Amount on the date and in the order required by Section 3.6(j) of the Series 2021-1 Supplement; and
(v) if any Event of Default shall occur and be continuing (and shall not have been waived in accordance with the Base Indenture) and as a result the payment of the Series 2021-1 Class A-1 Notes is accelerated pursuant to the terms of the Base Indenture (and such acceleration shall not have been rescinded in accordance with the Base Indenture), then in addition to the consequences set forth in clause (ii) above in respect of the Rapid Amortization Event resulting from such Event of Default, the Series 2021-1 Class A-1 Maximum Principal Amount, the Commitment Amounts, the Swingline Commitment, the L/C Commitment and the Maximum Investor Group Principal Amounts shall all be automatically and permanently reduced to zero upon such acceleration and the Master Issuer shall (in accordance with the Series 2021-1 Supplement) cause the Series 2021-1 Class A-1 Outstanding Principal Amount to be paid in full (which, for the avoidance of doubt, shall include cash collateralization of Undrawn L/C Face Amounts pursuant to Sections 4.02(b), 4.03(a), 4.03(b) and 9.18(c)(ii)), together with accrued interest, Series 2021-1 Class A-1 Quarterly Commitment Fees, Series 2021-1 Class A-1 Notes Other Amounts and all other amounts then due and payable to the Lender Parties, the Administrative Agent and the Funding Agents under this Agreement and the other Related Documents and any unreimbursed Advances and Manager Advances (in each case, with interest thereon at the Advance Interest Rate) subject to and in accordance with the Priority of Payments.
Section 2.06 Swingline Commitment.
(a) On the terms and conditions set forth in the Indenture and this Agreement, and in reliance on the covenants, representations and agreements set forth herein and therein, the Master Issuer shall issue and shall cause the Trustee to authenticate the Series 2021-1 Class A-1 Swingline Note, which the Master Issuer shall deliver to the Swingline Lender on the Closing Date; provided that, if such Series 2021-1 Class A-1 Swingline Note is an Uncertificated Note, the Trustee shall instead register it as described in Section 4.1(e) of the Series 2021-1 Supplement. Such Series 2021-1 Class A-1 Swingline Note shall be dated the Closing Date, shall be registered in the name of the Swingline Lender or its nominee, or in such other name as the Swingline Lender may request, shall have a maximum principal amount equal to the Swingline Commitment, shall have an initial outstanding principal amount equal to the Series 2021-1 Class A-1 Initial Swingline Principal Amount, and (unless it is an Uncertificated Note) shall be duly authenticated in accordance with the provisions of the Indenture. Subject to the terms and conditions hereof, the Swingline Lender, in reliance on the agreements of the Committed Note Purchasers set forth in this Section 2.06, agrees to make swingline loans (each, a “Swingline Loan” or a “Series 2021-1 Class A-1 Swingline Loan” and, collectively, the “Swingline Loans” or the “Series 2021-1 Class A-1 Swingline Loans”) to the Master Issuer from time to time during the period commencing on the Closing Date and ending on the date that is two (2) Business Days prior to the Commitment Termination Date; provided that the Swingline Lender shall have no obligation or right to make any Swingline Loan if, after giving effect thereto, (i) the aggregate
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principal amount of Swingline Loans outstanding would exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender’s other outstanding Advances hereunder, may exceed the Swingline Commitment then in effect) or (ii) the Series 2021-1 Class A-1 Outstanding Principal Amount would exceed the Series 2021-1 Class A-1 Maximum Principal Amount. Each such borrowing of a Swingline Loan will constitute a Subfacility Increase in the outstanding principal amount evidenced by the Series 2021-1 Class A-1 Swingline Note in an amount corresponding to such borrowing. Subject to the terms of this Agreement and the Series 2021-1 Supplement, the outstanding principal amount evidenced by the Series 2021-1 Class A-1 Swingline Note may be increased by borrowings of Swingline Loans or decreased by payments of principal thereon from time to time.
(b) Whenever the Master Issuer desires that the Swingline Lender make Swingline Loans, the Master Issuer shall (or shall cause the Manager on its behalf to) give the Swingline Lender and the Administrative Agent irrevocable notice in writing not later than 11:00 a.m. (Eastern time) on the proposed borrowing date, specifying (i) the amount to be borrowed, (ii) the requested borrowing date (which shall be a Business Day during the Commitment Term not later than the date that is two (2) Business Days prior to the Commitment Termination Date) and (iii) the payment instructions for the proceeds of such borrowing (which shall be consistent with the terms and provisions of this Agreement and the Indenture and which proceeds shall be made available to the Master Issuer). Such notice shall be in the form of a Swingline Advance Request in the form attached hereto as Exhibit A-2 (a “Swingline Loan Request”), a copy of which shall also be provided by the Master Issuer (or the Manager on its behalf) to the Control Party and the Trustee by 2:00 p.m. (Eastern time) on the date of delivery thereof to the Swingline Lender and the Administrative Agent. Each borrowing under the Swingline Commitment shall be in a minimum amount equal to $100,000. Promptly upon receipt of any Swingline Loan Request (but in no event later than 2:00 p.m. (Eastern time) on the date of such receipt), the Administrative Agent (based, with respect to any portion of the Series 2021-1 Class A-1 Outstanding Subfacility Amount held by any Person other than the Administrative Agent, solely on written notices received by the Administrative Agent under this Agreement) will inform the Swingline Lender whether or not, after giving effect to the requested Swingline Loan, the Series 2021-1 Class A-1 Outstanding Principal Amount would exceed the Series 2021-1 Class A-1 Maximum Principal Amount. If the Administrative Agent confirms that the Series 2021-1 Class A-1 Outstanding Principal Amount would not exceed the Series 2021-1 Class A-1 Maximum Principal Amount after giving effect to the requested Swingline Loan, then not later than 3:00 p.m. (Eastern time) on the borrowing date specified in the Swingline Loan Request, subject to the other conditions set forth herein and in the Series 2021-1 Supplement, the Swingline Lender shall make available to the Master Issuer in accordance with the payment instructions set forth in such notice an amount in immediately available funds equal to the amount of the requested Swingline Loan.
(c) The Master Issuer hereby agrees that each Swingline Loan made by the Swingline Lender to the Master Issuer pursuant to Section 2.06(a) shall constitute the promise and obligation of the Master Issuer to pay to the Swingline Lender the aggregate unpaid principal amount of all Swingline Loans made by such Swingline Lender pursuant to Section
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2.06(a), which amounts shall be due and payable (whether at maturity or by acceleration) as set forth in this Agreement and in the Indenture for the Series 2021-1 Class A-1 Outstanding Principal Amount.
(d) In accordance with Section 2.03(a), the Master Issuer agrees to cause requests for Borrowings to be made at least one time per month if any Swingline Loans are outstanding in amounts at least sufficient to repay in full all Swingline Loans outstanding on the date of the applicable request. In accordance with Section 3.01(c), outstanding Swingline Loans shall bear interest at the Base Rate.
(e) [Reserved].
(f) If, prior to the time Advances would have otherwise been made pursuant to Section 2.06(d), an Event of Bankruptcy shall have occurred and be continuing with respect to the Master Issuer or any Guarantor or if, for any other reason, as determined by the Swingline Lender in its sole and absolute discretion, Advances may not be made as contemplated by Section 2.06(d), each Committed Note Purchaser shall, on the date such Advances were to have been made pursuant to the notice referred to in Section 2.06(d), purchase for cash an undivided participating interest in the then-outstanding Swingline Loans by paying to the Swingline Lender an amount (the “Swingline Participation Amount”) equal to (i) its Committed Note Purchaser Percentage, multiplied by (ii) the related Investor Group’s Commitment Percentage, multiplied by (iii) the aggregate principal amount of Swingline Loans then outstanding that was to have been repaid with such Advances
(g) Whenever, at any time after the Swingline Lender has received from any Investor such Investor’s Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Investor its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Investor’s participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Investor’s pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due); provided, however, that in the event that such payment received by the Swingline Lender is required to be returned, such Investor will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender.
(h) Each applicable Investor’s obligation to make the Advances referred to in Section 2.06(d) and each Committed Note Purchaser’s obligation to purchase participating interests pursuant to Section 2.06(f) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Investor, Committed Note Purchaser or the Master Issuer may have against the Swingline Lender, the Master Issuer or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Article VII other than at the time the related Swingline Loan was made; (iii) any adverse change in the condition (financial or otherwise) of the Master Issuer; (iv) any breach of this Agreement or any other Indenture Document by the Master Issuer or any
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other Person or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
(i) The Master Issuer may, upon three (3) Business Days’ notice to the Administrative Agent and the Swingline Lender, effect a permanent reduction in the Swingline Commitment; provided that any such reduction will be limited to the undrawn portion of the Swingline Commitment. If requested by the Master Issuer in writing and with the prior written consent of the Administrative Agent, the Swingline Lender may (but shall not be obligated to) increase the amount of the Swingline Commitment; provided that, after giving effect thereto, the aggregate amount of the Swingline Commitment and the L/C Commitment does not exceed the aggregate amount of the Commitments; provided, further, that prior to any increase in the Swingline Commitment, the Master Issuer and the Trustee will enter into an amendment to the Series 2021-1 Supplement permitting such Swingline Commitment.
(j) The Master Issuer may, upon notice to the Swingline Lender (who shall promptly notify the Administrative Agent and the Trustee thereof in writing), at any time and from time to time, voluntarily prepay Swingline Loans in whole or in part without premium or penalty; provided that (x) such notice must be received by the Swingline Lender not later than 11:00 a.m. (Eastern time) on the date of the prepayment, (y) any such prepayment shall be in a minimum principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, if less, the entire principal amount thereof then outstanding and (z) if the source of funds for such prepayment is not a Borrowing, there shall be no unreimbursed Advances or Manager Advances (or interest thereon) at such time. Each such notice shall specify the date and amount of such prepayment. If such notice is given, the Master Issuer shall make such prepayment directly to the Swingline Lender and the payment amount specified in such notice shall be due and payable on the date specified therein.
Section 2.07 L/C Commitment.
(a) Subject to the terms and conditions hereof, the L/C Provider (or its permitted assigns pursuant to Section 9.17), in reliance on the agreements of the Committed Note Purchasers set forth in Sections 2.08 and 2.09, agrees to provide standby letters of credit, including Interest Reserve Letters of Credit (each, a “Letter of Credit” and, collectively, the “Letters of Credit”) for the account of the Master Issuer or its designee on any Business Day during the period commencing on the Closing Date and ending on the date that is ten (10) Business Days prior to the Commitment Termination Date to be issued in accordance with Section 2.07(h) in such form as may be approved from time to time by the L/C Provider; provided that the L/C Provider shall have no obligation or right to provide any Letter of Credit on a requested issuance date if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the Series 2021-1 Class A-1 Outstanding Principal Amount would exceed the Series 2021-1 Class A-1 Maximum Principal Amount.
Each Letter of Credit shall (x) be denominated in Dollars, (y) have a face amount of at least $25,000 or, if less than $25,000, shall bear a reasonable administrative fee to be agreed upon by the Master Issuer and the L/C Provider and (z) expire no later than the earlier of (A) the first anniversary of its date of issuance and (B) the date that is ten (10) Business Days prior to the
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Commitment Termination Date (the “Required Expiration Date”); provided that any Letter of Credit may provide for the automatic renewal thereof for additional periods, each individually not to exceed one year (which shall in no event extend beyond the Required Expiration Date) unless the L/C Provider notifies the beneficiary of such Letter of Credit at least 30 calendar days prior to the then-applicable expiration date (or no later than the applicable notice date, if earlier, as specified in such Letter of Credit) that such Letter of Credit shall not be renewed; provided, further, that any Letter of Credit may have an expiration date that is later than the Required Expiration Date so long as (x) the Undrawn L/C Face Amount with respect to such Letter of Credit has been fully cash collateralized by the Master Issuer in accordance with Section 4.02(b) or 4.03 as of the Required Expiration Date and there are no other outstanding L/C Obligations with respect to such Letter of Credit as of the Required Expiration Date and (y) such arrangement is satisfactory to the L/C Provider in its sole and absolute discretion.
Additionally, each Interest Reserve Letter of Credit shall (1) name each of (A) the Trustee, for the benefit of the Senior Noteholders or the Senior Subordinated Noteholders, as applicable, and (B) the Control Party, as the beneficiary thereof; (2) allow the Trustee or the Control Party to submit a notice of drawing in respect of such Interest Reserve Letter of Credit whenever amounts would otherwise be required to be withdrawn from the Senior Notes Interest Reserve Account or the Senior Subordinated Notes Interest Reserve Account, as applicable, pursuant to the Indenture and (3) indicate by its terms that the proceeds in respect of drawings under such Interest Reserve Letter of Credit shall be paid directly into the Senior Notes Interest Reserve Account or the Senior Subordinated Notes Interest Reserve Account, as applicable.
The L/C Provider shall not at any time be obligated to (I) provide any Letter of Credit hereunder if such issuance would violate, or cause any L/C Issuing Bank to exceed any limits imposed by, any applicable Requirement of Law or (II) amend any Letter of Credit hereunder if (1) the L/C Provider would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof or (2) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(b) On the terms and conditions set forth in the Indenture and this Agreement, and in reliance on the covenants, representations and agreements set forth herein and therein, the Master Issuer shall issue and shall cause the Trustee to authenticate the Series 2021-1 Class A-1 L/C Note, which the Master Issuer shall deliver to the L/C Provider on the Closing Date; provided that, if such Series 2021-1 Class A-1 L/C Note is an Uncertificated Note, the Trustee shall instead register it as described in Section 4.1(e) of the Series 2021-1 Supplement. Such Series 2021-1 Class A-1 L/C Note shall be dated the Closing Date, shall be registered in the name of the L/C Provider or in such other name or nominee as the L/C Provider may request, shall have a maximum principal amount equal to the L/C Commitment, shall have an initial outstanding principal amount equal to the Series 2021-1 Class A-1 Initial Aggregate Undrawn L/C Face Amount, and (unless it is an Uncertificated Note) shall be duly authenticated in accordance with the provisions of the Indenture. Each issuance of a Letter of Credit after the Closing Date will constitute an Increase in the outstanding principal amount evidenced by the Series 2021-1 Class A-1 L/C Note in an amount corresponding to the Undrawn L/C Face Amount of such Letter of Credit. All L/C Obligations (whether in respect of Undrawn L/C Face
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Amounts or Unreimbursed L/C Drawings) shall be deemed to be principal outstanding under the Series 2021-1 Class A-1 L/C Note and shall be deemed to be Series 2021-1 Class A-1 Outstanding Principal Amounts for all purposes of this Agreement, the Indenture and the other Related Documents other than, in the case of Undrawn L/C Face Amounts, for purposes of accrual of interest. Subject to the terms of this Agreement and the Series 2021-1 Supplement, the outstanding principal amount evidenced by the Series 2021-1 Class A-1 L/C Note shall be increased by issuances of Letters of Credit or decreased by expirations thereof or reimbursements of drawings thereunder or other circumstances resulting in the permanent reduction in any Undrawn L/C Face Amounts from time to time. The L/C Provider and the Master Issuer agree to promptly notify the Administrative Agent and the Trustee of any such decreases for which notice to the Administrative Agent is not otherwise provided hereunder.
(c) The Master Issuer may (or shall cause the Manager on its behalf to) from time to time request that the L/C Provider provide a new Letter of Credit by delivering to the L/C Provider at its address for notices specified herein an Application therefor (in the form required by the applicable L/C Issuing Bank as notified to the Master Issuer by the L/C Provider), completed to the satisfaction of the L/C Provider, and such other certificates, documents and other papers and information as the L/C Provider may reasonably request on behalf of the L/C Issuing Bank. Notwithstanding the foregoing sentence, the letters of credit set forth on Schedule IV hereto shall be deemed Letters of Credit provided and issued by the L/C Provider hereunder as of the Closing Date. Upon receipt of any completed Application, the L/C Provider will notify the Administrative Agent and the Trustee in writing of the amount, the beneficiary and the requested expiration of the requested Letter of Credit (which shall comply with Sections 2.07(a) and (i)) and, subject to the other conditions set forth herein and in the Series 2021-1 Supplement and upon receipt of written confirmation from the Administrative Agent (based, with respect to any portion of the Series 2021-1 Class A-1 Outstanding Subfacility Amount held by any Person other than the Administrative Agent, solely on written notices received by the Administrative Agent under this Agreement) that after giving effect to the requested issuance, the Series 2021-1 Class A-1 Outstanding Principal Amount would not exceed the Series 2021-1 Class A-1 Maximum Principal Amount (provided that the L/C Provider shall be entitled to rely upon any written statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons of the Administrative Agent for purposes of determining whether the L/C Provider received such prior written confirmation from the Administrative Agent with respect to any Letter of Credit), the L/C Provider will cause such Application and the certificates, documents and other papers and information delivered in connection therewith to be processed in accordance with the L/C Issuing Bank’s customary procedures and shall promptly provide the Letter of Credit requested thereby (but in no event shall the L/C Provider be required to provide any Letter of Credit earlier than three (3) Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto, as provided in Section 2.07(a)) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the L/C Provider and the Master Issuer. The L/C Provider shall furnish a copy of such Letter of Credit to the Manager (with a copy to the Administrative Agent) promptly following the issuance thereof. The L/C Provider shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Funding Agents, the Investors, the Control
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Party and the Trustee, written notice of the issuance of each Letter of Credit (including the amount thereof).
(d) The Master Issuer shall pay ratably to the Committed Note Purchasers the L/C Quarterly Fees (as defined in the Series 2021-1 Class A-1 VFN Fee Letter, the “L/C Quarterly Fees”) in accordance with the terms of the Series 2021-1 Class A-1 VFN Fee Letter and subject to the Priority of Payments.
(e) To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article II, the provisions of this Article II shall apply.
(f) The Master Issuer may, upon three (3) Business Days’ notice to the Administrative Agent and the L/C Provider, effect a permanent reduction in the L/C Commitment; provided that any such reduction will be limited to the undrawn portion of the L/C Commitment. If requested by the Master Issuer in writing and with the prior written consent of the L/C Provider and the Administrative Agent, the L/C Provider may (but shall not be obligated to) increase the amount of the L/C Commitment; provided that, after giving effect thereto, the aggregate amount of each of the Outstanding Series 2021-1 Class A-1 Note Advances, the Swingline Commitment and the L/C Commitment does not exceed the aggregate Commitment Amounts; provided, further, that prior to any increase in the Swingline Commitment, the Master Issuer and the Trustee will enter into an amendment to the Series 2021-1 Supplement permitting such L/C Commitment.
(g) The L/C Provider shall satisfy its obligations under this Section 2.07 with respect to providing any Letter of Credit hereunder by issuing such Letter of Credit itself or through an Affiliate, so long as the L/C Issuing Bank Rating Test is satisfied with respect to such Affiliate and the issuance of such Letter of Credit. If the L/C Issuing Bank Rating Test is not satisfied with respect to such Affiliate and the issuance of such Letter of Credit, the L/C Provider or a Person selected by (at the expense of the L/C Provider) the Master Issuer shall issue such Letter of Credit; provided that such Person and issuance of such Letter of Credit satisfies the L/C Issuing Bank Rating Test (the L/C Provider (or such Affiliate of the L/C Provider) in its capacity as the issuer of such Letter of Credit or such other Person selected by the Master Issuer being referred to as the “L/C Issuing Bank” with respect to such Letter of Credit). The “L/C Issuing Bank Rating Test” is a test that is satisfied with respect to a Person issuing a Letter of Credit if the Person is a U.S. commercial bank that has, at the time of the issuance of such Letter of Credit, (i) a short-term certificate of deposit rating of not less than “P-2” from Moody’s and “A-2” from S&P and (ii) a long-term unsecured debt rating of not less than “Baa2” from Moody’s or “BBB” from S&P or such other minimum long-term unsecured debt rating as may be reasonably required by the beneficiary of such proposed Letter of Credit.
(h) The L/C Provider and, if the L/C Provider is not the L/C Issuing Bank for any Letter of Credit, the L/C Issuing Bank shall be under no 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 the L/C Provider or the L/C Issuing Bank, as applicable, from issuing the Letter of Credit or (ii) any law applicable to the L/C Provider or the
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L/C Issuing Bank, as applicable, or any request or directive (which request or directive, in the reasonable judgment of the L/C Provider or the L/C Issuing Bank, as applicable, has the force of law) from any Governmental Authority with jurisdiction over the L/C Provider or the L/C Issuing Bank, as applicable, shall prohibit the L/C Provider or the L/C Issuing Bank, as applicable, from issuing of letters of credit generally or the Letter of Credit in particular.
(i) Unless otherwise expressly agreed by the L/C Provider or the L/C Issuing Bank, as applicable, and the Master Issuer when a Letter of Credit is issued, the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit issued hereunder.
(j) For the avoidance of doubt, the L/C Commitment shall be a sub-facility limit of the Commitment Amounts and aggregate outstanding L/C Obligations as of any date of determination shall be a component of the Series 2021-1 Class A-1 Outstanding Principal Amount on such date of determination, pursuant to the definition thereof.
(k) If, on the date that is five (5) Business Days prior to the expiration of any Interest Reserve Letter of Credit, such Interest Reserve Letter of Credit has not been replaced or renewed and the Master Issuer has not otherwise deposited funds into the Senior Notes Interest Reserve Account or the Senior Subordinated Notes Interest Reserve Account, as applicable, in the amounts that would otherwise be required pursuant to the Indenture had such Interest Reserve Letter of Credit not been issued, the Master Issuer shall instruct the Control Party to submit a notice of drawing under such Interest Reserve Letter of Credit and use the proceeds thereof to fund a deposit into the Senior Notes Interest Reserve Account or the Senior Subordinated Notes Interest Reserve Account, as applicable, in an amount equal to the Senior Notes Interest Reserve Account Deficiency Amount or the Senior Subordinated Notes Interest Reserve Account Deficiency Amount, as applicable, on such date, in each case calculated as if such Interest Reserve Letter of Credit had not been issued.
(l) Each of the parties hereto shall execute any amendments to this Agreement reasonably requested by the Master Issuer in order to have any letter of credit issued by a Person selected by the Master Issuer pursuant to Section 2.07(g) hereto or Section 5.17 of the Base Indenture be a “Letter of Credit” that has been issued hereunder and such Person selected by the Master Issuer be an “L/C Issuing Bank.”
Section 2.08 L/C Reimbursement Obligations.
(a) For the purpose of reimbursing the payment of any draft presented under any Letter of Credit, the Master Issuer agrees to pay, as set forth in this Section 2.08, the L/C Provider, for its own account or for the account of the L/C Issuing Bank, as applicable, an amount in Dollars equal to the sum of (i) the amount of such draft so paid (the “L/C Reimbursement Amount”) and (ii) any taxes, fees, charges or other costs or expenses (including amounts payable pursuant to Section 3.02(c), and collectively, the “L/C Other Reimbursement Costs”) incurred by the L/C Issuing Bank in connection with such payment. Each drawing under any Letter of Credit shall (unless an Event of Bankruptcy shall have occurred and be continuing
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with respect to the Master Issuer or any Guarantor, in which cases the procedures specified in Section 2.09 for funding by Committed Note Purchasers shall apply) constitute a request by the Master Issuer to the Administrative Agent and each Funding Agent for a Base Rate Borrowing pursuant to Section 2.03 in the amount equal to the applicable L/C Reimbursement Amount plus the applicable L/C Other Reimbursement Costs minus any such amounts repaid pursuant to Section 4.03(b), and the Master Issuer shall be deemed to have made such request pursuant to the procedures set forth in Section 2.03. The applicable Investors in each Investor Group hereby agree to make Advances in an aggregate amount for each Investor Group equal to such Investor Group’s Commitment Percentage of the L/C Reimbursement Amount and L/C Other Reimbursement Costs to pay the L/C Provider. The Borrowing date with respect to such Borrowing shall be the first date on which a Base Rate Borrowing could be made pursuant to Section 2.03 if the Administrative Agent had received a notice of such Borrowing at the time the Administrative Agent receives notice from the L/C Provider of such drawing under such Letter of Credit. Such Investors shall make the amount of such Advances available to the Administrative Agent in immediately available funds not later than 3:00 p.m. (Eastern time) on such Borrowing date, and the proceeds of such Advances shall be immediately made available by the Administrative Agent to the L/C Provider for application to the reimbursement of such drawing.
(b) The Master Issuer’s obligations under Section 2.08(a) shall be absolute and unconditional, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances and irrespective of (i) any setoff, counterclaim or defense to payment that the Master Issuer may have or has had against the L/C Provider, the L/C Issuing Bank, any beneficiary of a Letter of Credit or any other Person; (ii) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (iii) payment by the L/C 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; (iv) payment by the L/C Issuing Bank under a Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under the Bankruptcy Code or any other liquidation, conservatorship, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws of any jurisdictions or (v) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(b), constitute a legal or equitable discharge of, or provide a right of setoff against, the Master Issuer’s obligations hereunder. The Master Issuer also agrees that the L/C Provider and the L/C Issuing Bank shall not be responsible for, and the Master Issuer’s Reimbursement Obligations under Section 2.08(a) shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Master Issuer and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Master Issuer against any beneficiary of such Letter of Credit or any such transferee. Neither the L/C Provider nor the L/C Issuing Bank shall be liable for any error, omission, interruption, loss or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in
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connection with any Letter of Credit, except for direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Master Issuer to the extent permitted by applicable law) caused by errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of the L/C Provider or the L/C Issuing Bank, as the case may be. The Master Issuer agrees that any action taken or omitted by the L/C Provider or the L/C Issuing Bank, as the case may be, under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence, bad faith or willful misconduct and in accordance with the standards of care specified in the UCC of the State of New York, shall be binding on the Master Issuer and shall not result in any liability of the L/C Provider or the L/C Issuing Bank to the Master Issuer. As between the Master Issuer and the L/C Issuing Bank, the Master Issuer hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to such beneficiary’s or transferee’s use of any Letter of Credit. In furtherance of the foregoing and without limiting the generality thereof, the Master Issuer agrees with the L/C Issuing Bank that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the L/C 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.
(c) If any draft shall be presented for payment under any Letter of Credit, the L/C Provider shall promptly notify the Manager, the Control Party, the Master Issuer and the Administrative Agent of the date and amount thereof. The responsibility of the applicable L/C Issuing Bank to the Master Issuer in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit and, in paying such draft, such L/C Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of any Person(s) executing or delivering any such document.
Section 2.09 L/C Participations.
(a) The L/C Provider irrevocably agrees to grant and hereby grants to each Committed Note Purchaser, and, to induce the L/C Provider to provide Letters of Credit hereunder (and, if the L/C Provider is not the L/C Issuing Bank for any Letter of Credit, to induce the L/C Provider to agree to reimburse such L/C Issuing Bank for any payment of any drafts presented thereunder), each Committed Note Purchaser irrevocably and unconditionally agrees to accept and purchase and hereby accepts and purchases from the L/C Provider, on the terms and conditions set forth below, for such Committed Note Purchaser’s own account and risk an undivided interest equal to its Committed Note Purchaser Percentage of the related Investor Group’s Commitment Percentage of the L/C Provider’s obligations and rights under and in
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respect of each Letter of Credit provided hereunder and the L/C Reimbursement Amount with respect to each draft paid or reimbursed by the L/C Provider in connection therewith. Subject to Section 2.07(c), each Committed Note Purchaser unconditionally and irrevocably agrees with the L/C Provider that, if a draft is paid under any Letter of Credit for which the L/C Provider is not paid in full by the Master Issuer in accordance with the terms of this Agreement, such Committed Note Purchaser shall pay to the Administrative Agent upon demand of the L/C Provider an amount equal to its Committed Note Purchaser Percentage of the related Investor Group’s Commitment Percentage of the L/C Reimbursement Amount with respect to such draft, or any part thereof, that is not so paid.
(b) If any amount required to be paid by any Committed Note Purchaser to the Administrative Agent for forwarding to the L/C Provider pursuant to Section 2.09(a) in respect of any unreimbursed portion of any payment made or reimbursed by the L/C Provider under any Letter of Credit is paid to the Administrative Agent for forwarding to the L/C Provider within three (3) Business Days after the date such payment is due, such Committed Note Purchaser shall pay to Administrative Agent for forwarding to the L/C Provider on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the L/C Provider, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Committed Note Purchaser pursuant to Section 2.09(a) is not made available to the Administrative Agent for forwarding to the L/C Provider by such Committed Note Purchaser within three (3) Business Days after the date such payment is due, the L/C Provider shall be entitled to recover from such Committed Note Purchaser, on demand, such amount with interest thereon calculated from such due date at the Base Rate. A certificate of the L/C Provider submitted to any Committed Note Purchaser with respect to any amounts owing under this Section 2.09(b), in the absence of manifest error, shall be conclusive and binding on such Committed Note Purchaser. If any withholding taxes are required by law to be deducted from any amounts payable under this Section 2.09(b), the sum payable by the Committed Note Purchaser shall be increased as necessary so that after such deduction has been made, the L/C Provider receives an amount equal to the sum it would have received had no such deduction been made.
(c) Whenever, at any time after payment has been made under any Letter of Credit and the L/C Provider has received from any Committed Note Purchaser its pro rata share of such payment in accordance with Section 2.09(a), the Administrative Agent or the L/C Provider receives any payment related to such Letter of Credit (whether directly from the Master Issuer or otherwise, including proceeds of collateral applied thereto by the L/C Provider), or any payment of interest on account thereof, the Administrative Agent or the L/C Provider, as the case may be, will distribute to such Committed Note Purchaser its pro rata share thereof; provided, however, that in the event that any such payment received by the Administrative Agent or the L/C Provider, as the case may be, shall be required to be returned by the Administrative Agent or the L/C Provider, such Committed Note Purchaser shall return to the Administrative Agent for the account of the L/C Provider the portion thereof previously distributed by the Administrative Agent or the L/C Provider, as the case may be, to it.
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(d) Each Committed Note Purchaser’s obligation to make the Advances referred to in Section 2.08(a) and to pay its pro rata share of any unreimbursed draft pursuant to Section 2.09(a) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Committed Note Purchaser or the Master Issuer may have against the L/C Provider, any L/C Issuing Bank, the Master Issuer or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Article VII other than at the time the related Letter of Credit was issued; (iii) an adverse change in the condition (financial or otherwise) of the Master Issuer; (iv) any breach of this Agreement or any other Indenture Document by the Master Issuer or any other Person; (v) any amendment, renewal or extension of any Letter of Credit in compliance with this Agreement or with the terms of such Letter of Credit, as applicable; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
ARTICLE III
INTEREST AND FEES
INTEREST AND FEES
Section 3.01 Interest.
(a) To the extent that an Advance is funded or maintained by a Conduit Investor through the issuance of Commercial Paper, such Advance shall bear interest at the CP Rate applicable to such Conduit Investor. To the extent that, and only for so long as, an Advance is funded or maintained by a Conduit Investor through means other than the issuance of Commercial Paper (based on its determination in good faith that it is unable to raise or is precluded or prohibited from raising, or that it is not advisable to raise, funds through the issuance of Commercial Paper in the commercial paper market of the United States to finance its purchase or maintenance of such Advance or any portion thereof (which determination may be based on any allocation method employed in good faith by such Conduit Investor), including by reason of market conditions or by reason of insufficient availability under any of its Program Support Agreement or the downgrading of any of its Program Support Providers), such Advance shall bear interest at (i) the Base Rate or (ii) if the required notice has been given pursuant to Section 3.01(b) with respect to such Advance, for any EurodollarSOFR Interest Accrual Period, the Eurodollar RateAdjusted Term SOFR applicable to such EurodollarSOFR Interest Accrual Period for such Advance, in each case except as otherwise provided in the definition of EurodollarSOFR Interest Accrual Period or in Sections 3.03 or 3.04. Each Advance funded or maintained by a Committed Note Purchaser or a Program Support Provider shall bear interest at (i) the Base Rate or (ii) if the required notice has been given pursuant to Section 3.01(b) with respect to such Advance, for any EurodollarSOFR Interest Accrual Period, the Eurodollar RateAdjusted Term SOFR applicable to such EurodollarSOFR Interest Accrual Period for such Advance, in each case except as otherwise provided in the definition of EurodollarSOFR Interest Accrual Period or in Sections 3.03 or 3.04. By (x) 11:00 a.m. (Eastern time) on the second Business Day preceding each Quarterly Calculation Date, each Funding Agent shall notify the Administrative Agent of the applicable CP Rate for each Advance made by its Investor Group that was funded or maintained through the issuance of Commercial Paper and was outstanding during all or any portion of the Interest Accrual Period ending immediately prior to such
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Quarterly Calculation Date and (y) 3:00 p.m. (Eastern time) on the second Business Day preceding each Quarterly Calculation Date, the Administrative Agent shall notify the Master Issuer, the Manager, the Trustee, the Servicer and the Funding Agents of such applicable CP Rate and of the applicable interest rate for each other Advance for such Interest Accrual Period and of the amount of interest accrued on Advances during such Interest Accrual Period.
(b) With respect to any Advance (other than one funded or maintained by a Conduit Investor through the issuance of Commercial Paper), so long as no Potential Rapid Amortization Event, Rapid Amortization Period or Event of Default has commenced and is continuing, the Master Issuer may elect that such Advance bear interest at the Eurodollar RateAdjusted Term SOFR for any EurodollarSOFR Interest Accrual Period while such Advance is outstanding to the extent provided in Section 3.01(a) by giving notice thereof (including notice of the Master Issuer’s election of the term for the applicable EurodollarSOFR Interest Accrual Period) to the Funding Agents prior to 2:00 p.m. (Eastern time) on the date which is three (3) EurodollarU.S. Government Securities Business Days prior to the commencement of such EurodollarSOFR Interest Accrual Period. If such notice is not given in a timely manner, such Advance shall bear interest at the Base Rate. Each such conversion to or continuation of EurodollarSOFR Advances for a new EurodollarSOFR Interest Accrual Period in accordance with this Section 3.01(b) shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $500,000 in excess thereof.
(c) Any outstanding Swingline Loans and Unreimbursed L/C Drawings shall bear interest at the Base Rate. By (x) 11:00 a.m. (Eastern time) on the second Business Day preceding each Quarterly Calculation Date, the Swingline Lender shall notify the Administrative Agent in reasonable detail of the amount of interest accrued on any Swingline Loans during the Interest Accrual Period ending on such date and the L/C Provider shall notify the Administrative Agent in reasonable detail of the amount of interest accrued on any Unreimbursed L/C Drawings during such Interest Accrual Period and the amount of fees accrued on any Undrawn L/C Face Amounts during such Interest Accrual Period and (y) 3:00 p.m. (Eastern time) on such date, the Administrative Agent shall notify the Servicer, the Trustee, the Master Issuer and the Manager of the amount of such accrued interest and fees as set forth in such notices.
(d) All accrued interest pursuant to Sections 3.01(a) or (c) shall be due and payable in arrears on each Quarterly Payment Date in accordance with the applicable provisions of the Indenture.
(e) In addition, under the circumstances set forth in Section 3.4 of the Series 2021-1 Supplement, the Master Issuer shall pay quarterly interest in respect of the Series 2021-1 Class A-1 Outstanding Principal Amount in an amount equal to the Series 2021-1 Class A-1 Post-ARD Contingent Interest Amount payable pursuant to such Section 3.4, subject to and in accordance with the Priority of Payments.
(f) All computations of interest at the CP Rate and the Eurodollar RateAdjusted Term SOFR, all computations of the Series 2021-1 Class A-1 Post-ARD Contingent Interest Amount (other than any accruing on any Base Rate Advances) and all
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computations of fees shall be made on the basis of a year of 360 days and the actual number of days elapsed. All computations of interest at the Base Rate and all computations of the Series 2021-1 Class A-1 Post-ARD Contingent Interest Amount accruing on any Base Rate Advances shall be made on the basis of a 365- (or 366-, as applicable) day year and actual number of days elapsed. Whenever any payment of interest, principal or fees hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, unless specified otherwise in the Indenture, and such extension of time shall be included in the computation of the amount of interest owed. Interest shall accrue on each Advance, Swingline Loan and Unreimbursed L/C Drawing from and including the day on which it is made to but excluding the date of repayment thereof.
Section 3.02 Fees.
(a) The Master Issuer shall pay to the Administrative Agent for its own account the Administrative Agent Fees (as defined in the Series 2021-1 Class A-1 VFN Fee Letter, collectively, the “Administrative Agent Fees”) in accordance with the terms of the Series 2021-1 Class A-1 VFN Fee Letter and subject to the Priority of Payments.
(b) On each Quarterly Payment Date on or prior to the Commitment Termination Date, the Master Issuer shall, in accordance with Section 4.01, pay to each Funding Agent, for the account of the related Committed Note Purchaser(s), the Undrawn Commitment Fees (as defined in the Series 2021-1 Class A-1 VFN Fee Letter, the “Undrawn Commitment Fees”) in accordance with the terms of the Series 2021-1 Class A-1 VFN Fee Letter and subject to the Priority of Payments.
(c) The Master Issuer shall pay (i) the fees required pursuant to Section 2.07 in respect of Letters of Credit and (ii) any other fees set forth in the Series 2021-1 Class A-1 VFN Fee Letter (including the Upfront Commitment Fee and any Extension Fees (each, as defined in the Series 2021-1 Class A-1 VFN Fee Letter)), subject to the Priority of Payments.
(d) All fees payable pursuant to this Section 3.02 shall be calculated in accordance with Section 3.01(f) and paid on the date due in accordance with the applicable provisions of the Indenture. Once paid, all fees shall be nonrefundable under all circumstances other than manifest error.
Section 3.03 EurodollarSOFR Lending Unlawful. If any Investor or Program Support Provider shall determine that any Change in Law makes it unlawful, or any Official Body asserts that it is unlawful, for any such Person to fund or maintain any Advance as a EurodollarSOFR Advance, the obligation of such Person to fund or maintain any such Advance as a EurodollarSOFR Advance shall, upon such determination, forthwith be suspended until such Person shall notify the Administrative Agent, the related Funding Agent, the Manager and the Master Issuer that the circumstances causing such suspension no longer exist, and all then-outstanding EurodollarSOFR Advances of such Person shall be automatically converted into Base Rate Advances at the end of the then-current EurodollarSOFR Interest Accrual Period with respect thereto or sooner, if required by such law or assertion.
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Section 3.04 Deposits UnavailableBenchmark Replacement(a). If the Administrative Agent shall have determined that:
(a) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the interest rate applicable hereunder to the Eurodollar Advances; or
(a) Notwithstanding anything to the contrary herein or in any other Related Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Master Issuer may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all affected Investors and the Master Issuer so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from the Required Investor Groups (provided that the Commitment of any Defaulting Investor shall be disregarded in the determination of whether any threshold percentage of Commitments has been met).
(b) with respect to any interest rate otherwise applicable hereunder to any Eurodollar Advances the Eurodollar Interest Accrual Period for which has not then commenced, Investor Groups holding in the aggregate more than 50% of the Eurodollar Advances have determined that such interest rate will not adequately reflect the cost to them of funding, agreeing to fund or maintaining such Eurodollar Advances for such Eurodollar Interest Accrual Period, In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Related Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Related Document.
then, upon notice from the Administrative Agent (which, in the case of clause (ii) above, the Administrative Agent shall give upon obtaining actual knowledge that such percentage of the Investor Groups have so determined) to the Funding Agents, the Manager and the Master Issuer, the obligations of the Investors to fund or maintain any Advance as a Eurodollar Advance after the end of the then-current Eurodollar Interest Accrual Period, if any, with respect thereto shall forthwith be suspended and on the date such notice is given such Advances will convert to Base Rate Advances until the Administrative Agent has notified the Funding Agents and the Master Issuer that the circumstances causing such suspension no longer exist.
(c) The Administrative Agent will promptly notify the Master Issuer and the Investors of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will promptly notify the Master Issuer of the removal or reinstatement of any tenor of a Benchmark pursuant to
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Section 3.04(d). Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Investor (or group of Investors) pursuant to this Section 3.04, 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 Related Document, except, in each case, as expressly required pursuant to this Section 3.04.
(d) Notwithstanding anything to the contrary herein or in any other Related 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 Reference 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 administrator of such Benchmark or 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 not or will not be representative, then the Administrative Agent may modify the definition of “SOFR Interest Accrual Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned 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 not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “SOFR Interest Accrual Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(e) Upon the Master Issuer’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Master Issuer may revoke any pending request for a borrowing of, conversion to or continuation of any SOFR Advances to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Master Issuer will be deemed to have converted any such request into a request for a Borrowing of or conversion to Base Rate Advances. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of Base Rate
(f) In connection with the use, administration of, or conventions associated with, Term SOFR and the Term SOFR Reference Rate, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Related Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Related Document. The Administrative Agent will
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reasonably promptly notify the Master Issuer and the Investors of the effectiveness of any such Conforming Changes.
Section 3.05 Increased Costs, etc. The Master Issuer agrees to reimburse each Investor and any Program Support Provider (each, an “Affected Person”, which term, for purposes of Sections 3.07 and 3.08 and 3.09, shall also include the Swingline Lender and the L/C Issuing Bank) for any increase in the cost of, or any reduction in the amount of any sum receivable by any such Affected Person, including reductions in the rate of return on such Affected Person’s capital, in respect of funding or maintaining (or of its obligation to fund or maintain) any Advances that arise in connection with any Change in Law, except for any Change in Law with respect to increased capital costs and Taxes which shall be governed by Sections 3.07 and 3.08, respectively (whether or not amounts are payable thereunder in respect thereof). For purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all regulations, requests, guidelines or directives issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and been adopted subsequent to the date hereof. Each such demand shall be provided to the related Funding Agent and the Master Issuer in writing and shall state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Affected Person for such increased cost or reduced amount of return. Such additional amounts (“Increased Costs”) shall be deposited into the Collection Account by the Master Issuer within seven (7) Business Days of receipt of such notice to be payable as Class A-1 Notes Other Amounts, subject to and in accordance with the Priority of Payments, to the Administrative Agent and by the Administrative Agent to such Funding Agent and by such Funding Agent directly to such Affected Person, and such notice shall, in the absence of manifest error, be conclusive and binding on the Master Issuer; provided that with respect to any notice given to the Master Issuer under this Section 3.05, the Master Issuer shall not be under any obligation to pay any amount with respect to any period prior to the date that is nine (9) months prior to such demand if the relevant Affected Person knew or could reasonably have been expected to know of the circumstances giving rise to such increased costs or reductions in the rate of return (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).
Section 3.06 Funding Losses. In the event any Affected Person shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Affected Person to fund or maintain any portion of the principal amount of any Advance as a EurodollarSOFR Advance) as a result of:
(a) any conversion, repayment, prepayment or redemption (for any reason, including, without limitation, as a result of any Mandatory Decrease or Voluntary Decrease, or the acceleration of the maturity of such EurodollarSOFR Advance) of the principal
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amount of any EurodollarSOFR Advance on a date other than the scheduled last day of the EurodollarSOFR Interest Accrual Period applicable thereto;
(b) any Advance not being funded or maintained as a EurodollarSOFR Advance after a request therefor has been made in accordance with the terms contained herein (for a reason other than the failure of such Affected Person to make an Advance after all conditions thereto have been met); or
(c) any failure of the Master Issuer to make a Mandatory Decrease or a Voluntary Decrease, prepayment or redemption with respect to any EurodollarSOFR Advance after giving notice thereof pursuant to the applicable provisions of the Series 2021-1 Supplement;
then, upon the written notice of any Affected Person to the related Funding Agent and the Master Issuer, the Master Issuer shall deposit into the Collection Account (within seven (7) Business Days of receipt of such notice) to be payable as Class A-1 Notes Other Amounts, subject to and in accordance with the Priority of Payments, to the Administrative Agent and by the Administrative Agent to such Funding Agent and such Funding Agent shall pay directly to such Affected Person such amount (“Breakage Amount” or “Series 2021-1 Class A-1 Breakage Amount”) as will (in the reasonable determination of such Affected Person) reimburse such Affected Person for such loss or expense; provided that with respect to any notice given to the Master Issuer under this Section 3.06, the Master Issuer shall not be under any obligation to pay any amount with respect to any period prior to the date that is nine (9) months prior to such demand if the relevant Affected Person knew or could reasonably have been expected to know of the circumstances giving rise to such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Master Issuer.
Section 3.07 Increased Capital or Liquidity Costs. If any Change in Law affects or would affect the amount of capital or liquidity required or reasonably expected to be maintained by any Affected Person or any Person controlling such Affected Person and such Affected Person determines in its sole and absolute discretion that the rate of return on its or such controlling Person’s capital as a consequence of its commitment hereunder or under a Program Support Agreement or the Advances, Swingline Loans or Letters of Credit made or issued by such Affected Person is reduced to a level below that which such Affected Person or such controlling Person would have achieved but for the occurrence of any such circumstance, then, in any such case after notice from time to time by such Affected Person (or in the case of an L/C Issuing Bank, by the L/C Provider) to the related Funding Agent and the Master Issuer (or, in the case of the Swingline Lender or the L/C Provider, to the Master Issuer), the Master Issuer shall deposit into the Collection Account within seven (7) Business Days of the Master Issuer’s receipt of such notice, to be payable as Class A-1 Notes Other Amounts, subject to and in accordance with the Priority of Payments, to the Administrative Agent and by the Administrative Agent to such Funding Agent (or, in the case of the Swingline Lender or the L/C Provider, directly to such Person) and such Funding Agent shall pay to such Affected Person, such amounts (“Increased Capital Costs”) as will be sufficient to compensate such Affected Person or such controlling Person for such reduction in rate of return; provided that with respect to any notice given to the
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Master Issuer under this Section 3.07, the Master Issuer shall not be under any obligation to pay any amount with respect to any period prior to the date that is nine (9) months prior to such demand if the relevant Affected Person knew or could reasonably have been expected to know of the Change in Law (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof). A statement of such Affected Person as to any such additional amount or amounts (including calculations thereof in reasonable detail), in the absence of manifest error, shall be conclusive and binding on the Master Issuer. In determining such additional amount, such Affected Person may use any method of averaging and attribution that it (in its reasonable discretion) shall deem applicable so long as it applies such method to other similar transactions. For purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all regulations, requests, guidelines or directives issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, are deemed to have gone into effect and been adopted subsequent to the date hereof.
Section 3.08 Taxes.
(a) Except as otherwise required by law, all payments by the Master Issuer of principal of, and interest on, the Advances, the Swingline Loans and the L/C Obligations and all other amounts payable hereunder (including fees) shall be made free and clear of and without deduction or withholding for or on account of any present or future income, excise, documentary, property, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges in the nature of a tax imposed by any taxing authority including all interest, penalties or additions to tax and other liabilities with respect thereto (all such taxes, fees, duties, withholdings and other charges, and including all interest, penalties or additions to tax and other liabilities with respect thereto, being called “Taxes”), but excluding in the case of any Affected Person (i) net income, franchise (imposed in lieu of net income) or similar Taxes (and including branch profits or alternative minimum Taxes) and any other Taxes imposed or levied on the Affected Person as a result of a connection between the Affected Person and the jurisdiction of the Governmental Authority imposing such Taxes (or any political subdivision or taxing authority thereof or therein) (other than any such connection arising solely from such Affected Person having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Related Document), (ii) with respect to any Affected Person organized under the laws of a jurisdiction other than the United States or any state of the United States (“Foreign Affected Person”), any withholding Tax that is imposed on amounts payable to the Foreign Affected Person at the time the Foreign Affected Person becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Affected Person (or its assignor, if any) was already entitled, at the time of the designation of the new lending office (or assignment), to receive additional amounts from the Master Issuer with respect to withholding Tax, (iii) with respect to any Affected Person, any Taxes imposed under FATCA, (iv) any backup withholding Tax and (v) with respect to any Affected Person, any Taxes imposed as a result of such Affected Person’s failure to comply with
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Section 3.08(d) (such Taxes not excluded by (i), (ii), (iii), (iv) and (v) above being called “Non-Excluded Taxes”). If any Taxes are imposed and required by law to be withheld or deducted from any amount payable by the Master Issuer hereunder to an Affected Person, then, if such Taxes are Non-Excluded Taxes, (x) the amount of the payment shall be increased so that such payment is made, after withholding or deduction for or on account of such Non-Excluded Taxes, in an amount that is not less than the amount equal to the sum that would have been received by the Affected Person had no such deduction or withholding been required and (y) the Master Issuer, Administrative Agent or other applicable withholding agent shall withhold the amount of such Taxes from such payment (as increased, if applicable, pursuant to the preceding clause (x)) and shall pay such amount, subject to and in accordance with the Priority of Payments, to the taxing authority imposing such Taxes in accordance with applicable law.
(b) Moreover, if any Non-Excluded Taxes are directly asserted against any Affected Person with respect to any payment received by such Affected Person from the Master Issuer or otherwise in respect of any Related Document or the transactions contemplated therein, such Affected Person may pay such Non-Excluded Taxes and the Master Issuer will, within fifteen (15) Business Days of the related Funding Agent’s and Master Issuer’s receipt of written notice stating the amount of such Non-Excluded Taxes (including the calculation thereof in reasonable detail), deposit into the Collection Account, to be distributed as Class A-1 Notes Other Amounts, subject to and in accordance with the Priority of Payments, to the Administrative Agent and by the Administrative Agent to such Funding Agent and by such Funding Agent directly to such Affected Persons, such additional amounts (collectively, “Increased Tax Costs,” which term shall include all amounts payable by or on behalf of the Master Issuer pursuant to this Section 3.08) as is necessary in order that the net amount received by such Affected Person after the payment of such Non-Excluded Taxes (including any Non-Excluded Taxes on such Increased Tax Costs) shall equal the amount such Person would have retained had no such Non-Excluded Taxes been asserted. Any amount payable to an Affected Person under this Section 3.08 shall be reduced by, and Increased Tax Costs shall not include, the amount of incremental damages (including Taxes) due or payable by the Master Issuer as a direct result of such Affected Person’s failure to demand from the Master Issuer additional amounts pursuant to this Section 3.08 within 180 days from the date on which the related Non-Excluded Taxes were incurred.
(c) As promptly as practicable after the payment of any Taxes, and in any event within thirty (30) days of any such payment being due, the Master Issuer, Administrative Agent or other applicable withholding agent shall furnish to each applicable Affected Person or its agents a certified copy of an official receipt (or other documentary evidence satisfactory to such Affected Person and agents) evidencing the payment of such Taxes.
(d) Each Affected Person, on or prior to the date it becomes a party to this Agreement (and from time to time thereafter as soon as practicable after the obsolescence or invalidity of any form or document previously delivered or within a reasonable period of time following a written request by the Master Issuer), shall deliver to the Master Issuer and the Administrative Agent a U.S. Internal Revenue Service Form W-8BEN, Form W-8BEN-E, Form W-8ECI, Form W-8IMY or Form W-9, as applicable, or applicable successor form, or such other
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forms or documents (or successor forms or documents), appropriately completed and executed, as may be applicable, as will permit the Master Issuer or the Administrative Agent to establish the extent to which a payment to such Affected Person is exempt from, or eligible for a reduced rate of, United States federal withholding Taxes (including withholding pursuant to FATCA) and to determine whether or not such Affected Person is subject to backup withholding or information reporting requirements. Promptly following the receipt of a written request by the Master Issuer or the Administrative Agent, each Affected Person shall deliver to the Master Issuer and the Administrative Agent any other forms or documents (or successor forms or documents), appropriately completed and executed, as may be applicable to establish the extent to which a payment to such Affected Person is exempt from withholding or deduction of Non-Excluded Taxes other than United States federal withholding Taxes, including but not limited to, such information necessary to claim the benefits of the exemption for portfolio interest under section 881(c) of the Code. The Master Issuer and the Administrative Agent (or other withholding agent selected by the Master Issuer) may rely on any form or document provided pursuant to this Section 3.08(d) until notified otherwise by the Affected Person that delivered such form or document. Notwithstanding anything to the contrary, no Affected Person shall be required to deliver any documentation that it is not legally eligible to deliver as a result of a change in applicable law after the time the Affected Person becomes a party to this Agreement (or designates a new lending office).
(e) The Administrative Agent, Trustee, Paying Agent or any other withholding agent may deduct and withhold any Taxes required by any laws to be deducted and withheld from any payments pursuant to this Agreement.
(f) If any Governmental Authority asserts that the Master Issuer or the Administrative Agent or other withholding agent did not properly withhold or backup withhold, as the case may be, any Taxes from payments made to or for the account of any Affected Person, then to the extent such improper withholding or backup withholding was directly caused by such Affected Person’s actions or inactions, such Affected Person shall indemnify the Master Issuer, Trustee, Paying Agent and the Administrative Agent for any Taxes imposed by any jurisdiction on the amounts payable to the Master Issuer and the Administrative Agent under this Section 3.08, and costs and expenses (including attorney costs) of the Master Issuer, Trustee, Paying Agent and the Administrative Agent. The obligation of the Affected Persons, severally, under this Section 3.08 shall survive any assignment of rights by, or the replacement of, an Affected Person or the termination of the aggregate Commitments, repayment of all other Obligations hereunder and the resignation of the Administrative Agent.
(g) On or before the date the Administrative Agent becomes a party to this Agreement, the Administrative Agent shall provide to the Master Issuer, two duly-signed, properly completed copies of the documentation prescribed in clause (i) or (ii) below, as applicable (together with all required attachments thereto): (i) Internal Revenue Service Form W-9 or any successor thereto, or (ii) (A) Internal Revenue Service Form W-8ECI or any successor thereto, and (B) with respect to payments received on account of any Lender Party, a U.S. branch withholding certificate on Internal Revenue Service Form W-8IMY or any successor thereto evidencing its agreement with the Master Issuer to be treated as a U.S. person for U.S.
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federal withholding purposes. At any time thereafter, the Administrative Agent shall provide updated documentation previously provided (or a successor form thereto) when any documentation previously delivered has expired or become obsolete or invalid or otherwise upon the reasonable request of the Master Issuer.
(h) If an Affected Person determines, in its sole reasonable discretion, that it has received a refund of any Non-Excluded Taxes as to which it has been indemnified pursuant to this Section 3.08 or as to which it has been paid additional amounts pursuant to this Section 3.08, it shall promptly notify the Master Issuer and the Manager in writing of such refund and shall, within 30 days after receipt of a written request from the Master Issuer, pay over such refund to the Master Issuer (but only to the extent of indemnity payments made or additional amounts paid to such Affected Person under this Section 3.08 with respect to the Non-Excluded Taxes giving rise to such refund), net of all out-of-pocket expenses (including the net amount of Taxes, if any, imposed on or with respect to such refund or payment) of the Affected Person and without interest (other than any interest paid by the relevant taxing authority that is directly attributable to such refund of such Non-Excluded Taxes); provided that the Master Issuer, immediately upon the request of the Affected Person to the Master Issuer (which request shall include a calculation in reasonable detail of the amount to be repaid) agrees to repay the amount of the refund (and any applicable interest) (plus any penalties, interest or other charges imposed by the relevant taxing authority with respect to such amount) to the Affected Person in the event the Affected Person or any other Person is required to repay such refund to such taxing authority. This Section 3.08 shall not be construed to require the Affected Person to make available its Tax returns (or any other information relating to its Taxes that it reasonably deems confidential) to the Master Issuer or any other Person.
Section 3.09 Change of Lending Office. Each Committed Note Purchaser agrees that, upon the occurrence of any event giving rise to the operation of Sections 3.05 or 3.07 or the payment of additional amounts under Sections 3.08(a) or (b), in each case with respect to an Affected Person in such Committed Note Purchaser’s Investor Group, it will, if requested by the Master Issuer, use reasonable efforts (subject to overall policy considerations of such Committed Note Purchaser) to designate, or cause the designation of, another lending office for any Advances affected by such event with the object of avoiding the consequences of such event; provided that such designation is made on terms that, in the sole judgment of such Committed Note Purchaser, cause such Committed Note Purchaser and its lending office(s) or the related Affected Person to suffer no economic, legal or regulatory disadvantage; provided, further, that nothing in this Section 3.09 shall affect or postpone any of the obligations of the Master Issuer or the rights of any Committed Note Purchaser pursuant to Sections 3.05, 3.07 and 3.08. If a Committed Note Purchaser notifies the Master Issuer in writing that such Committed Note Purchaser will be unable to designate, or cause the designation of, another lending office, the Master Issuer may replace every member (but not any subset thereof) of such Committed Note Purchaser’s entire Investor Group by giving written notice to each member of such Investor Group and the Administrative Agent designating one or more Persons that are willing and able to purchase each member of such Investor Group’s rights and obligations under this Agreement for a purchase price that, with respect to each such member of such Investor Group, will equal the amount owed to each such member of such Investor Group with respect to the Series 2021-1
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Class A-1 Advance Notes (whether arising under the Indenture, this Agreement, the Series 2021-1 Class A-1 Advance Notes or otherwise). Upon receipt of such written notice, each member of such Investor Group shall assign its rights and obligations under this Agreement pursuant to and in accordance with Sections 9.17(a), (b) and (c), as applicable, in consideration for such purchase price and at the reasonable expense of the Master Issuer (including, without limitation, the reasonable documented fees and out-of-pocket expenses of counsel to each such member); provided, however, that no member of such Investor Group shall be obligated to assign any of its rights and obligations under this Agreement if the purchase price to be paid to such member is not at least equal to the amount owed to such member with respect to the Series 2021-1 Class A-1 Advance Notes (whether arising under the Indenture, this Agreement, the Series 2021-1 Class A-1 Advance Notes or otherwise).
Section 3.10 Benchmark Replacement SettingReaffirmation. On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month USD LIBOR tenor settings. Notwithstanding anything to the contrary herein or in any other Related Document:
(a) On the earlier of (i) the date that all Available Tenors of the Eurodollar Funding Rate have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is the Eurodollar Funding Rate, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Related Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Related Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.
(b) Upon the occurrence of (x) a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Related Document in respect of any Benchmark setting at or after 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Investors without any amendment to, or further action or consent of any other party to, this Agreement or any other Related Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from the Required Investor Groups or (y) an Other Rate Opt-in Election, the Benchmark Replacement will replace the Benchmark on the Early Opt-in Effective Date, if the then-current Benchmark is USD LIBOR for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of
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information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Master Issuer may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, converted or continued that would bear interest by reference to such Benchmark until the Master Issuer’s receipt of notice from the Administrative Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Master Issuer will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Advances. During the period referenced in the foregoing sentence, the component of the Base Rate based upon the Benchmark will not be used in any determination of the Base Rate.
(c) Notwithstanding anything to the contrary herein or in any other Related Document and subject to the proviso below in this paragraph, if a Term SOFR Transition Event and its related Term SOFR Transition Event Effective Date have occurred prior to the reference time in respect of any setting of the then-current Benchmark, then Term SOFR plus the Term SOFR Adjustment will replace the then-current Benchmark for all purposes hereunder or under any Related 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 Related Document; provided that, this clause (d) shall not be effective unless the Administrative Agent has delivered to the Investors and the Master Issuer a Term SOFR Notice. Notwithstanding anything contained herein to the contrary, the Administrative Agent shall not be required to deliver a Term SOFR Notice after a Term SOFR Transition Event and may do so in its sole discretion. For the avoidance of doubt, any applicable provisions set forth in this Section 3.10(d) shall apply with respect to any Term SOFR transition pursuant to this paragraph (d) as if such forward-looking term rate was initially determined in accordance herewith including, without limitation, the provisions set forth in Section 3.10(d) and Section 3.10(h).
(d) In connection with the implementation and administration of a Benchmark Replacement, 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 Related 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.
(e) . The Master Issuer and each Guarantor (including those that that become party hereto after the date hereof), in its respective capacity as the Master Issuer or, a Guarantor, debtor, obligor, grantor, pledgor, assignor, or other similar capacity in which such party acts as direct or indirect, or primary or secondary, obligor, accommodation party or guarantor or grants liens or security interests in or to its properties hereunder or under any other Related Document, hereby acknowledges and agrees to be bound by the provisions of this Section 3.103.04 (including, without limitation, the implementation from time to time of any Benchmark Replacement and any Benchmark Replacement Conforming Changes in accordance herewith) and, in furtherance of the forgoing (and without, in any way express or implied, invalidating, impairing or otherwise negatively affecting any obligations heretofore provided) hereby acknowledges and agrees that in connection with and after giving effect to any Benchmark CessationConforming Changes: (i) its
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obligationsObligations shall not in any way be novated, discharged or otherwise impaired, and shall continue, be ratified and be affirmed and shall remain in full force in effect, (ii) its grant of a guarantee, pledge, assignment or any other accommodation, lien or security interests in or to its properties relating to this Agreement or any other Related Document shall continue, be ratified and be affirmed, and shall remain in full force and effect and shall not be novated, discharged or otherwise impaired and (iii) the Related Documents and its obligations thereunder (contingent or otherwise) shall continue, be ratified and be affirmed and shall remain in full force and effect and shall not be novated, discharged or otherwise impaired. In addition, each party to this Agreementthe Master Issuer and each Guarantor hereby fully waives any requirements to notify such party of any Benchmark Cessationthe Master Issuer or such Guarantor, as applicable, of any Conforming Changes (except as expressly provided in this Section titled “Benchmark Replacement Setting”). In furtherance of the foregoing, each Guarantor hereby (i) appoints the Master Issuer (and the Master Issuer hereby accepts such appointment) as its agent, attorney-in-fact and representative for purposes of the delivery of any and all documents, instruments, agreements and other materials required to be delivered by any such party and for all other administrative purposes incidental to any of the foregoing provisions of this Section 3.10(e) and (ii) hereby authorizes the Master Issuer to take such actions, execute, acknowledge, and deliver, or cause to be executed, acknowledged and delivered, such further agreements, documents or instruments that are reasonably necessary or desirable to carry out the intent and purpose of this Section 3.10 on its behalfSection 3.04). From time to time, the Master Issuer (both in its individual capacity and in its capacity as agent, agent, attorney-in-fact and representative of each other party pursuant to the immediately preceding sentence) and the parties to this Agreementand each Guarantor shall execute and deliver, or cause to be executed and delivered, such instruments, agreements, certificates or documents, and take all such actions, as the Master IssuerAdministrative Agent may reasonably request for the purposes of implementing or effectuating the provisions of this Section 3.103.04, or of renewing, continuing, reaffirming or ratifying the rights of the Master IssuerAdministrative Agent, and the other InvestorsSecured Parties with respect to the ObligationsMaster Issuer’s or Guarantor’s obligations or the Collateral.
(f) The Administrative Agent will promptly notify the Master Issuer and the Investors of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Investors) pursuant to this Section 3.10, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 3.10.
(g) At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or the Eurodollar Funding Rate), then the Administrative Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark
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Replacement) settings and (ii) the Administrative Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings.
(h) Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration of, submission of, calculation of, or any other matter related to the London interbank offered rate or other rates in the definition of “Eurodollar Funding Rate” or any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, (i) any such alternative, successor or replacement rate implemented pursuant to this Section 3.10(h), whether upon the occurrence of a Benchmark Transition Event, an Other Rate Opt-in Election or an Early Opt-in Election, and (ii) the implementation of any Benchmark Replacement Conforming Changes pursuant to Section 3.10(d), including without limitation, (A) whether the composition or characteristics of any such alternative, successor or replacement reference rate for any currency will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the applicable Eurodollar Funding Rate for Advances denominated in such currency as did the London interbank offered rate prior to its discontinuance or unavailability, and (B) the impact or effect of such alternative, successor or replacement reference rate or Benchmark Replacement Conforming Changes on any other financial products or agreements in effect or offered by or to any Master Issuer, any Guarantor or any Investor or any of their respective Affiliates.
ARTICLE IV
OTHER PAYMENT TERMS
OTHER PAYMENT TERMS
Section 4.01 Time and Method of Payment (Amounts Distributed by the Administrative Agent). Except as otherwise provided in Section 4.02, all amounts payable to any Funding Agent or Investor hereunder or with respect to the Series 2021-1 Class A-1 Advance Notes shall be made to the Administrative Agent for the benefit of the applicable Person, by wire transfer of immediately available funds in Dollars not later than 3:00 p.m. (Eastern time) on the date due. The Administrative Agent will promptly, and in any event by 5:00 p.m. (Eastern time) on the same Business Day as its receipt or deemed receipt of the same, distribute to the applicable Funding Agent for the benefit of the applicable Person, or upon the order of the applicable Funding Agent for the benefit of the applicable Person, its pro rata share (or other applicable share as provided herein) of such payment by wire transfer in like funds as received.
Except as otherwise provided in Section 2.07 and Section 4.02, all amounts payable to the Swingline Lender or the L/C Provider hereunder or with respect to the Swingline Loans and L/C Obligations shall be made to or upon the order of the Swingline Lender or the L/C Provider, respectively, by wire transfer of immediately available funds in Dollars not later than 3:00 p.m. (Eastern time) on the date due. Any funds received after that time on such date will be deemed to have been received on the next Business Day.
The Master Issuer’s obligations hereunder in respect of any amounts payable to any Investor shall be discharged to the extent funds are disbursed by the Master Issuer to the Administrative Agent as provided herein or by the Trustee or Paying Agent in accordance with Section 4.02, whether or not such funds are properly applied by the Administrative Agent or
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by the Trustee or Paying Agent. The Administrative Agent’s obligations hereunder in respect of any amounts payable to any Investor shall be discharged to the extent funds are disbursed by the Administrative Agent to the applicable Funding Agent as provided herein whether or not such funds are properly applied by such Funding Agent.
Section 4.02 Order of Distributions (Amounts Distributed by the Trustee or the Paying Agent). (a) Subject to Section 9.18(c)(ii), any amounts deposited into the Series 2021-1 Class A-1 Distribution Account (including amounts in respect of accrued interest, letter of credit fees or undrawn commitment fees but excluding amounts allocated for the purpose of reducing the Series 2021-1 Class A-1 Outstanding Principal Balance) shall be distributed by the Trustee or the Paying Agent, as applicable, on the date due and payable under the Indenture and in the manner provided therein, ratably to the Series 2021-1 Class A-1 Noteholders of record on the applicable Record Date in respect of the amounts due to such payees at each applicable level of the Priority of Payments, in accordance with the applicable Quarterly Noteholders’ Report or the written report provided to the Trustee pursuant to Section 2.2(b) of the Series 2021-1 Supplement, as applicable.
(b) Subject to Section 9.18(c)(ii), any amounts deposited into the Series 2021-1 Class A-1 Distribution Account for the purpose of reducing the Series 2021-1 Class A-1 Outstanding Principal Balance shall be distributed by the Trustee or the Paying Agent, as applicable, on the date due and payable under the Indenture and in the manner provided therein, to the Series 2021-1 Class A-1 Noteholders of record on the applicable Record Date, in the following order of priority (which the Master Issuer shall cause to be set forth in the applicable Quarterly Noteholders’ Report or the written report provided to the Trustee pursuant to Section 2.2(b) of the Series 2021-1 Supplement, as applicable): first, to the Swingline Lender and the L/C Provider in respect of outstanding Swingline Loans and Unreimbursed L/C Drawings, to the extent Unreimbursed Drawings cannot be reimbursed pursuant to Section 2.08, ratably in proportion to the respective amounts due to such payees; second, to the other Series 2021-1 Class A-1 Noteholders in respect of their outstanding Advances, ratably in proportion thereto; and, third, any balance remaining of such amounts (up to an aggregate amount not to exceed the amount of Undrawn L/C Face Amounts at such time) shall be paid to the L/C Provider, to be deposited by the L/C Provider into a cash collateral account in the name of the L/C Provider in accordance with Section 4.03(b).
(c) Any amounts distributed to the Administrative Agent pursuant to the Priority of Payments in respect of any other amounts related to the Class A-1 Notes shall be distributed by the Administrative Agent in accordance with Section 4.01 on the date such amounts are due and payable hereunder to the applicable Series 2021-1 Class A-1 Noteholders and/or the Administrative Agent for its own account, as applicable, ratably in proportion to the respective aggregate of such amounts due to such payees.
Section 4.03 L/C Cash Collateral. (a) If (i) as of five (5) Business Days prior to the Commitment Termination Date, any Undrawn L/C Face Amounts remain in effect, the Master Issuer shall either (i) provide cash collateral (in an aggregate amount equal to the amount of Undrawn L/C Face Amounts at such time, to the extent that such amount of cash collateral has
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not been provided pursuant to Sections 4.02(b) or 9.18(c)(ii)) to the L/C Provider, to be deposited by the L/C Provider into a cash collateral account in the name of the L/C Provider in accordance with Section 4.03(b) or (ii) make other arrangements with respect thereto as may be satisfactory to the L/C Provider in its sole and absolute discretion.
(b) All amounts to be deposited in a cash collateral account pursuant to Section 4.02(b), Section 4.03(a) or Section 9.18(c)(ii) shall be held by the L/C Provider as collateral to secure the Master Issuer’s Reimbursement Obligations with respect to any outstanding Letters of Credit. The L/C Provider 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 deposit in Eligible Investments, which investments shall be made at the written direction, and at the risk and expense, of the Master Issuer (provided that if an Event of Default has occurred and is continuing, such investments shall be made solely at the option and sole discretion of the L/C Provider), such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account and all Taxes on such amounts shall be payable by the Master Issuer. Moneys in such account shall automatically be applied by such L/C Provider to reimburse it for any Unreimbursed L/C Drawings. Upon expiration of all then-outstanding Letters of Credit and payment in full of all Unreimbursed L/C Drawings, any balance remaining in such account shall be paid over (i) if the Base Indenture and any Series Supplement remain in effect, to the Trustee to be deposited into the Collection Account and distributed in accordance with the terms of the Base Indenture and (ii) otherwise to the Master Issuer; provided that, upon an Investor ceasing to be a Defaulting Investor in accordance with Section 9.18(d), any amounts of cash collateral provided pursuant to Section 9.18(c)(ii) upon such Investor becoming a Defaulting Investor shall be released and applied as such amounts would have been applied had such Investor not become a Defaulting Investor.
Section 4.04 Alternative Arrangements with Respect to Letters of Credit. Notwithstanding any other provision of this Agreement or any Related Document, a Letter of Credit (other than an Interest Reserve Letter of Credit) shall cease to be deemed outstanding for all purposes of this Agreement and each other Related Document if and to the extent that provisions, in form and substance satisfactory to the L/C Provider (and, if the L/C Provider is not the L/C Issuing Bank with respect to such Letter of Credit, the L/C Issuing Bank) in its sole and absolute discretion, have been made with respect to such Letter of Credit such that the L/C Provider (and, if applicable, the L/C Issuing Bank) has agreed in writing, with a copy of such agreement delivered to the Administrative Agent, the Control Party, the Trustee and the Master Issuer, that such Letter of Credit shall be deemed to be no longer outstanding hereunder, in which event such Letter of Credit shall cease to be a “Letter of Credit” as such term is used herein and in the Related Documents.
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ARTICLE V
THE ADMINISTRATIVE AGENT AND THE FUNDING AGENTS
THE ADMINISTRATIVE AGENT AND THE FUNDING AGENTS
Section 5.01 Authorization and Action of the Administrative Agent. Each of the Lender Parties and the Funding Agents hereby designates and appoints Coöperatieve Rabobank U.A., New York Branch, as the Administrative Agent hereunder, and hereby authorizes the Administrative Agent to take such actions as agent on their behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto. The Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender Party or any Funding Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Administrative Agent shall be read into this Agreement or otherwise exist for the Administrative Agent. In performing its functions and duties hereunder, the Administrative Agent shall act solely as agent for the Lender Parties and the Funding Agents and does not assume, nor shall it be deemed to have assumed, any obligation or relationship of trust or agency with or for the Master Issuer or any of its successors or assigns. The provisions of this Article (other than the rights of the Master Issuer set forth in Section 5.07) are solely for the benefit of the Administrative Agent, the Lender Parties and the Funding Agents, and the Master Issuer shall not have any rights as a third-party beneficiary of any such provisions. The Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, exposes the Administrative Agent to personal liability or that is contrary to this Agreement or any Requirement of Law. The appointment and authority of the Administrative Agent hereunder shall terminate upon the indefeasible payment in full of the Series 2021-1 Class A-1 Notes and all other amounts owed by the Master Issuer hereunder to the Administrative Agent, all members of the Investor Groups, the Swingline Lender and the L/C Provider (the “Aggregate Unpaids”) and termination in full of all Commitments and the Swingline Commitment and the L/C Commitment.
Section 5.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact, provided that any agent or attorneys-in-fact receiving payments from the Lender Parties shall be a “U.S. person” and a “financial institution” within the meaning of Treasury Regulations Section 1.1441-1, and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The exculpatory provisions of this Article shall apply to any such agents or attorneys-in-fact and shall apply to their respective activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence, bad faith or misconduct of any agents or attorneys-in-fact selected by it in good faith.
Section 5.03 Exculpatory Provisions. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be (a) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement (except for its, their or such Person’s own gross negligence, bad faith or willful misconduct as determined by a court of competent jurisdiction by a final and nonappealable judgment), or (b) responsible in any manner to any Lender Party or any Funding Agent for any recitals, statements, representations or warranties made by the Master Issuer contained in this Agreement or in any certificate, report,
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statement or other document referred to or provided for in, or received under or in connection with, this Agreement for the due execution, legality, value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document furnished in connection herewith, or for any failure of the Master Issuer to perform its obligations hereunder, or for the satisfaction of any condition specified in Article VII. The Administrative Agent shall not be under any obligation to any Investor or any Funding Agent to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Master Issuer. The Administrative Agent shall not be deemed to have knowledge of any Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default unless the Administrative Agent has received notice in writing of such event from the Master Issuer, any Lender Party or any Funding Agent.
Section 5.04 Reliance. The Administrative Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Master Issuer), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other document furnished in connection herewith unless it shall first receive such advice or concurrence of any Lender Party or any Funding Agent as it deems appropriate or it shall first be indemnified to its satisfaction by any Lender Party or any Funding Agent; provided that unless and until the Administrative Agent shall have received such advice, the Administrative Agent may take or refrain from taking any action, as the Administrative Agent shall deem advisable and in the best interests of the Lender Parties and the Funding Agents. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of Investor Groups holding more than 50% of the Commitments and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lender Parties and the Funding Agents.
Section 5.05 Non-Reliance on the Administrative Agent and Other Purchasers. Each of the Lender Parties and the Funding Agents expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including, without limitation, any review of the affairs of the Master Issuer, shall be deemed to constitute any representation or warranty by the Administrative Agent. Each of the Lender Parties and the Funding Agents represents and warrants to the Administrative Agent that it has and will, independently and without reliance upon the Administrative Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Master Issuer and made its own decision to enter into this Agreement.
Section 5.06 The Administrative Agent in its Individual Capacity. The Administrative Agent and any of its Affiliates may make loans to, accept deposits from, and
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generally engage in any kind of business with the Master Issuer or any Affiliate of the Master Issuer as though the Administrative Agent were not the Administrative Agent hereunder.
Section 5.07 Successor Administrative Agent; Defaulting Administrative Agent.
(a) The Administrative Agent may, upon 30 days' notice to the Master Issuer and each of the Lender Parties and the Funding Agents, and the Administrative Agent will, upon the direction of Investor Groups holding 100% of the Commitments (excluding any Commitments held by Defaulting Investors), resign as Administrative Agent. If the Administrative Agent shall resign, then the Required Investor Groups, during such 30-day period, shall appoint an Affiliate of a member of the Investor Groups as a successor administrative agent, who shall be a “U.S. person” and a “financial institution” within the meaning of Treasury Regulations Section 1.1441-1, subject to the consent of (i) the Master Issuer, at all times other than while an Event of Default has occurred and is continuing (which consent of the Master Issuer shall not be unreasonably withheld or delayed) and (ii) the Control Party (which consent of the Control Party shall not be unreasonably withheld or delayed). If for any reason no successor Administrative Agent is appointed by the Investor Groups during such 30-day period, then, effective upon the expiration of such 30-day period, the Master Issuer shall make all payments in respect of the Aggregate Unpaids or under any fee letter delivered in connection herewith (including, without limitation, the Series 2021-1 Class A-1 VFN Fee Letter) directly to the Funding Agents or the Swingline Lender or the L/C Provider, as applicable, and the Master Issuer for all purposes shall deal directly with the Funding Agents or the Swingline Lender or the L/C Provider, as applicable, until such time, if any, as a successor administrative agent is appointed as provided above, and the Master Issuer shall instruct the Trustee in writing accordingly. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of Section 9.05 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.
(b) The Master Issuer may, upon the occurrence of any of the following events (any such event, a “Defaulting Administrative Agent Event”) and with the consent of the Required Investor Groups, remove the Administrative Agent and, upon such removal, the Required Investor Groups shall appoint an Affiliate of a member of the Investor Groups as a successor administrative agent, who shall be a “U.S. person” and a “financial institution” within the meaning of Treasury Regulations Section 1.1441-1, subject to the consent of (x) the Master Issuer, at all times other than while an Event of Default has occurred and is continuing (which consent of the Master Issuer shall not be unreasonably withheld or delayed) and (y) the Control Party (which consent of the Control Party shall not be unreasonably withheld or delayed): (i) an Event of Bankruptcy with respect to the Administrative Agent; (ii) if the Person acting as Administrative Agent or an Affiliate thereof is also an Investor, any other event pursuant to which such Person becomes a Defaulting Investor; (iii) the failure by the Administrative Agent to pay or remit any funds required to be remitted when due (in each case, if amounts are available for payment or remittance in accordance with the terms of this Agreement for application to the payment or remittance thereof) which continues for two (2) Business Days after such funds were required to be paid or remitted; (iv) any representation, warranty, certification or statement made by the Administrative Agent under this Agreement or
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in any agreement, certificate, report or other document furnished by the Administrative Agent proves to have been false or misleading in any material respect as of the time made or deemed made, and if such representation, warranty, certification or statement is susceptible of remedy in all material respects, is not remedied within thirty (30) calendar days after knowledge thereof or notice by the Master Issuer to the Administrative Agent, and if not susceptible of remedy in all material respects, upon notice by the Master Issuer to the Administrative Agent or (v) any act constituting the gross negligence, bad faith or willful misconduct of the Administrative Agent. If for any reason no successor Administrative Agent is appointed by the Investor Groups within 30 days of the Administrative Agent’s removal pursuant to the immediately preceding sentence, then, effective upon the expiration of such 30-day period, the Master Issuer shall make all payments in respect of the Aggregate Unpaids or under any fee letter delivered in connection herewith (including, without limitation, the Series 2021-1 Class A-1 VFN Fee Letter) directly to the Funding Agents or the Swingline Lender or the L/C Provider, as applicable, and the Master Issuer for all purposes shall deal directly with the Funding Agents or the Swingline Lender or the L/C Provider, as applicable, until such time, if any, as a successor administrative agent is appointed as provided above, and the Master Issuer shall instruct the Trustee in writing accordingly. After any Administrative Agent’s removal hereunder as Administrative Agent, the provisions of Section 9.05 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.
(c) If a Defaulting Administrative Agent Event has occurred and is continuing, the Master Issuer may make all payments in respect of the Aggregate Unpaids or under any fee letter delivered in connection herewith (including, without limitation, the Series 2021-1 Class A-1 VFN Fee Letter) directly to the Funding Agents or the Swingline Lender or the L/C Provider, as applicable, and the Master Issuer for all purposes may deal directly with the Funding Agents or the Swingline Lender or the L/C Provider, as applicable.
Section 5.08 Authorization and Action of Funding Agents. Each Investor is hereby deemed to have designated and appointed its related Funding Agent set forth next to such Investor’s name on Schedule I (or identified as such Investor’s Funding Agent pursuant to any applicable Assignment and Assumption Agreement or Investor Group Supplement) as the agent of such Person hereunder, and hereby authorizes such Funding Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to such Funding Agent by the terms of this Agreement together with such powers as are reasonably incidental thereto. Each Funding Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with the related Investor Group, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Funding Agent shall be read into this Agreement or otherwise exist for such Funding Agent. In performing its functions and duties hereunder, each Funding Agent shall act solely as agent for the related Investor Group and does not assume, nor shall it be deemed to have assumed, any obligation or relationship of trust or agency with or for the Master Issuer, any of its successors or assigns or any other Person. Each Funding Agent shall not be required to take any action that exposes such Funding Agent to personal liability or that is contrary to this Agreement or any Requirement of Law. The appointment and authority of the Funding Agents hereunder shall terminate upon the
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indefeasible payment in full of the Aggregate Unpaids of the Investor Groups and the termination in full of all the Commitments.
Section 5.09 Delegation of Duties. Each Funding Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Each Funding Agent shall not be responsible for the gross negligence, bad faith or willful misconduct of any agents or attorneys-in-fact selected by it in good faith.
Section 5.10 Exculpatory Provisions. Each Funding Agent and its Affiliates, and each of their directors, officers, agents or employees shall not be (a) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement (except for its, their or such Person’s own gross negligence, bad faith or willful misconduct), or (b) responsible in any manner to the related Investor Group for any recitals, statements, representations or warranties made by the Master Issuer contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document furnished in connection herewith, or for any failure of the Master Issuer to perform its obligations hereunder, or for the satisfaction of any condition specified in Article VII. Each Funding Agent shall not be under any obligation to the related Investor Group to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Master Issuer. Each Funding Agent shall not be deemed to have knowledge of any Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default unless such Funding Agent has received notice of such event from the Master Issuer or any member of the related Investor Group.
Section 5.11 Reliance. Each Funding Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of the Administrative Agent and legal counsel (including, without limitation, counsel to the Master Issuer), independent accountants and other experts selected by such Funding Agent. Each Funding Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other document furnished in connection herewith unless it shall first receive such advice or concurrence of the related Investor Group as it deems appropriate or it shall first be indemnified to its satisfaction by the related Investor Group; provided that unless and until such Funding Agent shall have received such advice, such Funding Agent may take or refrain from taking any action, as such Funding Agent shall deem advisable and in the best interests of the related Investor Group. Each Funding Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of the related Investor Group and such request and any action taken or failure to act pursuant thereto shall be binding upon the related Investor Group.
Section 5.12 Non-Reliance on the Funding Agent and Other Purchasers. The related Investor Group expressly acknowledges that its Funding Agent and any of its officers,
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directors, employees, agents, attorneys-in-fact or Affiliates has not made any representations or warranties to it and that no act by such Funding Agent hereafter taken, including, without limitation, any review of the affairs of the Master Issuer, shall be deemed to constitute any representation or warranty by such Funding Agent. The related Investor Group represents and warrants to such Funding Agent that it has and will, independently and without reliance upon such Funding Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Master Issuer and made its own decision to enter into this Agreement.
Section 5.13 The Funding Agent in its Individual Capacity. Each Funding Agent and any of its Affiliates may make loans to, accept deposits from, and generally engage in any kind of business with the Master Issuer or any Affiliate of the Master Issuer as though such Funding Agent were not a Funding Agent hereunder.
Section 5.14 Successor Funding Agent. Each Funding Agent will, upon the direction of the related Investor Group, resign as such Funding Agent. If such Funding Agent shall resign, then the related Investor Group shall appoint an Affiliate of a member of the related Investor Group as a successor funding agent (it being understood that such resignation shall not be effective until such successor is appointed). After any retiring Funding Agent’s resignation hereunder as Funding Agent, subject to the limitations set forth herein, the provisions of Section 9.05 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Funding Agent under this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
Section 6.01 The Master Issuer and Guarantors. The Master Issuer and the Guarantors jointly and severally represent and warrant to the Administrative Agent and each Lender Party, as of the date of this Agreement, as of the Closing Date and as of the date of each Advance made hereunder, that:
(a) each of their representations and warranties made in favor of the Trustee or the Noteholders in the Indenture and the other Related Documents (other than a Related Document relating solely to a Series of Notes other than the Series 2021-1 Notes) is true and correct (i) if not qualified as to materiality or Material Adverse Effect, in all material respects and (ii) if qualified as to materiality or Material Adverse Effect, in all respects, as of the date originally made, as of the date hereof and as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);
(b) no Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default has occurred and is continuing;
(c) neither they nor or any of their Affiliates, have, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with
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the offering of the Series 2021-1 Class A-1 Notes under the 1933 Act or in any manner involving a public offering within the meaning of Section 4(a)(2) of the 1933 Act, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; provided that no representation or warranty is made with respect to the Lender Parties and their Affiliates; and neither the Master Issuer nor any of its Affiliates has entered into any contractual arrangement with respect to the distribution of the Series 2021-1 Class A-1 Notes, except for this Agreement and the other Related Documents, and the Master Issuer will not enter into any such arrangement;
(d) neither they nor any of their Affiliates have, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any “security” (as defined in the 1933 Act) that is or will be integrated with the sale of the Series 2021-1 Class A-1 Notes in a manner that would require the registration of the Series 2021-1 Class A-1 Notes under the 1933 Act;
(e) assuming the representations and warranties of each Lender Party set forth in Section 6.03 are true and correct, the offer and sale of the Series 2021-1 Class A-1 Notes in the manner contemplated by this Agreement is a transaction exempt from the registration requirements of the 1933 Act, and the Base Indenture is not required to be qualified under the United States Trust Indenture Act of 1939, as amended;
(f) the Master Issuer has furnished to the Administrative Agent and each Funding Agent true, accurate and complete copies of all other Related Documents (excluding Series Supplements and other Related Documents relating solely to a Series of Notes other than the Series 2021-1 Notes) to which they are a party as of the Closing Date, all of which Related Documents are in full force and effect as of the Closing Date and no terms of any such agreements or documents have been amended, modified or otherwise waived as of such date, other than such amendments, modifications or waivers about which the Master Issuer has informed each Funding Agent, the Swingline Lender and the L/C Provider;
(g) the Master Issuer is not an “investment company” as defined in Section 3(a)(1) of the 1940 Act, and therefore has no need (x) to rely solely on the exemption from the definition of “investment company” set forth in Section 3(c)(1) and/or Section 3(c)(7) of the 1940 Act or (y) to be entitled to the benefit of the exclusion for loan securitizations in the Volcker Rule under 10 C.F.R. 248.10(c)(8); and
(h) none of the Master Issuer, any Guarantor or any of their Affiliates is in violation of any Anti-Terrorism Laws, Anti-Corruption Laws, or Sanctions or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Laws, Anti-Corruption Laws, or Sanctions; nor are the Master Issuer, any Guarantor or any of their Affiliates or any director, officer, employee, agent or affiliate of the Master Issuer, any Guarantor or any of their Affiliates is a Person (each such Person, a “Sanctioned Person”) that is, or is owned or controlled by Persons that are: (i) the subject of any Sanctions, or (ii) located,
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organized or resident in a region, country or territory that is, or whose government is, the subject of Sanctions, including, without limitation, currently the Region of Crimea, Cuba, Iran, North Korea, Sudan and Syria.
Section 6.02 The Manager. The Manager represents and warrants to the Administrative Agent and each Lender Party as of the date of this Agreement, as of the Closing Date and as of the date of each Advance made hereunder, that (i) no Manager Termination Event has occurred and is continuing and (ii) each representation and warranty made by it in any Related Document (other than a Related Document relating solely to a Series of Notes other than the Series 2021-1 Notes and other than any representation or warranty in Article V of the Management Agreement) to which it is a party (including any representations and warranties made by it in its capacity as Manager) is true and correct (a) if not qualified as to materiality or Material Adverse Effect, in all material respects and (b) if qualified as to materiality or Material Adverse Effect, in all respects as of the date originally made, as of the date hereof and as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date).
Section 6.03 Lender Parties. Each of the Lender Parties represents and warrants to the Master Issuer and the Manager as of the date hereof (or, in the case of a successor or assign of an Investor, as of the subsequent date on which such successor or assign shall become or be deemed to become a party hereto) that:
(a) it has had an opportunity to discuss the Master Issuer’s and the Manager’s business, management and financial affairs, and the terms and conditions of the proposed purchase of the Series 2021-1 Class A-1 Notes, with the Master Issuer and the Manager and their respective representatives;
(b) it is a “qualified institutional buyer” within the meaning of Rule 144A under the 1933 Act and has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of investing in, and is able and prepared to bear the economic risk of investing in, the Series 2021-1 Class A-1 Notes;
(c) it is purchasing the Series 2021-1 Class A-1 Notes for its own account, or for the account of one or more “qualified institutional buyers” within the meaning of Rule 144A under the 1933 Act that meet the criteria described in clause (b) above and for which it is acting with complete investment discretion, for investment purposes only and not with a view to a distribution in violation of the 1933 Act, subject, nevertheless, to the understanding that the disposition of its property shall at all times be and remain within its control, and neither it nor its Affiliates has engaged in any general solicitation or general advertising within the meaning of the 1933 Act, or the rules and regulations promulgated thereunder, with respect to the Series 2021-1 Class A-1 Notes;
(d) it understands that (i) the Series 2021-1 Class A-1 Notes have not been and will not be registered or qualified under the 1933 Act or any applicable state securities laws or the securities laws of any other jurisdiction and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act and may not be resold or
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otherwise transferred unless so registered or qualified or unless an exemption from registration or qualification is available and an opinion of counsel shall have been delivered in advance to the Master Issuer, (ii) the Master Issuer is not required to register the Series 2021-1 Class A-1 Notes under the 1933 Act or any applicable state securities laws or the securities laws of any other jurisdiction, (iii) any permitted transferee hereunder must meet the criteria in clause (b) above and (iv) any transfer must comply with the provisions of Section 2.8 of the Base Indenture, Section 4.3 of the Series 2021-1 Supplement and Section 9.03 or 9.17, as applicable, of this Agreement;
(e) it will comply with the requirements of Section 6.03(d) above in connection with any transfer by it of the Series 2021-1 Class A-1 Notes;
(f) it understands that the Series 2021-1 Class A-1 Notes will bear the legend set out in the form of Series 2021-1 Class A-1 Notes attached to the Series 2021-1 Supplement and be subject to the restrictions on transfer described in such legend;
(g) it will obtain for the benefit of the Master Issuer from any purchaser of the Series 2021-1 Class A-1 Notes substantially the same representations and warranties contained in the foregoing paragraphs; and
(h) it has executed a Purchaser’s Letter substantially in the form of Exhibit D hereto.
ARTICLE VII
CONDITIONS
CONDITIONS
Section 7.01 Conditions to Issuance and Effectiveness. Each Lender Party will have no obligation to purchase the Series 2021-1 Class A-1 Notes hereunder on the Closing Date, and the Commitments, the Swingline Commitment and the L/C Commitment will not become effective, unless:
(a) the Base Indenture, the Series 2021-1 Supplement, the Guarantee and Collateral Agreement and the other Related Documents shall be in full force and effect;
(b) on the Closing Date, the Administrative Agent shall have received a letter, in form and substance reasonably satisfactory to it, from S&P stating that a long-term rating of “BBB” has been assigned to the Series 2021-1 Class A-1 Notes;
(c) at the time of such issuance, the additional conditions set forth in Schedule III hereto and all other conditions to the issuance of the Series 2021-1 Class A-1 Notes under the Indenture shall have been satisfied or waived by such Lender Party.
Section 7.02 Conditions to Initial Extensions of Credit. The election of each Conduit Investor to fund, and the obligation of each Committed Note Purchaser to fund, the initial Borrowing hereunder, and the obligations of the Swingline Lender and the L/C Provider to fund the initial Swingline Loan or provide the initial Letter of Credit hereunder, respectively,
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shall be subject to the satisfaction of the conditions precedent that (a) each Funding Agent shall have received a duly executed and authenticated Series 2021-1 Class A-1 Advance Note registered in its name or in such other name as shall have been directed by such Funding Agent and stating that the principal amount thereof shall not exceed the Maximum Investor Group Principal Amount of the related Investor Group (or, in the case of a Series 2021-1 Class A-1 Advance Note that is an Uncertificated Note, a Confirmation of Registration with respect thereto); (b) each of the Swingline Lender and the L/C Provider shall have received a duly executed and authenticated Series 2021-1 Class A-1 Swingline Note or Series 2021-1 Class A-1 L/C Note, as applicable, registered in its name or in such other name as shall have been directed by it and stating that the principal amount thereof shall not exceed the Swingline Commitment or L/C Commitment, respectively (or, if either the initial Series 2021-1 Class A-1 Swingline Note or the initial Series 2021-1 Class A-1 L/C Note is an Uncertificated Note, a Confirmation of Registration with respect thereto); and (c) the Master Issuer shall have paid all fees required to be paid by it under the Related Documents on the Closing Date, including all fees required hereunder.
Section 7.03 Conditions to Each Extension of Credit. The election of each Conduit Investor to fund, and the obligation of each Committed Note Purchaser to fund, any Borrowing on any day (including the initial Borrowing but excluding any Borrowings to repay Swingline Loans or L/C Obligations pursuant to Sections 2.05, 2.06 or 2.08, as applicable), and the obligations of the Swingline Lender to fund any Swingline Loan (including the initial one) and of the L/C Provider to provide any Letter of Credit (including the initial one), respectively, shall be subject to the conditions precedent that, on the date of such funding or provision, before and after giving effect thereto and to the application of any proceeds therefrom, the following statements shall be true (without regard to any waiver, amendment or other modification of this Section 7.03 or any definitions used herein consented to by the Control Party unless the Required Investor Groups have consented to such waiver, amendment or other modification for purposes of this Section 7.03); provided, however, that if a Rapid Amortization Event has occurred and (other than in the case of Section 9.1(e)) has been declared by the Control Party pursuant to Sections 9.1(a), (b), (c), (d), or (e) of the Base Indenture, consent to such waiver, amendment or other modification from all Investors (provided that it shall not be the obligation of the Control Party to obtain such consent from the Investors) as well as the Control Party is required for purposes of this Section 7.03:
(a)(i) the representations and warranties of the Master Issuer set out in this Agreement and (ii) the representations and warranties of the Manager set out in this Agreement, in each such case, shall be true and correct (A) if qualified as to materiality or Material Adverse Effect, in all respects and (B) if not qualified as to materiality or Material Adverse Effect, in all material respects, as of the date of such funding or issuance, with the same effect as though made on that date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date);
(b) no Default, Event of Default, Potential Rapid Amortization Event or Rapid Amortization Event shall be in existence at the time of, or after giving effect to, such funding or issuance;
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(c) the DSCR as calculated as of the immediately preceding Quarterly Calculation Date shall not be less than 1.50x;
(d) in the case of any Borrowing, except to the extent an advance request is expressly deemed to have been delivered hereunder, the Master Issuer shall have delivered or have been deemed to have delivered to the Administrative Agent an executed advance request in the form of Exhibit A-1 hereto with respect to such Borrowing (each such request, an “Advance Request” or a “Series 2021-1 Class A-1 Advance Request”);
(e) the Senior Notes Interest Reserve Amount (including any Senior Notes Interest Reserve Account Deficiency Amount) will be funded and/or an Interest Reserve Letter of Credit will be maintained for such amount as of the date of such draw in the amounts required pursuant to the Indenture after giving effect to such draw;
(f) all Undrawn Commitment Fees, Administrative Agent Fees and L/C Quarterly Fees due and payable on or prior to the date of such funding or issuance shall have been paid in full; and
(g) all conditions to such extension of credit or provision specified in Sections 2.02, 2.03, 2.06 or 2.07, as applicable, shall have been satisfied.
The giving of any notice pursuant to Sections 2.03, 2.06 or 2.07, as applicable, shall constitute a representation and warranty by the Master Issuer and the Manager that all conditions precedent to such funding or provision have been satisfied or will be satisfied concurrently therewith.
ARTICLE VIII
COVENANTS
COVENANTS
Section 8.01 Covenants. Each of the Master Issuer and the Manager, severally, covenants and agrees that, until all Aggregate Unpaids have been paid in full and all Commitments, the Swingline Commitment and the L/C Commitment have been terminated, it will:
(a) unless waived in writing by the Control Party in accordance with Section 9.7 of the Base Indenture, duly and timely perform all of its covenants (both affirmative and negative) and obligations under each Related Document to which it is a party;
(b) not amend, modify, waive or give any approval, consent or permission under any provision of the Base Indenture or any other Related Document to which it is a party unless any such amendment, modification, waiver or other action is in writing and made in accordance with the terms of the Base Indenture or such other Related Document, as applicable;
(c) reasonably concurrently with the time any report, notice or other document is provided to the Rating Agencies and/or the Trustee, or caused to be provided, by the
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Master Issuer or the Manager under the Base Indenture (including, without limitation, under Sections 8.8, 8.9 and/or 8.11 thereof) or under the Series 2021-1 Supplement, provide the Administrative Agent (who shall promptly provide a copy thereof to the Lender Parties) with a copy of such report, notice or other document; provided, however, that neither the Manager nor the Master Issuer shall have any obligation under this Section 8.01(c) to deliver to the Administrative Agent copies of any Quarterly Noteholders’ Reports that relate solely to a Series of Notes other than the Series 2021-1 Notes;
(d) once per calendar year, following reasonable prior notice from the Administrative Agent (the “Annual Inspection Notice”), and during regular business hours, permit any one or more of such Administrative Agent, any Funding Agent, the Swingline Lender or the L/C Provider, or any of their respective agents, representatives or permitted assigns, at the Master Issuer’s expense, access (as a group, and not individually unless only one such Person desires such access) to the offices of the Manager, the Master Issuer and the Guarantors, (i) to examine and make copies of and abstracts from all documentation relating to the Collateral on the same terms as are provided to the Trustee under Section 8.6 of the Base Indenture, and (ii) to visit the offices and properties of the Manager, the Master Issuer and the Guarantors for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to the Collateral, or the administration and performance of the Base Indenture, the Series 2021-1 Supplement and the other Related Documents with any of the officers or employees of, the Manager, the Master Issuer and/or the Guarantors, as applicable, having knowledge of such matters; provided, however, that upon the occurrence and continuation of a Potential Rapid Amortization Event, Rapid Amortization Event, Cash Trapping Period, Default or Event of Default, the Administrative Agent, any Funding Agent, the Swingline Lender or the L/C Provider, or any of their respective agents, representatives or permitted assigns, at the Master Issuer’s expense may do any of the foregoing at any time during normal business hours and without advance notice; provided, further, that, in addition to any visits made pursuant to provision of an Annual Inspection Notice or during the continuation of a Potential Rapid Amortization Event, Rapid Amortization Event, Default or Event of Default, the Administrative Agent, any Funding Agent, the Swingline Lender or the L/C Provider, or any of their respective agents, representatives or permitted assigns, at their own expense, may do any of the foregoing at any time during normal business hours following reasonable prior notice with respect to the business of the Master Issuer and/or the Guarantors; and provided, further, that the Funding Agents, the Swingline Lender and the L/C Provider will be permitted to provide input to the Administrative Agent with respect to the timing of delivery, and content, of the Annual Inspection Notice;
(e) not take, or cause to be taken, any action, including, without limitation, acquiring any Margin Stock, that could cause the transactions contemplated by the Related Documents to fail to comply with the regulations of the Board of Governors of the Federal Reserve System, including Regulations T, U and X thereof;
(f) not permit any amounts owed with respect to the Series 2021-1 Class A-1 Notes to be secured, directly or indirectly, by any Margin Stock in a manner that
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would violate the regulations of the Board of Governors of the Federal Reserve System, including Regulations T, U and X thereof;
(g) promptly provide such additional financial and other information with respect to the Related Documents (other than Series Supplements and Related Documents relating solely to a Series of Notes other than the Series 2021-1 Notes), the Master Issuer, the Manager or the Guarantors as the Administrative Agent may from time to time reasonably request;
(h) deliver to the Administrative Agent (who shall promptly provide a copy thereof to the Lender Parties), the financial statements prepared pursuant to Section 4.1 of the Base Indenture reasonably contemporaneously with the delivery of such statements under the Base Indenture;
(i) cause the Securitization Entities to (i) pay dividends, directly or indirectly, on their respective equity interests or (ii) repurchase, directly or indirectly, their respective equity interests using only the Residual Amount;
(j) promptly following any change in the information included in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners or control parties identified in part (c) or (d) of such certification, execute and deliver, or cause each Guarantor to execute and deliver, as applicable, to the Administrative Agent an updated Beneficial Ownership Certification; and
(k) promptly following any request therefor, deliver, or cause each Guarantor to deliver, as applicable, to the Administrative Agent all documentation and other information required by bank regulatory authorities requested by a Committed Lender for purposes of compliance with applicable “know your customer” requirements under the Patriot Act, the Beneficial Ownership Rule or other applicable anti-money laundering laws, rules and regulations.
ARTICLE IX
MISCELLANEOUS PROVISIONS
MISCELLANEOUS PROVISIONS
Section 9.01 Amendments. No amendment to or waiver or other modification of any provision of this Agreement, nor consent to any departure therefrom by the Manager or the Master Issuer, shall in any event be effective unless the same shall be in writing and signed by the Manager, the Master Issuer and the Administrative Agent with the written consent of the Required Investor Groups; provided, however, that, in addition, (i) the prior written consent of each affected Investor shall be required in connection with any amendment, modification or waiver that (x) increases the amount of the Commitment of such Investor, extends the Commitment Termination Date or the Series 2021-1 Class A-1 Anticipated Repayment Date, modifies the conditions to funding such Commitment or otherwise subjects such Investor to any increased or additional duties or obligations hereunder or in connection herewith (it being understood and agreed that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate Commitments shall not
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constitute an increase of the Commitments of any Lender Party), (y) reduces the amount or delays the timing of payment of any principal, interest, fees or other amounts payable to such Investor hereunder or (z) would have an effect comparable to any of those set forth in Section 13.2(a) of the Base Indenture that require the consent of each Noteholder or each affected Noteholder; (ii) any amendment, modification or waiver that affects the rights or duties of any of the Swingline Lender, the L/C Provider, the Administrative Agent or the Funding Agents shall require the prior written consent of such affected Person; and (iii) the prior written consent of each Investor, the Swingline Lender, the L/C Provider, the Administrative Agent and each Funding Agent shall be required in connection with any amendment, modification or waiver of this Section 9.01. For purposes of any provision of any other Indenture Document relating to any vote, consent, direction or the like to be given by the Series 2021-1 Class A-1 Noteholders, such vote, consent, direction or the like shall be given by the Holders of the Series 2021-1 Class A-1 Advance Notes only and not by the Holders of any Series 2021-1 Class A-1 Swingline Notes or Series 2021-1 Class A-1 L/C Notes except to the extent that such vote, consent, direction or the like is to be given by each affected Noteholder and the Holders of any Series 2021-1 Class A-1 Swingline Notes or Series 2021-1 Class A-1 L/C Notes would be affected thereby. The Master Issuer and the Lender Parties shall negotiate any amendments, waivers, consents, supplements or other modifications to this Agreement or the other Related Documents that require the consent of the Lender Parties in good faith. Pursuant to Section 9.05(a), the Lender Parties shall be entitled to reimbursement by the Master Issuer for the reasonable expenses incurred by the Lender Parties in reviewing and approving any such amendment, waiver, consent, supplement or other modification to this Agreement or any Related Document. Should any amendment, waiver or other modification be made pursuant to this Section 9.01, the Master Issuer shall notify the Back-Up Manager in writing of such action; provided that failure to provide such notice shall not affect the validity or enforceability of the action.
Section 9.02 No Waiver; Remedies. Any waiver, consent or approval given by any party hereto shall be effective only in the specific instance and for the specific purpose for which given, and no waiver by a party of any breach or default under this Agreement shall be deemed a waiver of any other breach or default. No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder, or any abandonment or discontinuation of steps to enforce the right, power or privilege, preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in the same, similar or other circumstances. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
Section 9.03 Binding on Successors and Assigns.
(a) This Agreement shall be binding upon, and inure to the benefit of, the Master Issuer, the Manager, the Lender Parties, the Funding Agents, the Administrative Agent and their respective successors and assigns; provided, however, that neither the Master Issuer nor the Manager may assign its rights or obligations hereunder or in connection herewith or any interest herein (voluntarily, by operation of law or otherwise) without the prior written
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consent of each Lender Party (other than any Defaulting Investor); provided, further, that nothing herein shall prevent the Master Issuer from assigning its rights (but none of its duties or liabilities) to the Trustee under the Base Indenture and the Series 2021-1 Supplement; and provided, further that none of the Lender Parties may transfer, pledge, assign, sell participations in or otherwise encumber its rights or obligations hereunder or in connection herewith or any interest herein except as permitted under Section 6.03, Section 9.17 and this Section 9.03. Nothing expressed herein is intended or shall be construed to give any Person other than the Persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement except as provided in Section 9.16.
(b) Notwithstanding any other provision set forth in this Agreement, each Investor may at any time grant to one or more Program Support Providers a participating interest in or lien on such Investor’s interests in the Advances made hereunder and such Program Support Provider, with respect to its participating interest, shall be entitled to the benefits granted to such Investor under this Agreement.
(c) In addition to its rights under Section 9.17, each Conduit Investor may at any time assign its rights in the Series 2021-1 Class A-1 Advance Notes (and its rights hereunder and under the Related Documents) to its related Committed Note Purchaser or, subject to Section 6.03 and Section 9.17(f), its related Program Support Provider or any Affiliate of any of the foregoing, in each case in accordance with the applicable provisions of the Indenture. Furthermore, each Conduit Investor may at any time grant a security interest in and lien on, all or any portion of its interests under this Agreement, its Series 2021-1 Class A-1 Advance Note and all Related Documents to (i) its related Committed Note Purchaser, (ii) its Funding Agent, (iii) any Program Support Provider who, at any time now or in the future, provides program liquidity or credit enhancement, including, without limitation, an insurance policy for such Conduit Investor relating to the Commercial Paper or the Series 2021-1 Class A-1 Advance Notes, (iv) any other Person who, at any time now or in the future, provides liquidity or credit enhancement for the Conduit Investors, including, without limitation, an insurance policy relating to the Commercial Paper or the Series 2021-1 Class A-1 Advance Notes or (v) any collateral trustee or collateral agent for any of the foregoing; provided, however, that any such security interest or lien shall be released upon assignment of its Series 2021-1 Class A-1 Advance Note to its related Committed Note Purchaser. Each Committed Note Purchaser may assign its Commitment, or all or any portion of its interest under its Series 2021-1 Class A-1 Advance Note, this Agreement and the Related Documents to any Person to the extent permitted by Section 9.17. Notwithstanding any other provisions set forth in this Agreement, each Committed Note Purchaser may at any time create a security interest in all or any portion of its rights under this Agreement, its Series 2021-1 Class A-1 Advance Note and the Related Documents in favor of any Federal Reserve Bank in accordance with Regulation A of the F.R.S. Board or any similar foreign entity.
Section 9.04 Survival of Agreement. All covenants, agreements, representations and warranties made herein and in the Series 2021-1 Class A-1 Notes delivered pursuant hereto shall survive the making and the repayment of the Advances, the Swingline Loans and the Letters of Credit and the execution and delivery of this Agreement and the Series 2021-1 Class
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A-1 Notes and shall continue in full force and effect until all interest on and principal of the Series 2021-1 Class A-1 Notes, and all other amounts owed to the Lender Parties, the Funding Agents and the Administrative Agent hereunder and under the Series 2021-1 Supplement have been paid in full, all Letters of Credit have expired or been fully cash collateralized in accordance with the terms of this Agreement and the Commitments, the Swingline Commitment and the L/C Commitment have been terminated. In addition, the obligations of the Master Issuer and the Lender Parties under Sections 3.05, 3.06, 3.07, 3.08, 9.05, 9.10 and 9.11 shall survive the termination of this Agreement.
Section 9.05 Payment of Costs and Expenses; Indemnification.
(a) Payment of Costs and Expenses. The Master Issuer agrees to pay (by depositing such amounts into the Collection Account to be distributed subject to and in accordance with the Priority of Payments), on the Closing Date (if invoiced at least one (1) Business Day prior to such date) or on or before seven (7) Business Days after written demand (in all other cases), all reasonable expenses of the Administrative Agent, each initial Funding Agent and each initial Lender Party (including the reasonable fees and out-of-pocket expenses of counsel to each of the foregoing, if any, as well as the fees and expenses of the Rating Agencies) in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and of each other Related Document, including schedules and exhibits, whether or not the transactions contemplated hereby or thereby are consummated (“Pre-Closing Costs”), and (ii) any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Related Document as may from time to time hereafter be proposed (“Amendment Expenses”). The Master Issuer further agrees to pay, subject to and in accordance with the Priority of Payments, and to hold the Administrative Agent, each Funding Agent and each Lender Party harmless from all liability for (x) any breach by the Master Issuer of its obligations under this Agreement, (y) all reasonable costs incurred by the Administrative Agent, such Funding Agent or such Lender Party in enforcing this Agreement and (z) any Non-Excluded Taxes that may be payable in connection with (1) the execution or delivery of this Agreement, (2) any Borrowing or Swingline Loan hereunder, (3) the issuance of the Series 2021-1 Class A-1 Notes, (4) any Letter of Credit hereunder or (5) any other Related Documents (“Other Post-Closing Expenses”). The Master Issuer also agrees to reimburse, subject to and in accordance with the Priority of Payments, the Administrative Agent, such Funding Agent and such Lender Party upon demand for all reasonable out-of-pocket expenses incurred by the Administrative Agent, such Funding Agent and such Lender Party in connection with (1) the negotiation of any restructuring or “work-out”, whether or not consummated, of the Related Documents and (2) the enforcement of, or any waiver or amendment requested under or with respect to, this Agreement or any other Related Documents (“Out-of-Pocket Expenses”). Notwithstanding the foregoing, other than in connection with a sale or assignment pursuant to Section 9.18(a), the Master Issuer shall have no obligation to reimburse any Lender Party for any of the fees and/or expenses incurred by such Lender Party with respect to its sale or assignment of all or any part of its respective rights and obligations under this Agreement and the Series 2021-1 Class A-1 Notes pursuant to Section 9.03 or Section 9.17.
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(b) Indemnification of the Lender Parties. In consideration of the execution and delivery of this Agreement by the Lender Parties, the Master Issuer hereby agrees to indemnify and hold each Lender Party (each in its capacity as such and to the extent not reimbursed by the Master Issuer and without limiting the obligation of the Master Issuer to do so) and each of their officers, directors, employees and agents (collectively, the “Indemnified Parties”) harmless (by depositing such amounts into the Collection Account to be distributed subject to and in accordance with the Priority of Payments) from and against any and all actions, causes of action, suits, losses, liabilities and damages, and reasonable documented costs and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought and including, without limitation, any liability in connection with the offering and sale of the Series 2021-1 Class A-1 Notes), including reasonable documented attorneys’ fees and disbursements (collectively, the “Indemnified Liabilities”), incurred by the Indemnified Parties or any of them (whether in prosecuting or defending against such actions, suits or claims) to the extent resulting from, or arising out of, or relating to:
(i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Advance, Swingline Loan or Letter of Credit;
(ii) the entering into and performance of this Agreement and any other Related Document by any of the Indemnified Parties, including, for the avoidance of doubt, the consent by the Lender Parties set forth in Section 9.19; or
(iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether the Indemnified Party is a party thereto;
except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party’s gross negligence, bad faith or willful misconduct or breach of representations set forth herein. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Master Issuer hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. The indemnity set forth in this Section 9.05(b) shall in no event include indemnification for special, punitive, consequential or indirect damages of any kind or for any Taxes which shall be covered by (or expressly excluded from) the indemnification provided in Section 3.08 or for any transfer Taxes with respect to its sale or assignment of all or any part of its respective rights and obligations under this Agreement and the Series 2021-1 Class A-1 Notes pursuant to Section 9.17. The Master Issuer shall give notice to the Rating Agencies of any claim for Indemnified Liabilities made under this Section 9.05(b).
(c) Indemnification of the Administrative Agent and each Funding Agent by the Master Issuer. In consideration of the execution and delivery of this Agreement by the Administrative Agent and each Funding Agent, the Master Issuer hereby agrees to indemnify and hold the Administrative Agent and each Funding Agent and each of their officers, directors, employees and agents (collectively, the “Agent Indemnified Parties”) harmless (by depositing such amounts into the Collection Account to be distributed subject to and in accordance with the
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Priority of Payments) from and against any and all actions, causes of action, suits, losses, liabilities and damages, and reasonable documented costs and expenses incurred in connection therewith (irrespective of whether any such Agent Indemnified Party is a party to the action for which indemnification hereunder is sought and including, without limitation, any liability in connection with the offering and sale of the Series 2021-1 Class A-1 Notes), including reasonable documented attorneys’ fees and disbursements (collectively, the “Agent Indemnified Liabilities”), incurred by the Agent Indemnified Parties or any of them (whether in prosecuting or defending against such actions, suits or claims) to the extent resulting from, or arising out of, or relating to the entering into and performance of this Agreement and any other Related Document by any of the Agent Indemnified Parties, except for any such Agent Indemnified Liabilities arising for the account of a particular Agent Indemnified Party by reason of the relevant Agent Indemnified Party’s gross negligence, bad faith or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Master Issuer hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Agent Indemnified Liabilities that is permissible under applicable law. The indemnity set forth in this Section 9.05(c) shall in no event include indemnification for special, punitive, consequential or indirect damages of any kind or for any Taxes which shall be covered by (or expressly excluded from) the indemnification provided in Section 3.08. The Master Issuer shall give notice to the Rating Agencies of any claim for Agent Indemnified Liabilities made under this Section 9.05(c).
(d) Indemnification of the Administrative Agent and each Funding Agent by the Committed Note Purchasers. In consideration of the execution and delivery of this Agreement by the Administrative Agent and the related Funding Agent, each Committed Note Purchaser, ratably according to its respective Commitment, hereby agrees to indemnify and hold the Administrative Agent and each of its officers, directors, employees and agents (collectively, the “Administrative Agent Indemnified Parties”) and such Funding Agent and each of its officers, directors, employees and agents (collectively, the “Funding Agent Indemnified Parties,” and together with the Administrative Agent Indemnified Parties, the “Applicable Agent Indemnified Parties”) harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and reasonable documented costs and expenses incurred in connection therewith (solely to the extent not reimbursed by or on behalf of the Master Issuer) (irrespective of whether any such Applicable Agent Indemnified Party is a party to the action for which indemnification hereunder is sought and including, without limitation, any liability in connection with the offering and sale of the Series 2021-1 Class A-1 Notes), including reasonable documented attorneys’ fees and disbursements (collectively, the “Applicable Agent Indemnified Liabilities”), incurred by the Applicable Agent Indemnified Parties or any of them (whether in prosecuting or defending against such actions, suits or claims) to the extent resulting from, or arising out of, or relating to the entering into and performance of this Agreement and any other Related Document by any of the Applicable Agent Indemnified Parties, except for any such Applicable Agent Indemnified Liabilities arising for the account of a particular Applicable Agent Indemnified Party by reason of the relevant Applicable Agent Indemnified Party’s gross negligence, bad faith or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each Committed Note Purchaser, ratably according to its respective Commitment, hereby agrees to make the maximum contribution to the payment and
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satisfaction of each of the Applicable Agent Indemnified Liabilities that is permissible under applicable law. The indemnity set forth in this Section 9.05(d) shall in no event include indemnification for consequential or indirect damages of any kind or for any Taxes which shall be covered by (or expressly excluded from) the indemnification provided in Section 3.08.
Section 9.06 Characterization as Related Document; Entire Agreement. This Agreement shall be deemed to be a Related Document for all purposes of the Base Indenture and the other Related Documents. This Agreement, together with the Base Indenture, the Series 2021-1 Supplement, the documents delivered pursuant to Article VII and the other Related Documents, including the exhibits and schedules thereto, contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all previous oral statements and other writings with respect thereto.
Section 9.07 Notices. All notices, amendments, waivers, consents and other communications provided to any party hereto under this Agreement shall be in writing and addressed, delivered or transmitted to such party at its address, e-mail address (if provided), or facsimile number set forth on Schedule II hereto, or in each case at such other address, e-mail address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by e-mail, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (so long as transmitted on a Business Day, otherwise the next succeeding Business Day) upon receipt of electronic confirmation of transmission.
Section 9.08 Severability of Provisions. Any covenant, provision, agreement or term of this Agreement that is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability without invalidating the remaining provisions of this Agreement.
Section 9.09 Tax Characterization. Each party to this Agreement (a) acknowledges that it is the intent of the parties to this Agreement that, for accounting purposes and for all federal, state, local and foreign income and franchise Tax purposes, the Series 2021-1 Class A-1 Notes will be treated as evidence of indebtedness, (b) agrees to treat the Series 2021-1 Class A-1 Notes for all such purposes as indebtedness and (c) agrees that the provisions of the Related Documents shall be construed to further these intentions.
Section 9.10 No Proceedings; Limited Recourse.
(a) The Securitization Entities. Each of the parties hereto (other than the Master Issuer) hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of the last maturing Note issued by the Master Issuer pursuant to the Base Indenture, it will not institute against, or join with any other Person in instituting against, any Securitization Entity, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings, under any federal or state bankruptcy or similar law, all as more particularly set forth in Section 14.13 of the Base Indenture and subject to any retained
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rights set forth therein; provided, however, that nothing in this Section 9.10(a) shall constitute a waiver of any right to indemnification, reimbursement or other payment from the Securitization Entities pursuant to this Agreement, the Series 2021-1 Supplement, the Base Indenture or any other Related Document. In the event that a Lender Party (solely in its capacity as such) takes action in violation of this Section 9.10(a), each affected Securitization Entity shall file or cause to be filed an answer with the bankruptcy court or otherwise properly contest or cause to be contested the filing of such a petition by any such Person against such Securitization Entity or the commencement of such action and raise or cause to be raised the defense that such Person has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert. The provisions of this Section 9.10(a) shall survive the termination of this Agreement. Nothing contained herein shall preclude participation by a Lender Party in the assertion or defense of its claims in any such proceeding involving any Securitization Entity. The obligations of the Master Issuer under this Agreement are solely the limited liability company obligations of the Master Issuer.
(b) The Conduit Investors. Each of the parties hereto (other than the Conduit Investors) hereby covenants and agrees that it will not, prior to the date that is one year and one day after the payment in full of the latest maturing Commercial Paper or other debt securities or instruments issued by a Conduit Investor, institute against, or join with any other Person in instituting against, such Conduit Investor, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law; provided, however, that nothing in this Section 9.10(b) shall constitute a waiver of any right to indemnification, reimbursement or other payment from such Conduit Investor pursuant to this Agreement, the Series 2021-1 Supplement, the Base Indenture or any other Related Document. In the event that the Master Issuer, the Manager or a Lender Party (solely in its capacity as such) takes action in violation of this Section 9.10(b), such related Conduit Investor may file an answer with the bankruptcy court or otherwise properly contest or cause to be contested the filing of such a petition by any such Person against such Conduit Investor or the commencement of such action and raise or cause to be raised the defense that such Person has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert. The provisions of this Section 9.10(b) shall survive the termination of this Agreement. Nothing contained herein shall preclude participation by the Master Issuer, the Manager or a Lender Party in assertion or defense of its claims in any such proceeding involving a Conduit Investor. The obligations of the Conduit Investors under this Agreement are solely the corporate obligations of the Conduit Investors. No recourse shall be had for the payment of any amount owing in respect of this Agreement, including any obligation or claim arising out of or based upon this Agreement, against any stockholder, employee, officer, agent, director, member, affiliate or incorporator (or Person similar to an incorporator under state business organization laws) of any Conduit Investor; provided, however, nothing in this Section 9.10(b) shall relieve any of the foregoing Persons from any liability that any such Person may otherwise have for its gross negligence, bad faith or willful misconduct.
Section 9.11 Confidentiality. Each Lender Party agrees that it shall not disclose any Confidential Information to any Person without the prior written consent of the Manager and
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the Master Issuer, other than (a) to their Affiliates, officers, directors, employees, agents and advisors, including, without limitation, legal counsel and accountants (it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep it confidential), (b) to actual or prospective assignees and participants, and then only on a confidential basis (after obtaining such actual or prospective assignee’s or participant’s agreement to keep such Confidential Information confidential in a manner substantially similar to this Section 9.11), (c) as requested by a Governmental Authority or self-regulatory organization or required by any law, rule or regulation or judicial process of which the Master Issuer or the Manager, as the case may be, has knowledge; provided that each Lender Party may disclose Confidential Information as requested by a Governmental Authority or self-regulatory organization or required by any law, rule or regulation or judicial process of which the Master Issuer or the Manager, as the case may be, does not have knowledge if such Lender Party is prohibited by law, rule or regulation from disclosing such requirement to the Master Issuer or the Manager, as the case may be, (d) to Program Support Providers (after obtaining such Program Support Providers’ agreement to keep such Confidential Information confidential in a manner substantially similar to this Section 9.11), (e) to any Rating Agency providing a rating for any Series or Class of Notes or any Conduit Investor’s debt, (f) in connection with the exercise of any remedies hereunder or under any other Related Document or any action or proceeding relating to this Agreement or any other Related Document or the enforcement of rights hereunder or thereunder or (g) in the course of litigation with the Master Issuer, the Manager or such Lender Party. Any Person required to maintain the confidentiality of Confidential 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 Confidential Information as such Person would accord to its own Confidential Information.
“Confidential Information” means information that the Master Issuer or the Manager furnishes to a Lender Party, but does not include (i) any such information that is or becomes generally available to the public other than as a result of a disclosure by a Lender Party or other Person to which a Lender Party delivered such information, (ii) any such information that was in the possession of a Lender Party prior to its being furnished to such Lender Party by the Master Issuer or the Manager or (iii) any such information that is or becomes available to a Lender Party from a source other than the Master Issuer or the Manager; provided that with respect to clauses (ii) and (iii) herein, such source is not (x) known to a Lender Party to be bound by a confidentiality agreement with the Master Issuer or the Manager, as the case may be, with respect to the information or (y) known to a Lender Party to be otherwise prohibited from transmitting the information by a contractual, legal or fiduciary obligation.
Section 9.12 GOVERNING LAW; CONFLICTS WITH INDENTURE. THIS AGREEMENT AND ALL MATTERS ARISING UNDER OR IN ANY MANNER RELATING TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
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OTHER THAN THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW. IN THE EVENT OF ANY CONFLICTS BETWEEN THIS AGREEMENT AND THE INDENTURE, THE INDENTURE SHALL GOVERN.
Section 9.13 JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE PARTIES HEREUNDER WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR (TO THE EXTENT PERMITTED BY LAW) FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREUNDER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
Section 9.14 WAIVER OF JURY TRIAL. ALL PARTIES HEREUNDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PARTIES IN CONNECTION HEREWITH OR THEREWITH. ALL PARTIES ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SIGNIFICANT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR ALL PARTIES TO ENTER INTO THIS AGREEMENT.
Section 9.15 Counterparts. This Agreement may be executed in any number of counterparts (which may include facsimile or other electronic transmission of counterparts) and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which together shall constitute one and the same instrument.
Section 9.16 Third-Party Beneficiary. The Trustee, on behalf of the Secured Parties, and the Control Party are express third-party beneficiaries of this Agreement.
Section 9.17 Assignment.
(a) Subject to Sections 6.03 and 9.17(f), any Committed Note Purchaser may at any time sell all or any part of its rights and obligations under this Agreement, the Series 2021-1 Class A-1 Advance Notes and, in connection therewith, any other Related Documents to which it is a party, with the prior written consent (not to be unreasonably withheld or delayed) of the Master Issuer, the Swingline Lender and the L/C Provider, to one or more financial institutions (an “Acquiring Committed Note Purchaser”) pursuant to an assignment and
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assumption agreement, substantially in the form of Exhibit B (the “Assignment and Assumption Agreement”), executed by such Acquiring Committed Note Purchaser, such assigning Committed Note Purchaser, the Funding Agent with respect to such Committed Note Purchaser, the Master Issuer, the Swingline Lender and the L/C Provider and delivered to the Administrative Agent; provided that no consent of the Master Issuer shall be required for (i) an assignment to another Committed Note Purchaser or any Affiliate of a Committed Note Purchaser or if a Rapid Amortization Event or an Event of Default has occurred and is continuing or (ii) a sale or assignment between Affiliates of a Committed Note Purchaser; provided, further, that no assignment pursuant to this Section 9.17 shall be made to a Competitor.
(b) Without limiting the foregoing, subject to Sections 6.03 and 9.17(f), each Conduit Investor may assign all or a portion of the Investor Group Principal Amount with respect to such Conduit Investor and its rights and obligations under this Agreement, the Series 2021-1 Class A-1 Advance Notes and, in connection therewith, any other Related Documents to which it is a party to a Conduit Assignee with respect to such Conduit Investor, without the prior written consent of the Master Issuer. Upon such assignment by a Conduit Investor to a Conduit Assignee, (i) such Conduit Assignee shall be the owner of the Investor Group Principal Amount or such portion thereof with respect to such Conduit Investor, (ii) the related administrative or managing agent for such Conduit Assignee will act as the Funding Agent for such Conduit Assignee hereunder, with all corresponding rights and powers, express or implied, granted to the Funding Agent hereunder or under the other Related Documents, (iii) such Conduit Assignee and its liquidity support provider(s) and credit support provider(s) and other related parties, in each case relating to the Commercial Paper and/or the Series 2021-1 Class A-1 Advance Notes, shall have the benefit of all the rights and protections provided to such Conduit Investor herein and in the other Related Documents (including, without limitation, any limitation on recourse against such Conduit Assignee as provided in this paragraph), (iv) such Conduit Assignee shall assume all of such Conduit Investor’s obligations, if any, hereunder or under the Base Indenture or under any other Related Document with respect to such portion of the Investor Group Principal Amount and such Conduit Investor shall be released from such obligations, (v) all distributions in respect of the Investor Group Principal Amount or such portion thereof with respect to such Conduit Investor shall be made to the applicable Funding Agent on behalf of such Conduit Assignee, (vi) the definition of the term “CP Funding Rate” with respect to the portion of the Investor Group Principal Amount with respect to such Conduit Investor, as applicable, funded or maintained with commercial paper issued by such Conduit Assignee from time to time shall be determined in the manner set forth in the definition of “CP Funding Rate” applicable to such Conduit Assignee on the basis of the interest rate or discount applicable to Commercial Paper issued by or for the benefit of such Conduit Assignee (rather than any other Conduit Investor), (vii) the defined terms and other terms and provisions of this Agreement and the other Related Documents shall be interpreted in accordance with the foregoing, and (viii) if requested by the Funding Agent with respect to such Conduit Assignee, the parties will execute and deliver such further agreements and documents and take such other actions as the Funding Agent may reasonably request to evidence and give effect to the foregoing. No assignment by any Conduit Investor to a Conduit Assignee of all or any portion of the Investor Group Principal Amount with respect to such Conduit Investor shall in any way diminish the obligation of the Committed Note Purchasers in the same Investor Group as such
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Conduit Investor under Section 2.03 to fund any Increase not funded by such Conduit Investor or such Conduit Assignee.
(c) Subject to Sections 6.03 and 9.17(f), any Conduit Investor and the related Committed Note Purchaser(s) may at any time sell all or any part of their respective rights and obligations under this Agreement, the Series 2021-1 Class A-1 Advance Notes and, in connection therewith, any other Related Documents to which it is a party, with the prior written consent (not to be unreasonably withheld or delayed) of the Master Issuer, the Swingline Lender and the L/C Provider, to a multi-seller commercial paper conduit, whose commercial paper is rated at least “A-1” from S&P, “P1” from Moody’s and/or “F1” from Fitch, as applicable, and one or more financial institutions providing support to such multi-seller commercial paper conduit (an “Acquiring Investor Group”) pursuant to a transfer supplement, substantially in the form of Exhibit C (the “Investor Group Supplement” or the “Series 2021-1 Class A-1 Investor Group Supplement”), executed by such Acquiring Investor Group, the Funding Agent with respect to such Acquiring Investor Group (including the Conduit Investor and the Committed Note Purchasers with respect to such Investor Group), such assigning Conduit Investor and the Committed Note Purchasers with respect to such Conduit Investor, the Funding Agent with respect to such assigning Conduit Investor and Committed Note Purchasers, the Master Issuer, the Swingline Lender and the L/C Provider and delivered to the Administrative Agent; provided that no consent of the Master Issuer shall be required for an assignment to another Committed Note Purchaser or any Affiliate of a Committed Note Purchaser and its related Conduit Investor or if a Rapid Amortization Event or an Event of Default has occurred and is continuing. For the avoidance of doubt, this Section 9.17(c) is intended to permit and provide for (i) assignments from a Committed Note Purchaser to a Conduit Investor in a different Investor Group and (ii) assignments from a Conduit Investor to a Committed Note Purchaser in a different Investor group, and, in each of (i) and (ii), Exhibit C shall be revised to reflect such assignments.
(d) Subject to Sections 6.03 and 9.17(f), the Swingline Lender may at any time assign all its rights and obligations hereunder and under the Series 2021-1 Class A-1 Swingline Note, in whole but not in part, with the prior written consent of the Master Issuer and the Administrative Agent, which consent shall not be unreasonably withheld or delayed, to a financial institution pursuant to an agreement with, and in form and substance reasonably satisfactory to, the Administrative Agent and the Master Issuer, whereupon the assignor shall be released from its obligations hereunder; provided that no consent of the Master Issuer shall be required if a Rapid Amortization Event or an Event of Default has occurred and is continuing; provided, further, that the prior written consent of each Funding Agent (other than any Funding Agent with respect to which all of the Committed Note Purchasers in such Funding Agent’s Investor Group are Defaulting Investors), which consent shall not be unreasonably withheld or delayed, shall be required if such financial institution is not a Committed Note Purchaser.
(e) Subject to Sections 6.03 and 9.17(f), the L/C Provider may at any time assign all or any portion of its rights and obligations hereunder and under the Series 2021-1 Class A-1 L/C Note with the prior written consent of the Master Issuer and the Administrative Agent, which consent shall not be unreasonably withheld or delayed, to a financial institution pursuant to an agreement with, and in form and substance reasonably satisfactory to, the
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Administrative Agent and the Master Issuer, whereupon the assignor shall be released from its obligations hereunder to the extent so assigned; provided that no consent of the Master Issuer shall be required if a Rapid Amortization Event or an Event of Default has occurred and is continuing.
(f) Any assignment of the Series 2021-1 Class A-1 Notes shall be made in accordance with the applicable provisions of the Indenture.
Section 9.18 Defaulting Investors. (a) The Master Issuer may, at its sole expense and effort, upon notice to such Defaulting Investor and the Administrative Agent, (i) require any Defaulting Investor to sell all of its rights, obligations and commitments under this Agreement, the Series 2021-1 Class A-1 Notes and, in connection therewith, any other Related Documents to which it is a party, to an assignee; provided that (x) such assignment is made in compliance with Section 9.17 and (y) such Defaulting Investor shall have received from such assignee an amount equal to such Defaulting Investor’s Committed Note Purchaser Percentage of the related Investor Group Principal Amount of such Defaulting Investor and all accrued interest thereon, accrued fees and all other amounts payable to such Defaulting Investor hereunder or (ii) remove any Defaulting Investor as an Investor by paying to such Defaulting Investor an amount equal to such Defaulting Investor’s Committed Note Purchaser Percentage of the related Investor Group Principal Amount of such Defaulting Investor and all accrued interest thereon, accrued fees and all other amounts payable to such Defaulting Investor hereunder.
(b) In the event that a Defaulting Investor desires to sell all or any portion of it rights, obligations and commitments under this Agreement, the Series 2021-1 Class A-1 Notes and, in connection therewith, any other Related Documents to which it is a party, to an unaffiliated third-party assignee for an amount less than 100% (or, if only a portion of such rights, obligations and commitments are proposed to be sold, such portion) of such Defaulting Investor’s Committed Note Purchaser Percentage of the related Investor Group Principal Amount of such Defaulting Investor and all accrued interest thereon, accrued fees and all other amounts payable to such Defaulting Investor hereunder, such Defaulting Investor shall promptly notify the Master Issuer of the proposed sale (the “Sale Notice”). Each Sale Notice shall certify that such Defaulting Investor has received a firm offer from the prospective unaffiliated third party and shall contain the material terms of the proposed sale, including, without limitation, the purchase price of the proposed sale and the portion of such Defaulting Investor’s rights, obligations and commitments proposed to be sold. The Master Issuer and any of its Affiliates shall have an option for a period of three (3) Business Days from the date the Sale Notice is given to elect to purchase such rights, obligations and commitments at the same price and subject to the same material terms as described in the Sale Notice. The Master Issuer or any of its Affiliates may exercise such purchase option by notifying such Defaulting Investor before expiration of such three (3) Business Day period that it wishes to purchase all (but not a portion) of the rights, obligations and commitments of such Defaulting Investor proposed to be sold to such unaffiliated third party. If the Master Issuer or any of its Affiliates gives notice to such Defaulting Investor that it desires to purchase such rights, obligations and commitments, the Master Issuer or such Affiliate shall promptly pay the purchase price to such Defaulting Investor. If the Master Issuer or any of its Affiliates does not respond to any Sale Notice within such three
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(3) Business Day period, the Master Issuer and its Affiliates shall be deemed not to have exercised such purchase option.
(c) Notwithstanding anything to the contrary contained in this Agreement, if any Investor becomes a Defaulting Investor, then, until such time as such Investor is no longer a Defaulting Investor, to the extent permitted by applicable law:
(i) Such Defaulting Investor’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 9.01.
(ii) Any payment of principal, interest, fees or other amounts payable to the account of such Defaulting Investor (whether voluntary or mandatory, at maturity or otherwise) shall be applied (and the Master Issuer shall instruct the Trustee to apply such amounts) as follows: first, to the payment of any amounts owing by such Defaulting Investor to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Investor to the L/C Provider or the Swingline Lender hereunder; third, to provide cash collateral to the L/C Provider in accordance with Section 4.03(b) in an amount equal to the amount of Undrawn L/C Face Amounts at such time multiplied by the Commitment Percentage of such Defaulting Investor’s Investor Group multiplied by the Committed Note Purchaser Percentage of such Defaulting Investor; fourth, as the Master Issuer may request (so long as no Default or Event of Default exists), to the funding of any Advance in respect of which such Defaulting Investor 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 Master Issuer, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Investor’s potential future funding obligations with respect to Advances under this Agreement and (y) to provide cash collateral to the L/C Provider in accordance with Section 4.03(b) in an amount equal to the amount of any future Undrawn L/C Face Amounts multiplied by the Commitment Percentage of such Defaulting Investor’s Investor Group multiplied by the Committed Note Purchaser Percentage of such Defaulting Investor; sixth, to the payment of any amounts owing to the Investors, the L/C Provider or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Investor, the L/C Provider or the Swingline Lender against such Defaulting Investor as a result of such Defaulting Investor’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Master Issuer as a result of any judgment of a court of competent jurisdiction obtained by the Master Issuer against such Defaulting Investor as a result of such Defaulting Investor’s breach of its obligations under this Agreement; and eighth, to such Defaulting Investor 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 Advances or any extensions of credit resulting from a drawing under any Letter of Credit that has not been reimbursed as an Advance pursuant to Section 2.08(a) in respect of which such Defaulting Investor has not fully funded its appropriate share, and (y) such Advances were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 7.03 were satisfied or waived, such payment shall be applied solely to pay the Advances of, and extensions of credit resulting from a drawing under any Letter of Credit that has not been
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reimbursed as an Advance pursuant to Section 2.08(a) owed to, all non-Defaulting Investors on a pro rata basis prior to being applied to the payment of any Advances of, participations required to be purchased pursuant to Section 2.09(a) owed to, such Defaulting Investor until such time as all Advances and funded and unfunded participations in L/C Obligations and Swingline Loans are held by the Investors pro rata in accordance with the Commitments without giving effect to Section 9.18(c)(iii). Any payments, prepayments or other amounts paid or payable to a Defaulting Investor that are applied (or held) to pay amounts owed by a Defaulting Investor or to post cash collateral pursuant to this Section 9.18(c)(ii) shall be deemed paid to and redirected by such Defaulting Investor, and each Investor irrevocably consents hereto.
(iii) All or any part of such Defaulting Investor’s participation in L/C Obligations and Swingline Loans shall be reallocated among the non-Defaulting Investors pro rata based on their Commitments (calculated without regard to such Defaulting Investor’s Commitment) but only to the extent that (x) the conditions set forth in Section 7.03 are satisfied at the time of such reallocation (and, unless the Master Issuer shall have otherwise notified the Administrative Agent at such time, the Master Issuer shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the product of any non-Defaulting Investor’s related Investor Group Principal Amount multiplied by such non-Defaulting Investor’s Committed Note Purchaser Percentage to exceed such non-Defaulting Investor’s Commitment Amount. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Investor arising from that Investor having become a Defaulting Investor, including any claim of a non-Defaulting Investor as a result of such non-Defaulting Investor’s increased exposure following such reallocation.
(iv) If the reallocation described in clause (iii) above cannot, or can only partially, be effected, the Master Issuer shall, without prejudice to any right or remedy available to them hereunder or under law, prepay Swingline Loans in an amount equal to the amount that cannot be so reallocated.
(d) If the Master Issuer, the Administrative Agent, the Swingline Lender and the L/C Provider agree in writing that an Investor is no longer a Defaulting Investor, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), that Investor will, to the extent applicable, purchase that portion of outstanding Advances of the other Investors or take such other actions as the Administrative Agent may determine to be necessary to cause the Advances and funded and unfunded participations in Letters of Credit and Swingline Loans to be held pro rata by the Investors in accordance with their respective Commitments (without giving effect to Section 9.18(c)(iii)), whereupon such Investor will cease to be a Defaulting Investor; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Master Issuer while that Investor was a Defaulting Investor; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Investor to Investor will constitute a waiver or release of any claim of any party hereunder arising from that Investor’s having been a Defaulting Investor.
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Section 9.19 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any TransactionRelated Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any TransactionRelated Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-In Action or any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other TransactionRelated Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
Section 9.20 Patriot Act. In accordance with the USA PATRIOT Act, to help fight the funding of terrorism and money laundering activities, any Lender Party may obtain, verify and record information that identifies individuals or entities that establish a relationship with such Lender Party. Such Lender Party may ask for the name, address, tax identification number and other information that will allow it to identify the individual or entity who is establishing the relationship or opening the account. Such Lender Party may also ask for formation documents such as articles of incorporation, an offering memorandum, or other identifying documents to be provided.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers and delivered as of the day and year first above written.
WENDY’S FUNDING, LLC
as Master Issuer
By:
Name:
Title:
as Master Issuer
By:
Name:
Title:
WENDY’S INTERNATIONAL, LLC
as Manager
By:
Name:
Title:
as Manager
By:
Name:
Title:
QUALITY IS OUR RECIPE, LLC
as Guarantor
By:
Name:
Title:
as Guarantor
By:
Name:
Title:
WENDY’S PROPERTIES, LLC
as Guarantor
By:
Name:
Title:
as Guarantor
By:
Name:
Title:
99
WENDY’S SPV GUARANTOR, LLC
as Guarantor
By:
Name:
Title:
as Guarantor
By:
Name:
Title:
100
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Administrative Agent
By:
Name:
Title:
as Administrative Agent
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as L/C Provider
By:
Name:
Title:
as L/C Provider
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Swingline Lender
By:
Name:
Title:
as Swingline Lender
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
101
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as the Committed Note Purchaser
By:
Name:
Title:
as the Committed Note Purchaser
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
102
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as the related Funding Agent
By:
Name:
Title:
as the related Funding Agent
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
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SCHEDULE I TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
INVESTOR GROUPS AND COMMITMENTS
| Investor Group/Funding Agent | Maximum Investor Group Principal Amount | Conduit Lender (if any) | Committed Note Purchaser(s) | Commitment Amount | ||||||||||
| Coöperatieve Rabobank U.A., New York Branch | $300,000,000 | N/A | Coöperatieve Rabobank U.A., New York Branch | $300,000,000 | ||||||||||
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SCHEDULE II TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
NOTICE ADDRESSES FOR LENDER PARTIES, AGENTS, MASTER ISSUER AND MANAGER
CONDUIT INVESTORS
N/A
COMMITTED PURCHASERS
Coöperatieve Rabobank U.A., New York Branch
245 Park Avenue
New York, NY 10167
Attention: General Counsel
With a copy by e-mail to: tmteam@rabobank.com
And a copy to:
Susan Williams
Assistant Vice President
245 Park Avenue, 38th Floor
New York, NY 10167
Fax: 914.304.9326
fm.us.bilateralloansfax@rabobank.com
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FUNDING AGENTS
Coöperatieve Rabobank U.A., New York Branch
245 Park Avenue
New York, NY 10167
Attention: General Counsel
With a copy by e-mail to: tmteam@rabobank.com
And a copy to:
Susan Williams
Assistant Vice President
245 Park Avenue, 38th Floor
New York, NY 10167
Fax: 914.304.9326
fm.us.bilateralloansfax@rabobank.com
ADMINISTRATIVE AGENT
Coöperatieve Rabobank U.A., New York Branch
245 Park Avenue
New York, NY 10167
Attention: General Counsel
With a copy by e-mail to: tmteam@rabobank.com
And a copy to:
Susan Williams
Assistant Vice President
245 Park Avenue, 38th Floor
New York, NY 10167
Fax: 914.304.9326
fm.us.bilateralloansfax@rabobank.com
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MASTER ISSUER
Wendy’s Funding, LLC
One Dave Thomas Blvd.
Dublin, Ohio 43017
Attention: General Counsel
And a copy to (which shall not constitute notice):
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Patricia Lynch
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Patricia Lynch
Facsimile: 617-235-9384
MANAGER
Wendy’s International, LLC
One Dave Thomas Blvd.
Dublin, Ohio 43017
Attention: General Counsel
And a copy to (which shall not constitute notice):
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Patricia Lynch
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Patricia Lynch
Facsimile: 617-235-9384
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SCHEDULE III TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
ADDITIONAL CLOSING CONDITIONS
The following are the additional conditions to initial issuance and effectiveness referred to in Section 7.01(c):
(a) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Related Documents, and all other legal matters relating to the Related Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Lender Parties, and the Master Issuer and the Guarantors shall have furnished to the Lender Parties all documents and information that the Lender Parties or their counsel may reasonably request to enable them to pass upon such matters.
(b) The Lender Parties shall have received evidence satisfactory to the Lender Parties and their counsel, that, on or before the Closing Date, all existing Liens (other than Permitted Liens) on the Collateral shall have been released and UCC-1 financing statements and assignments and other instruments required to be filed on or prior to the Closing Date pursuant to the Related Documents have been or are being filed.
(c) Each Lender Party shall have received opinions of counsel, in each case dated as of the Closing Date and addressed to the Lender Parties, from Ropes & Gray LLP, as counsel to the Master Issuer, the Guarantors, the Manager and the Parent Companies, and such local, franchise, special and foreign counsel as the Administrative Agent shall reasonably request, dated as of the Closing Date and addressed to the Lender Parties, with respect to such matters as the Administrative Agent shall reasonably request (including, without limitation, company matters, franchise matters, non-consolidation matters, security interest matters relating to the Collateral and no-conflicts matters, “true contribution” matters and, from appropriate special counsel, franchise law matters).
(d) There shall exist at and as of the Closing Date no condition that would constitute an “Event of Default” (or an event that with notice or the lapse of time, or both, would constitute an “Event of Default”) under, and as defined in, the Indenture or a material breach under any of the Related Documents as in effect at the Closing Date (or an event that, with notice or lapse of time, or both, would constitute such a material breach). On the Closing Date, each of the Related Documents shall be in full force and effect.
(e) The Manager, the Master Issuer and each Guarantor, shall have furnished to the Administrative Agent a certificate, dated as of the Closing Date, of the Chief Financial Officer of such entity (or other officers reasonably satisfactory to the Administrative Agent) that such entity will be Solvent immediately after the consummation of the transactions contemplated by this Agreement; provided, that, in the case of each Securitization Entity, the liabilities of the other Securitization Entities with respect to debts, liabilities and obligations for which such Securitization Entity is jointly and severally liable shall be taken into account. The Manager shall have furnished to the Administrative Agent a certificate, dated as of the Closing Date, of the
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Chief Financial Officer of the Manager that each of Oldemark LLC, Wendy’s Old Fashioned Hamburgers of New York, LLC, Wendy’s Restaurants of New York, LLC and Wendy’s Digital, LLC was Solvent on the date that any replacement financing statement was filed with the applicable secretary of state and will be Solvent immediately after the consummation of the transactions contemplated by this Agreement.
(f) None of the transactions contemplated by this Agreement shall be subject to an injunction (temporary or permanent) and no restraining order or other injunctive order shall have been issued; and there shall not have been any legal action, order, decree or other administrative proceeding instituted or threatened against the Master Issuer, the Parent Companies, the Guarantors or the Lender Parties that would reasonably be expected to adversely impact the issuance of the Series 2021-1 Notes and the Guarantee thereof under the Guarantee and Collateral Agreement or the Lender Parties’ activities in connection therewith or any other transactions contemplated by the Related Documents.
(g) The representations and warranties of each of the Master Issuer, the Parent Companies, the Manager and the Guarantors (to the extent a party thereto) contained in the Related Documents to which each of the Master Issuer, the Parent Companies, the Manager and the Guarantors is a party will be true and correct (i) if qualified as to materiality or Material Adverse Effect, in all respects, and (ii) if not so qualified, in all material respects, as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct (x) if qualified as to materiality, in all respects, and (y) if not so qualified, in all material respects, as of such earlier date).
(h) The Lender Parties shall have received a certificate from each of the Master Issuer, the Manager and each Guarantor, in each case executed on behalf of such Person by any Authorized Officer of the such Person, dated the Closing Date, to the effect that, to the best of each such Authorized Officer’s knowledge, (i) the representations and warranties of such Person in this Agreement and in each other Related Document to which such Person is a party are true and correct (A) if qualified as to materiality or Material Adverse Effect, in all respects and (B) if not so qualified, in all material respects, in each case, on and as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct (x) if qualified as to materiality or Material Adverse Effect, in all respects, and (y) if not so qualified, in all material respects, in each case, as of such earlier date); (ii) such Person has complied with all agreements in all material respects and satisfied all conditions on its part to be performed or satisfied hereunder or under the Related Documents at or prior to the Closing Date; (iii) there has not been any development in the general affairs, business, properties, capitalization, condition (financial or otherwise) or results of operation of such Person except as described in such certificate or certificates after February 26, 2020 that could reasonably be expected to result in a Material Adverse Effect; and (iv) nothing has come to such officer’s attention that would lead such Authorized Officer to believe that the information and documentation provided to the Administrative Agent by the Master Issuer or any Affiliate thereof included or includes any untrue statement of a material fact or omitted or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
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(i) On or prior to the Closing Date, the Master Issuer shall have paid to the Administrative Agent (i) the Upfront Commitment Fee (under and as defined in the Series 2021-1 Class A-1 VFN Fee Letter) and (ii) the initial installment of Administrative Agent Fees (under and as defined in the Series 2021-1 Class A-1 VFN Fee Letter).
(j) On or prior to the Closing Date, the Parent Companies, the Manager, the Guarantors and the Master Issuer shall have furnished to the Lender Parties such further certificates and documents as the Lender Parties may reasonably request.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Administrative Agent.
For purposes of this Schedule III, “Parent Companies” shall mean The Wendy’s Company, a Delaware corporation, and the Manager.
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SCHEDULE IV TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
Letters of Credit
| Applicant | Beneficiary | LC Number | LC Expiry Date | Face Amount | ||||||||||
| WENDY'S FUNDING LLC | CITIBANK, NA AND MIDLAND LOAN SERVICES | SB19716 | 6/1/2022 | $23,000,000.00 | ||||||||||
| WENDY'S FUNDING LLC | OHIO BUREAU OF WORKERS COMPENSATION | SBLC51132 | 8/15/2021 | $470,000.00 | ||||||||||
| WENDY'S FUNDING LLC | PACIFIC EMPLOYERS INS. & ACE AMERICAN INS. | SBLC52000 | 1/5/2022 | $2,266,019.00 | ||||||||||
| WENDY'S INTERNATIONAL LLC | NATIONAL UNION FIRE INS. CO OF PITTSBURGH | SBLC55351 | 12/31/2021 | $471,500.00 | ||||||||||
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EXHIBIT A-1 TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
ADVANCE REQUEST
WENDY’S FUNDING, LLC
WENDY’S FUNDING, LLC
SERIES 2021-1 VARIABLE FUNDING SENIOR NOTES, CLASS A-1
TO:
Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent
Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent
Ladies and Gentlemen:
This Advance Request is delivered to you pursuant to Section 2.03 of that certain Series 2021-1 Class A-1 Note Purchase Agreement, dated as of June 22, 2021 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Series 2021-1 Class A-1 Note Purchase Agreement”), by and among Wendy’s Funding, LLC, as Master Issuer, Quality Is Our Recipe, LLC, Wendy’s Properties, LLC and Wendy’s SPV Guarantor, LLC, each as a Guarantor, Wendy’s International, LLC, as Manager, the Conduit Investors, Committed Note Purchasers and Funding Agents named therein, the L/C Provider and Swingline Lender named therein, and Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent (in such capacity, the “Administrative Agent”).
Unless otherwise defined herein or as the context otherwise requires, terms used herein have the meaning assigned thereto under or as provided in the Recitals and Section 1.01 of the Series 2021-1 Class A-1 Note Purchase Agreement.
The undersigned hereby requests that Advances be made in the aggregate principal amount of $ on , 20___.
[IF THE MASTER ISSUER IS ELECTING EURODOLLAR RATEADJUSTED TERM SOFR FOR THESE ADVANCES ON THE DATE MADE IN ACCORDANCE WITH SECTION 3.01(b) OF THE CLASS A-1 NOTE PURCHASE AGREEMENT, ADD THE FOLLOWING SENTENCE: The undersigned hereby elects that the Advances that are not funded at the CP Rate by an Eligible Conduit Investor shall be EurodollarSOFR Advances and the related EurodollarSOFR Interest Accrual Period shall commence on the date of such EurodollarSOFR Advances and end on but excluding the date [one] [two] [three] [six] months subsequent to such date.
The undersigned hereby acknowledges that the delivery of this Advance Request and the acceptance by the undersigned of the proceeds of the Advances requested hereby constitute a representation and warranty by the undersigned that, on the date of such Advances,
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and before and after giving effect thereto and to the application of the proceeds therefrom, all conditions set forth in Section 7.03 of the Series 2021-1 Class A-1 Note Purchase Agreement have been satisfied and all statements set forth in Section 6.01 of the Series 2021-1 Class A-1 Note Purchase Agreement are true and correct.
The undersigned agrees that if prior to the time of the Advances requested hereby any matter certified to herein by it will not be true and correct at such time as if then made, it will immediately so notify both you and each Investor. Except to the extent, if any, that prior to the time of the Advances requested hereby you and each Investor shall receive written notice to the contrary from the undersigned, each matter certified to herein shall be deemed once again to be certified as true and correct at the date of such Advances as if then made.
Please wire transfer the proceeds of the Advances, first, $[ ] to the Swingline Lender and $[ ] to the L/C Provider for application to repayment of outstanding Swingline Loans and Unreimbursed L/C Drawings, as applicable, and, second, pursuant to the following instructions:
[insert payment instructions]
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The undersigned has caused this Advance Request to be executed and delivered, and the certification and warranties contained herein to be made, by its duly Authorized Officer this ____ day of ______________, 20___.
WENDY’S INTERNATIONAL, LLC,
as Manager on behalf of the Master Issuer
By:
Name:
Title:
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EXHIBIT A-2 TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
SWINGLINE LOAN REQUEST
WENDY’S FUNDING, LLC
SERIES 2021-1 VARIABLE FUNDING SENIOR NOTES, CLASS A-1
TO:
Coöperatieve Rabobank U.A., New York Branch, as Swingline Lender
Ladies and Gentlemen:
This Swingline Loan Request is delivered to you pursuant to Section 2.06 of that certain Series 2021-1 Class A-1 Note Purchase Agreement, dated as of June 22, 2021 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Series 2021-1 Class A-1 Note Purchase Agreement”), by and among Wendy’s Funding, LLC, as Master Issuer, Quality Is Our Recipe, LLC, Wendy’s Properties, LLC and Wendy’s SPV Guarantor, LLC, each as a Guarantor, Wendy’s International, LLC, as Manager, the Conduit Investors, Committed Note Purchasers and Funding Agents named therein, the L/C Provider named therein, Coöperatieve Rabobank U.A., New York Branch, as Swingline Lender (in such capacity, the “Swingline Lender”) and Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent (in such capacity, the “Administrative Agent”).
Unless otherwise defined herein or as the context otherwise requires, terms used herein have the meaning assigned thereto under or as provided in the Recitals and Section 1.01 of the Series 2021-1 Class A-1 Note Purchase Agreement.
The undersigned hereby requests that Swingline Loans be made in the aggregate principal amount of $ on , 20___.
The undersigned hereby acknowledges that the delivery of this Swingline Loan Request and the acceptance by the undersigned of the proceeds of the Swingline Loans requested hereby constitute a representation and warranty by the undersigned that, on the date of such Advances, and before and after giving effect thereto and to the application of the proceeds therefrom, all conditions set forth in Section 7.03 of the Series 2021-1 Class A-1 Note Purchase Agreement have been satisfied and all statements set forth in Section 6.01 of the Series 2021-1 Class A-1 Note Purchase Agreement are true and correct.
The undersigned agrees that if prior to the time of the Swingline Loans requested hereby any matter certified to herein by it will not be true and correct at such time as if then made, it will immediately so notify you. Except to the extent, if any, that prior to the time of the Swingline Loans requested hereby you shall receive written notice to the contrary from the
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undersigned, each matter certified to herein shall be deemed once again to be certified as true and correct at the date of such Swingline Loans as if then made.
Please wire transfer the proceeds of the Swingline Loans pursuant to the following instructions:
[insert payment instructions]
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The undersigned has caused this Swingline Loan Request to be executed and delivered, and the certification and warranties contained herein to be made, by its duly Authorized Officer this ____ day of ______________, 20___.
WENDY’S INTERNATIONAL, LLC,
as Manager on behalf of the Master Issuer
as Manager on behalf of the Master Issuer
By:
Name:
Title:
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EXHIBIT B TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of [ ], by and among [____________] (the “Transferor”), each purchaser listed as an Acquiring Committed Note Purchaser on the signature pages hereof (each, an “Acquiring Committed Note Purchaser”), the Funding Agent with respect to such Acquiring Committed Note Purchaser listed on the signature pages hereof (each, a “Funding Agent”), and the Master Issuer, Swingline Lender and L/C Provider listed on the signature pages hereof.
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement is being executed and delivered in accordance with Section 9.17(a) of the Series 2021-1 Class A-1 Note Purchase Agreement, dated as of June 22, 2021 (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the “Series 2021-1 Class A-1 Note Purchase Agreement”; terms used but not otherwise defined herein having the meanings ascribed to such terms therein), by and among the Master Issuer, the Guarantors, the Manager, the Conduit Investors, Committed Note Purchasers and Funding Agents named therein, the L/C Provider and Swingline Lender named therein, Wendy’s International, LLC, as Manager, and Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent (in such capacity, the “Administrative Agent”);
WHEREAS, each Acquiring Committed Note Purchaser (if it is not already an existing Committed Note Purchaser) wishes to become a Committed Note Purchaser party to the Series 2021-1 Class A-1 Note Purchase Agreement; and
WHEREAS, the Transferor is selling and assigning to each Acquiring Committed Note Purchaser, [all] [a portion of] its rights, obligations and commitments under the Series 2021-1 Class A-1 Note Purchase Agreement, the Series 2021-1 Class A-1 Advance Notes and each other Related Document to which it is a party with respect to the percentage of its Commitment Amount specified on Schedule I attached hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Upon the execution and delivery of this Assignment and Assumption Agreement by each Acquiring Committed Note Purchaser, each related Funding Agent, the Transferor, the Swingline Lender, the L/C Provider and, to the extent required by Section 9.17(a) of the Series 2021-1 Class A-1 Note Purchase Agreement, the Master Issuer (the date of such execution and delivery, the “Transfer Issuance Date”), each Acquiring Committed Note Purchaser shall be a Committed Note Purchaser party to the Series 2021-1 Class A-1 Note Purchase Agreement for all purposes thereof.
The Transferor acknowledges receipt from each Acquiring Committed Note Purchaser of an amount equal to the purchase price, as agreed between the Transferor and such Acquiring Committed Note Purchaser (the “Purchase Price”), of the portion being purchased by
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such Acquiring Committed Note Purchaser (such Acquiring Committed Note Purchaser’s “Purchased Percentage”) of (i) the Transferor’s Commitment under the Series 2021-1 Class A-1 Note Purchase Agreement and (ii) the Transferor’s Committed Note Purchaser Percentage of the related Investor Group Principal Amount. The Transferor hereby irrevocably sells, assigns and transfers to each Acquiring Committed Note Purchaser, without recourse, representation or warranty, and each Acquiring Committed Note Purchaser hereby irrevocably purchases, takes and assumes from the Transferor, such Acquiring Committed Note Purchaser’s Purchased Percentage of (x) the Transferor’s Commitment under the Series 2021-1 Class A-1 Note Purchase Agreement and (y) the Transferor’s Committed Note Purchaser Percentage of the related Investor Group Principal Amount.
The Transferor has made arrangements with each Acquiring Committed Note Purchaser with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor to such Acquiring Committed Note Purchaser of any program fees, undrawn facility fee, structuring and commitment fees or other fees (collectively, the “Fees”) [heretofore received] by the Transferor pursuant to Section 3.02 of the Series 2021-1 Class A-1 Note Purchase Agreement prior to the Transfer Issuance Date [and (ii) the portion, if any, to be paid, and the date or dates for payment, by such Acquiring Committed Note Purchaser to the Transferor of Fees or [__________] received by such Acquiring Committed Note Purchaser pursuant to the Series 2021-1 Supplement from and after the Transfer Issuance Date].
From and after the Transfer Issuance Date, amounts that would otherwise be payable to or for the account of the Transferor pursuant to the Series 2021-1 Supplement or the Series 2021-1 Class A-1 Note Purchase Agreement shall, instead, be payable to or for the account of the Transferor and the Acquiring Committed Note Purchasers, as the case may be, in accordance with their respective interests as reflected in this Assignment and Assumption Agreement, whether such amounts have accrued prior to the Transfer Issuance Date or accrue subsequent to the Transfer Issuance Date.
Each of the parties to this Assignment and Assumption Agreement agrees that, at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment and Assumption Agreement.
By executing and delivering this Assignment and Assumption Agreement, the Transferor and each Acquiring Committed Note Purchaser confirm to and agree with each other and the other parties to the Series 2021-1 Class A-1 Note Purchase Agreement as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Series 2021-1 Supplement, the Series 2021-1 Class A-1 Note Purchase Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Indenture, the Series 2021-1 Class A-1 Notes, the Related Documents or any instrument or document furnished pursuant thereto; (ii) the Transferor makes no representation or warranty and assumes no responsibility with respect to the
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financial condition of the Master Issuer or the performance or observance by the Master Issuer of any of the Master Issuer’s obligations under the Indenture, the Series 2021-1 Class A-1 Note Purchase Agreement, the Related Documents or any other instrument or document furnished pursuant hereto; (iii) each Acquiring Committed Note Purchaser confirms that it has received a copy of the Indenture, the Series 2021-1 Class A-1 Note Purchase Agreement and such other Related Documents and other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (iv) each Acquiring Committed Note Purchaser will, independently and without reliance upon the Administrative Agent, the Transferor, the Funding Agent or any other Investor Group and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Series 2021-1 Class A-1 Note Purchase Agreement; (v) each Acquiring Committed Note Purchaser appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Series 2021-1 Class A-1 Note Purchase Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Article V of the Series 2021-1 Class A-1 Note Purchase Agreement; (vi) each Acquiring Committed Note Purchaser appoints and authorizes its related Funding Agent to take such action as agent on its behalf and to exercise such powers under the Series 2021-1 Class A-1 Note Purchase Agreement as are delegated to such Funding Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Article V of the Series 2021-1 Class A-1 Note Purchase Agreement; (vii) each Acquiring Committed Note Purchaser agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Series 2021-1 Class A-1 Note Purchase Agreement are required to be performed by it as an Acquiring Committed Note Purchaser; and (viii) each Acquiring Committed Note Purchaser hereby represents and warrants to the Master Issuer and the Manager that: (A) it has had an opportunity to discuss the Master Issuer’s and the Manager’s business, management and financial affairs, and the terms and conditions of the proposed purchase, with the Master Issuer and the Manager and their respective representatives; (B) it is a “qualified institutional buyer” within the meaning of Rule 144A under the 1933 Act and otherwise meets the criteria in Section 6.03(b) of the Series 2021-1 Class A-1 Note Purchase Agreement and has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of investing in, and is able and prepared to bear the economic risk of investing in, the Series 2021-1 Class A-1 Notes; (C) it is purchasing the Series 2021-1 Class A-1 Notes for its own account, or for the account of one or more “qualified institutional buyers” within the meaning of Rule 144A under the 1933 Act that meet the criteria described in clause (viii)(B) above and for which it is acting with complete investment discretion, for investment purposes only and not with a view to distribution, subject, nevertheless, to the understanding that the disposition of its property shall at all times be and remain within its control, and neither it nor its Affiliates has engaged in any general solicitation or general advertising within the meaning of the 1933 Act with respect to the Series 2021-1 Class A-1 Notes; (D) it understands that (I) the Series 2021-1 Class A-1 Notes have not been and will not be registered or qualified under the 1933 Act or any applicable state securities laws or the securities laws of any other jurisdiction and are being offered only in a transaction not involving any public offering within the meaning of the 1933 Act and may not be resold or otherwise transferred unless so registered or qualified or unless an exemption from registration or
120
qualification is available and an opinion of counsel shall have been delivered in advance to the Master Issuer, (II) the Master Issuer is not required to register the Series 2021-1 Class A-1 Notes, (III) any permitted transferee hereunder must be a “qualified institutional buyer” within the meaning of Rule 144A under the 1933 Act and must otherwise meet the criteria described under clause (viii)(B) above and (IV) any transfer must comply with the provisions of Section 2.8 of the Base Indenture, Section [4.3] of the Series 2021-1 Supplement and Sections 9.03 or 9.17, as applicable, of the Series 2021-1 Class A-1 Note Purchase Agreement; (E) it will comply with the requirements of clause (viii)(D) above in connection with any transfer by it of the Series 2021-1 Class A-1 Notes; (F) it understands that the Series 2021-1 Class A-1 Notes will bear the legend set out in the form of Series 2021-1 Class A-1 Notes attached to the Series 2021-1 Supplement and be subject to the restrictions on transfer described in such legend; (G) it will obtain for the benefit of the Master Issuer from any purchaser of the Series 2021-1 Class A-1 Notes substantially the same representations and warranties contained in the foregoing paragraphs; and (H) it has executed a Purchaser’s Letter substantially in the form of Exhibit D to the Series 2021-1 Class A-1 Note Purchase Agreement.
Schedule I hereto sets forth (i) the Purchased Percentage for each Acquiring Committed Note Purchaser, (ii) the revised Commitment Amounts of the Transferor and each Acquiring Committed Note Purchaser, and (iii) the revised Maximum Investor Group Principal Amounts for the Investor Groups of the Transferor and each Acquiring Committed Note Purchaser (it being understood that if the Transferor was part of a Conduit Investor’s Investor Group and the Acquiring Committed Note Purchaser is intended to be part of the same Investor Group, there will not be any change to the Maximum Investor Group Principal Amount for that Investor Group) and (iv) administrative information with respect to each Acquiring Committed Note Purchaser and its related Funding Agent.
This Assignment and Assumption Agreement and all matters arising under or in any manner relating to this Assignment and Assumption Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to any choice of law or conflict provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York), and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such law.
ALL PARTIES HEREUNDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ON THE SERIES 2021-1 CLASS A-1 NOTE PURCHASE AGREEMENT, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS ASSIGNMENT AND ASSUMPTION AGREEMENT OR THE SERIES 2021-1 CLASS A-1 NOTE PURCHASE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PARTIES IN CONNECTION HEREWITH OR THEREWITH. ALL PARTIES ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SIGNIFICANT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR ALL PARTIES TO ENTER INTO THIS ASSIGNMENT AND ASSUMPTION AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed by their respective duly authorized officers as of the date first set forth above.
[ ], as Transferor
By:
By:
Name:
Title:
Title:
By:
Name:
Title:
Name:
Title:
[ ], as Acquiring Committed Note Purchaser
By:
By:
Name:
Title:
Title:
[ ], as Funding Agent
By:
Name:
Title:
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CONSENTED AND ACKNOWLEDGED BY THE MASTER ISSUER:
WENDY’S FUNDING, LLC, as Master Issuer
WENDY’S FUNDING, LLC, as Master Issuer
By:
Name:
Title:
Title:
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CONSENTED BY:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as L/C Provider
By:
Name:
Title:
as L/C Provider
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Swingline Lender
By:
Name:
Title:
as Swingline Lender
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
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SCHEDULE I TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
LIST OF ADDRESSES FOR NOTICES
AND OF COMMITMENT AMOUNTS
AND OF COMMITMENT AMOUNTS
[____________________], as Transferor Prior Commitment Amount: $[ | ] | |||||||
| Revised Commitment Amount: | $[ | ] | ||||||
| Prior Maximum Investor Group | ||||||||
| Principal Amount: $[ | ] | |||||||
| Revised Maximum Investor | ||||||||
| Group Principal Amount: $[ | ] | |||||||
Related Conduit Investor (if applicable) [ | ] | |||||||
| [ | ], as | |||||||
Acquiring Committed Note Purchaser Address:
Attention:
Attention:
Telephone:
Facsimile:
Purchased Percentage of
Transferor’s Commitment: [ ]%
Transferor’s Commitment: [ ]%
Prior Commitment Amount: $[ ]
Revised Commitment Amount: $[ ]
Prior Maximum Investor Group
Principal Amount: $[ ]
Revised Maximum Investor
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Group Principal Amount: $[ ]
Related Conduit Investor
(if applicable) [ ]
[_____________________], as
related Funding Agent
Address:
Attention:
Telephone:
Facsimile:
126
EXHIBIT C TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
INVESTOR GROUP SUPPLEMENT, dated as of [________], by and among (i) [________] (the “Transferor Investor Group”), (ii) [________] (the “Acquiring Investor Group”), (iii) the Funding Agent with respect to the Acquiring Investor Group listed on the signature pages hereof (each, a “Funding Agent”), and (iv) the Master Issuer, the Swingline Lender and the L/C Provider listed on the signature pages hereof.
W I T N E S S E T H:
WHEREAS, this Investor Group Supplement is being executed and delivered in accordance with Section 9.17(c) of the Series 2021-1 Class A-1 Note Purchase Agreement, dated as of June 22, 2021 (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the “Series 2021-1 Class A-1 Note Purchase Agreement”; terms used but not otherwise defined herein having the meanings ascribed to such terms therein), by and among the Master Issuer, the Guarantors, the Manager, the Conduit Investors, Committed Note Purchasers and Funding Agents named therein, the L/C Provider and Swingline Lender named therein, Wendy’s International, LLC, as Manager, and Coöperatieve Rabobank U.A., New York Branch, as Administrative Agent (in such capacity, the “Administrative Agent”);
WHEREAS, the Acquiring Investor Group wishes to become a Conduit Investor and [a] Committed Note Purchaser[s] with respect to such Conduit Investor under the Series 2021-1 Class A-1 Note Purchase Agreement; and
WHEREAS, the Transferor Investor Group is selling and assigning to the Acquiring Investor Group [all] [a portion of] its respective rights, obligations and commitments under the Series 2021-1 Class A-1 Note Purchase Agreement, the Series 2021-1 Class A-1 Advance Notes and each other Related Document to which it is a party with respect to the percentage of its Commitment Amount specified on Schedule I attached hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Upon the execution and delivery of this Investor Group Supplement by the Acquiring Investor Group, each related Funding Agent with respect thereto, the Transferor Investor Group, the Swingline Lender, the L/C Provider and, to the extent required by Section 9.17(c) of the Series 2021-1 Class A-1 Note Purchase Agreement (the date of such execution and delivery, the “Transfer Issuance Date”), the Master Issuer, the Conduit Investor and the Committed Note Purchaser[s] with respect to the Acquiring Investor Group shall be parties to the Series 2021-1 Class A-1 Note Purchase Agreement for all purposes thereof.
The Transferor Investor Group acknowledges receipt from the Acquiring Investor Group of an amount equal to the purchase price, as agreed between the Transferor Investor Group and the Acquiring Investor Group (the “Purchase Price”), of the portion being purchased by the Acquiring Investor Group (the Acquiring Investor Group’s “Purchased Percentage”) of (i) the aggregate Commitment[s] of the Committed Note Purchaser[s] included in the Transferor
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Investor Group under the Series 2021-1 Class A-1 Note Purchase Agreement and (ii) the aggregate related Committed Note Purchaser Percentage[s] of the related Investor Group Principal Amount. The Transferor Investor Group hereby irrevocably sells, assigns and transfers to the Acquiring Investor Group, without recourse, representation or warranty, and the Acquiring Investor Group hereby irrevocably purchases, takes and assumes from the Transferor Investor Group, such Acquiring Investor Group’s Purchased Percentage of (x) the aggregate Commitment[s] of the Committed Note Purchaser[s] included in the Transferor Investor Group under the Series 2021-1 Class A-1 Note Purchase Agreement and (y) the aggregate related Committed Note Purchaser Percentage[s] of the related Investor Group Principal Amount.
The Transferor Investor Group has made arrangements with the Acquiring Investor Group with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Investor Group to such Acquiring Investor Group of any program fees, undrawn facility fee, structuring and commitment fees or other fees (collectively, the “Fees”) [heretofore received] by the Transferor Investor Group pursuant to Section 3.02 of the Series 2021-1 Class A-1 Note Purchase Agreement prior to the Transfer Issuance Date [and (ii) the portion, if any, to be paid, and the date or dates for payment, by such Acquiring Investor Group to the Transferor Investor Group of Fees or [_______] received by such Acquiring Investor Group pursuant to the Series 2021-1 Supplement from and after the Transfer Issuance Date].
From and after the Transfer Issuance Date, amounts that would otherwise be payable to or for the account of the Transferor Investor Group pursuant to the Series 2021-1 Supplement or the Series 2021-1 Class A-1 Note Purchase Agreement shall, instead, be payable to or for the account of the Transferor Investor Group and the Acquiring Investor Group, as the case may be, in accordance with their respective interests as reflected in this Investor Group Supplement, whether such amounts have accrued prior to the Transfer Issuance Date or accrue subsequent to the Transfer Issuance Date.
Each of the parties to this Investor Group Supplement agrees that, at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Investor Group Supplement.
The Acquiring Investor Group has executed and delivered to the Administrative Agent a Purchaser’s Letter substantially in the form of Exhibit D to the Series 2021-1 Class A-1 Note Purchase Agreement.
By executing and delivering this Investor Group Supplement, the Transferor Investor Group and the Acquiring Investor Group confirm to and agree with each other and the other parties to the Series 2021-1 Class A-1 Note Purchase Agreement as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Investor Group makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Series 2021-1 Supplement, the Series 2021-1 Class A-1 Note Purchase Agreement or the execution, legality, validity,
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enforceability, genuineness, sufficiency or value of the Indenture, the Series 2021-1 Class A-1 Notes, the Related Documents or any instrument or document furnished pursuant thereto; (ii) the Transferor Investor Group makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Master Issuer or the performance or observance by the Master Issuer of any of the Master Issuer’s obligations under the Indenture, the Series 2021-1 Class A-1 Note Purchase Agreement, the Related Documents or any other instrument or document furnished pursuant hereto; (iii) the Acquiring Investor Group confirms that it has received a copy of the Indenture, the Series 2021-1 Class A-1 Note Purchase Agreement and such other Related Documents and other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Investor Group Supplement; (iv) the Acquiring Investor Group will, independently and without reliance upon the Administrative Agent, the Transferor Investor Group, the Funding Agents or any other Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Series 2021-1 Class A-1 Note Purchase Agreement; (v) the Acquiring Investor Group appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Series 2021-1 Class A-1 Note Purchase Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Article V of the Series 2021-1 Class A-1 Note Purchase Agreement; (vi) each member of the Acquiring Investor Group appoints and authorizes its related Funding Agent, listed on Schedule I hereto, to take such action as agent on its behalf and to exercise such powers under the Series 2021-1 Class A-1 Note Purchase Agreement as are delegated to such Funding Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Article V of the Series 2021-1 Class A-1 Note Purchase Agreement; (vii) each member of the Acquiring Investor Group agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Series 2021-1 Class A-1 Note Purchase Agreement are required to be performed by it as a member of the Acquiring Investor Group; and (viii) each member of the Acquiring Investor Group hereby represents and warrants to the Master Issuer and the Manager that: (A) it has had an opportunity to discuss the Master Issuer’s and the Manager’s business, management and financial affairs, and the terms and conditions of the proposed purchase, with the Master Issuer and the Manager and their respective representatives; (B) it is a “qualified institutional buyer” within the meaning of Rule 144A under the 1933 Act and has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of investing in, and is able and prepared to bear the economic risk of investing in, the Series 2021-1 Class A-1 Notes; (C) it is purchasing the Series 2021-1 Class A-1 Notes for its own account, or for the account of one or more “qualified institutional buyers” within the meaning of Rule 144A under the 1933 Act that meet the criteria described in clause (viii)(B) above and for which it is acting with complete investment discretion, for investment purposes only and not with a view to distribution, subject, nevertheless, to the understanding that the disposition of its property shall at all times be and remain within its control, and neither it nor its Affiliates has engaged in any general solicitation or general advertising within the meaning of the 1933 Act with respect to the Series 2021-1 Class A-1 Notes; (D) it understands that (I) the Series 2021-1 Class A-1 Notes have not been and will not be registered or qualified under the 1933 Act or any applicable state securities laws or the securities laws of any other jurisdiction and are being offered only in a transaction not involving
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any public offering within the meaning of the 1933 Act and may not be resold or otherwise transferred unless so registered or qualified or unless an exemption from registration or qualification is available and an opinion of counsel shall have been delivered in advance to the Master Issuer, (II) the Master Issuer is not required to register the Series 2021-1 Class A-1 Notes, (III) any permitted transferee hereunder must meet the criteria described under clause (viii)(B) above and (IV) any transfer must comply with the provisions of Section 2.8 of the Base Indenture, Section [4.3] of the Series 2021-1 Supplement and Sections 9.03 or 9.17, as applicable, of the Series 2021-1 Class A-1 Note Purchase Agreement; (E) it will comply with the requirements of clause (viii)(D) above in connection with any transfer by it of the Series 2021-1 Class A-1 Notes; (F) it understands that the Series 2021-1 Class A-1 Notes will bear the legend set out in the form of Series 2021-1 Class A-1 Notes attached to the Series 2021-1 Supplement and be subject to the restrictions on transfer described in such legend; (G) it will obtain for the benefit of the Master Issuer from any purchaser of the Series 2021-1 Class A-1 Notes substantially the same representations and warranties contained in the foregoing paragraphs; and (H) it has executed a Purchaser’s Letter substantially in the form of Exhibit D to the Series 2021-1 Class A-1 Note Purchase Agreement.
Schedule I hereto sets forth (i) the Purchased Percentage for the Acquiring Investor Group, (ii) the revised Commitment Amounts of the Transferor Investor Group and the Acquiring Investor Group, and (iii) the revised Maximum Investor Group Principal Amounts for the Transferor Investor Group and the Acquiring Investor Group and (iv) administrative information with respect to the Acquiring Investor Group and its related Funding Agent.
This Investor Group Supplement and all matters arising under or in any manner relating to this Investor Group Supplement shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to any choice of law or conflict provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York, and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such law.
ALL PARTIES HEREUNDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ON THE SERIES 2021-1 CLASS A-1 NOTE PURCHASE AGREEMENT, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS INVESTOR GROUP SUPPLEMENT OR THE SERIES 2021-1 CLASS A-1 NOTE PURCHASE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PARTIES IN CONNECTION HEREWITH OR THEREWITH. ALL PARTIES ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SIGNIFICANT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR ALL PARTIES TO ENTER INTO THIS INVESTOR GROUP SUPPLEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Investor Group Supplement to be executed by their respective duly authorized officers as of the date first set forth above.
[ ], as Transferor Investor Group
By:
By:
Name:
Title
[ ], as Acquiring Investor Group
By:
Name:
Title:
[ ], as Funding Agent
By:
Name:
Title
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CONSENTED AND ACKNOWLEDGED
BY THE MASTER ISSUER:
WENDY’S FUNDING, LLC, as Master Issuer
By:
Name:
Title:
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CONSENTED BY:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as L/C Provider
By:
Name:
Title:
as L/C Provider
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH,
as Swingline Lender
By:
Name:
Title:
as Swingline Lender
By:
Name:
Title:
By:
Name:
Title:
Name:
Title:
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SCHEDULE I TO
INVESTOR GROUP SUPPLEMENT
INVESTOR GROUP SUPPLEMENT
LIST OF ADDRESSES FOR NOTICES
AND OF COMMITMENT AMOUNTS
[____________________], as
Transferor Investor Group
Prior Commitment Amount: $[ ]
Revised Commitment Amount: $[ ]
Prior Maximum Investor Group
Principal Amount: $[ ]
Revised Maximum Investor
Group Principal Amount: $[ ]
[_______________________], as
Acquiring Investor Group
Address:
Attention:
Telephone:
Facsimile:
Purchased Percentage of
Transferor Investor Group’s Commitment: [_______]%
Prior Commitment Amount: $[________]
Revised Commitment Amount: $[______]
Prior Maximum Investor Group
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Principal Amount: $[________]
Revised Maximum Investor
Group Principal Amount: $[_______]
[_________________________________], as
related Funding Agent
Address: Attention:
Telephone:
Facsimile:
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EXHIBIT D TO CLASS A-1
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT
[FORM OF PURCHASER’S LETTER]
[INVESTOR]
[INVESTOR ADDRESS]
Attention: [INVESTOR CONTACT] [Date]
[INVESTOR ADDRESS]
Attention: [INVESTOR CONTACT] [Date]
Ladies and Gentlemen:
Reference is hereby made to the Class A-1 Note Purchase Agreement dated June 22, 2021 (the “NPA”) relating to the offer and sale (the “Offering”) of up to $300,000,000 of Series 2021-1 Variable Funding Senior Notes, Class A-1 (the “Securities”) of Wendy’s Funding, LLC (the “Master Issuer”). The Offering will not be required to be registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Act”) under an exemption from registration granted in Section 4(a)(2) of the Act. Coöperatieve Rabobank U.A., New York Branch is acting as administrative agent (the “Administrative Agent”) in connection with the Offering. Unless otherwise defined herein, capitalized terms have the definitions ascribed to them in the NPA. Please confirm with us your acknowledgement and agreement with the following:
(a) You are a “qualified institutional buyer” within the meaning of Rule 144A under the Act (a “Qualified Institutional Buyer”) and have sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of investing in, and are able and prepared to bear the economic risk of investing in, the Securities.
(b) Neither the Administrative Agent nor its Affiliates (i) has provided you with any information with respect to the Master Issuer, the Securities or the Offering other than the information contained in the NPA, which was prepared by the Master Issuer, or (ii) makes any representation as to the credit quality of the Master Issuer or the merits of an investment in the Securities. The Administrative Agent has not provided you with any legal, business, tax or other advice in connection with the Offering or your possible purchase of the Securities.
(c) You acknowledge that you have completed your own diligence investigation of the Master Issuer and the Securities and have had sufficient access to the agreements, documents, records, officers and directors of the Master Issuer to make your investment decision related to the Securities. You further acknowledge that you have had an opportunity to discuss the Master Issuer’s and the Manager’s business, management and financial affairs, and the terms and conditions of the proposed purchase, with the Master Issuer and the Manager and their respective representatives.
(d) The Administrative Agent may currently or in the future own securities issued by, or have business relationships (including, among others, lending, depository, risk management, advisory and banking relationships) with, the Master Issuer and its affiliates, and the Administrative Agent
136
will manage such security positions and business relationships as it determines to be in its best interests, without regard to the interests of the holders of the Securities.
(e) You are purchasing the Securities for your own account, or for the account of one or more Persons who are Qualified Institutional Buyers and who meet the criteria described in paragraph (a) above and for whom you are acting with complete investment discretion, for investment purposes only and not with a view to a distribution in violation of the Act, subject, nevertheless, to the understanding that the disposition of your property shall at all times be and remain within your control, and neither you nor your Affiliates has engaged in any general solicitation or general advertising within the meaning of the Act, or the rules and regulations promulgated thereunder with respect to the Securities. You confirm that, to the extent you are purchasing the Securities for the account of one or more other Persons, (i) you have been duly authorized to make the representations, warranties, acknowledgements and agreements set forth herein on their behalf and (ii) the provisions of this letter constitute legal, valid and binding obligations of you and any other Person for whose account you are acting;
(f) You understand that (i) the Securities have not been and will not be registered or qualified under the Act or any applicable state securities laws or the securities laws of any other jurisdiction and are being offered only in a transaction not involving any public offering within the meaning of the Act and may not be resold or otherwise transferred unless so registered or qualified or unless an exemption from registration or qualification is available and an opinion of counsel on the foregoing shall have been delivered in advance to the Master Issuer, (ii) the Master Issuer is not required to register the Securities under the Act or any applicable state securities laws or the securities laws of any state of the United States or any other jurisdiction, (iii) any permitted transferee under the NPA must be a Qualified Institutional Buyer and (iv) any transfer must comply with the provisions of Section 2.8 of the Base Indenture, Section [4.3] of the Series 2021-1 Supplement and Sections 9.03 or 9.17 of the NPA, as applicable;
(g) You will comply with the requirements of paragraph (f) above in connection with any transfer by you of the Securities;
(h) You understand that the Securities will bear the legend set out in the form of Securities attached to the Series 2021-1 Supplement and be subject to the restrictions on transfer described in such legend;
(i) Either (i) you are not acquiring or holding the Securities for or on behalf of, or with the assets of, any plan, account or other arrangement that is subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), Section 4975 of the Code, or provisions under any Similar Law (as defined in the Series 2021-1 Supplemental Definitions List attached to the Series 2021-1 Supplement as Annex A) or (ii) your purchase and holding of the Securities will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of any applicable Similar Law; and
(j) You will obtain for the benefit of the Master Issuer from any purchaser of the Securities substantially the same representations and warranties contained in the foregoing paragraphs.
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This letter agreement will be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice of law or conflict provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
You understand that the Administrative Agent will rely upon this letter agreement in acting as an Administrative Agent in connection with the Offering. You agree to notify the Administrative Agent promptly in writing if any of your representations, acknowledgements or agreements herein cease to be accurate and complete. You irrevocably authorize the Administrative Agent to produce this letter to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters set forth herein.
[ ]
By:
Name:
Title:
Agreed and Acknowledged:
[INVESTOR]
By:
Name:
Title:
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EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
OF THE WENDY’S COMPANY, PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Todd A. Penegor, certify that:
1.I have reviewed this quarterly report on Form 10-Q of The Wendy’s Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) 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: August 9, 2023
/s/ Todd A. Penegor
Todd A. Penegor
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
OF THE WENDY’S COMPANY, PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gunther Plosch, certify that:
1.I have reviewed this quarterly report on Form 10-Q of The Wendy’s Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) 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: August 9, 2023
/s/ Gunther Plosch
Gunther Plosch
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of The Wendy’s Company, a Delaware corporation (the “Company”), does hereby certify, to the best of such officer’s knowledge, that in connection with the Quarterly Report on Form 10-Q of the Company for the quarter ended July 2, 2023 (the “Form 10-Q”):
1.the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 9, 2023
/s/ Todd A. Penegor
Todd A. Penegor
President and Chief Executive Officer
Date: August 9, 2023
/s/ Gunther Plosch
Gunther Plosch
Chief Financial Officer