Sprouts Farmers Market 2014 Annual Report Download - page 62

The proceeds of the Term Loan were used to repay in full the outstanding balance of $403.1 million
(as of April 23, 2013) under our former credit facilities. Such repayment resulted in $8.2 million of loss on
extinguishment of debt due to the write-off of deferred financing costs and original issue discount. The
remaining proceeds of the term loans, together with cash on hand, were used to make a $282 million
distribution to our equity holders, to make payments of $13.9 million to vested option holders and to pay
transaction fees and expenses.
Obligations under the Credit Facility are guaranteed by us and all of our current and future wholly
owned material domestic subsidiaries. Our borrowings under the Credit Facility are secured by (i) a pledge
by Sprouts of its equity interests in Intermediate Holdings and (ii) first-priority liens on substantially all
assets of Intermediate Holdings and the subsidiary guarantors, in each case, subject to permitted liens and
certain exceptions.
The issue price for the Credit Facility was 99.5% of the principal amount thereof, which original issue
discount or upfront fee will be amortized over the life of the Credit Facility.
Interest and Applicable Margin. All amounts outstanding under the Credit Facility bear interest, at our
option, at a rate per annum equal to LIBOR (with a 1.00% floor with respect to Eurodollar borrowings under
the Term Loan), adjusted for statutory reserves, plus a margin equal to 3.00%, or an alternate base rate,
plus a margin equal to 2.00%, as set forth in the Credit Facility.
Payments and Prepayments. Subject to exceptions set forth therein, the Credit Facility requires
mandatory prepayments, in amounts equal to (i) 50% (reduced to 25% if net first lien leverage is less than
3.00 to 1.00 but greater than 2.50 to 1.00 and 0% if net first lien leverage is less than 2.50 to 1.00) of
excess cash flow (as defined in the Credit Facility) at the end of each fiscal year, (ii) 100% of the net cash
proceeds from certain non-ordinary course asset sales by Sprouts or any subsidiary guarantor (subject to
certain exceptions and reinvestment provisions) and (iii) 100% of the net cash proceeds from the issuance
or incurrence after the April 2013 Refinancing Closing Date of debt by Sprouts or any of its subsidiaries not
permitted under the Credit Facility.
Voluntary prepayments of borrowings under the Credit Facility are permitted at any time, in agreed-
upon minimum principal amounts. There is a prepayment fee equal to 1.00% of the principal amount of the
Term Loan under the Credit Facility optionally prepaid in connection with any “repricing transaction” on or
prior to the first anniversary of the closing date. Prepayments made thereafter will not be subject to
premium or penalty (except LIBOR breakage costs, if applicable).
The Term Loan will mature on the seventh anniversary of the April 2013 Refinancing Closing Date and
will amortize at a rate per annum, in four equal quarterly installments, in an aggregate amount equal to
1.00% of the April 2013 Refinancing Closing Date principal amount of the term loans, with the balance due
on the maturity date. The Revolving Credit Facility will mature on the fifth anniversary of the April 2013
Refinancing Closing Date.
Covenants. The Credit Facility contains financial, affirmative and negative covenants that we believe
are usual and customary for a senior secured credit agreement. In addition, if we have any amounts
outstanding under the Revolving Credit Facility as of the last day of any fiscal quarter, the Revolving Credit
Facility requires us to maintain a ratio of Revolving Facility Credit exposure to consolidated trailing 12-
month EBITDA (as defined in the Credit Facility) of no more than 0.75 to 1.00 as of the end of each such
fiscal quarter.
We were in compliance with all applicable covenants under the Credit Facility as of December 28,
2014.
Events of Default. The Credit Facility contains customary events of default included in financing
transactions, including failure to make payments when due, default under other material indebtedness,
59