Document:

Exhibit 10.3

 

Award Number:           

 

FDO HOLDINGS, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

PURSUANT TO THE

FDO HOLDINGS, INC.

2011 STOCK OPTION PLAN

 

AGREEMENT (“Agreement”), dated as of [·], 20     between FDO Holdings, Inc., a Delaware corporation (the “Company”), and [·] (the “Participant”).

 

Preliminary Statement

 

The Committee authorized this grant of a non-qualified stock option (the “Option”) on [·], 20       (the “Grant Date”)(1) to purchase the number of shares of Class B non-voting Common Stock, par value $0.001 per share, of the Company (the “Common Stock”), set forth below to the Participant, as an Eligible Employee of the Company or one of its Affiliates (collectively, the Company and all of its Affiliates shall be referred to as the “Employer”).  Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the FDO Holdings, Inc. 2011 Stock Option Plan, as it may be amended from time to time (the “Plan”).  A copy of the Plan has been delivered to the Participant.  By signing and returning this Agreement, the Participant acknowledges having received and read a copy of the Plan and agrees to comply with it, this Agreement and all applicable laws and regulations.

 

Accordingly, the parties hereto agree as follows:

 

1.                                      Tax Matters.  No part of the Option granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

 

2.                                      Grant of Option.  Subject in all respects to the Plan and the terms and conditions set forth herein and therein, the Participant is hereby granted an Option to purchase from the Company [·] shares of Common Stock, at a price per share of $[·] (the “Option Price”).

 

3.                                      Exercise.

 

(a)                                 The Option shall vest and become exercisable as provided below, which shall be cumulative.  To the extent that the Option has become exercisable with respect to a number of shares of Common Stock as provided below, the Option may thereafter be exercised by the Participant, in whole or in part, at any time or from time to time prior to the expiration of the Option as provided herein and in accordance with Section 6.3(b) of the Plan, including, without limitation, the filing of such written form of exercise notice, if any, as may be required by the Committee and payment in full of the Option Price multiplied by the number of shares of Common Stock underlying the portion of the Option exercised.  Upon expiration of the 

 

(1)  Insert date that the Option was approved by the Committee.

 

 

Option, the Option shall be canceled and no longer exercisable.  The following table indicates each date upon which the Option shall be vested and Participant shall be entitled to exercise the Option with respect to the percentage indicated beside that date provided that the Participant has not suffered a Termination prior to the applicable vesting date:

 

	
 
    	
Vesting Date
    	
 
    	
Percent Vested
    	
 
    	
 
    
	
 
    	
First Anniversary of Grant   Date
    	
 
    	
[·]
    	
%
    	
 
    
	
 
    	
Second Anniversary of   Grant Date
    	
 
    	
[·]
    	
%
    	
 
    
	
 
    	
Third Anniversary of Grant   Date
    	
 
    	
[·]
    	
%
    	
 
    
	
 
    	
Fourth Anniversary of   Grant Date
    	
 
    	
[·]
    	
%
    	
 
    
	
 
    	
Fifth Anniversary of the   Grant Date
    	
 
    	
[·]
    	
%
    	
 
    

 

There shall be no proportionate or partial vesting in the periods prior to each vesting date and all vesting shall occur only on the appropriate vesting date.

 

(b)                                 Notwithstanding the foregoing, the Participant may not exercise the Option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act, or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act.  The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and the Participant may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.  In addition, the Participant may not exercise the Option if the terms of the Plan do not permit the exercise of Options at such time.

 

(c)                                  The provisions in the Plan regarding Detrimental Activity shall apply to the Option.  In the event that the Participant engages in Detrimental Activity prior to the exercise of the Option, the Option shall terminate and expire as of the date the Participant engaged in such Detrimental Activity.  As a condition of the exercise of the Option, the Participant shall be required to certify (or be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity.  In the event the Participant engages in Detrimental Activity during the one year period commencing on the date the Option is exercised, the Company shall be entitled to recover from the Participant at any time within one year after such exercise, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise of the Option (whether at the time of exercise or thereafter).

 

4.                                      Option Term.  The term of the Option shall be until the tenth anniversary of the Grant Date, after which time it shall terminate, subject to earlier termination in the event of the Participant’s Termination as specified in Section 5 below.

 

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5.                                      Termination.

 

(a)                                 Subject to the terms of the Plan and this Agreement, the Option, to the extent vested at the time of the Participant’s Termination, shall remain vested and exercisable as provided in Section 7.2(a)-(c) of the Plan.

 

(b)                                 Any portion of the Option that is not vested as of the date of the Participant’s Termination for any reason shall terminate and expire as of the date of such Termination.

 

(c)                                  In the event that the Participant’s employment agreement provides more favorable rights with respect to the vesting and post-Termination exercise of the Option and such rights were approved by the Committee in connection with the grant of the Option, such rights shall apply.

 

6.                                      Restriction on Transfer of Option.  No part of the Option shall be Transferable other than by will or by the laws of descent and distribution and during the lifetime of the Participant, may be exercised only by the Participant or the Participant’s guardian or legal representative.  In addition, the Option shall not be assigned, negotiated, pledged or hypothecated in any way (except as provided by law or herein), and the Option shall not be subject to execution, attachment or similar process.  Upon any attempt to Transfer the Option or in the event of any levy upon the Option by reason of any execution, attachment or similar process contrary to the provisions hereof, the Option shall immediately become null and void.

 

7.                                      Company’s Right to Repurchase; Restrictions on Transfer.

 

(a)                                 The Option, and any shares of Common Stock that the Participant acquires upon exercise of the Option, shall be subject to the restrictions on transfer set forth in Article XI of the Plan and in this Section 7.

 

(b)                                 Company’s Right of Repurchase.

 

(i)                                     In the event of a Participant’s Termination for Cause or a Participant’s voluntary Termination without Good Reason or the discovery that a Participant engaged in a Detrimental Activity, the Company shall have the right (the “Repurchase Right”), but not the obligation, to repurchase (or may cause its designee to repurchase) from the Participant (or his or her transferee) any or all of the shares of Common Stock previously acquired by the Participant pursuant to the exercise of the vested Stock Option (the “Option Shares”) held by the Participant at the Repurchase Price.  The Repurchase Right shall be exercised upon one or more occasions and at any time during the 90-day period following the later of such Termination or the date on which the Participant exercises the Option; provided, that, the Company’s Repurchase Right may be further extended for an additional 90-day period if the Company determines it necessary to obtain lender consent to any such purchase.  The “Repurchase Price” shall be an amount in cash equal to the product of (X) the number of the Option Shares to be repurchased by the Company and the lesser of (Y) (i) the exercise price or (ii) the Fair Market Value of a share of Common Stock on the date of Termination.

 

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(ii)                                  In the event of a Termination for any reason other than for Cause or on account of a Participant’s voluntary Termination without Good Reason (including Termination due to retirement, death, Disability or involuntary termination without Cause), (i) the Company may at any time within 180 days of the date of Termination repurchase (or may cause its designee to repurchase) from the Participant (or his or her transferee) any shares of Common Stock acquired by the Participant through the exercise of a Stock Option on or prior to the date of his or her Termination at a repurchase price equal to the Fair Market Value on the date of Termination and (ii) the Company may at any time within 60 days of the date of Termination (A) repurchase (or may cause its designee to repurchase) from the Participant the outstanding vested portion of the Option based on the difference between the exercise price of a share of Common Stock relating to such Stock Option and the Fair Market Value of a share of Common Stock on the date of Termination or (B) repurchase (or may cause its designee to repurchase) from the Participant (or his or her transferee) any shares of Common Stock acquired by the Participant through the exercise of a Stock Option after the date of Termination at a repurchase price equal to the Fair Market Value on the date of repurchase.  Notwithstanding the foregoing, if the Company elects to exercise its right to repurchase shares of Common Stock pursuant to clause (ii)(B) of this Section 7(b)(ii) within 5 days of the applicable exercise date, in lieu of such exercise and repurchase, the Company will repurchase the number of shares to be purchased pursuant to such written notice of exercise based on the difference between the exercise price of a share of Common Stock relating to such Stock Option and the Fair Market Value of a share of Common Stock on the date of Termination.

 

(iii)                               To exercise its repurchase rights under this Section 7(b), the Company (or its designee) shall deliver a written notice to the Participant setting forth the securities to be repurchased and the applicable purchase price thereof, and the date on which such repurchase is to be consummated, which date shall be not less than 15 days or more than 30 days after the date of such notice (provided, that such period shall be extended at any time when repurchase by the Company is prohibited pursuant to (i) any applicable law or (ii) any debt instrument of the Company or any of its Affiliates or (iii) would result in adverse accounting consequences for the Company).

 

(iv)                              At such closing, the Company will pay the Participant the repurchase price as specified in this Section 7(b) in cash, or by cancellation of indebtedness of the Participant to the Company.

 

(c)                                  Notwithstanding anything in this Agreement to the contrary, if the Participant is a party to the Shareholders Agreement or executes a Joinder Agreement (or is a party to or executes a joinder agreement to another shareholders agreement (or similar agreement) that provides repurchase rights, call rights and/or rights of first refusal or rights of first offer), such provisions with respect to repurchase rights, call rights and/or rights of first refusal or rights of first offer in the Shareholders Agreement or such other shareholders agreement (or similar agreement), including any amendments thereto, shall control to the extent they are inconsistent with the provisions herein.

 

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(d)                                 To ensure that the shares of Common Stock issuable upon exercise of the Option are not transferred in contravention of the terms of the Plan and this Agreement, and to ensure compliance with other provisions of the Plan and this Agreement, the Company may deposit the certificates evidencing the shares of Common Stock to be issued upon the exercise of the Option with an escrow agent designated by the Company.

 

8.                                      Securities Representations.  Upon the exercise of the Option prior to the registration of the Common Stock subject to the Option pursuant to the Securities Act or other applicable securities laws, the Participant shall be deemed to acknowledge and make the representations and warranties as described below and as otherwise may be requested by the Company for compliance with applicable laws, and any issuances of Common Stock by the Company shall be made in reliance upon the express representations and warranties of the Participant.

 

(a)                                 The Participant is acquiring and will hold the shares of Common Stock for investment for his account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or other applicable securities laws.

 

(b)                                 The Participant has been advised that the shares of Common Stock have not been registered under the Securities Act or other applicable securities laws, on the ground that no distribution or public offering of the shares of Common Stock is to be effected (it being understood, however, that the shares of Common Stock are being issued and sold in reliance on the exemption provided under Rule 701 under the Securities Act), and that the shares of Common Stock must be held indefinitely, unless they are subsequently registered under the applicable securities laws or the Participant obtains an opinion of counsel (in the form and substance satisfactory to the Company and its counsel) that registration is not required.  In connection with the foregoing, the Company is relying in part on the Participant’s representations set forth in this Section.  The Participant further acknowledges and understands that the Company is under no obligation hereunder to register the shares of Common Stock.

 

(c)                                  The Participant is aware of the adoption of Rule 144 by the Securities and Exchange Commission under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions.  The Participant acknowledges that he is familiar with the conditions for resale set forth in Rule 144, and acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company has no plans to satisfy these conditions in the foreseeable future.

 

(d)                                 The Participant will not sell, transfer or otherwise dispose of the shares of Common Stock in violation of the Plan, this Agreement, Securities Act (or the rules and regulations promulgated thereunder) or under any other applicable securities laws.  The Participant agrees that he will not dispose of the Common Stock unless and until he has complied with all requirements of this Agreement applicable to the disposition of the shares of Common Stock.

 

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(e)                                  The Participant has been furnished with, and has had access to, such information as he considers necessary or appropriate for deciding whether to invest in the shares of Common Stock, and the Participant has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Common Stock.

 

(f)                                   The Participant is aware that his investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.  The Participant is able, without impairing his financial condition, to hold the Shares for an indefinite period and to suffer a complete loss of his investment in the Common Stock.

 

9.                                      Rights as a Shareholder.  The Participant shall have no rights as a shareholder with respect to any shares covered by the Option unless and until the Participant has become the holder of record of the shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such shares, except as otherwise specifically provided for in the Plan.

 

10.                               Provisions of Plan Control.  This Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time.  The Plan is incorporated herein by reference.  If and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.  This Agreement contains the entire understanding of the parties with respect to the subject matter hereof (other than any exercise notice or other documents expressly contemplated herein or in the Plan) and supersedes any prior agreements between the Company and the Participant with respect to the subject matter hereof.

 

11.                               Notices.  All notices, demands or requests made pursuant to, under or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made:

 

(a)                                 unless otherwise specified by the Company in a notice delivered by the Company in accordance with this Section 11, any notice required to be delivered to the Company shall be properly delivered if delivered to:

 

FDO Holdings, Inc.

c/o Ares Management II, L.P.

2000 Avenue of the Stars, 12th Floor

Los Angeles, CA 90067

	
Attention:
    	
Adam   Stein
    
	
Telephone:
    	
(310)   201-4100
    
	
Facsimile:
    	
(310)   201-4170
    

with copies (which shall not constitute notice) to:

 

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Proskauer Rose LLP
 2049 Century Park East, Suite 3200
 Los Angeles, CA 90067

	
Attention:
    	
Monica   J. Shilling, Esq.
    
	
Telephone:
    	
(310)   284-4544
    
	
Facsimile:
    	
(310)   557-2193
    

 

and to:

 

FS Equity Partners VI, L.P.
 c/o Freeman Spogli & Co.
 11100 Santa Monica Boulevard, Suite 1900
 Los Angeles, CA 90025
 Attention: Brad Brutocao
 Telephone: (310) 444-1822
 Facsimile: (310) 444-1870

 

(b)                                 if to the Participant, to the address on file with the Company.

 

Any notice, demand or request, if made in accordance with this Section 11 shall be deemed to have been duly given:  (i) when delivered in person; (ii) three (3) days after being sent by United States mail; or (iii) on the first business day following the date of deposit if delivered by a nationally recognized overnight delivery service.

 

12.                               No Obligation to Continue Employment.  This Agreement is not an agreement of employment.  This Agreement does not guarantee that the Employer will employ the Participant for any specific time period, nor does it modify in any respect the Employer’s right to terminate or modify the Participant’s employment or compensation.

 

13.                               Shareholders Agreement and Other Requirements.  Notwithstanding anything herein to the contrary, as a condition to the receipt of shares of Common Stock when the Option is exercised, at the Company’s request, the Participant shall execute and deliver a Joinder Agreement or such other documentation which shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise or purchase, a right of first refusal of the Company with respect to shares, and such other terms or restrictions as the Committee shall from time to time establish, including, without limitation, any drag-along rights, tag-along rights, transfer restrictions and registration rights.  The Shareholders Agreement or other documentation shall apply to the Common Stock acquired under the Plan and covered by the Shareholders Agreement or other documentation.  The Company may require, as a condition of exercise, the Participant to become a party to any other existing shareholder agreement or other agreement.

 

14.                               Waiver of Jury Trial.  Each party to this Agreement, for itself and its affiliates, hereby irrevocably and unconditionally waives to the fullest extent permitted by applicable law all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to the actions of

 

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the parties hereto or their respective affiliates pursuant to this Agreement or in the negotiation, administration, performance or enforcement of this Agreement.

 

15.                               Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws.

 

[Remainder of Page Left Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
 
    	
 
    	
FDO   HOLDINGS, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Employee   Name:
    	
 
    	
 
    	
 
    
	
Employee   ID number:
    	
 
    	
 
    	
 
    

 

9Exhibit 10.6

 

INDEMNIFICATION AGREEMENT

 

This INDEMNIFICATION AGREEMENT (this “Agreement”) is effective [·], by and among Floor & Decor Holdings, Inc., a Delaware corporation (the “Company”), [·] (“Indemnitee”) and, with respect to its guarantee set forth on the signature pages hereto only, Floor and Decor Outlets of America, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“F&D”).

 

WHEREAS, it is essential to the Company to retain and attract the most capable persons available as directors and officers of the Company and its subsidiaries (including F&D);

 

WHEREAS, Indemnitee is a [director][officer] of the Company;

 

WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability to enhance Indemnitee’s continued service to the Company and its subsidiaries in an effective manner, the increasing difficulty in obtaining satisfactory directors’ and officers’ liability insurance coverage, and in part to provide Indemnitee with specific contractual assurance that indemnification will be available to Indemnitee (regardless of, among other things, any change in the composition of the Board or acquisition transaction relating to the Company), the Company and F&D wish to provide in this Agreement for the indemnification of and the advancing of Expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies;

 

NOW, THEREFORE, in consideration of the foregoing and of Indemnitee continuing to serve the Company and its subsidiaries (including F&D) directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.                                      Certain Definitions.

 

(a)                                 “Affiliate” means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such first Person.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Securities or other ownership interests, by contract or otherwise.

 

(b)                                 “beneficial owner” has the meaning set forth in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time.  The term “beneficially own” shall have a correlative meaning.

 

(c)                                  “Board” means the Board of Directors of the Company.

 

 

(d)                                 “Bylaws” means the bylaws of the Company, as the same may be amended or amended and restated from time to time.

 

(e)                                  “Change of Control” means the occurrence of any of the following events:

 

(i)                                     a merger or consolidation in which (A) the Company is a constituent party or (B) a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, in each case, unless the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for, shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting entity, or (2) if the surviving or resulting entity is a wholly owned subsidiary of another entity immediately following such merger or consolidation, the parent entity of such surviving or resulting entity;

 

(ii)                                  the sale, lease, transfer, exclusive license or other disposition (whether by merger, consolidation or otherwise), in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of (A) all or substantially all of the assets of the Company and its subsidiaries taken as a whole, or (B) one or more subsidiaries of the Company if all or substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, in each case except where such sale, lease, transfer, exclusive license or other disposition is to (1) a wholly owned subsidiary of the Company or (2) the Permitted Holders;

 

(iii)                               the acquisition, in a single transaction or a series of related transactions, by any person or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than the Permitted Holders, of (A) beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of the Corporation representing at least 50% of the combined voting power entitled to vote in the election of directors of the Company (including by means of the Company’s issuance of its capital stock or securities convertible into its capital stock) or (B) the contractual right to designate or elect 50% or more of the members of the Board;

 

(iv)                              during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (together with any new members of the Board whose election by such Board or whose nomination for election by the equityholders of the Company was approved by a vote of the majority of the members of the Board then still in office who were either members of the Board at the beginning of such period or whose election or nomination for election was previously so approved including new members of the Board designated in or provided for in an agreement regarding the merger, consolidation or sale, transfer or other conveyance, of all or substantially all of the assets of the Company, if such agreement was approved by a vote of such majority of members of the Board) cease for any reason to constitute a majority of the Board then in office; or

 

(v)                                 the adoption by the holders of capital stock of the Company of any plan or proposal for the liquidation or dissolution of the Company by way of merger, consolidation or otherwise.

 

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(f)                                   “Charter” means the certificate of incorporation of the Company, as the same may be amended or amended and restated from time to time.

 

(g)                                  “Claim” means any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether instituted by the Company or any other Person, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other.

 

(h)                                 “Expenses” means attorneys’ fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event.

 

(i)                                     “Indemnifiable Event” means any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.

 

(j)                                    “Independent Legal Counsel” means an attorney or firm of attorneys, selected in accordance with the provisions of Section 3, who shall not have otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

 

(k)                                 “Permitted Holders” means (i) Ares Corporate Opportunities Fund III, L.P., Ares Management LLC and Ares Management, L.P. and their respective Affiliates and (ii) FS Equity Partners VI, L.P., FS Affiliates VI, L.P. and their respective Affiliates.

 

(l)                                     “Person” means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity.

 

(m)                             “Potential Change of Control” means (i) the Company entering into an agreement, the consummation of which would result in the occurrence of a Change of Control; (ii) any Person (including the Company) publicly announcing an intention to take or to consider taking actions that if consummated would constitute a Change of Control; or (iii) the Board adopting a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control has occurred.

 

(n)                                 “Reviewing Party” means Independent Legal Counsel or any Person or body consisting of a member or members of the Board or any other Person or body appointed by the Board who is not a party to the particular Claim for which Indemnitee is seeking indemnification.

 

(o)                                 “Voting Securities” means any securities of the Company, the holders of which vote generally in the election of directors.

 

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(p)                                 For purposes of this Agreement, except as otherwise expressly provided herein, (i) the words “hereof,” “herein,” “hereto,” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision hereof; (ii) the meaning assigned to each term defined herein is equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting either gender include both genders; (iii) reference to any Person includes such Person’s successors and assigns, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (v) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) numbered or lettered sections and subsections herein contained refer to sections and subsections of this Agreement; (vii) the term “dollars” and character “$” mean United States dollars; (viii) the term “including” means “including, without limitation,” and the words “include” and “includes” have corresponding meanings, and such words do not limit any general statement that they follow to the specific or similar items or matters immediately following them; and (ix) the term “or” is not exclusive.

 

2.                                      Basic Indemnification Arrangement.

 

(a)                                 In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim.  If so requested by Indemnitee, the Company shall advance to the fullest extent permitted by law (within ten business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”).  Expense Advances shall be unsecured and interest free.  Expense Advances shall be made without regard to Indemnitee’s ability to repay Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  Indemnitee shall qualify for Expense Advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that Indemnitee undertakes to (1) repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company and (2) provide reasonably satisfactory documentation supporting such Expenses.  Notwithstanding anything in this Agreement to the contrary, prior to a Change of Control, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless the Board has authorized or consented to the initiation of such Claim.

 

(b)                                 Notwithstanding the foregoing, the indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not

 

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have determined (in a written opinion if Independent Legal Counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law; provided, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed).  If there has not been a Change of Control, the Reviewing Party shall be selected by the Board, and if there has been such a Change of Control (other than a Change of Control that has been approved by a majority of the Board who were directors immediately prior to such Change of Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 hereof.  If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding.  If such litigation has not been commenced, any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

 

(c)                                  If, prior to, during the pendency of or after completion of a Claim for which the Indemnitee is entitled to indemnification pursuant to Section 2(a) and Section 2(b), the Indemnitee is deceased, the Company shall indemnify the Indemnitee’s heirs, executors and administrators against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim to the extent the Indemnitee would have been entitled to indemnification pursuant to this Agreement were the Indemnitee still alive.

 

3.                                      Change of Control.  If there is a Change of Control (other than a Change of Control that has been approved by a majority of the members of the Board who were directors immediately prior to such Change of Control), then, with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by the Board (which approval shall not be unreasonably withheld).  Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law.  The Company shall pay the reasonable fees of the Independent Legal Counsel referred to above and indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of such counsel pursuant hereto.

 

4.                                      Establishment of Trust.  In the event of a Potential Change of Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee

 

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and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Claim relating to an Indemnifiable Event, and any and all judgments, fines, penalties and settlement amounts of any and all Claims relating to an Indemnifiable Event from time to time actually paid or claimed or reasonably anticipated or proposed to be paid, provided that in no event shall more than $250,000 be required to be deposited in any trust created hereunder (and no more than $1,000,000 in the aggregate with respect to any such trusts created under this Agreement and all indemnification agreements with directors and officers) in excess of amounts deposited in respect of reasonably anticipated Expenses.  The amount or amounts to be deposited in the trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party, in any case in which determination the Independent Legal Counsel referred to above is involved.  The terms of the trust shall provide that upon a Change of Control (a) the trust shall not be revoked or the principal thereof invaded, without the written consent of Indemnitee, (b) the trustee shall advance, within ten business days of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the trust under the circumstances under which Indemnitee would be required to reimburse the Company under Section 2(a) of this Agreement), (c) the trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (d) the trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (e) all unexpended funds in such trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement.  The trustee shall be chosen by Indemnitee.  Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement.

 

5.                                      Indemnification for Additional Expenses.  The Company shall indemnify Indemnitee to the fullest extent permitted by applicable law against any and all Expenses (including attorneys’ fees and retainers) and, if requested by Indemnitee, shall (within ten business days of such request) advance such Expenses to Indemnitee, that are incurred by Indemnitee in connection with any action brought by Indemnitee for (a) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company.

 

6.                                      Partial Indemnity, Etc.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.  Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses incurred in connection therewith.

 

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7.                                      Contribution.

 

(a)                                 Contribution Payment.  To the extent the indemnification provided for under any provision of this Agreement is determined (in the manner herein provided) not to be permitted under applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the extent permitted by applicable law, contribute to the amount of any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of a Claim by reason of (or arising in part out of) an Indemnifiable Event incurred or paid by Indemnitee for which such indemnification is not permitted.  The amount the Company contributes shall be in such proportion as is appropriate to reflect the relative fault of Indemnitee, on the one hand, and of the Company and any and all other parties (including directors and officers of the Company other than Indemnitee) who may be at fault (collectively, including the Company, the “Third Parties”), on the other hand.

 

(b)                                 Relative Fault.  The relative fault of the Third Parties and Indemnitee shall be determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency or (ii) to the extent such court or other governmental agency does not apportion relative fault, by the Reviewing Party after giving effect to, among other things, the relative intent, knowledge, access to information and opportunity to prevent or correct the relevant events, of each party, and other relevant equitable considerations.  The Company and Indemnitee agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 7(b).

 

8.                                      Burden of Proof.  In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified or to contribution hereunder the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

 

9.                                      No Presumptions.  For purposes of this Agreement, the termination or conclusion of any Claim, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.  In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee’s Claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.

 

10.                               Nonexclusivity.  The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s Certificate of Incorporation or Bylaws, the Delaware General Corporation Law, the vote of the Company’s stockholders or disinterested directors, other agreements or otherwise.  To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by

 

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agreement than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

 

11.                               Subrogation.

 

(a)                                 The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses or insurance provided by one or more of the Permitted Holders or their Affiliates (collectively, the “Fund Indemnitors”).  The Company hereby agrees that it (i) is the indemnitor of first resort with respect to Claims by reason of (or arising in part out of) an Indemnifiable Event (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to indemnify, advance Expenses to or provide insurance for Indemnitee are secondary), (ii) shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses to the extent legally permitted, in each case, as set forth in this Agreement, the Charter and the Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and (iii) irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any Claim for which Indemnitee has sought advancement or indemnification from the Company hereunder shall affect the foregoing and the Fund Indemnitors shall have a right of contribution or be subrogated to the extent of such advancement or payment to all rights of recovery of Indemnitee against the Company.  The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 11(a).

 

(b)                                 If the Company makes any payment to or for the benefit of Indemnitee pursuant to the terms of this Agreement, the Company shall be subrogated to all of Indemnitee’s rights, claims and interests against any Person other than the Fund Indemnitors with regard to the subject of the payment.  The Company may proceed on any such claim immediately following any such payment by the Company to Indemnitee.  Indemnitee agrees to execute and deliver any documents requested in good faith by the Company in connection with the Company’s enforcement of Indemnitee’s rights, claims and interests, including assignments of such rights, claims and interests.  Any such assignment will include a warranty by Indemnitee that it owns the assigned rights, claims and interests free and clear of the claims and interests of any other Person.

 

12.                               Liability Insurance.

 

(a)                                 The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board, with the advice of counsel, covering Indemnitee for any Claim made against Indemnitee for any Indemnifiable Event and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any Claim made against Indemnitee for any Indemnifiable Event.  In the event that the Company receives notice of cancellation of any policy providing such directors and officers liability insurance, it shall promptly give notice of such cancellation to Indemnitee.

 

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(b)                                 Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Claim over the coverage of any insurance referred to in Section 12(a) above.  The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies.  If, at the time the Company receives notice from any source of a Claim to which Indemnitee is a party or a participant (as a witness or otherwise) and the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Claim to the insurers in accordance with the procedures set forth in the respective policies.

 

13.                               Period of Limitations.  To the fullest extent permitted by applicable law, no legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee or Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of the occurrence of the events leading to such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

 

14.                               Amendments, Etc.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

15.                               No Duplication of Payments.  Except as otherwise provided in Section 11(a), the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, the Bylaws or otherwise) of the amounts otherwise indemnifiable hereunder.

 

16.                               Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs, executors and personal and legal representatives.  This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director or officer of the Company or of any other enterprise at the Company’s request.

 

17.                               Severability.  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise

 

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unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

 

18.                               Integration and Entire Agreement.  This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.  If the Company and Indemnitee have previously entered into an indemnification agreement providing for indemnification of Indemnitee by the Company, the parties’ entry into this Agreement shall be deemed to amend and restate such indemnification agreement to read in its entirety as, and to be superseded by, this Agreement.

 

19.                               Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date set forth above.

 

 

	
 
    	
FLOOR & DECOR HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Its:
    

 

Signature Page to Indemnification Agreement

 

 

	
 
    	
INDEMNITEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[·]
    

 

Signature Page to Indemnification Agreement

 

 

Floor and Decor Outlets of America, Inc. hereby unconditionally guarantees the due and punctual payment and performance of all obligations of the Company under this Agreement in accordance with the terms set forth herein.

 

 

	
 
    	
FLOOR AND DECOR OUTLETS OF AMERICA, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Its:
    

 

Signature Page to Indemnification Agreement

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