The Committee also considers such other relevant factors as it deems appropriate, including
the current composition of the Board, the balance of management and independent directors, specific business and financial expertise, experience as a director of a public company, the need for Audit Committee expertise, the evaluations of other
prospective nominees, and diversity. The Board considers a number of factors in its evaluation of diversity, including gender, race, ethnicity, geography and age. The Board is committed to increasing its diversity through the recruitment of
qualified members with more diverse backgrounds to fill Board vacancies as they occur.
In connection with this evaluation, the Committee
determines whether to interview the prospective nominee(s), and if warranted, one or more members of the Committee, and others as appropriate, interview the prospective nominee(s) in person or by telephone. After completing this evaluation and
interview, the Committee makes a recommendation to the full Board as to the person(s) who should be nominated by the Board, and the Board determines the nominee(s) after considering the recommendation and report of the Committee.
The Board has adopted age limits for members of our Board which require that any person who has reached the age of 75 shall not be nominated
for initial election to the Board. However, the Governance and Nominating Committee may recommend, and the Board may approve the nomination for re-election of a director at or after the age of 75 if, in light
of all the circumstances, the Board believes it is in our best interests and the best interests of our shareholders.
We previously
entered into an employment agreement with Mr. Trojan that requires us to take all reasonable action within our control to cause him to continue to be appointed or elected to our Board of Directors during the term of his employment under the
employment agreement.
Relationship with BJs Act III, LLC
On May 5, 2020, we completed the sale of 375,000 shares of common stock and a Warrant to purchase up to 875,000 shares of common stock to SC
2018 Trust, LLC (SC LLC). Following the closing of such sale, SC LLC contributed the purchased shares and warrant to BJs Act III, LLC, a newly-formed subsidiary of Act III Holdings, LLC, which is owned by SC LLC and other limited
liability companies either controlled by Ronald M. Shaich or wholly owned by trusts established by Ronald M. Shaich.
In connection with
the sale of the shares and warrant SC LLC and BJs Act III, LLC became parties to an Investor Rights Agreement pursuant to which they (and any transferees who agree to become parties thereto) (together, the Investors) have certain
rights and obligations, including the following:
Board Nominee. The Investors have the right to designate one member (the
Act III Director) to our Board. Keith Pascal has been appointed as the initial Act III Director. We are required to name the Act III Director as a nominee in each election of directors at a meeting of shareholders. The Investors retain
the right to designate the Act III Director for so long as they collectively own the lesser of 4.25% of our then outstanding common stock or rights convertible or exercisable into common stock (on an
as-converted or exercised basis) or 187,500 shares of common stock (the Ownership Threshold).
Voting Agreement. For so long as the Investors have the right to designate or nominate a director to our Board, they have agreed to
vote any shares of common stock held by them (i) in favor of each director nominated or recommended by our Board for election at any meeting of shareholders, (ii) in favor of our say-on-pay proposal, and (iii) in favor of our proposal for ratification of the appointment of our independent public accounting firm.
Standstill. Until the later of May 5, 2024, or such time as the Investors no longer have the right to designate the Act III
Director, subject to certain customary exceptions, the Investors are prohibited from, among other things, (i) effecting a tender offer, merger or acquisition of us, (ii) soliciting proxies or seeking to change our directors/management, and
(iii) acquiring our securities, assets or indebtedness in connection with any of the actions described in (i) and (ii) above.
Noah Elbogen, who is a partner of Act III Holdings, LLC, the parent company of BJs Act III, LLC, is a current director and director
nominee at this years Annual Meeting. His nomination and continuing service are independent of BJs Act III, LLCs rights to appoint or nominate the Act III Director to the Board.
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