<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
RANDALL'S FOOD MARKETS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
TEXAS 5411 74-213-4840
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
3663 BRIARPARK
HOUSTON, TEXAS 77042
(713)268-3500
(Address, including zip Code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
R. RANDALL ONSTEAD
CHIEF EXECUTIVE OFFICER
3663 BRIARPARK
HOUSTON, TEXAS 77042
(713)268-3500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH A COPY TO:
<TABLE>
<S> <C>
ARTHUR D. ROBINSON, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE PRICE(1) FEE
<S> <C> <C> <C> <C>
9 3/8% Series B Senior Subordinated Notes due
2007..................................................... $ 150,000,000 100% $ 150,000,000 $ 45,454.55
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
RANDALL'S FOOD MARKETS, INC.
[LOGO]
OFFER TO EXCHANGE UP TO $150,000,000 OF ITS
[LOGO]
9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES DUE 2007
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
------------------------------
Randall's Food Markets, Inc. (the "Company" or "Randall's"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange an aggregate of up to $150,000,000 principal amount of
9 3/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes") of the
Company for an identical face amount of the issued and outstanding 9 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes", and together with the Exchange
Notes, the "Notes") of the Company from the Holders (as defined) thereof. As of
the date of this Prospectus, there is $150,000,000 aggregate principal amount of
the Old Notes outstanding. The terms of the Exchange Notes are identical in all
material respects to the Old Notes, except that the Exchange Notes have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and therefore will not bear legends restricting their transfer and will not
contain certain provisions providing for an increase in the interest rate on the
Old Notes under certain circumstances described in the Registration Rights
Agreement (as defined), which provisions will terminate as to all of the Notes
upon the consummation of the Exchange Offer.
Interest on the Exchange Notes will be payable semi-annually on January 1
and July 1 of each year, commencing on January 1, 1998. The Exchange Notes will
mature on July 1, 2007.
Except as described below, the Company may not redeem the Exchange Notes
prior to July 1, 2002. On or after such date, the Company may redeem the
Exchange Notes, in whole or in part, at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to July 1, 2000, the Company may, subject to
certain requirements, redeem up to 40% of the original aggregate principal
amount of the Exchange Notes with the net proceeds of one or more Equity
Offerings (as defined), at a price equal to 109.375% of the aggregate principal
amount to be redeemed, together with accrued and unpaid interest, if any, to the
date of redemption; provided that at least 60% of the original aggregate
principal amount of the Exchange Notes remains outstanding immediately after
each such redemption. The Exchange Notes will not be subject to any sinking fund
requirements. Upon the occurrence of a Change of Control (as defined) or certain
transfer events, the Company will have the option, at any time prior to July 1,
2002, to redeem the Exchange Notes, in whole but not in part, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
(as defined), together with accrued and unpaid interest, if any, to the date of
redemption. Upon the occurrence of a Change of Control, if the Company does not
so redeem such Exchange Notes or if a Change of Control occurs after July 1,
2002, the Company will be required to make an offer to purchase the Exchange
Notes at a price equal to 101% of the original aggregate principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
purchase. See "Description of the Exchange Notes."
The Exchange Notes will be unsecured, will be subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company and will be effectively subordinated to all obligations of the
subsidiaries of the Company. The Exchange Notes will rank PARI PASSU with any
future senior subordinated indebtedness of the Company and will rank senior to
all other Subordinated Indebtedness (as defined) of the Company. The Indenture
(as defined) permits the Company to incur additional indebtedness, including up
to $450.0 million of Senior Indebtedness under the Credit Facilities (as
defined), subject to certain limitations. See "Description of the Exchange
Notes." As of June 28, 1997, the aggregate amount of the Company's outstanding
Senior Indebtedness was approximately $128.0 million (excluding unused
commitments) and the Company would have had no senior subordinated indebtedness
outstanding other than the Old Notes. As of June 28, 1997, the Company's
subsidiaries had total liabilities of $366.2 million, excluding guarantees of
$128.0 million of indebtedness under the Credit Facilities. See "Selected
Historical Consolidated Condensed Financial and Other Data" and "Risk
Factors--Adverse Consequences of Holding Company Structure" and "--
Subordination."
The Old Notes were issued and sold on June 27, 1997 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act. The
Exchange Notes are being offered hereby in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, PROVIDED that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such Exchange Notes and
neither such holder nor any such other person is engaging in or intends to
engage in a distribution of such Exchange Notes. However, the Company has not
sought, and does not intend to seek, its own no-action letter, and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Notwithstanding the foregoing, each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with any resale of Exchange Notes
received in exchange for such Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company). The
Company has agreed that, for a period of 90 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. There is no established
trading market for the Exchange Notes. The Company does not currently intend to
list the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the fourth business day
following the Expiration Date (as defined). Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date. The
Company will not receive any proceeds from the Exchange Offer. The Company will
pay all of the expenses incident to the Exchange Offer. The Exchange Offer will
expire 5:00 p.m., New York City Time, on , 1997 (the "Expiration Date").
The Company does not currently intend to extend the Expiration Date.
------------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY INVESTORS IN CONNECTION WITH THE EXCHANGE OFFER AND
AN INVESTMENT IN THE EXCHANGE NOTES.
--------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Company is not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon completion of the Exchange Offer, the Company will be subject to the
information requirements of the Exchange Act and, in accordance therewith, will
file periodic reports and other information with the Commission. The
Registration Statement, such reports and other information can be inspected and
copied at the Public Reference Section of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional
public reference facilities maintained by the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material, including copies of all or any portion of the Registration Statement,
can be obtained from the Public Reference Section of the Commission at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet (http://www.sec.gov). In addition,
pursuant to the Indenture covering Old Notes and the Exchange Notes, the Company
has agreed to file with the Commission and provide to the Holders the annual
reports and the information, documents and other reports otherwise required
pursuant to Section 13 of the Exchange Act. Such requirements may be satisfied
through the filing and provision of such documents and reports which would
otherwise be required pursuant to Section 13 in respect of the Company.
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Risk Factors," among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Prospectus,
including, without limitation, in "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in the Company's
press release and in oral statements made by authorized officers of the Company.
When used in this Prospectus, the words "estimate," "project," "anticipate,"
"expect," "intend," "believe" and similar expressions are intended to identify
forward-looking statements. All of these forward-looking statements are based on
estimates and assumptions made by management of the Company, which, although
believed to be reasonable, are inherently uncertain. Therefore, undue reliance
should not be placed upon such estimates and statements. No assurance can be
given that any of such statements or estimates will be realized and actual
results will differ from those contemplated by such forward-looking statements.
The Prospectus includes certain economic and demographic data relating to
the historic and projected performance of the United States and Texas economies
based on information from the U.S. Census Bureau and an independent economic
forecasting firm and the Company assumes no responsibility for the accuracy
thereof.
RANDALLS, TOM THUMB, REMARKABLE, THE NEW GENERATION STORE and RANDALLS
FLAGSHIP are registered trademarks of the Company.
i
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE
"COMPANY" SHALL MEAN RANDALL'S FOOD MARKETS, INC. AND ITS CONSOLIDATED
SUBSIDIARIES. ALL REFERENCES TO FISCAL YEAR IN THIS PROSPECTUS REFER TO THE
FISCAL YEAR ENDING ON THE LAST SATURDAY OF JUNE. ALL REFERENCES TO MARKET SHARE
AND DEMOGRAPHIC DATA IN THIS PROSPECTUS ARE BASED ON INDUSTRY AND GOVERNMENT
PUBLICATIONS AND COMPANY DATA, AND UNLESS OTHERWISE INDICATED, REFERENCES TO
YEARS DENOTE CALENDAR, RATHER THAN FISCAL, YEARS. THE COMPANY'S MOST RECENT
FISCAL YEAR ENDED ON JUNE 28, 1997 AND ALL FINANCIAL AND STATISTICAL DATA
PRESENTED HEREIN RELATING TO THE COMPANY'S OPERATIONS, UNLESS OTHERWISE
INDICATED, IS CALCULATED AS OF JUNE 28, 1997. MARKET SHARE DATA PRESENTED HEREIN
IS BASED ON SALES REPORTED IN JULY 1997 WITH RESPECT TO HOUSTON, DALLAS AND FORT
WORTH AND JUNE 1997 WITH RESPECT TO AUSTIN.
THE COMPANY
GENERAL
The Company is the second largest supermarket operator in its principal
markets, with 121 stores located in Houston (53 stores), Dallas/Fort Worth (52
stores), and Austin (16 stores). With over 30 years of operations in Houston and
49 years of operations in Dallas/Fort Worth, the Company has developed a loyal
customer base and a portfolio of large, attractive stores in prime locations.
The Company offers customers an expanded selection of high quality products,
exceptional customer service and a variety of specialty departments. These
strengths, together with the Company's position as a Texas-based supermarket
operator, have enabled it to maintain a number two market share in Houston,
Dallas and Austin, the Company's principal markets. For the fiscal year ended
June 28, 1997 ("fiscal year 1997"), the Houston, Dallas, Fort Worth and Austin
markets represented approximately 47%, 35%, 7% and 11% of the Company's net
sales, respectively. For fiscal year 1997, the Company generated net sales of
approximately $2.34 billion and EBITDA (as defined) of $29.8 million.
The Company operates combination food and drug stores which emphasize high
quality products, exceptional customer service and expanded selections of
quality meat, seafood, produce and other perishables. This format appeals to a
broad customer base by offering shoppers an extensive variety of products and
services, including large produce and perishables departments, in-store
bakeries, delicatessens, full-service meat and seafood departments, banks,
pharmacies, full-service floral departments, expanded cosmetic departments,
video rental departments and film processing counters. The Company operates 84
traditional combination food and drug stores under the RANDALLS banner in
Houston and Austin and the TOM THUMB banner in Dallas/Fort Worth averaging
approximately 49,800 square feet. For fiscal year 1997, these stores generated
sales of approximately $1.59 billion, or 68% of net sales, and average weekly
sales per store of approximately $356,000.
The Company's NEW GENERATION and FLAGSHIP STORES are each variations of the
Company's traditional combination food and drug stores, offering an even wider
selection of premium products and services:
NEW GENERATION STORES emphasize expanded perishable food departments and
open product preparation in order to create a farmer's market atmosphere and
highlight product freshness to customers. The Company's 20 New Generation
Stores operate under the RANDALLS banner in Houston and Austin and the TOM
THUMB banner in Dallas, and average approximately 68,900 square feet. For
fiscal year 1997, New Generation Stores generated sales of approximately
$450.0 million, or 19% of net sales, and average weekly sales per store of
approximately $493,000.
FLAGSHIP STORES target customers seeking an expanded array of premium
services and a wider variety of top quality gourmet and specialty
selections. Flagship Stores feature additional "one-stop" shopping
conveniences and many higher margin specialty products and services,
including in-store gourmet
1
<PAGE>
coffee bars and eating areas, expanded bakery departments staffed with
French pastry chefs, a wide range of freshly prepared foods (including
made-to-order pizza, pastas and barbecued meats), home delivery and
catering. The Company operates seven Flagship Stores under the RANDALLS
FLAGSHIP banner in Houston averaging approximately 57,500 square feet and
one store of approximately 34,000 square feet under the SIMON DAVID banner
in Dallas. For fiscal year 1997, Flagship Stores generated sales of
approximately $220.0 million, or 10% of net sales, and average weekly sales
per store of approximately $578,000.
The Company also operates 9 conventional stores which offer a similar variety of
food products and specialty departments as its traditional combination food and
drug stores, but do not include pharmacies. Conventional stores average
approximately 20,600 square feet. For fiscal year 1997, conventional stores
generated sales of approximately $80.0 million, or 3% of net sales, and average
weekly sales per store of approximately $171,000.
COMPANY STRENGTHS
STRONG FRANCHISE AND DISTINCTIVE IMAGE. Over its history, the Company has
established a reputation for providing high quality products and exceptional
service to customers. The Company's stores are known for their broad selection
of high quality meat, seafood, produce and other perishables, which are
complemented by a variety of specialty departments to create a differentiated,
"one-stop" shopping experience. In a series of independent surveys of shoppers
in Houston and Dallas, the Company has consistently received the highest ratings
for specialty categories, such as fresh meat, produce, bakery and floral, and
service categories, such as customer assistance, quick checkout, cleanliness,
product variety and selection. In addition, the Company's long-standing practice
of reinvesting in the community by partnering with customers in charitable
giving programs, such as the "Good Neighbor" program, further enhances customer
loyalty and provides the Company with an additional competitive advantage.
ATTRACTIVE STORES IN PRIME LOCATIONS. The Company has developed a portfolio
of large, attractive stores in prime locations which provides flexibility in
store layout and merchandising. Since 1992, the Company has increased average
store size from approximately 46,000 square feet to approximately 51,000 square
feet by pursuing a strategy of store expansion in selected markets. The Company
attempts to optimize operating results by selecting the variation of its
combination food and drug store that is best suited to each store site's
demographics, local preferences and competition.
LEADING MARKET SHARES. The Company believes that its strong franchise and
distinctive image have enabled it to establish a number two market share in
Houston, Dallas and Austin, its principal markets. The Company's market shares
in Houston, Dallas and Austin are approximately 22%, 19% and 19%, respectively.
The Company's history as a local supermarket operator and the recent
introduction of its frequent shopper program have helped the Company to maintain
its strong market position despite aggressive store opening and remodeling
programs by competitors in recent years. Management believes that the Company's
competitive position will be strengthened by store remodels and new store
construction. In addition, management believes that its frequent shopper program
will continue to enhance its competitive position.
GROWING MARKETS. Over the past several years, Texas has been one of the
fastest growing states in terms of population, income and employment, and
economists project growth in excess of the national average to continue in the
near future. Since 1990, the Houston, Dallas, Fort Worth and Austin markets have
experienced compound annual employment growth of 1.9%, 2.6%, 2.2% and 5.5%,
respectively, all exceeding the national average of 1.5%. In 1996, grocery sales
in Texas increased 5.2% versus 3.3% for the country as a whole. The Houston,
Dallas/Fort Worth and Austin markets accounted for total grocery sales of
approximately $14.8 billion, or 48.9% of total grocery sales in Texas. The Texas
economy, employment, personal income and population growth are forecast to
continue to expand at rates above the national average over the next three
years.
2
<PAGE>
EXPERIENCED MANAGEMENT TEAM. The Company's executive officers have spent
the majority of their careers in the supermarket business and have an average of
15 years of experience in the food retailing industry. In addition, the Company
believes opportunities exist to enhance the existing management team with
additional experienced industry executives. Management's expertise and in-depth
knowledge of the Company's markets are further complemented by the experience of
certain affiliates of Kohlberg Kravis Roberts & Co., L.P. ("KKR"), which have a
track record of successfully acquiring and improving the operations of
supermarket companies and attracting senior level executives.
CUSTOMER SERVICE-ORIENTED WORKFORCE. The Company emphasizes friendly,
efficient and knowledgeable customer service. All employees are trained to
actively address the needs of customers. These employees reinforce the Company's
distinctive service-oriented image and differentiate it from its competitors.
The Company is dedicated to promoting from within its organization and believes
that it possesses considerable management depth among its workforce, with store
directors having an average of over 15 years of experience with the Company.
BUSINESS STRATEGY
ACCELERATE NEW STORE DEVELOPMENT AND REMODELING PROGRAM. The Company
believes that it will be able to capitalize on the continued growth in its
markets by accelerating its new store development and remodeling program. In
recent years, the Company has not had the financial resources to aggressively
remodel its existing store base or construct new stores. Since the beginning of
fiscal year 1995, the Company has only opened 15 stores and remodeled 10 stores
(while closing 17 stores), compared to management's estimate that its
competitors have opened approximately 110 stores and remodeled approximately 100
stores in the Company's markets over the same period. The Recapitalization and
the Financings (each as defined) will provide the Company with increased
financial flexibility, enabling it to undertake significant remodeling in the
Houston area, new store construction and remodeling in Dallas/ Fort Worth and
selected store expansion in the Austin market.
REDUCE OPERATING COSTS. The Company has identified a number of initiatives
designed to improve operating results by lowering operating costs. Specific
initiatives include: (i) applying the Company's successful labor scheduling
guidelines throughout all operational areas; (ii) implementing performance
measurement standards to further improve operating efficiency; (iii) enhancing
category management to improve store-level merchandising efforts and to increase
promotional buying opportunities; (iv) improving shelf pricing procedures to
decrease the frequency of price changes and inaccurate labeling; and (v)
introducing production planning in the perishables departments. The breadth of
these initiatives reflects the significant opportunities available to the
Company.
OPTIMIZE DISTRIBUTION. The Company is currently undertaking an evaluation
of its existing distribution channels. Of the products currently sold by the
Company, approximately 40% are self-distributed, approximately 30% are delivered
directly to stores from vendors and approximately 30% are delivered through The
Fleming Companies, Inc. ("Fleming"). The Company believes it can improve its
cost structure and manage working capital more efficiently by enhancing its
distribution capabilities.See "Business--Litigation."
DIFFERENTIATE BASED ON HIGH QUALITY PRODUCTS AND SERVICES AT A COMPETITIVE
PRICE. Throughout its history, the Company has developed a reputation for
operating large, attractive stores with an extensive variety of specialty
departments staffed by well-trained, service-oriented employees. The Company
offers an expanded selection of high quality products at competitive prices to
create a differentiated "one-stop" shopping experience. In addition, the Company
is committed to being the "first to market" in providing solutions to its
customers' changing lifestyle needs, as is evidenced by the recent launches of
its frequent shopper program and the PEAPOD on-line grocery ordering and home
delivery program.
3
<PAGE>
LEVERAGE FREQUENT SHOPPER PROGRAM. The Company believes that significant
opportunities exist to increase revenue and focus its marketing efforts by
leveraging its frequent shopper program. Data collected from customers
participating in the frequent shopper program enables the Company to track sales
trends, demographic patterns and customer preferences, and utilize that data to
allocate shelf space, target marketing activities and increase customer loyalty.
INCREASE PRIVATE LABEL SALES. Relative to national brands, private label
products provide comparable quality at lower prices to shoppers and higher gross
margins to the Company. The Company currently offers a three-tiered private
label program, including PRESIDENT'S CHOICE premium private label products, its
own REMARKABLE private label products and VALUE TIME private label products
catering to value-conscious consumers. In recent years, the Company's private
label sales have been lower than the national average. The Company is currently
expanding its private label offerings across all tiers, with particular emphasis
on increasing REMARKABLE label offerings.
THE RECAPITALIZATION AND THE FINANCINGS
RFM Acquisition LLC ("RFM Acquisition"), a Delaware limited liability
company organized at the direction of KKR, the Company and Robert R. Onstead
entered into a Subscription Agreement dated as of April 1, 1997 pursuant to
which RFM Acquisition acquired control of approximately 63% of the Company's
common stock, par value $.25 per share (the "the Common Stock"). The
consummation of the transactions contemplated by the Subscription Agreement are
collectively referred to as the "Recapitalization." Pursuant to the Subscription
Agreement, RFM Acquisition paid an aggregate of $225.0 million to the Company
(the "Equity Investment") as consideration for the Company's issuance to RFM
Acquisition of 18,579,686 shares of Common Stock and a 25-year option to
purchase 3,606,881 shares of Common Stock at $12.11 per share, subject to
adjustments (the "RFM Option"). The Company applied the proceeds from the Equity
Investment, together with approximately $278.0 million of aggregate proceeds
from certain financings described below (collectively, the "Financings"), on
June 27, 1997 (the "Closing") to (i) redeem 5,585,186 shares of Common Stock at
$16.00 per share pursuant to a tender offer (the "Tender Offer") for aggregate
consideration of $89.4 million, (ii) redeem, collectively, 8,250 shares of the
Company's Class A Preferred Stock, par value $10.00 per share (the "Class A
Preferred Stock"), and 278,201 shares of the Company's 8% convertible preferred
stock (the "Convertible Preferred Stock") for an aggregate redemption price of
$28.7 million, including accrued dividends of $0.1 million (the "Preferred Stock
Redemption"), (iii) repay or redeem Old Indebtedness (as defined) of
approximately $336.0 million, including accrued interest of $1.0 million (the
"Debt Prepayment"), (iv) pay an estimated make-whole premium (including accrued
interest of $0.9 million) of approximately $14.9 million (the "Make-Whole
Premium") in connection with the redemption of the Company's Senior Notes (as
defined) and (v) pay an estimated $33.8 million in expenses and transaction
fees. As of June 28, 1997, RFM Acquisition owned approximately 63% of the issued
and outstanding Common Stock.
The Financings included (i) an aggregate of approximately $128.0 million of
bank borrowings by the Company, including $125.0 million of borrowings under a
senior secured term loan facility (the "Term Loan Facility") and $3.0 million of
borrowings under a $225.0 million senior secured revolving credit facility (the
"Revolving Credit Facility", and together with the Term Loan Facility, the
"Credit Facilities"), (ii) $150.0 million aggregate principal amount of Old
Notes (generating gross proceeds of $149.8 million) and (iii) the Equity
Investment. The Revolving Credit Facility will provide for the Company's working
capital requirements and the implementation of the Company's strategy to expand
and enhance its store base.
4
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Company is offering to exchange pursuant to the
Exchange Offer up to $150,000,000 aggregate principal
amount of its Exchange Notes for a like aggregate
principal amount of its Old Notes. The terms of the
Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity)
to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that
the Exchange Notes are freely transferrable by Holders
(as defined) thereof (other than as provided herein),
and are not subject to any covenant regarding
registration under the Securities Act. See "The Exchange
Offer."
Minimum Condition................. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered
for exchange.
Expiration Date; Withdrawal of
Tender.......................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1997, unless the Exchange Offer
is extended, in which case the term "Expiration Date"
means the latest date and time to which the Exchange
Offer is extended. The Company does not currently intend
to extend the Expiration Date. Tenders may be withdrawn
at any time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange Offer--Withdrawal
Rights."
Exchange Date..................... The date of acceptance for exchange of the Old Notes
will be the fourth business day following the Expiration
Date.
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the conditions
will be satisfied and that no waivers will be necessary.
See "The Exchange Offer--Certain Conditions to the
Exchange Offer." The Company reserves the right to
terminate or amend the Exchange Offer at any time prior
to the Expiration Date upon the occurrence of any such
condition.
Procedures for Tendering
Old Notes....................... Each Holder wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with the Old Notes and any other required
documentation to the Exchange Agent (as defined) at the
address set forth therein. See "The Exchange
Offer--Procedures for Tendering Old Notes" and "Plan of
Distribution."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Federal Income Tax Consequences... The exchange of Notes pursuant to the Exchange Offer
should not be a taxable event for federal income tax
purposes. See "Certain U.S. Federal Income Tax
Consequences."
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct
such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing
the Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer--Procedures for Tendering Old Notes."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Procedures for Tendering Old Notes."
Acceptance of Old Notes and
Delivery of Exchange Notes...... The Company will accept for exchange any and all Old
Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to
the Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer--Acceptance
of Old Notes for Exchange; Delivery of Exchange Notes."
Effect on Holders of Old Notes.... As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant to
the terms of this Exchange Offer, the Company will have
fulfilled a covenant contained in the Registration
Rights Agreement (the "Registration Rights Agreement")
dated as of June 27, 1997 among the Company and BT
Securities Corporation, Chase Securities Inc., Goldman,
Sachs & Co., and Paine Webber Incorporated. (the
"Initial Purchasers") and, accordingly, there will be no
increase in the interest rate on the Old Notes pursuant
to the terms of the Registration Rights Agreement, and
the holders of the Old Notes will have no further
registration or other rights under the Registration
Rights Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be entitled to
all the rights and limitations applicable thereto under
the Indenture dated as of June 27, 1997 between the
Company and Marine Midland Bank relating to the Old
Notes and the Exchange Notes (the "Indenture"), except
for any such rights under the Registration Rights
Agreement that by their terms terminate or cease to have
further effectiveness as a result of the making of, and
the acceptance for
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
exchange of all validly tendered Old Notes pursuant to,
the Exchange Offer. All untendered Old Notes will
continue to be subject to the restrictions on transfer
provided for in the Old Notes and in the Indenture. To
the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered
Old Notes could be adversely affected.
Consequence of Failure to
Exchange........................ Holders of Old Notes who do not exchange their Old Notes
for Exchange Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer
of such Old Notes as set forth in the legend thereon. In
general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws. The Company does not currently
anticipate that it will register the Old Notes under the
Securities Act.
Exchange Agent.................... Marine Midland Bank is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
</TABLE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
Securities Offered................ $150,000,000 principal amount of 9 3/8% Series B Senior
Subordinated Notes due 2007.
Maturity Date..................... July 1, 2007.
Interest Payment Dates............ Interest on the Exchange Notes will be payable in cash
semi-annually in arrears on each January 1 and July 1,
commencing January 1, 1998.
Optional Redemption............... On or after July 1, 2002, the Exchange Notes will be
redeemable, in whole or in part, at the redemption
prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to July 1, 2000, the
Company may redeem up to $60 million of the aggregate
principal amount of the Exchange Notes with the net
proceeds of one or more Equity Offerings, at a
redemption price equal to 109.375% of the aggregate
principal amount to be redeemed, together with accrued
and unpaid interest, if any, to the date of redemption;
PROVIDED that at least $90 million of the aggregate
principal amount of the Exchange Notes remains
outstanding immediately after each such redemption. See
"Description of the Exchange Notes--Optional
Redemption."
Change of Control and Certain
Transfer Events................. Upon the occurrence of a Change of Control or certain
transfer events, the Company will have the option, at
any time prior to July 1, 2002, to redeem the Exchange
Notes, in whole but not in part, at a redemption price
equal to 100% of the aggregate principal amount thereof
plus the Applicable Premium, together with accrued and
unpaid interest, if any, to the date of redemption. Upon
the occurrence of a Change of Control, if the Company
does not so redeem the Exchange Notes or if a
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Change of Control occurs after July 1, 2002, the Company
will be required to make an offer to purchase the
Exchange Notes at a price equal to 101% of the principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. See
"Description of the Exchange Notes-- Repurchase at the
Option of Holders--Change of Control."
Ranking........................... The Exchange Notes will be unsecured, will be
subordinated in right of payment to all existing and
future Senior Indebtedness of the Company and will be
effectively subordinated to all obligations of the
subsidiaries of the Company. The Exchange Notes will
rank PARI PASSU with any future senior subordinated
indebtedness of the Company and will rank senior to all
other Subordinated Indebtedness of the Company. The
Indenture permits the Company to incur additional
indebtedness, including up to $450.0 million of Senior
Indebtedness under the Credit Facilities, subject to
certain limitations. As of June 28, 1997, the aggregate
amount of the Company's outstanding Senior Indebtedness
was approximately $128.0 million (excluding unused
commitments), the Company had no senior subordinated
indebtedness outstanding other than the Old Notes, and
the Company's subsidiaries had total liabilities of
$366.2 million, excluding guarantees of $128.0 million
of indebtedness under the Credit Facilities. See
"Selected Historical Consolidated Condensed Financial
and Other Data" and "Risk Factors--Adverse Consequences
of Holding Company Structure and "--Subordination."
Certain Covenants................. The Indenture contains covenants that will, subject to
certain exceptions, limit, among other things, the
ability of the Company and/or its Restricted
Subsidiaries to (i) pay dividends or make certain other
restricted payments or investments; (ii) incur
additional Indebtedness and issue disqualified stock and
preferred stock; (iii) create liens on assets; (iv)
merge, consolidate, or sell all or substantially all of
their assets; (v) enter into certain transactions with
affiliates; (vi) create restrictions on dividends or
other payments by Restricted Subsidiaries to the
Company; (vii) create guarantees of indebtedness by
Restricted Subsidiaries; and (viii) incur other senior
subordinated indebtedness. See "Description of the
Exchange Notes."
Absence of Market................. The Exchange Notes are new securities for which there is
currently no established market. Accordingly, there can
be no assurance as to the development or liquidity of
any market for the Exchange Notes. The Company does not
intend to apply for a listing on a securities exchange
of the Exchange Notes.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
8
<PAGE>
SUMMARY CONSOLIDATED CONDENSED HISTORICAL FINANCIAL DATA
The following table sets forth certain summary consolidated condensed
historical financial data of the Company. The historical consolidated financial
data of the Company for the fiscal years ended June 24, 1995 ("fiscal year
1995"), June 29, 1996 ("fiscal year 1996") and fiscal year 1997 have been
derived from, and should be read in conjunction with, the audited consolidated
financial statements of the Company and the related notes thereto included
elsewhere in this Prospectus. See "Pro Forma Consolidated Condensed Financial
Statement," "Selected Historical Consolidated Condensed Financial and Other
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the historical consolidated financial statements and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JUNE 28, JUNE 29, JUNE 24,
(DOLLARS IN THOUSANDS) 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
(52 WEEKS) (53 WEEKS) (52 WEEKS)
OPERATING DATA:
Net sales.......................................................... $ 2,344,983 $ 2,368,645 $ 2,328,247
Gross profit....................................................... 634,638 630,658 599,549
Store operating, selling and administrative expenses............... 558,065 507,894 501,634
Interest expense, net (1).......................................... 36,828 38,981 43,411
Litigation charge (2).............................................. 9,500 1,000 --
Severance/benefits charge (3)...................................... 4,512 -- --
Estimated store closing costs...................................... 32,790(4) 1,215 --
Loss on extinguishment of debt (5)................................. (9,798)
Net income (loss).................................................. (50,515) 19,438 37
Ratio of earnings to fixed
charges (6)...................................................... -- 1.67x 1.13x
OTHER DATA:
EBITDA (7)(8)...................................................... $ 29,771 $ 120,549 $ 97,915
Depreciation and amortization...................................... 48,875 45,814 47,447
Capital expenditures (9)........................................... 73,864 66,131 59,850
Stores open at end of period (10).................................. 121 120 120
BALANCE SHEET DATA (END OF PERIOD):
Working capital.................................................... $ 11,429 $ 29,895 $ 30,186
Total assets....................................................... 862,374 823,265 816,790
Total debt and capital lease obligations........................... 362,148 437,982 463,944
Redeemable Common Stock............................................ 5,002 31,045 18,749
Stockholders' equity............................................... 213,361 136,650 134,753
</TABLE>
See Notes to Summary Consolidated Condensed Historical Financial Data
9
<PAGE>
NOTES TO SUMMARY CONSOLIDATED CONDENSED HISTORICAL FINANCIAL DATA
(1) Represents interest expense net of interest income.
(2) Represents a charge recorded in connection with the settlement of litigation
relating to the ESOP (as defined). See "Business--Litigation."
(3) Represents a charge recorded in connection with the recent or anticipated
departure of certain executives and other employees of the Company, as well
as certain charges relating to benefits granted under certain employment
agreements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(4) Represents a charge recorded in connection with the Company's decision to
close, replace or sell approximately 20 stores, two of which had been closed
at the end of fiscal year 1997.
(5) Reflects an extraordinary loss of $9.8 million resulting from the early
extinguishment of debt, net of tax, refinanced in the Recapitalization.
(6) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges (net of
capitalized interest). Fixed charges consist of net interest expense on all
indebtedness and capitalized interest, amortization of deferred financing
costs, and one-third of rental expense on operating leases representing that
portion of rental expense deemed by the Company to be attributable to
interest. For fiscal year 1997, the deficiency in earnings to cover fixed
charges was $55.9 million.
(7) "EBITDA" represents earnings before net interest expense, income taxes and
depreciation and amortization. EBITDA is not intended to represent cash
flows from operations as defined by generally accepted accounting principles
("GAAP") and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this Prospectus as it is a basis
upon which the Company assesses its financial performance and certain
covenants in the Company's borrowing arrangements are tied to similar
measures.
(8) Included in EBITDA for the 52 weeks ended June 28, 1997 are $63.4 million of
charges to record an inventory charge, year-end closed store accrual (see
footnote 4), the settlement of the ESOP litigation (see footnote 2), costs
associated with implementation of the Company's frequent shopper program, a
severance accrual (see footnote 3), compensation expense related to the
issuance of shares of restricted Common Stock to certain employees and
accruals for transaction costs related to the Recapitalization and the
Financings, sales taxes, payroll taxes, legal expenses, rent and other
payables. See "Management's Discussion and Analysis of Operations and
Financial Condition."
(9) Capital expenditures include purchases of real estate, buildings and
equipment. Certain items included in capital expenditures are subsequently
financed through sale leaseback transactions. In fiscal years 1997, 1996 and
1995, proceeds from asset sales (a substantial portion of which were sale
leasebacks of certain real estate properties) were $55.4 million, $30.3
million and $59.3 million, respectively.
(10) The following table sets forth additional information concerning changes in
the Company's store base:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
<S> <C> <C> <C>
JUNE 28, JUNE 29, JUNE 24,
1997 1996 1995
----------- ----------- -----------
Beginning of period......................................................... 120 120 121
Newly constructed......................................................... 8 4 3
Acquired.................................................................. 2 -- --
Closed.................................................................... (9) (4) (4)
--- --- ---
End of period............................................................... 121(a) 120 120
--- --- ---
--- --- ---
</TABLE>
- ------------------------
(a) Includes 18 stores that, as of June 28, 1997, the Company has decided to
close, replace or sell.
10
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS BEFORE DECIDING
TO TENDER OLD NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW ARE
GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE EXCHANGE NOTES.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. The Company does not currently intend to register the Old Notes under the
Securities Act. Based on interpretations by the staff of the Commission, the
Company believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Old Notes were acquired in the
ordinary course of such Holders' business and such Holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes will be adversely affected.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
The Company continued to be significantly leveraged after the
Recapitalization and the Financings. See "The Recapitalization" and
"Capitalization." As of June 28, 1997, the Company had $362.1 million of
consolidated indebtedness, $213.4 million of consolidated common stockholders'
equity and $220.2 million available to be borrowed under the Revolving Credit
Facility (reduced by $1.8 million to reflect outstanding letters of credit).
Also after giving pro forma effect to the Recapitalization and the Financings as
if they had occurred at the beginning of fiscal year 1997, the Company's pro
forma earnings would have been insufficient to cover fixed charges by $53.8
million for fiscal year 1997. Pro forma income (loss) before extraordinary item
for fiscal year 1997 would have been $(39.4) million as compared to $(40.7)
million for the same period on a historical basis, and pro forma interest
expense for fiscal year 1997 would have been $34.7 million as compared to $36.8
million for the same period on a historical basis. See "Capitalization" and "Pro
Forma Consolidated Condensed Financial Statement." The Company and its
subsidiaries may incur additional indebtedness in the future, subject to certain
limitations contained in the instruments governing its indebtedness.
Accordingly, the Company will have significant debt service obligations.
The Company's debt service obligations will have important consequences to
Holders, including the following: (i) a substantial portion of the Company's
cash flow from operations will be dedicated to the payment of principal and
interest on its indebtedness, thereby reducing the funds available to the
Company for operations, future business opportunities and other purposes and
increasing the Company's vulnerability to adverse general economic and industry
conditions; (ii) the Company's ability to obtain additional financing in the
future may be limited; (iii) certain of the Company's borrowings (including, but
not limited to, the amounts borrowed under the Credit Facilities) will be at
variable rates of interest, which would make the Company vulnerable to increases
in interest rates; and (iv) all of the indebtedness incurred in connection with
the Credit Facilities will become due prior to the time the principal payment on
the Exchange Notes will become due.
11
<PAGE>
The Company's ability to make scheduled payments of the principal of, or to
pay interest on, or to refinance its indebtedness (including the Exchange Notes)
and to make scheduled payments under its operating leases depends on its future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control. Based upon the current level
of operations and anticipated growth, management believes that future cash flow
from operations, together with available borrowings under the Revolving Credit
Facility, will be adequate to meet the Company's anticipated requirements for
working capital, capital expenditures, interest payments and scheduled principal
payments for the foreseeable future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources." There can be no assurance, however, that the Company's business will
continue to generate sufficient cash flow from operations in the future to
service its debt and make necessary capital expenditures. If unable to do so,
the Company may be required to refinance all or a portion of its existing debt,
including the Exchange Notes, to sell assets or to obtain additional financing.
There can be no assurance that any such refinancing or that any such sale of
assets or additional financing would be possible on terms reasonably favorable
to the Company.
RESTRICTIVE LOAN COVENANTS
The Credit Facilities and the Indenture contain numerous financial and
operating covenants that will limit the discretion of the Company's management
with respect to certain business matters. These covenants will place significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to make certain
payments and investments, and to sell or otherwise dispose of assets and merge
or consolidate with other entities. See "Description of Credit Facilities" and
"Description of the Exchange Notes--Certain Covenants." The Credit Facilities
will also require the Company to meet certain financial ratios and tests. A
failure to comply with the obligations contained in the Credit Facilities or the
Indenture could result in an event of default under either the Credit Facilities
or the Indenture which could result in acceleration of the related debt and the
acceleration of debt under other instruments evidencing indebtedness that may
contain cross-acceleration or cross-default provisions. If, as a result thereof,
a default occurs with respect to Senior Indebtedness, the subordination
provisions in the Indenture would likely restrict payments to the Holders.
ADVERSE CONSEQUENCES OF HOLDING COMPANY STRUCTURE
The Company is a holding company which conducts substantially all of its
operations through its subsidiaries. Consequently, the Exchange Notes are
effectively subordinated to the obligations of the Company's subsidiaries,
including the guarantee by its subsidiaries of obligations under the Credit
Facilities. In the event of an insolvency, liquidation or other reorganization
of any of the subsidiaries of the Company, the creditors of the Company
(including the Holders), as well as stockholders of the Company, will have no
right to proceed against the assets of such subsidiaries or to cause the
liquidation or bankruptcy of such subsidiaries under Federal bankruptcy laws.
Creditors of such subsidiaries, including lenders under the Credit Facilities,
would be entitled to payment in full from such assets before the Company would
be entitled to receive any distribution therefrom. Except to the extent that the
Company may itself be a creditor with recognized claims against such
subsidiaries, claims of creditors of such subsidiaries will have priority with
respect to the assets and earnings of such subsidiaries over the claims of
creditors of the Company, including claims under the Exchange Notes. In
addition, as a result of the Company being a holding company, the Company's
operating cash flow and its ability to service its indebtedness, including the
Exchange Notes, is dependent upon the operating cash flow of its subsidiaries
and the payment of funds by such subsidiaries to the Company in the form of
loans, dividends or otherwise. As of June 28, 1997, the subsidiaries of the
Company had total liabilities of $366.2 million, excluding guarantees of $128.0
million of indebtedness under the Credit Facilities.
12
<PAGE>
SUBORDINATION
The Company's obligations under the Exchange Notes will be subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. As of June 28, 1997, the aggregate amount of the Company's outstanding
Senior Indebtedness was approximately $128.0 million (excluding unused
commitments). Additional Senior Indebtedness may be incurred by the Company from
time to time, subject to certain restrictions. By reason of such subordination,
in the event of an insolvency, liquidation, or other reorganization of the
Company, the lenders under the Credit Facilities and other creditors who are
holders of Senior Indebtedness must be paid in full before the Holders may be
paid; accordingly, there may be insufficient assets remaining after payment of
prior claims to pay amounts due on the Exchange Notes. In addition, under
certain circumstances, no payments may be made with respect to the Exchange
Notes if a default exists with respect to Senior Indebtedness.
ENCUMBRANCES ON ASSETS TO SECURE CREDIT FACILITIES
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Exchange Notes will not be secured by any of
the Company's assets. The Company's obligations under the Credit Facilities will
be secured by a first priority pledge of and security interest in certain common
stock of certain of the Company's subsidiaries and, in certain circumstances,
non-cash consideration received for certain sales of assets. If the Company
becomes insolvent or is liquidated, or if payment under any of the Credit
Facilities is accelerated, the lenders under the Credit Facilities will be
entitled to exercise the remedies available to a secured lender under applicable
law. See "Description of Credit Facilities" and "Description of the Exchange
Notes."
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control, the
Company will (unless the Company elects to redeem the Exchange Notes in the
event of a Change of Control prior to July 1, 2002) make an offer to purchase
all or any part of the Exchange Notes at a price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase. The Credit Facilities will prohibit the Company from
repurchasing any Exchange Notes, except with certain proceeds of one or more
Equity Offerings. The Credit Facilities will also provide that certain change of
control events with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements relating to Senior
Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing the Exchange Notes, or if the
Company is required to make an Asset Sale Offer (as defined) pursuant to the
terms of the Exchange Notes, the Company could seek the consent of its lenders
to purchase the Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
refinance such borrowings, the Company would remain prohibited from purchasing
the Exchange Notes. In such case, the Company's failure to purchase tendered
Exchange Notes would constitute an Event of Default (as defined) under the
Indenture. If, as a result thereof, a default occurs with respect to any Senior
Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the Holders. The provisions relating to a Change of Control
included in the Indenture may increase the difficulty of a potential acquiror
obtaining control of the Company. See "Description of the Exchange
Notes--Repurchase at the Option of Holders--Change of Control."
COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, and the newer "alternative format" food stores, including warehouse club
stores, deep discount drug stores and supercenters. Supermarket chains generally
compete on the
13
<PAGE>
basis of location, quality of products, service, price, product variety and
store condition. The Company regularly monitors its competitors' prices and
adjusts its prices and marketing strategy as management deems appropriate in
light of existing conditions. The Company faces increased competitive pressure
in all of its markets from existing competitors which have opened, and which the
Company expects to continue to open, a significant number of new stores in the
Company's markets. Since the beginning of fiscal year 1995, the Company
estimates that its competitors have opened approximately 110 stores and
remodeled approximately 100 stores in its markets. Some of the Company's
competitors have greater financial resources than the Company and could use
these resources to take measures which could adversely affect the Company's
competitive position. The Company's ability to remain competitive in its markets
will depend in part on its ability to remodel and update stores in response to
remodelings and new store openings by its competitors. See
"Business--Competition."
DIFFICULTY IN ACHIEVING POST-RECAPITALIZATION STRATEGY
The post-Recapitalization business strategy that has been developed by the
Company is based on the Company's review of its operations and its competitive
position. See "Prospectus Summary--Business Strategy" and "Business--Business
Strategy." The Company may decide to alter or discontinue certain aspects of the
business strategy described herein and may adopt alternative or additional
strategies. In addition, there can be no assurance that any such strategies, if
implemented, will be successful or will improve operating results. Moreover,
there can be no assurance that the successful implementation of such a strategy
will result in improved operating results. Further, other conditions may exist,
such as increased competition, or an economic downturn in the Company's markets,
which may offset any improved operating results that are attributable to such a
strategy.
Generally, new stores opened by the Company operate at a loss for varying
periods of time, depending on such factors as prevailing competition and the
Company's market position in the surrounding community. Pursuing a strategy of
growth and expansion in light of the current highly competitive industry
conditions could lead to a near-term decline in earnings as a result of opening
and operating a substantial number of new stores, particularly with respect to
stores in markets where the Company does not have an established presence.
MSP LITIGATION
Following the Cullum Acquisition (as defined), the Company terminated
Cullum's Management Security Plan for Cullum Companies, Inc. (the "MSP") and in
respect of such terminations paid participants the greater of (i) the amount of
such participant's deferral and (ii) the present value of the participant's
accrued benefit (prorated for the years of service compared to the years
required to reach age 65). Thirty of the former MSP participants have instituted
a claim against the Company on behalf of all persons who were participants in
the MSP on its date of termination (which is alleged by plaintiffs to be
approximately 250 persons). On May 7, 1997, the plaintiffs filed an amended
complaint for the court to recognize their action as a class action, to recover
additional amounts under the MSP, for a declaration of rights under an employee
pension benefit plan and for breach of fiduciary duty. The plaintiffs assert
that the yearly plan agreement executed by each participant in the MSP was a
contract for a specified retirement and death benefit set forth in such plan
agreements and that such benefits were vested and nonforfeitable. Summary
judgment motions have been filed by both parties with respect to various
matters, and judicial rulings on such motions are currently pending. The trial
is scheduled to commence during the 1997 calendar year. Although there can be no
assurance that the Company will prevail in respect of this claim, the Company
believes that it has meritorious defenses and intends to vigorously contest it.
A judgment against the Company on the MSP litigation could have a material
adverse effect on the Company's financial position, results of operations and
cash flow.
14
<PAGE>
GEOGRAPHIC CONCENTRATION
Substantially all of the Company's stores are located in the Houston,
Dallas/Fort Worth and Austin metropolitan areas in Texas which have experienced
economic and demographic growth over the past several years. Although the Texas
economy has diversified in recent years, it remains dependent to some extent on
energy-related industries and a significant economic downturn in any or all of
these areas, or in the energy-related industry generally, could have a material
adverse effect on the Company.
DEPENDENCE ON KEY MANAGEMENT
The Company's success depends largely upon the abilities and experience of
certain key management personnel. The loss of the services of one or more of
such key personnel could have a material adverse effect on the Company. The
Company does not maintain key-man life insurance policies on any of its
executives. See "Management" and "Principal Shareholders."
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposal or other releases of hazardous materials. The Company believes
that it currently conducts its operations, and in the past has operated its
business, in substantial compliance with applicable environmental laws and
regulations. From time to time, operations of the Company have resulted or may
result in noncompliance with or liability for cleanup pursuant to environmental
laws and regulations. The Company has determined, based on site evaluations,
that underground storage tanks at truck fueling sites in Texas and Nebraska may
have leaked fuel or other materials and resulted in soil contamination. At the
Abilene, Texas site, based on soil and groundwater remediation efforts to date,
the Company estimates a range of future expenditures between $300,000 and
$700,000, substantially all of which has been reserved. With respect to a second
site, located in Dallas, Texas, the Company has paid remediation costs of
approximately $300,000, and state regulatory authorities have advised the
Company that no further corrective action is necessary. The Company expects to
submit its final closure report to the state shortly, which will be the last
submission associated with that location. One other site, located in Garland,
Texas, was sold to a party who accepted responsibility for corrective action
pertaining to leaking underground storage tank site remediation. Under
applicable environmental laws, the Company may remain liable for remediation at
the Garland site, which the Company estimates may cost up to approximately
$100,000. Remediation of the Nebraska site had been initiated by the Nebraska
Department of Environmental Quality ("NDEQ") using funds from a state fund (the
"Nebraska Fund") dedicated to remediation of leaking underground storage tanks.
Due to shortfalls in the Nebraska Fund, the NDEQ, which has not classified the
Company's site as a high priority, suspended the remediation efforts. The
Company anticipates that future remediation efforts at such site, if any, would
be paid for by the Nebraska Fund. Including the remediation efforts described
above, the Company believes that any noncompliance or liability under current
environmental laws and regulations would not have a material adverse effect on
its results of operations, financial condition and cash flow. See
"Business--Environmental Matters."
The Company has not incurred material capital expenditures for environmental
controls during the previous three years, nor does the Company anticipate
incurring any such material expenditures to comply with environmental
regulations during the current fiscal or the succeeding fiscal year.
CONTROL BY KKR AFFILIATES
RFM Acquisition holds approximately 63% of the issued and outstanding shares
of Common Stock. RFM Acquisition is a Delaware limited liability company whose
sole member is KKR 1996 Fund L.P. KKR
15
<PAGE>
1996 Fund L.P. is a Delaware limited partnership whose sole general partner is
KKR Associates 1996 L.P. KKR Associates 1996 L.P. is a Delaware limited
partnership whose sole general partner is KKR 1996 GP L.L.C. KKR 1996 GP L.L.C.
is a Delaware limited liability company whose members are also the members of
the limited liability company which is the general partner of KKR. Accordingly,
affiliates of KKR control the Company and have the power to elect all of its
directors, appoint new management and approve any action requiring the approval
of the Company's shareholders, including adopting amendments to the Company's
Articles of Incorporation and approving mergers or sales of substantially all of
the Company's assets. There can be no assurance that the interests of KKR and
its affiliates will not conflict with the interests of the Holders. See
"Management," "Principal Shareholders" and "Certain Relationships and Related
Transactions."
LACK OF PRIOR MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in June 1997 to a small number of institutional
investors and are eligible for trading in the PORTAL Market.
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange. There is currently no established market for the Exchange
Notes and there can be no assurance as to the liquidity of markets that may
develop for the Exchange Notes, the ability of the holders of the Exchange Notes
to sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than the initial market values thereof
depending on many factors, including prevailing interest rates and the markets
for similar securities. Although there is currently no market for the Exchange
Notes, the Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes. However, the Initial Purchasers
are not obligated to do so, and any market making with respect to the Exchange
Notes may be discontinued at any time without notice.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performances and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business. These statements are based upon a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. Some of these assumptions
inevitably will not materialize, and unanticipated events will occur which will
affect the Company's results.
16
<PAGE>
THE RECAPITALIZATION
THE SUBSCRIPTION AGREEMENT
RFM Acquisition, the Company and Robert R. Onstead entered into the
Subscription Agreement as of April 1, 1997 pursuant to which RFM Acquisition
acquired control of the Company. Pursuant to the Subscription Agreement, RFM
Acquisition paid the $225.0 million Equity Investment to the Company as
consideration for the Company's issuance to RFM Acquisition of 18,579,686 shares
of Common Stock and the RFM Option.
At a special meeting of the Company's shareholders held on June 9, 1997 (the
"Special Meeting"), the shareholders approved a single proposal (the
"Shareholder Proposal") to (i) amend the Company's existing Articles of
Incorporation to increase the number of authorized shares of Common Stock from
25,000,000 shares to 75,000,000 (the "Charter Amendment"), (ii) approve the
Subscription Agreement and the related transactions and (iii) approve the
Shareholders Agreement and the related transactions.
Pursuant to the Subscription Agreement, until the one-year anniversary of
the Closing, Robert R. Onstead has agreed to indemnify RFM Acquisition for
certain damages relating to breaches of the representations, warranties,
covenants and agreements contained in the Subscription Agreement. Mr. Onstead
will be required to indemnify RFM Acquisition only to the extent damages for any
such breaches exceed $10.0 million in the aggregate (or, in the case of
representations and warranties other than those relating to the Company's
Employee Stock Ownership Plan (the "ESOP") or liabilities for taxes or certain
breaches of agreements or covenants of the Company, $12.5 million in the
aggregate), and the extent of his indemnification obligations will be limited to
$3.0 million in the aggregate. With respect to certain breaches of
representations, warranties, covenants and agreements contained in the
Subscription Agreement, the Company has agreed to indemnify RFM Acquisition
through the issuance of additional shares of Common Stock. Pursuant to separate
agreements, the Company has agreed to indemnify RFM Acquisition in the event the
Company incurs any liability from a claim filed against the Company by
participants in the MSP. See "Risk Factors--MSP Litigation" and
"Business--Litigation--MSP Litigation."
In connection with the consummation of the Recapitalization, the Company
paid to KKR a fee of $8.0 million. The Company is also required to reimburse KKR
for all of its expenses contemplated by the Subscription Agreement.
THE TENDER OFFER
Pursuant to the Subscription Agreement, the Company purchased 5,585,186
shares of Common Stock at $16.00 per share in connection with the Tender Offer.
These shares were allocated among three tender offer pools: (i) 1,104,336 shares
held by the ESOP (the "ESOP Shares"), (ii) 200,435 shares of the 613,457 shares
which are subject to repurchase obligations of the Company pursuant to
pre-existing contractual arrangements with certain shareholders (such 613,457
shares being referred to as the "Putable Shares") and (iii) 4,280,415 shares
(other than Putable Shares) held by holders of Common Stock other than the ESOP
("Non-ESOP Shares"). The number of shares subject to each tender offer pool
represented approximately 33% of the ESOP Shares and the Non-ESOP Shares, and
35% of the Putable Shares, calculated as of April 1, 1997.
THE SHAREHOLDERS AGREEMENT
RFM Acquisition and certain of the Company's shareholders entered into a
voting, repurchase and shareholders agreement dated as of April 1, 1997 (the
"Shareholders Agreement").
The shareholders party to the Shareholders Agreement will have the right to
participate pro rata in certain sales of Common Stock by RFM Acquisition or its
affiliates (the "RFM Tag Along") and RFM Acquisition or its affiliates will have
the right to require such shareholders to participate pro rata in certain sales
by RFM Acquisition or its affiliates (the "RFM Drag Along").
17
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer. The Company used the proceeds from the Equity Investment,
together with approximately $278.0 million of aggregate proceeds from the
issuance of the Old Notes and borrowings under the Credit Facilities to (i)
consummate the Tender Offer for $89.4 million, (ii) apply $28.7 million to the
Preferred Stock Redemption, (iii) apply $336.0 million to the Debt Prepayment,
(iv) pay the Make-Whole Premium (including accrued interest) of approximately
$14.9 million and (v) pay an estimated $33.8 million in expenses and transaction
fees. The Company, concurrently with the Closing, made an $11.3 payment in
connection with the settlement of litigation relating to its ESOP. See
"Business--Litigation".
The indebtedness of the Company repaid in connection with the
Recapitalization and the Financings (the "Old Indebtedness") consisted of (i)
$144.5 million aggregate principal amount of loans under a term loan facility
provided pursuant to the credit agreement dated as of November 1, 1993, as
amended, among the Company, certain of its subsidiaries, the banks party thereto
and Texas Commerce Bank National Association ("Texas Commerce"), as agent (the
"TCB Credit Facility"), (ii) $55.0 million aggregate principal amount of loans
under a $65.0 million revolving credit facility provided pursuant to the TCB
Credit Facility, (iii) $39.5 million aggregate principal amount of 8.70% Series
A Senior Notes due December 1, 2003 (the "Series A Senior Notes") issued
pursuant to the note purchase agreement dated as of November 1, 1993, as
amended, among the Company, certain of its subsidiaries and the insurance
companies party thereto (the "Note Purchase Agreement"), (iv) $71.0 million
aggregate principal amount of 9.16% Series B-1 Senior Notes due December 1, 2005
(the "Series B-1 Senior Notes") issued pursuant to the Note Purchase Agreement
and (v) $25.0 million aggregate principal amount of 9.16% Series B-2 Senior
Notes due December 1, 2003 (the "Series B-2 Senior Notes", together with the
Series A Senior Notes and the Series B-1 Senior Notes, the "Senior Notes")
issued pursuant to the Note Purchase Agreement.
The sources and uses of the funds for the Recapitalization, the Financings
and the related transactions, were as follows (dollars in thousands):
SOURCES OF FUNDS
<TABLE>
<S> <C>
Revolving Credit Facility......................................................... $ 3,000
Term Loan Facility................................................................ 125,000
Old Notes......................................................................... 149,800
Equity Investment................................................................. 225,000
---------
Total sources................................................................. $ 502,800
---------
---------
</TABLE>
USES OF FUNDS
<TABLE>
<S> <C>
Tender Offer...................................................................... $ 89,400
Preferred Stock Redemption........................................................ 28,700
Debt Prepayment................................................................... 336,000
Make-Whole Premium (including accrued interest of $0.9 million)................... 14,900
Expenses and transaction fees(1).................................................. 33,800
---------
Total uses.................................................................... $ 502,800
---------
---------
</TABLE>
(1) Includes a portion of the $11.3 million payment made by the Company in
connection with the settlement of the ESOP litigation.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of June 28, 1997 the audited consolidated
historical cash and cash equivalents and capitalization of the Company. This
table should be read in conjunction with the notes thereto and the historical
consolidated financial statements of the Company and its subsidiaries and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE
28, 1997
-----------
<S> <C>
(DOLLARS IN THOUSANDS)
Cash and equivalents............................................................................... $ 23,115
-----------
-----------
Debt:
Capital lease obligations........................................................................ 81,645
Other indebtedness............................................................................... 2,748
Credit Facilities (1)............................................................................ 128,000
Old Notes........................................................................................ 149,755
-----------
Total debt..................................................................................... 362,148
Redeemable Common Stock............................................................................ 5,002
Stockholders' equity............................................................................... 213,361
-----------
Total capitalization........................................................................... $ 580,511
-----------
-----------
</TABLE>
- ------------------------
(1) As of June 28, 1997, the Company had availability of $220.2 million under
the Revolving Credit Facility (reduced to reflect $1.8 million of
outstanding letters of credit). See "Description of Credit Facilities."
19
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENT
The following unaudited pro forma consolidated condensed financial statement
(the "Pro Forma Financial Statement") has been derived by the application of pro
forma adjustments to the Company's historical consolidated financial statements
included elsewhere in this Prospectus. The pro forma consolidated condensed
statements of operations for the period presented give effect to the
Recapitalization, the Financings and the related transactions (including the
offering of the Old Notes) as if such transactions were consummated as of June
30, 1996 (the first day of fiscal year 1997). The adjustments are described in
the accompanying notes. The Pro Forma Financial Statement should not be
considered indicative of actual results that would have been achieved had the
Recapitalization, the Financings and the related transactions (including the
offering of the Old Notes) been consummated for the period indicated and does
not purport to indicate results of operations for any future period. The Pro
Forma Financial Statement should be read in conjunction with the Company's
historical consolidated financial statements and the notes thereto included
elsewhere in this Prospectus.
20
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
52 WEEKS ENDED JUNE 28, 1997
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
--------- --------------- -----------
<S> <C> <C> <C>
Net sales.................................................................... $2,344,983 $ -- $2,344,983
Cost of sales................................................................ 1,710,345 -- 1,710,345
--------- ------- -----------
Gross profit............................................................... 634,638 -- 634,638
Store operating, selling and administrative expenses......................... 558,065 -- 558,065
Depreciation and amortization................................................ 48,875 -- 48,875
Interest expense, net........................................................ 36,828 (2,175)(a) 34,653
Litigation and severance/benefits............................................ 14,012 -- 14,012
Estimated store closing costs................................................ 32,790 -- 32,790
--------- ------- -----------
Income (loss) before income taxes and extraordinary item................... (55,932) 2,175 (53,757)
(Benefit) provision for income taxes......................................... (15,215) 827(b) (14,388)
--------- ------- -----------
Income (loss) before extraordinary item.................................... $ (40,717) $ 1,348 $ (39,369)
--------- ------- -----------
--------- ------- -----------
Pro forma ratio of earnings to fixed charges (c)............................. (c)
-----------
-----------
</TABLE>
- --------------------------
(a) The pro forma adjustments to net interest expense reflect the following:
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
-------------
<S> <C>
JUNE 28, 1997
-------------
Interest on historical debt repaid................................................. $ (27,806)
Interest expense on new debt (1)................................................... 23,225
Amortization of deferred financing costs (eight years)............................. 2,406
-------------
Total adjustment................................................................. $ (2,175)
-------------
-------------
</TABLE>
-------------------------
1) Reflects assumed weighted average interest rates of 7.16% on
indebtedness under the Credit Facilities and an effective yield of
9.40% on the Notes.
A 0.25% increase or decrease in the assumed average interest on
borrowings under the Credit Facilities would change the pro forma
interest expense by $0.3 million for the period ended June 28, 1997 and
the pro forma net earnings (loss) would change by approximately $0.2
million. For fiscal year 1997, each $1.0 million increase or decrease in
the Revolving Credit Facility would change pro forma net interest expense
by approximately $0.1 million. The pro forma net earnings (loss) would
change by approximately $0.1 million.
(b) The adjustment reflects the tax effect of the pro forma adjustments at a 38%
effective tax rate.
(c) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges (net of
capitalized interest). Fixed charges consist of interest expense on all
indebtedness and capitalized interest, amortization of deferred financing
costs, and one-third of rental expense on operating leases representing that
portion of rental expense deemed by the Company to be attributable to
interest. The Company's pro forma earnings, which include certain
non-recurring charges, would have been insufficient to cover fixed charges
by $53.8 million for fiscal year 1997.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED CONDENSED FINANCIAL AND OTHER DATA
The following table sets forth selected historical consolidated condensed
financial and other data for the Company. The historical consolidated financial
statements of the Company for fiscal year 1997 have been audited by Deloitte &
Touche LLP and the historical consolidated financial statements for fiscal years
1996, 1995, the fiscal year ended June 25, 1994 ("fiscal year 1994") and the
fiscal year ended June 26, 1993 ("fiscal year 1993") have been audited by Arthur
Andersen LLP. The historical consolidated financial data as of June 28, 1997 and
June 29, 1996 and for the fiscal years 1997, 1996 and 1995 have been derived
from, and should be read in conjunction with, the audited consolidated financial
statements of the Company and the related notes thereto included elsewhere in
this Prospectus. See "Pro Forma Consolidated Condensed Financial Statement,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
SELECTED HISTORICAL CONSOLIDATED CONDENSED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 28, JUNE 29, JUNE 24, JUNE 25, JUNE 26,
(DOLLARS IN THOUSANDS) 1997 1996 1995 1994 1993
- -------------------------------------------- --------------- ------------ ------------ ------------ ------------
<CAPTION>
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................... $ 2,344,983 $ 2,368,645 $ 2,328,247 $ 2,304,524 $ 2,038,360
Cost of sales............................... 1,710,345 1,737,987 1,728,698 1,718,761 1,520,094
--------------- ------------ ------------ ------------ ------------
Gross profit.............................. 634,638 630,658 599,549 585,763 518,266
Store operating, selling and administrative
expenses.................................. 558,065 507,894 501,634 495,280 405,434
Depreciation and amortization............... 48,875 45,814 47,447 45,065 46,189
Interest expense, net(1).................... 36,828 38,981 43,411 50,442 58,553
(Gain) on sale of warehouse................. -- -- -- (5,187) --
Litigation charge(2)........................ 9,500 1,000 -- -- --
Severance/benefits charge(3)................ 4,512 -- -- -- --
Estimated store closing costs............... 32,790(4) 1,215 -- -- --
Income (loss) before income taxes and
extraordinary item...................... (55,932) 35,754 7,057 163 8,090
Benefit (provision) for income taxes........ 15,215 (16,316) (7,020) (3,667) (6,772)
--------------- ------------ ------------ ------------ ------------
Income (loss) before extraordinary item... (40,717) 19,438 37 (3,504) 1,318
Loss on extinguishment of debt(5)........... (9,798) -- -- -- 13,633
--------------- ------------ ------------ ------------ ------------
Net income (loss)......................... $ (50,515) $ 19,438 $ 37 $ (3,504) $ (12,315)
--------------- ------------ ------------ ------------ ------------
--------------- ------------ ------------ ------------ ------------
Ratio of earnings to fixed charges(6)....... -- 1.67x 1.13x 1.00x 1.12x
OTHER DATA:
EBITDA(7)(8)................................ $ 29,771 $ 120,549 $ 97,915 $ 90,483 $ 112,832
Capital expenditures(9)..................... 73,864 66,131 59,850 79,279 51,543
Stores open at end of period(10)............ 121 120 120 121 109
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................. $ 11,429 $ 29,895 $ 30,186 $ 44,211 $ 78,862
Total assets................................ 862,374 823,265 816,790 876,820 934,416
Total debt and capital lease obligations.... 362,148 437,982 463,944 533,273 598,020
Redeemable Common Stock..................... 5,002 31,045 18,749 16,097 36,460
Stockholders' equity........................ 213,361 136,650 134,753 128,165 112,396
</TABLE>
See Notes to Selected Historical Consolidated Financial and Other Data
22
<PAGE>
NOTES TO SELECTED HISTORICAL CONSOLIDATED CONDENSED FINANCIAL AND OTHER DATA
(1) Represents interest expense net of interest income.
(2) Represents a charge recorded in connection with the settlement of litigation
relating to the ESOP. See "Business--Litigation."
(3) Represents a charge recorded in connection with the recent or anticipated
departure of certain executives and other employees of the Company, as well
as certain charges relating to benefits granted under certain employment
agreements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(4) Represents a charge recorded in connection with the Company's decision to
close, replace or sell approximately 20 stores, two of which had been closed
at the end of fiscal year 1997.
(5) The net loss for the fiscal year 1993 reflects an extraordinary loss of
$13.6 million resulting from the retirement of a total of $224.7 million
aggregate principal amount of 16% subordinated discount debentures and $78.6
million aggregate principal amount of 14% senior subordinated debentures.
The net loss for fiscal year 1997 reflects an extraordinary loss of $9.8
million resulting from the early extinguishment of debt, net of tax.
(6) For purposes of determining the ratio of earnings to fixed charges,
refinanced in the Recapitalization, earnings are defined as earnings before
income taxes, plus fixed charges (net of capitalized interest). Fixed
charges consist of interest expense on all indebtedness and capitalized
interest, amortization of deferred financing costs, and one-third of rental
expense on operating leases representing that portion of rental expense
deemed by the Company to be attributable to interest. For fiscal year 1997,
the deficiency in earnings to cover fixed charges was $55.9 million.
(7) "EBITDA" represents earnings before net interest expense, income taxes and
depreciation and amortization. EBITDA is not intended to represent cash
flows from operations as defined by GAAP and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. EBITDA is included
in this Prospectus as it is a basis upon which the Company assesses its
financial performance and certain covenants in the Company's borrowing
arrangements are tied to similar measures.
(8) Included in EBITDA for fiscal year 1997 are $63.4 million of charges to
record an inventory charge, a year-end closed store accrual (see footnote
4), the settlement of the ESOP litigation (see footnote 2), costs associated
with implementation of the Company's frequent shopper program, severance
accrual (see footnote 3), compensation expense related to the issuance of
shares of restricted Common Stock to certain employees and accruals for
transaction costs related to the Recapitalization and the Financings, sales
taxes, payroll taxes, legal expenses, rent and other payables. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
(9) Capital expenditures include purchases of real estate, buildings and
equipment. Certain items included in capital expenditures are subsequently
financed through sale leaseback transactions. In fiscal years 1994, 1995,
1996 and 1997, proceeds from asset sales (a substantial portion of which
were sale leasebacks of certain real estate properties) were $78.3 million,
$59.3 million, $30.3 million and $55.4 million, respectively. For fiscal
year 1994, capital expenditures include $22.3 million relating to the
acquisition of 15 stores in Austin and Houston from Appletree Markets, Inc.
(10) The following sets forth additional information concerning changes in the
Company's store base:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 28, JUNE 29, JUNE 24, JUNE 25, JUNE 26,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
TOTAL STORES:
Beginning of period.............................. 120 120 121 109 45
Newly constructed.............................. 8 4 3 5 4
Acquired....................................... 2 0 0 15(b) 63(c)
Closed......................................... (9) (4) (4) (8)(b) (3)
--- --- --- --- ---
End of period.................................... 121(a) 120 120 121 109
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
- ------------------------------
(a) Includes 18 stores that, as of June 28, 1997, the Company has decided to
close, replace or sell.
(b) Reflects the acquisition of 15 stores in Austin and Houston from AppleTree
Markets, Inc. and the immediate closure of three of such stores in Austin.
(c) Includes the acquisition by the Company in August 1992 of 100% of the stock
of Cullum (representing 62 TOM THUMB stores).
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations of the
Company covers periods before completion of the Recapitalization, the Financings
and the related transactions. Accordingly, the discussion and analysis of such
periods does not reflect the significant impact that the Recapitalization, the
Financings and the related transactions will have on the Company. However, since
the Recapitalization occurred prior to the close of fiscal year 1997, the
balance sheet of the Company as of June 28, 1997, and hence the discussion of
liquidity and capital resources, reflects the impact of the Recapitalization and
the Financings. See "Risk Factors," "Pro Forma Consolidated Condensed Financial
Statement" and the discussion below under "-- Liquidity and Capital Resources"
for further discussion relating to the impact that the Recapitalization, the
Financings and the related transactions had and may in the future have on the
Company.
GENERAL
The Company operates a chain of 121 supermarkets primarily under the
RANDALLS and TOM THUMB banners in the Houston, Dallas/Fort Worth and Austin
metropolitan areas. The Company operates on a 52 or 53 week fiscal year ending
on the last Saturday of June. The consolidated statements of operations for
fiscal years 1995 and 1997 include 52 weeks of operations while fiscal year 1996
includes 53 weeks of operations. Same store sales is defined as net sales for
stores in operation in each of the entire current fiscal period and the
comparable period of the prior fiscal year. Replacement stores are included in
the same store sales calculation. A replacement store is defined as a store that
is opened to replace a store that is closed nearby. At the close of fiscal year
1997, the Company selected 18 stores to be closed, replaced or sold. See
"Business--Store Development."
COMPARISON OF FISCAL YEARS 1997 AND 1996
A table showing the percentage of net sales represented by certain items in
the Company's consolidated condensed statements of operations is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
(DOLLARS IN THOUSANDS) JUNE 28, 1997 JUNE 29, 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
(52 WEEKS) (53 WEEKS)
Net sales............................... $ 2,344,903 100.0% $ 2,368,645 100.0%
Cost of sales........................... 1,710,345 72.9 1,737,987 73.4
------------ --------- ------------ ---------
Gross profit.......................... 634,638 27.1 630,658 26.6
Store operating, selling and
administrative expenses............... 558,065 23.8 507,894 21.5
Depreciation and amortization........... 48,875 2.1 45,814 1.9
Interest expense, net................... 36,828 1.6 38,981 1.6
Litigation charge....................... 9,500 0.4 1,000 --
Severance/benefits charge............... 4,512 0.2 -- --
Estimated store closing costs........... 32,790 1.4 1,215 --
Income (loss) before income taxes and
extraordinary item.................... (55,932) (2.4) 35,754 1.5
Benefit (provision) for income taxes.... 15,215 0.6 (16,316) (0.7)
Loss on extinguishment of debt.......... 9,798 0.4 -- --
------------ --------- ------------ ---------
Net income (loss)....................... $ (50,515) (2.2)% $ 19,438 0.8%
------------ --------- ------------ ---------
------------ --------- ------------ ---------
EBITDA.................................. $ 29,771 1.3% $ 120,549 5.1%
------------ --------- ------------ ---------
------------ --------- ------------ ---------
</TABLE>
24
<PAGE>
NET SALES
Net sales decreased by $23.7 million, or 1.0%, during fiscal year 1997 as
compared to fiscal year 1996. The decrease in net sales is attributable to the
additional week of operations in fiscal year 1996. Based on a comparable 52 week
year, net sales increased by $18.8 million, or 0.8% of net sales. The increase
is primarily attributable to additional sales of $93.5 million generated from
the opening of six new stores during fiscal year 1997 and the operation for
fiscal year 1997 of three stores opened during fiscal year 1996. This increase
was offset by a decline in same store sales of 1.45% from fiscal year 1996 due
to continued competitor store openings and remodels, and a decrease in sales of
$41.7 million from fiscal year 1996 due to the closure of five stores during
fiscal year 1997, two more than were closed during fiscal year 1996.
The Company's trend in same store sales has improved during fiscal year 1997
from a decrease of 3.6% in the first quarter, to a decrease of 1.3% in the
second quarter, to an increase of 0.1% in the third quarter, to an increase of
0.3% in the fourth quarter. This improvement has resulted from the introduction
of the frequent shopper program and other marketing initiatives and the
contribution of three replacement stores.
GROSS PROFIT
Gross profit increased by $4.0 million and, as a percentage of net sales,
increased to 27.1% for fiscal year 1997 from 26.6% for fiscal year 1996. This
increase is attributable to higher margins from new and replacement stores, an
increase in vendor rebates, as well as the impact for fiscal year 1997 of price
increases implemented by the Company late in the second quarter of fiscal year
1996. The higher gross margins of new and replacement stores are due to their
larger formats, more expansive specialty departments and broader range of
products and services.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses increased by $50.2
million and, as a percentage of net sales, increased to 23.8% for fiscal year
1997 from 21.5% for fiscal year 1996. The increase is the result of increased
advertising expenditures to introduce and promote the Company's frequent shopper
program, expenses related to the introduction and start-up of the Company's
PEAPOD on-line ordering and home delivery program, store occupancy costs of new
and replacement stores in excess of the occupancy costs of closed stores, and an
increase in labor and benefit costs associated in part with the new and
replacement stores. Also included in store operating, selling and administrative
expenses for fiscal year 1997 are $19.3 million of charges, including
recognition of compensation expense in connection with the issuance of
restricted Common Stock to certain of its employees, charges to record accruals
for sales taxes, payroll taxes, legal expenses, rent and other payables, an
inventory charge, costs associated with implementation of the frequent shopper
program and transaction costs related to the Recapitalization and the
Financings.
EBITDA
EBITDA declined by $90.8 million from fiscal year 1996 and, as a percentage
of net sales, declined to 1.3% for fiscal year 1997 from 5.1% for fiscal year
1996. This decrease is attributable to the increase in store operating, selling
and administrative expenses described above, partially offset by the $4.0
million increase in gross profit as described above, and an additional $44.1
million of other charges. Included in the other charges are a year-end closed
store charge of $30.1 million, settlement of the ESOP litigation for $9.5
million and a severance charge of $4.5 million.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased by $3.0 million and, as a
percentage of net sales, increased to 2.1% for fiscal year 1997 from 1.9% for
fiscal year 1996. This increase is primarily due to new store openings during
fiscal year 1997.
25
<PAGE>
INTEREST EXPENSE, NET
Net interest expense for fiscal year 1997 declined by $2.1 million compared
to fiscal year 1996 due primarily to a net reduction of debt. The refinancing of
the TCB Credit Facility and the Senior Notes that occurred on June 27, 1997 had
minimal impact on interest expense for fiscal year 1997.
LITIGATION CHARGE
During fiscal year 1995, the Company was named as a defendant in a class
action lawsuit alleging the violation of various federal and state laws in
connection with the operation of the ESOP. The Company and other defendants
elected to settle the suit for $16.5 million, of which the Company was liable
for $11.3 million plus $0.2 million in administrative expenses. Net of insurance
proceeds, the Company paid $10.5 million in the aggregate in connection with the
settlement. During fiscal year 1997 the Company increased its existing
litigation reserves by $9.5 million to fully reserve for such matter. See
"Business--Litigation."
SEVERANCE/BENEFITS CHARGE
For fiscal year 1997, the Company recorded a non-recurring charge of $4.5
million representing a reserve recorded in connection with the recent or
anticipated departures of certain executives and other employees of the Company,
as well as certain charges relating to benefits granted under certain employment
agreements.
ESTIMATED STORE CLOSING COSTS
For fiscal year 1997, the Company recorded a charge of $32.8 million
representing a charge recorded in connection with the Company's decision to
close, replace or sell approximately 20 stores, 2 of which had been closed at
the end of fiscal year 1997. These costs include estimated inventory losses,
lease termination costs and losses related to the impairment of certain store
assets for the stores to be closed.
BENEFIT (PROVISION) FOR INCOME TAXES
The benefit for income taxes for fiscal year 1997 was $21.2 million due to a
loss before income taxes of $55.9 million and early extinguishment of debt of
$9.8 million. The benefit consists of $15.2 million related to loss before
income taxes and extraordinary item and $6.0 million related to extraordinary
item.
NET INCOME (LOSS)
Net loss for fiscal year 1997 was $50.5 million compared to net earnings of
$19.4 million for fiscal year 1996.
26
<PAGE>
COMPARISON OF FISCAL YEARS 1996 AND 1995
A table showing the percentage of net sales represented by certain items in
the Company's condensed consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
(DOLLARS IN THOUSANDS) JUNE 29, 1996 JUNE 24, 1995
----------------------- -----------------------
<S> <C> <C> <C> <C>
(53 WEEKS) (52 WEEKS)
Net sales............................... $ 2,368,645 100.0% $ 2,328,247 100.0%
Cost of sales........................... 1,737,987 73.4 1,728,698 74.2
------------ --------- ------------ ---------
Gross profit.......................... 630,658 26.6 599,549 25.8
Store operating, selling and
administrative expenses............... 510,109 21.5 501,634 21.5
Depreciation and amortization........... 45,814 1.9 47,447 2.0
Interest expense, net................... 38,981 1.6 43,411 1.9
------------ --------- ------------ ---------
Income before income taxes.............. 35,754 1.5 7,057 0.3
(Provision) for income taxes............ (16,316) 0.7 (7,020) 0.3
------------ --------- ------------ ---------
Net income.............................. $ 19,438 0.8% $ 37 0.0%
------------ --------- ------------ ---------
------------ --------- ------------ ---------
EBITDA.................................. $ 120,549 5.1% $ 97,915 4.2%
------------ --------- ------------ ---------
------------ --------- ------------ ---------
</TABLE>
NET SALES
Net sales increased by $40.4 million, or 1.7%, during fiscal year 1996 as
compared to fiscal year 1995. Included in this increase is approximately $44.7
million of net sales resulting from the additional week of operations in fiscal
year 1996. In addition, this increase is attributable to additional sales of
$86.6 million generated from the opening of three new stores in fiscal year 1996
and the operation for the entire fiscal year 1996 of three new stores opened in
fiscal year 1995, which was offset by a decrease in sales of $32.0 million from
the closure of four stores in fiscal year 1996 and the closure of four stores in
fiscal year 1995 and a decline in same store sales of 2.5% due to continued
competitor store openings and remodels.
GROSS PROFIT
Gross profit increased by $31.1 million and, as a percentage of net sales,
increased to 26.6% for fiscal year 1996 from 25.8% for fiscal year 1995.
Included in this increase is approximately $11.9 million of gross profit
resulting from the additional week of operations in the 53 week fiscal year
1996. The remainder of the increase is due primarily to an increase in the
amount of vendor rebates and the effect of price increases implemented by the
Company late in the second quarter of fiscal year 1996. The increase in vendor
rebates is due to the Company negotiating for additional vendor rebates
resulting in lower net product costs instead of receiving advertising allowances
which are recorded as a credit to store operating, selling and administrative
expenses.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses increased by $8.5
million for fiscal year 1996 compared to fiscal year 1995. As a percentage of
net sales, store operating, selling and administrative expenses has remained
constant at 21.5% of net sales for each of fiscal years 1996 and 1995. Included
in store operating, selling and administrative expenses is approximately $9.6
million of expenses resulting from the additional week of operations in the 53
week fiscal year of 1996. The remainder of the increase is also the result of a
number of other factors, including store occupancy costs of new and replacement
stores in excess of the occupancy costs of closed stores, the full year impact
of rent expense associated with seven stores that were sold and leased back in
fiscal year 1995. In addition, the Company negotiated for lower advertising
allowances which are recorded as a credit to store operating, selling and
administrative expenses, in exchange for increased vendor rebates to lower net
product costs (as described above under
27
<PAGE>
"-- Gross Profit"). These increases were offset by a decline in gross
advertising expenses, professional fees and other operating expenses.
EBITDA
EBITDA increased by $22.6 million and, as a percentage of net sales,
increased to 5.1% for fiscal year 1996 from 4.2% for fiscal year 1995. The
increase in EBITDA is attributable to the increase in gross profit partially
offset by the increase in store operating, selling and administrative expenses
as described above.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense decreased $1.6 million and, as a
percentage of net sales, decreased to 1.9% for fiscal year 1996 from 2.0% for
fiscal year 1995. The decrease in expense of $1.6 million is attributed to
reduced capital expenditures for store fixtures and equipment in fiscal year
1996 as compared to fiscal year 1995.
INTEREST EXPENSE, NET
Net interest expense for fiscal year 1996 declined by $4.4 million compared
to fiscal year 1995 due primarily to a net reduction of debt of $26.0 million.
PROVISION FOR INCOME TAXES
The provision for income taxes for fiscal year 1996 increased by $9.3
million compared to fiscal year 1995 due to the increase in earnings before
income taxes to $35.8 million for fiscal year 1996 compared to earnings before
income taxes of $7.1 million for fiscal year 1995.
NET EARNINGS
Net earnings for fiscal year 1996 increased by $19.4 million to $19.4
million from net earnings of $37,000 for fiscal year 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are expected to be cash flow
from operations, borrowings under the Revolving Credit Facility and proceeds
from the sale leaseback of real estate properties. Management anticipates that
the Company's principal uses of liquidity will be to provide working capital,
meet debt service requirements and finance the Company's expansion and
remodeling plans. Management believes that cash flows generated from operations
and borrowings under the Credit Facilities will adequately provide for its
working capital and debt service needs and will be sufficient to fund the
Company's expected capital expenditures.
The Credit Facilities are comprised of the Term Loan Facility and the
Revolving Credit Facility. In the future, the Company will use the proceeds from
the Revolving Credit Facility to provide for working capital requirements and
the implementation of the Company's strategy to expand and enhance its store
base and optimize its distribution facility. At Closing, all amounts outstanding
under the TCB Credit Facility were repaid and the commitments thereunder
terminated and the Senior Notes were similarly retired. The Company has $220.2
million available (reduced by $1.8 million to reflect outstanding letters of
credit) to be borrowed under the Revolving Credit Facility.
Historically, the Company has funded working capital requirements, capital
expenditures and other cash requirements primarily through cash flow from
operations and borrowings under the revolving credit facility of the TCB Credit
Facility and the proceeds of sale leasebacks. In fiscal years 1997, 1996 and
1995, operating activities generated cash of $18.4 million, $63.8 million and
$53.5 million, respectively. Net borrowings (repayments) of revolving loans
under the TCB Credit Facility were $3.0 million, $17.0 million and $(14.0)
million during fiscal years 1997, 1996 and 1995, respectively.
Cash flows used in (or provided by) investing activities were $48.5 million,
$33.8 million and $0.1 million in fiscal years 1997, 1996 and 1995,
respectively. Capital expenditures include expenditures
28
<PAGE>
related to the construction of new stores, the purchase of real estate, the
remodeling of existing stores, ongoing store expenditures for equipment and
maintenance, as well as expenditures relating to warehousing, distribution,
manufacturing facilities and equipment, data processing and computer equipment.
To finance store development, the Company has traditionally purchased real
estate and constructed stores from operating cash flows and from the proceeds of
its revolving credit facility and then entered into sale leaseback transactions,
the proceeds of which were applied to reduce debt incurred to construct the
stores. Capital expenditures since fiscal year 1994 were primarily financed from
internally generated funds, proceeds from the sale of real estate properties
(including sale leaseback transactions) and borrowings under the TCB Credit
Facility. In fiscal years 1997, 1996 and 1995, capital expenditures were $73.9
million, $66.1 million and $59.9 million, respectively. Proceeds from asset
sales (a substantial portion of which were sale leasebacks of certain real
estate properties) totaled $55.4 million during fiscal year 1997 compared to
$30.3 million during fiscal year 1996. As a result of the disposal of certain
assets, a gain of $0.9 million was recognized during fiscal year 1997. Although
the Company has not finalized its future store development program, the Company
expects to accelerate its store development program and optimize its
distribution system which will result in a level of capital expenditures
significantly in excess of historical levels. See "Business -- Store
Development." The Company anticipates funding its capital expenditures with cash
flow from operations and borrowings under the Revolving Credit Facility and
proceeds from sale leaseback transactions.
The principal uses of cash from financing activities during fiscal year 1997
were net repayments of long-term debt of $400.0 million, the Tender Offer of
$89.4 million, the Preferred Stock Redemption of $28.7 million, the payment of
the Make-Whole Premium of $14.9 million, payment of preferred stock dividends of
$2.3 million, the accelerated amortization of deferred financing costs of $1.8
million and purchase of treasury stock of $0.9 million, offset by a net increase
in capital lease obligations of $5.4 million and net proceeds from the
Recapitalization and the Financings of $55.3 million. In fiscal year 1996, the
primary uses of cash from financing activities were net repayments of long-term
debt and capital lease obligations of $26.0 million and payment of preferred
stock dividends of $5.9 million and issuance of common stock of $0.6 million.
The primary uses of cash from financing activities in fiscal year 1995 were net
repayments of long-term debt and capital lease obligations of $63.7 million and
issuance of common stock of $9.4 million.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company
adopted this standard in the first quarter of fiscal year 1997. The adoption of
SFAS No. 121 did not have a significant impact on the Company's financial
condition, results of operations or cash flows.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation," effective for financial statements
for fiscal years beginning after December 15, 1995. This statement defines a
fair value-based method of accounting for employee stock options or similar
equity instruments. As the statement permits, the Company will continue to
account for these types of instruments using the intrinsic value-based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." The statement, if adopted, would not have
materially affected reported amounts for net income (loss) and income (loss) per
share in fiscal years 1997 and 1996.
EFFECTS OF INFLATION
The Company's primary costs, inventory and labor, are affected by a number
of factors that are beyond its control, including availability and price of
merchandise, the competitive climate and general and regional economic
conditions. As is typical of the supermarket industry, the Company has generally
been able to maintain gross profit margins by adjusting retail prices, but
competitive conditions may from time to time render the Company unable to do so
while maintaining its market share.
29
<PAGE>
BUSINESS
GENERAL
The Company is the second largest supermarket operator in its principal
markets, with 121 stores located in Houston (53 stores), Dallas/Fort Worth (52
stores), and Austin (16 stores). With over 30 years of operations in Houston and
49 years of operations in Dallas/Fort Worth, the Company has developed a loyal
customer base and a portfolio of large, attractive stores in prime locations.
The Company offers customers an expanded selection of high quality products,
exceptional customer service and a variety of specialty departments. These
strengths, together with the Company's position as a Texas-based supermarket
operator, have enabled it to maintain a number two market share in Houston,
Dallas and Austin, the Company's principal markets. For fiscal year 1997, the
Houston, Dallas, Fort Worth and Austin markets represented approximately 47%,
35%, 7% and 11% of the Company's net sales, respectively. For fiscal year 1997,
the Company generated net sales of approximately $2.34 billion and EBITDA of
$29.8 million.
The Company operates combination food and drug stores which emphasize high
quality products, exceptional customer service and expanded selections of
quality meat, seafood, produce and other perishables. This format appeals to a
broad customer base by offering shoppers an extensive variety of products and
services, including large produce and perishables departments, in-store
bakeries, delicatessens, full-service meat and seafood departments, salad bars,
banks, pharmacies, full-service floral departments, expanded cosmetic
departments, video rental departments and film processing counters. The Company
operates 84 traditional combination food and drug stores under the RANDALLS
banner in Houston and Austin and the TOM THUMB banner in Dallas/Fort Worth
averaging approximately 49,800 square feet. For fiscal year 1997, these stores
generated sales of approximately $1.59 billion, or 68% of net sales, and average
sales weekly per store of approximately $356,000.
The Company's NEW GENERATION and FLAGSHIP STORES are each variations of the
Company's traditional combination food and drug stores, offering an even wider
selection of premium products and services:
NEW GENERATION STORES emphasize expanded perishable food departments and
open product preparation in order to create a farmer's market atmosphere and
highlight product freshness to customers. The Company's 20 New Generation
Stores operate under the RANDALLS banner in Houston and Austin and the TOM
THUMB banner in Dallas, and average approximately 68,900 square feet. For
fiscal year 1997, New Generation Stores generated sales of approximately
$450.0 million, or 19% of net sales, and average weekly sales per store of
approximately $493,000.
FLAGSHIP STORES target customers seeking an expanded array of premium
services and a wider variety of top quality gourmet and specialty
selections. Flagship Stores feature additional "one-stop" shopping
conveniences and many higher margin specialty products and services,
including in-store gourmet coffee bars and eating areas, expanded bakery
departments staffed with French pastry chefs, a wide range of freshly
prepared foods (including made-to-order pizza, pastas and barbecued meats),
home delivery and catering. The Company operates seven Flagship Stores under
the RANDALLS FLAGSHIP banner in Houston averaging approximately 57,500
square feet and one store of approximately 34,000 square feet under the
SIMON DAVID banner in Dallas. For fiscal year 1997, Flagship Stores
generated sales of approximately $220.0 million, or 10% of net sales, and
average weekly sales per store of approximately $578,000.
The Company also operates 9 conventional stores which offer a similar variety of
food products and specialty departments as its traditional combination food and
drug stores, but do not include pharmacies. Conventional stores average
approximately 20,600 square feet. For fiscal year 1997, Conventional stores
generated sales of approximately $80.0 million, or 3% of net sales, and average
weekly sales per store of approximately $171,000.
30
<PAGE>
COMPANY STRENGTHS
STRONG FRANCHISE AND DISTINCTIVE IMAGE. Over its history, the Company has
established a reputation for providing high quality products and exceptional
service to customers. The Company's stores are known for their broad selection
of high quality meats, seafood, produce and other perishables, which are
complemented by a variety of specialty departments to create a differentiated,
"one-stop" shopping experience. In a series of independent surveys of shoppers
in Houston and Dallas, the Company has consistently received the highest ratings
for specialty categories, such as fresh meat, produce, bakery and floral, and
service categories, such as customer assistance, quick checkout, cleanliness,
product variety and selection. In addition, the Company's long-standing practice
of reinvesting in the community by partnering with customers in charitable
giving programs, such as the "Good Neighbor" program, further enhances customer
loyalty and provides the Company with an additional competitive advantage.
ATTRACTIVE STORES IN PRIME LOCATIONS. The Company has developed a portfolio
of large, attractive stores in prime locations which provide flexibility in
store layout and merchandising. Since 1992, the Company has increased average
store size from approximately 46,000 square feet to approximately 51,000 square
feet by pursuing a strategy of store expansion in selected markets. The Company
attempts to optimize operating results by selecting the variation of its
combination food and drug store that is best suited to each store site's
demographics, local preferences and competition.
LEADING MARKET SHARES. The Company believes that its strong franchise and
distinctive image have enabled it to establish a number two market share in
Houston, Dallas and Austin, its principal markets. The Company's market shares
in Houston, Dallas, Austin, and Fort Worth are approximately 22%, 19%, 19% and
9%, respectively. The Company's history as a local supermarket operator and the
recent introduction of its frequent shopper program have helped the Company to
maintain its strong market position despite aggressive store opening and
remodeling programs by competitors in recent years. Management believes that
following the Recapitalization and the Financings, the Company's competitive
position will be strengthened by store remodels and new construction. In
addition, management believes that its frequent shopper program will continue to
enhance its competitive position.
GROWING MARKETS. Over the past several years, Texas has been one of the
fastest growing states in terms of population, income and employment, and
economists project growth in excess of the national average to continue in the
near future. Since 1990, the Houston, Dallas, Fort Worth and Austin markets have
experienced compound annual employment growth of 1.9%, 2.6%, 2.2% and 5.5%,
respectively, all exceeding the national average of 1.5%. In 1996, grocery sales
in Texas increased 5.2% versus 3.3% for the country as a whole, and the Houston,
Dallas/Fort Worth and Austin markets accounted for total grocery sales of
approximately $15.0 billion, or 48.9% of total grocery sales in Texas. The Texas
economy, employment, personal income and population growth are forecast to
continue to expand at rates above the national average over the next three
years.
EXPERIENCED MANAGEMENT TEAM. The Company's executive officers have spent
the majority of their careers in the supermarket business and have an average of
15 years of experience in the food retailing industry. In addition, the Company
believes opportunities exist to enhance the existing management team with
additional experienced industry executives. Management's expertise and in-depth
knowledge of the Company's markets are further complemented by the experience of
certain affiliates of KKR, which have a track record of successfully acquiring
and improving the operations of supermarket companies and the ability to attract
senior level executives.
CUSTOMER SERVICE-ORIENTED WORKFORCE. The Company emphasizes friendly,
efficient and knowledgeable customer service. All employees are trained to
actively address the needs of customers. These employees reinforce the Company's
distinctive service-oriented image and differentiate it from its competitors.
The Company is dedicated to promoting from within its organization and believes
that it possesses considerable management depth among its workforce, with store
directors having an average of over 15 years of experience with the Company.
31
<PAGE>
BUSINESS STRATEGY
ACCELERATE NEW STORE DEVELOPMENT AND REMODELING PROGRAM. The Company
believes that it will be able to capitalize on the continued growth in its
markets by accelerating its new store development and remodeling program. In
recent years, the Company has not had the financial resources to aggressively
remodel its existing store base or construct new stores. Since the beginning of
fiscal year 1995, the Company has only opened 15 stores and remodeled 10 stores
(while closing 17 stores), compared to management's estimate that its
competitors have opened approximately 110 stores and remodeled approximately 100
stores in the Company's markets over the same period. The Recapitalization and
the Financings will provide the Company with increased financial flexibility,
enabling it to undertake significant remodeling in the Houston area, new store
construction and remodeling in Dallas/Fort Worth and selected store expansion in
the Austin market.
REDUCE OPERATING COSTS. The Company has identified a number of initiatives
designed to improve operating results by lowering operating costs. Specific
initiatives include: (i) applying the Company's successful labor scheduling
guidelines throughout all operational areas; (ii) implementing performance
measurement standards to further improve operating efficiency; (iii) enhancing
category management to improve store-level merchandising efforts and to increase
promotional buying opportunities; (iv) improving shelf pricing procedures to
decrease the frequency of price changes and inaccurate labeling; and (v)
introducing production planning in the perishables departments. The breadth of
these initiatives reflects the significant opportunities available to the
Company.
OPTIMIZE DISTRIBUTION. The Company is currently undertaking an evaluation
of its existing distribution channels. Of the products currently sold by the
Company, approximately 40% are self-distributed, approximately 30% are delivered
directly to stores from vendors and approximately 30% are delivered through
Fleming. The Company believes it can improve its cost structure and manage
working capital more efficiently by enhancing its distribution capabilities. See
"--Litigation."
DIFFERENTIATE BASED ON HIGH QUALITY PRODUCTS AND SERVICES AT A COMPETITIVE
PRICE. Throughout its history, the Company has developed a reputation for
operating large, attractive stores with an extensive variety of specialty
departments staffed by well-trained, service-oriented employees. The Company
offers an expanded selection of high quality products at competitive prices to
create a differentiated "one-stop" shopping experience. In addition, the Company
is committed to being the "first to market" in providing solutions to its
customers' changing lifestyle needs, as is evidenced by the recent launches of
its frequent shopper program and the PEAPOD on-line grocery ordering and home
delivery program.
LEVERAGE FREQUENT SHOPPER PROGRAM. The Company believes that significant
opportunities exist to increase revenue and focus its marketing efforts by
leveraging its frequent shopper program. Data collected from customers
participating in the frequent shopper program enables the Company to track sales
trends, demographic patterns and customer preferences, and utilize that data to
allocate shelf space, target marketing activities and increase customer loyalty.
INCREASE PRIVATE LABEL SALES. Relative to national brands, private label
products provide comparable quality at lower prices to shoppers and higher gross
margins to the Company. The Company currently offers a three-tiered private
label program, including PRESIDENT'S CHOICE premium private label products, its
own REMARKABLE private label products and VALUE TIME private label products
catering to value-conscious consumers. In recent years the Company's private
label sales have been lower than the national average. The Company is currently
expanding its private label offerings across all tiers, with particular emphasis
on increasing REMARKABLE label offerings.
OPERATING INITIATIVES
LABOR SCHEDULING AND WORK METHODS. The Company is currently in the process
of introducing a labor scheduling system based upon engineered labor standards,
corporate productivity guidelines and customer service standards. Subsequent to
the implementation of such system to the front-end of its stores, the
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<PAGE>
system will be expanded storewide. As part of this program, the Company intends
to redesign certain work standards to improve labor productivity.
COMPANY-WIDE PERFORMANCE MEASURES. The Company is currently evaluating its
existing set of financial reporting and performance measurement systems to
ensure that these systems support its business strategy and identify those
factors which lead to enhanced operating profitability. The reporting systems
will monitor each department's performance relative to identified financial
goals and report exceptions to management.
CATEGORY MANAGEMENT. The Company is in the process of implementing
store-wide category management programs as part of a coordinated merchandising
effort. The next phase of this initiative includes the integration of category
management plans with operating budgets and with company-wide promotional
efforts and the identification of enhanced performance measures. The program
will enable the Company to execute more consistent promotional programs at the
store level and increased promotional buying opportunities. The Company plans to
work more closely with vendors to coordinate joint advertising and promotional
programs and increase vendor support. As a part of this initiative, the Company
will begin to track inventory in each store with a goal of reducing the
frequency of inadequate store inventory levels.
COMPANY HISTORY
Co-founders Robert R. Onstead, R.C. Barclay, and Norman N. Frewin began
operations in Houston on July 4, 1966 with the purchase of two existing grocery
stores. The Company's stores emphasized service and personal attention with an
overriding goal to treat each customer as a member of the family. As the first
two stores prospered, the Company was able to open a third store in 1968 and a
fourth in 1970. In early 1979, the Company acquired four grocery stores, each
approximately 40,000 square feet in size and substantially larger than any of
its existing stores, to increase its store total to 14. The Company continued to
expand in the Houston area in the 1980s, operating 39 stores by 1989, many of
which were in excess of 40,000 square feet.
In August 1992, having accumulated a portfolio of 45 stores in the Houston
market, the Company acquired 100% of the stock of Cullum Companies, Inc.
("Cullum"), a food and drug retailer which operated 62 stores in Dallas and
Austin under the TOM THUMB banner (the "Cullum Acquisition"). Cullum had
operated in Dallas since 1948 and in Austin since 1972. In January 1994, the
Company acquired 12 stores in Austin (three of which were closed immediately
after the acquisition) and three stores in Houston from AppleTree Markets, Inc.
STORE DEVELOPMENT
The Company's long history of developing stores in densely populated areas
has resulted in a portfolio of large, attractive stores in prime locations which
offers the Company significant competitive advantages. The Company attempts to
optimize operating results by selecting the variation of its combination food
and drug store that is best suited to each store site's demographics, local
preferences and competition. The Company carefully monitors changes in
neighborhood demographics to determine whether a change in format is warranted
and selectively converts stores when opportunities arise.
The Company believes that the appearance of its stores is an integral
component of the customer's shopping experience. The Company's goal is to
maintain clean, well-lit stores with attractive architectural features that
enhance the image of its stores as upscale markets catering to the changing
lifestyle needs of quality conscious customers. As a result of acquisitions, new
store construction and remodelings, total square footage in the Company's stores
has increased 26% since 1992 from approximately 4,915,000 square feet to
approximately 6,185,000 square feet and average store size has increased from
approximately 46,400 square feet to approximately 51,100 square feet over the
same period. While most of its newer stores are larger and while the Company
expects the average size of its stores to grow as stores are remodeled and new
stores are opened, the Company intends to remain flexible as to the size of new,
acquired and remodeled stores.
33
<PAGE>
The following table sets forth certain information with respect to store
size.
<TABLE>
<CAPTION>
NUMBER OF STORES
AS OF JUNE 28, 1997
-----------------------
<S> <C>
STORE SIZE:
Less than 20,000 square feet................................................................. 6
Between 20,000 and 30,000 square feet........................................................ 3
Between 30,000 and 40,000 square feet........................................................ 16
Between 40,000 and 50,000 square feet........................................................ 14
Between 50,000 and 60,000 square feet........................................................ 58
Over 60,000 square feet...................................................................... 24
</TABLE>
The following table sets forth additional information concerning the
Company's stores for the indicated period:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JUNE 28, JUNE 29, JUNE 24, JUNE 25, JUNE 26,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
TOTAL STORES:
Beginning of period........................................ 120 120 121 109 45
Newly constructed........................................ 8 4 3 5 4
Acquired................................................. 2 0 0 15(2) 63(3)
Closed................................................... (9) (4) (4) (8)(2) (3)
--- --- --- --- ---
End of period.............................................. 121(1) 120 120 121 109
--- --- --- --- ---
--- --- --- --- ---
MAJOR REMODELS(4)............................................ 0 5 5 5 1
</TABLE>
- ------------------------
(1) Includes 18 stores that, as of June 28, 1997, the Company has decided to
close, replace or sell.
(2) Reflects the acquisition of 15 stores in Austin and Houston from AppleTree
Markets, Inc. and the immediate closure of three of such stores in Austin.
(3) Includes the acquisition by the Company in August 1992 of 100% of the stock
of Cullum (representing 62 TOM THUMB stores).
(4) Includes major remodels involving expenditures of at least $1.0 million per
store.
In fiscal year 1997, the Company opened three stores in Houston, six stores
in Dallas and one store in Austin, while closing nine stores. In addition, the
Company has decided to close or replace up to 14 stores and sell 4 stores as
part of a strategic review of its operations. Over the next three years, the
Company presently plans to open an average of eight to 10 new stores per year
and engage in an average of 25 major and other remodels per year, with a focus
on new store openings in Dallas and remodels in Houston. The Company's plans to
remodel existing stores and construct new stores are reviewed continually and
are subject to change. The Company has been highly selective in acquiring store
locations and attempts to take advantage of market research and its extensive
knowledge of Texas markets in evaluating opportunities. In conducting market
research for store locations the Company typically evaluates population shifts,
demographic conditions, socio-economic characteristics, zoning changes, traffic
patterns, new construction, anticipated cannibalization of the Company's
existing stores and the proximity of competitors' stores, in an effort to
determine a future store's sales potential. The Company's ability to expand and
remodel existing stores and to open new stores is subject to many factors,
including successful negotiation of new leases or amendments to existing leases,
successful site acquisition and the availability of financing on acceptable
terms, and may be limited by zoning, environmental and other governmental
regulations.
INDUSTRY OVERVIEW
The $426.0 billion food retailing industry in the United States includes
national and regional supermarket chains, independent and specialty grocers,
traditional convenience food stores and newer
34
<PAGE>
"alternative format" food stores, including warehouse club stores, deep discount
food operators and supercenters. Management believes that the food retailing
industry is identified by four trends: consolidation, shift in store formats,
increased private label penetration and increased sales of home meal replacement
products.
A large portion of the U.S. supermarket industry is highly fragmented.
According to industry reports, the top 10 supermarket operators (excluding
convenience and grocery stores with annual sales of less than $2.0 million and
also excluding warehouse stores, club stores, deep food discounters and
supercenters) accounted for approximately 37% of the approximately $323.0
billion of 1996 domestic supermarket sales, while no supermarket operator
outside of the top five accounted for more than 3.5% of such sales. In addition,
approximately 150 supermarket operators had sales of $250 million or more in
1995. Recently, the food retailing industry has been experiencing consolidation
as larger supermarket chains acquire smaller independent competitors within
their markets as well as supermarket chains in different geographic markets.
According to the PROGRESSIVE GROCER ANNUAL REPORT published in April 1997,
high-volume supermarket chains accounted for 78% of 1996 supermarket sales, as
compared to only 61% in 1976.
In an effort to increase sales and margins, supermarkets are introducing new
formats and remodeling older stores more frequently. Operators have shifted
resources to building larger stores or reformatting conventional stores into
superstores or combination stores to accommodate higher margin specialty
departments, such as bakery, seafood, delicatessen, health and beauty aids,
pharmacies and video rentals. As a result of this trend, the average size of a
chain store has increased to 37,000 square feet.
The percentage of gross supermarket sales derived from private label
products has increased significantly in recent years to a range of 15% to 20%.
Private label goods enable grocery chains to provide a product with quality
comparable to a branded product at a lower cost. In addition to providing
enhanced gross margins and a value-oriented product to customers, certain food
retailers also are able to use private label products as negotiating leverage
with branded suppliers to enhance margins on branded products as well. Over a
longer term, private label products build customer loyalty by offering a product
label that the customer can only purchase at the retailer's stores.
Management believes that, in recent years, the trend toward increased
convenience has led to an increase in eating away from home and the purchase of
prepared meals for home consumption. According to the U.S. Department of
Commerce, retail sales for "eating and drinking" establishments increased by
6.2% per annum from 1986 to 1995, significantly higher than the 3.7% annual
growth experienced by "food stores" during the same period. In response to this
trend, supermarkets have expanded their frozen food selections, full-service
specialty departments such as delicatessens, and home meal replacement products,
each of which provide convenience-oriented consumers with an alternative to
restaurants and fast food establishments.
MARKET OVERVIEW
Over the past several years, Texas has been one of the fastest growing
states in terms of population, income and employment, and economists project
growth in excess of the national average to continue in the near future. Since
1990, the Houston, Dallas, Fort Worth and Austin markets have experienced
compound annual employment growth of 1.9%, 2.6%, 2.2% and 5.5%, respectively,
all exceeding the national average of 1.5%. In 1996, grocery sales in Texas
increased 5.2% versus 3.3% for the country as a whole, and the Houston,
Dallas/Fort Worth and Austin markets accounted for total grocery sales of
approximately $14.8 billion, or approximately 48.9% of total grocery sales in
Texas. Texas has experienced a structural shift away from energy-based
industries such as oil and gas, towards growth industries such as healthcare and
technology. As a result of this increased diversification, the Texas economy has
become less susceptible to energy-related economic cycles. The Texas economy is
forecasted to continue to expand at rates above the national average in both the
short and long term, and economists are currently forecasting non-farm
employment growth in the Company's served markets of approximately 2.3% a year
through 2000 and real personal income growth in the Company's served markets of
approximately 3.3% a year through 2000, compared to 1.1% and 2.1% nationally
through 2000, respectively.
35
<PAGE>
HOUSTON
With a population of approximately 4.2 million, the Houston metropolitan
area is expanding at a rate slightly above national levels. In addition to the
energy industry, Houston is also home to global technology, biomedical,
aerospace and engineering firms. Annual population and job growth in the Houston
area are projected at 1.8% and 2.2%, respectively, through 2000, compared to
0.9% and 1.1% nationally through 2000, respectively. In addition, the Houston
market experienced 4.5% cumulative annual growth in retail sales during 1995 and
1996, compared to 5.1% nationally.
DALLAS/FORT WORTH
The Dallas/Fort Worth metropolitan area has a population of approximately
4.4 million and has benefited in recent years from strong oil and natural gas
markets, continued strong growth in the high technology sector and renewed
strength in the airline industry. Annual population and job growth in the
Dallas/Fort Worth area are projected at 1.8% and 2.3%, respectively, through
2000, compared to 0.9% and 1.1% nationally through 2000, respectively. In
addition, the Dallas/Fort Worth market experienced 6.9% cumulative annual growth
in retail sales during 1995 and 1996 compared to 5.1% nationally.
AUSTIN
With a population of approximately 1.0 million, the Austin metropolitan area
has experienced population growth during the past five years that is three times
the national average. This significant population growth has been driven by the
area's opportunities in the semiconductor industry and other technology-related
industries. Annual population and job growth in the Austin area are projected at
2.1% and 2.6%, respectively, through 2000, compared to 0.9% and 1.1% nationally
through 2000, respectively. In addition, the Austin market experienced 14.7%
cumulative annual growth in retail sales during 1995 and 1996 compared to 5.1%
nationally.
MERCHANDISING
The Company's merchandising strategy is designed to create a differentiated
"one-stop" shopping experience that blends concerns for value and quick service
with variety, quality and convenience. Management believes that its
merchandising strengths have fostered a loyal customer base by establishing a
distinctive reputation for providing high quality products and a variety of
specialty departments.
EXPANDED SELECTIONS OF QUALITY MEAT, SEAFOOD, PRODUCE AND OTHER
PERISHABLES. The Company's stores are well-known for their broad selection of
quality meats, seafood, produce and other perishables. The Company believes that
its reputation for carrying select cuts of beef, natural poultry and pork, fresh
seafood and local produce differentiates its stores from those of its
competitors. The Company's full-service meat departments generally incorporate
an open design which fosters interaction among butchers and customers. All meat
offerings are skillfully trimmed and appealingly displayed. A wide range of home
replacement meals, such as shish kebabs, chicken kiev and stuffed game hens, are
featured in each store's meat department and many stores' meat departments
include full-service smokehouses. Fresh fish and seafood from nearby Gulf waters
are delivered daily to each store. The Company's produce departments are
designed to portray an open market feel with carefully selected and hand stacked
produce and offerings of fresh herbs and organically grown fruits and
vegetables. An extensive variety of produce from local growers is given special
emphasis in store merchandising.
HIGH QUALITY CONVENIENCE-ORIENTED SPECIALTY DEPARTMENTS AND SERVICES. Based
on market and demographic data, management believes that supermarkets offering a
broad array of products and time-saving services are perceived by customers as
part of a solution to today's lifestyle demands. Accordingly, a principal
component of the Company's merchandising strategy is to design stores which
offer a "one-stop" shopping experience. In-store services such as bank branches,
ATMs, drycleaning services and video rental departments are strategically placed
near the front of the stores. Gourmet coffee bars, in-store bakeries
36
<PAGE>
and prepared foods sections are conveniently located near seating areas. Most
stores are open 24 hours, with well-lit parking lots and on-site security
personnel.
INCREASED EMPHASIS ON PREPARED FOODS AND HOME MEAL REPLACEMENT ITEMS. Many
stores offer daily selections of pastas and dinner entrees, as well as
made-to-order pizzas, rotisserie chickens, quiches, hot and cold sandwiches and
salads. In Flagship and New Generation Stores, food is prepared in open areas to
increase shoppers' confidence in product freshness. In Flagship Stores,
selections extend to panini sandwiches made of focaccia bread baked on the
premises and a sushi bar staffed by trained sushi chefs. In many stores, baked
goods are made daily from scratch, including bagels, hot rolls, scones, brioche
and specialty breads; and each Flagship Store is staffed with a French pastry
chef. Each store contains a full-service florist shop offering flowers and
plants delivered daily by vendors, and most stores are staffed by master
florists or designers. Most stores offer an extensive selection of wines and
champagnes, including wines from well-known California and French vineyards as
well as local vineyards.
The Company's video rental departments feature over 5,000 movie titles,
rental VCRs and snack centers all contained in an appealing alcove decorated
with glossy posters and monitors playing current videos. Most stores include a
bank branch and/or ATM machines, one-hour photo processing, as well as a
full-service pharmacy. Customer service centers in each store provide a wide
array of services, including the purchase of lottery and movie tickets, check
cashing, payment of utility bills, car licenses, and hunting and fishing
licenses.
PRIVATE LABEL PROGRAM
The Company supplements its branded grocery offerings with a selection of
private label goods, including grocery, general merchandise, floral, health and
beauty products, dairy, produce and delicatessen products. In comparison to
national brands, private label goods provide comparable quality at lower prices
to customers and higher gross margins to the Company. The Company currently
offers a three-tiered private label program including PRESIDENT'S CHOICE premium
private label products, its own REMARKABLE brand private label products and
VALUE TIME private label products catering to value-conscious consumers. The
Company procures REMARKABLE and VALUE TIME products through Topco Associates,
Inc., a national food buying cooperative owned by over 45 retail, wholesale and
food service operators and offering over 6,000 private label branded goods. In
addition, Daymon Associates, a leading sales and marketing company for private
label brands, manages the Company's private label program. In recent years the
Company's private label sales have been significantly lower than the national
average; however, the Company is currently expanding its private label offerings
across all tiers, with particular emphasis on increasing REMARKABLE label
offerings.
ADVERTISING AND MARKETING
The Company advertises through television, radio, newspapers and newspaper
inserts, with an emphasis placed on its reputation for providing high quality
products and exceptional service. The Company distributes a large number of its
circulars to target markets each week. The Company regularly promotes new
products and services through in-store demonstrations and samplings, and "point
of sale" coupons. In addition, in order to enhance its name recognition and
quality-oriented image, the Company sponsors a number of local and nationally
recognized charitable organizations and professional sports franchises. The
Company also provides coupons which are printed on the reverse side of the
shopper's receipt.
The Company's frequent shopper program has become the cornerstone of its
marketing efforts since its inception in the fall of 1996. Currently, frequent
shopper card holders account for a majority of the Company's total sales and a
significant percentage of the Company's total transactions. Data generated from
frequent shopper card purchases enables the Company to track changing sales and
demographic patterns and customer preferences. The Company uses such data to
allocate advertising resources and shelf space accordingly and focus on targeted
marketing activities (i.e., direct mailings) that are tailored to the needs of
identifiable consumer segments.
37
<PAGE>
Frequent shopper card holders currently receive check-cashing privileges,
debit card capability, electronic discounts and direct mailings from the
Company. In addition, in conjunction with the Company's "Good Neighbor" program,
frequent shopper card holders can select from one of over 5,000 participating
not-for-profit organizations, and the Company will donate a fixed percentage of
the holder's frequent shopper card purchases to that organization.
PURCHASING AND DISTRIBUTION
The Company is currently undertaking an evaluation of its existing
distribution channels. The Company has traditionally purchased a portion of its
merchandise from third party suppliers. Approximately 30% of the Company's
purchases are supplied directly to the Company's stores by Fleming, one of the
nation's largest food distribution companies, pursuant to a 1993 supply
agreement which expires in June 2001. The Company has initiated a legal action
against Fleming, one of its long-time suppliers. In the action, the Company
alleges, among other things, that Fleming violated the terms of a supply
agreement signed in 1993. Under the terms of the supply agreement, the Company
was to purchase groceries and other items at Fleming's cost, plus a small
markup. Among the violations alleged by the Company are claims that Fleming
wrongfully manipulated its costing procedures, which resulted in overcharges,
and then unilaterally changed the overall pricing formula. Additionally, the
Company alleged that Fleming failed to provide supporting documentation for
purchases as required under the contract. Since 1993 when the supply agreement
was signed, the Company has purchased approximately $2.0 billion in products
from Fleming. Based on the supporting documents provided to the Company by
Fleming to date, the Company will be seeking a substantial amount of damages
from Fleming and termination of the supply agreement. Fleming has filed an
answer denying each allegation and a counterclaim alleging that the Company
failed to purchase the quantities required by the supply agreement.
An additional 30% of the Company's purchases, including beverages, tobacco
products, milk, bread and snack foods, are supplied directly to the Company's
stores by vendors, with the remaining 40% of products being self-distributed.
The Company believes it can improve its cost structure and manage working
capital more efficiently by enhancing its distribution capabilities.
The Company currently operates two distribution facilities in Houston and
one in Dallas, totaling over 600,000 square feet. The Telge Road facility in
Houston consists of 109,640 square feet of refrigerated space to store
perishable goods, 33,020 square feet of dry grocery space and 7,000 square feet
of office space, and is located on approximately 70 acres of Company-owned land,
10 of which have been developed. The Rogerdale facility in Houston consists of
155,728 square feet of dry grocery space and 13,916 square feet of office space,
and is located on approximately 29 acres of Company-owned land, approximately 20
of which have been developed. The Inwood facility located in Dallas consists of
78,854 square feet of refrigerated space, 194,020 square feet of dry grocery
space, and 21,900 square feet of office space, and is located on approximately
25 acres of Company-owned land, substantially all of which has been developed.
Each store submits orders to the distribution facilities through a
centralized processing system, and merchandise is normally received by the
stores on the next day. Merchandise is delivered from the distribution
facilities through a leased fleet of 34 tractors, 66 refrigerated trailers and
18 dry trailers. The majority of the Company's stores in Houston and Dallas are
located within a 70 mile radius of a distribution facility.
The Rogerdale facility currently is for sale. The Company intends to expand
the Telge Road facility in connection with the anticipated consummation of such
sale.
INFORMATION TECHNOLOGY SYSTEMS
The Company's information systems include IBM personal computer-based
point-of-sale hardware and software in every checkout lane of each store,
thereby facilitating the implementation of the frequent shopper program. The
Company has an electronic payment system which includes check verification,
credit
38
<PAGE>
and debit card processing, ACH payment option, video rental application, and a
check collection system. These systems are fully integrated into the IBM
point-of-sale system.
The Company has a direct store delivery system, which integrates the receipt
of goods at each store with accounting and merchandising at the Company's
corporate headquarters. This integrated system provides the Company timely
information and greater efficiency and control over product receipts,
merchandising and accounts payable functions. In addition, the Company has
electronic time and attendance and labor scheduling systems that enable store
management to better control labor costs and increase the automation level of
the payroll process.
The Company is in the final stage of converting from a mainframe data center
operation to client-server based "open systems" architecture that will be the
foundation for its future technology development. Management expects that the
expanded functionality of its information capabilities will permit the
refinement of tools it can apply to better analyze data from the frequent
shopper program.
The Company is in the process of converting from a mainframe based
accounting software system to a client server based accounting system that
enhances the accounting process and provides for greater and more timely access
to Company accounting information. The Company also uses Electronic Data
Interchange to transmit and receive documents from suppliers. The Company is
using a warehousing and merchandising system developed internally running on a
UNIX machine using Informix as its database engine.
COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, and the newer "alternative format" food stores, including warehouse club
stores, deep discount drug stores and supercenters. Supermarket chains generally
compete on the basis of location, quality of products, service, price, variety
and store condition. The Company regularly monitors its competitors' prices and
adjusts its prices and marketing strategy as management deems appropriate in
light of existing conditions. The Company faces increased competitive pressure
in all of its markets from existing competitors which have opened, and appear to
have plans to continue to open, a significant number of new stores in the
Company's markets. Some of the Company's competitors have greater financial
resources than the Company and could use these resources to take measures which
could adversely affect the Company's competitive position.
The Company's principal competitors in Houston are The Kroger Co.
("Kroger"), Fiesta Mart Inc. and H.E. Butt Grocery Company ("H.E.B."), with
market shares of approximately 26%, 11% and 8%, respectively. The Company's
principal competitors in Dallas are Albertsons Inc. ("Albertsons"), Minyard Food
Stores ("Minyard") and Kroger, with market shares of approximately 21%, 15% and
15%, respectively. The Company's principal competitors in Fort Worth are
Albertsons, Kroger, Winn-Dixie Stores and Minyard, with market shares of
approximately 22%, 19%, 17% and 10%, respectively. The Company's principal
competitors in the Austin metropolitan area are H.E.B. and Albertsons, with
market shares of approximately 48% and 17%, respectively.
EMPLOYEES AND LABOR RELATIONS
The Company is one of the leading private employers in Texas. As of June 28,
1997, the Company employed 17,067 persons, of whom approximately 43% were
full-time and approximately 57% were part-time employees. Of this number, 15,952
were employed in supermarkets, 471 were employed in the
39
<PAGE>
warehouse operations and 644 were employed in the Company's business offices.
The Company currently employs an average of 130 employees in each store.
<TABLE>
<S> <C>
EMPLOYEE TYPE: TOTAL
---------
Salaried............................................................................ 2,059
Hourly:
Full-time......................................................................... 5,229
Part-time......................................................................... 9,779
---------
Total............................................................................... 17,067
---------
---------
</TABLE>
The Company has an incentive compensation plan covering its key management
staff. Incentive compensation for store operations managers is based upon the
profitability of the operations within the scope of their management
responsibility.
The Company's employees are not members of unions or parties to collective
bargaining agreements.
PROPERTIES
The Company operates a total of 121 supermarkets, with 53 located in the
Houston metropolitan area, 52 in the Dallas/Fort Worth metropolitan area and 16
in the Austin metropolitan area. Four of the Company's stores are owned and 117
are leased (four of which are held through interests in joint ventures).
The Company's real estate holdings consist of 139 leasehold (the "Leased
Properties") and 29 owned (the "Fee Properties") properties. The Company also
indirectly owns interests in seven properties through joint ventures (the "Joint
Venture Properties").
LEASED PROPERTIES
The Company leases 139 properties under standard commercial leases which
generally obligate the Company to pay its proportionate share of real estate
taxes, common area maintenance charges and insurance costs. In addition, such
leases generally provide for percentage of sales rent when sales from the store
exceed a certain dollar amount. Generally these leases have 20-year terms, with
four five-year renewal options. The Company owns a majority of the fixtures and
equipment in each leased location and has made various leasehold improvements to
the store sites. Company stores are located on 117 of the 139 Leased Properties
and, of the remaining 22 leases, 16 have been assigned or subleased to
unaffiliated third parties, generally in connection with store closings.
FEE PROPERTIES
The Company owns the 29 Fee Properties through Randall's Properties, Inc., a
wholly-owned subsidiary. The Fee Properties consist of the Company's
headquarters in Houston (comprised of two sites), the three Warehouses, two
shopping centers which are not occupied by Company stores, one shopping center
anchored by a Company store, one store leased to an unaffiliated party, three
free-standing supermarkets, 16 undeveloped properties and one property currently
under construction. The Company intends to enter into a sale leaseback
arrangement with third parties in connection with this property upon completion
of construction.
JOINT VENTURE PROPERTIES
The seven Joint Venture Properties are comprised of four shopping centers
which contain Company stores and three parcels of undeveloped land. The joint
ventures relating to the Joint Venture Properties were originally formed in
order to acquire land, develop shopping centers and lease the land. The Company
does not intend to enter into any additional joint venture or similar
arrangements in the future.
40
<PAGE>
TRADENAMES AND TRADEMARKS
The Company uses a variety of tradenames and trademarks. Except for
RANDALLS, TOM THUMB and REMARKABLE, the Company does not believe any of such
tradenames or trademarks are material to its business. The Company has granted
the right to certain retail shopping centers to use the RANDALLS, TOM THUMB and
SIMON DAVID tradenames as part of the tradenames of such shopping centers, so
long as the Company's stores are operating in such shopping centers.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposal or other releases of hazardous materials. Under various
environmental laws and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property and may be held liable
to a governmental entity or to third parties for damages and for investigation
and clean-up costs incurred by such parties in connection with the
contamination. The Company believes that it currently conducts its operations,
and in the past has operated its business, in substantial compliance with
applicable environmental laws and regulations. There can be no assurance that
(i) future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as the presence of
underground storage tanks), or by third parties unrelated to the Company. From
time to time, operations of the Company have resulted or may result in
noncompliance with or liability for cleanup pursuant to environmental laws and
regulations. The Company has determined that underground storage tanks at truck
fueling sites in Texas and Nebraska may have leaked fuel and other materials and
resulted in soil contamination. At the Abilene, Texas site, based on soil and
groundwater remediation efforts to date, the Company estimates a range of future
expenditures between $300,000 and $700,000, substantially all of which has been
reserved. With respect to a second site, located in Dallas, Texas, the Company
has paid remediation costs of approximately $300,000, and state regulatory
authorities have advised the Company that no further corrective action is
necessary. The Company expects to submit its final closure report to the state
shortly, which will be the last submittal associated with that location. One
other site, located in Garland, Texas, was sold to a party who accepted
responsibility for corrective action pertaining to leaking underground storage
tank site remediation. Under applicable environmental laws, the Company may
remain liable for remediation of the Garland site, which the Company estimates
may cost up to approximately $100,000. Remediation of the Nebraska site had been
initiated by the NDEQ using funds from the Nebraska Fund dedicated to
remediation of leaking underground storage tanks. Due to shortfalls in the
Nebraska Fund, the NDEQ, which has not classified the Company's site as a high
priority, suspended the remediation efforts. The Company anticipates that future
remediation efforts at such site, if any, would be paid for by the Nebraska
Fund. Including the remediation efforts described above, the Company believes
that any noncompliance or liability under current environmental laws and
regulations would not have a material adverse effect on its results of
operations and financial condition.
The Company has not incurred material capital expenditures for environmental
controls during the previous three years, nor does the Company anticipate
incurring any such material expenditures to comply with environmental
regulations during the current fiscal or the succeeding fiscal year.
GOVERNMENT REGULATION
The Company is subject to regulation by a variety of governmental agencies,
including, but not limited to, the U.S. Food and Drug Administration, the U.S.
Department of Agriculture, and other federal, state and local agencies. The
Company's stores are also subject to local laws regarding the sale of alcoholic
beverages.
41
<PAGE>
LITIGATION
MSP LITIGATION
Following the Cullum Acquisition, the Company terminated the MSP and in
respect of such terminations paid participants the greater of (i) the amount of
such participant's deferral and (ii) the present value of the participant's
accrued benefit (prorated for the years of service compared to the years
required to reach age 65). Thirty of the former MSP participants have instituted
a claim against the Company on behalf of all persons who were participants in
the MSP on its date of termination (which is alleged by plaintiffs to be
approximately 250 persons). On May 7, 1997, the plaintiffs filed an amended
complaint for the court to recognize their action as a class action, to recover
additional amounts under the MSP, for a declaration of rights under an employee
pension benefit plan and for breach of fiduciary duty. The plaintiffs assert
that the yearly plan agreement executed by each participant in the MSP was a
contract for a specified retirement and death benefit set forth in such plan
agreements and that such benefits were vested and nonforfeitable. Summary
judgment motions have been filed by both parties with respect to various
matters, and judicial rulings on such motions are currently pending. The trial
is scheduled to commence during the 1997 calendar year. Although there can be no
assurance that the Company will prevail in respect of this claim, the Company
believes that it has meritorious defenses and intends to vigorously contest it.
A judgment against the Company on the MSP litigation could have a material
adverse effect on the Company's financial position, results of operations and
cash flow.
ESOP LITIGATION
On November 28, 1995, two individuals filed a lawsuit on behalf of the ESOP
and certain participants and former participants in and beneficiaries of the
ESOP. The lawsuit alleged that the Company, certain employees thereof and
certain entities which engaged in a variety of services relating to the ESOP had
violated various federal and state laws in connection with the operation of the
ESOP, including transactions by the ESOP involving the Common Stock. The Company
and the other defendants denied all of the allegations. The plaintiffs'
representatives and the Company and the other defendants subsequently agreed to
settle the litigation. Although the defendants continue to deny all charges of
wrongdoing or liability against them, they have concluded that it was desirable
to settle the litigation in order to avoid further expense, inconvenience and
distraction, noting the uncertainty and risks inherent in litigation.
The Company and the other defendants elected to settle the suit pursuant to
a settlement agreement (the "Settlement Agreement") for $16.5 million, of which
the Company was liable for $11.3 million plus $0.2 million in expenses. Net of
insurance proceeds, the Company has paid $10.5 million in the aggregate in
connection with the settlement. The Company increased its existing litigation
reserves by $9.5 million during fiscal year 1997 to fully reserve for such
matters and concurrently with the Closing, the Company paid $11.3 million into a
trust fund pursuant to the Settlement Agreement.
In addition, the settlement provides for certain changes in the operation of
the ESOP, including the addition of a 401(k) feature offering a variety of
professionally managed mutual fund investments and the cessation of additional
investments by the ESOP in the Common Stock. Under the Settlement Agreement, the
Company and the other defendants were released from further liability relating
to the litigation by all the members of the plaintiffs' class.
EEOC LITIGATION
On June 5, 1997, the U.S. District Court for the Southern District of Texas
granted a joint motion by the Company and the Equal Employment Opportunity
Commission (the "EEOC") for entry of a consent decree (the "Consent Decree")
settling a charge by the EEOC Commissioner filed in 1989 that the Company
violated Title VII of the Civil Rights Act of 1964, as amended. The Consent
Decree provides that between January 1, 1988 and December 31, 1992 the Company
violated Title VII by (i) failing to hire African American, Hispanic and female
applicants for entry-level jobs, (ii) segregating female and Hispanic employees,
(iii) failing to select African Americans and women for the Grocery Management
Training Program and (iv) failing to maintain required records. Under the terms
of the Consent Decree,
42
<PAGE>
the Company is required to pay $2.3 million, representing back pay and interest,
into a fund to be divided among entry-level claimants, and $0.2 million into a
fund to be divided among grocery department management trainee claimants. The
Company will bear the costs of administering the settlement, which the Company
estimates to be approximately $0.8 million. Qualified promotion claimants will
be placed on a preferential promotion list from which future promotions will be
made by the Company. The Consent Decree includes certain requirements to
properly notify potential claimants and certain enhanced reporting requirements.
The Consent Decree will be effective for a two-year period, except that the
obligations to distribute back pay, offer employment, retain information and
make reports will extend beyond the two-year term.
During the course of the EEOC investigation evidence was uncovered that the
Company may not have hired certain persons for age and other reasons. The
Company has agreed to settle these charges for an immaterial amount of money.
FLEMING DISPUTE
The Company has initiated a legal action against Fleming, one of its
long-time suppliers. In the action, the Company alleges, among other things,
that Fleming violated the terms of a supply agreement signed in 1993. Under the
terms of the supply agreement, the Company was to purchase groceries and other
items at Fleming's cost, plus a small markup. Among the violations alleged by
the Company are claims that Fleming wrongfully manipulated its costing
procedures, which resulted in overcharges, and then unilaterally changed the
overall pricing formula. Additionally, the Company alleged that Fleming failed
to provide supporting documentation for purchases as required under the
contract. Since 1993 when the supply agreement was signed, the Company has
purchased approximately $2.0 billion in products from Fleming. Based on the
supporting documents provided to the Company by Fleming to date, the Company
will be seeking a substantial amount of damages from Fleming and termination of
the supply agreement. Fleming has filed an answer denying each allegation and a
counterclaim alleging that the Company failed to purchase the quantities
required by the supply agreement.
Other than the foregoing matters, the Company believes it is not a party to
any pending legal proceedings, including ordinary litigation incidental to the
conduct of its business and the ownership of its property, the adverse
determination of which would have a material adverse effect on the Company, its
operations or its financial condition.
43
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages and positions with the Company of
directors and executive officers of the Company, together with certain other key
personnel. The Board of Directors will be subject to change from time to time.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Robert R. Onstead.................................... 66 Chairman of the Board
R. Randall Onstead................................... 41 Chief Executive Officer and Director
Douglas G. Beckstett................................. 45 Senior Vice President, Human Resources
Michael M. Calbert................................... 35 Senior Vice President, Corporate Planning and
Development
Curtis D. McClellan.................................. 30 Vice President, Corporate Controller
Terry P. Poyner...................................... 45 Senior Vice President, Merchandising/Logistics
D. Mark Prestidge.................................... 38 President, Dallas Division
J. Russell Robinson.................................. 55 Senior Vice President, Chief Information Officer
Joe R. Rollins....................................... 41 Senior Vice President, Real Estate and Assistant
Secretary
Lee E. Straus........................................ 48 Senior Vice President, Finance, Secretary and
Treasurer
John V. Sullivan..................................... 40 Senior Vice President, Houston Operations, Randall's
Food & Drugs, Inc.
Henry R. Kravis...................................... 53 Director
George R. Roberts.................................... 53 Director
Paul E. Raether...................................... 50 Director
James H. Greene, Jr.................................. 46 Director
Nils P. Brous........................................ 32 Director
</TABLE>
ROBERT R. ONSTEAD is a co-founder of the Company and has been its Chairman
for all 31 years of its existence. Mr. Onstead attended the University of North
Texas.
R. RANDALL ONSTEAD has been President and Chief Executive Officer of the
Company since April 1996, a Director of the Company for 11 years and has been
with the Company for 19 years. From 1986 to April 1996, Mr. Onstead served as
President and Chief Operating Officer. Prior to 1986, Mr. Onstead was Assistant
Grocery Buyer for five years after serving in various management positions since
1978. He has a B.S. degree in Marketing from Texas Tech University and has
attended Harvard Business School's Management Development Program.
DOUGLAS G. BECKSTETT joined the Company as Senior Vice President of Human
Resources in June 1997. He had 20 years of Human Resources experience prior to
joining the Company, most recently serving as vice president of Human Resources
for APS Inc. He received his bachelor's degree in management science with a
concentration in organizational theory in 1974 from Duke University and his
M.B.A., with honors, in organizational behavior in 1977 from Boston University.
MICHAEL M. CALBERT joined the Company in September 1994 as Senior Vice
President, Corporate Controller and was promoted to Senior Vice President,
Corporate Planning and Development in 1996. From 1984 to 1994, he served as a
Manager in the audit and consulting groups of Arthur Andersen LLP. Mr. Calbert
is responsible for the coordination and implementation of the Company's overall
strategic plan. Mr. Calbert is a certified public accountant and received a
B.B.A. degree from Stephen F. Austin State University.
44
<PAGE>
CURTIS D. MCCLELLAN was named Vice President and Corporate Controller of the
Company on August 12, 1997. Mr. McClellan most recently served as Controller in
the Dallas Division. Other positions he has held include director of operational
accounting, chief accounting manager, and accounting manager. He joined the
Company in 1991 after working for Price Waterhouse L.L.P. in the Audit
Department for two years. He received his bachelor's degree in business
administration with an emphasis in accounting from Abilene Christian University.
He is a certified public accountant.
TERRY P. POYNER joined the Company as a Store Director in 1981 and currently
is Senior Vice President, Merchandising/Logistics. Mr. Poyner directs the
Company's merchandising, marketing, distribution and category management
strategies and programs. Mr. Poyner has a B.B.A. degree in Finance and a M.B.A.
from the University of Houston.
D. MARK PRESTIDGE was appointed President, Tom Thumb Stores Division in
March 1996. From April 1994 to 1996, Mr. Prestidge served as Division Vice
President, Tom Thumb Stores Division after serving for two years as a Vice
President/District Manager of the Division. From 1980 to 1992, he served in
various store management positions at the Company. Mr. Prestidge joined the
Company in 1979 and oversees the management of the Tom Thumb stores division's
retail stores, merchandising, procurement, and distribution operations.
J. RUSSELL ROBINSON joined the Company as Senior Vice President, Chief
Information Officer in June 1997. Prior to joining the Company, he served as
Vice President, Information Services for Ralph's Grocery Company where he worked
for 12 years. Mr. Robinson has a B.A. degree in Business Administration from
California State University at Long Beach and an M.B.A. degree from the
University of Southern California.
JOE R. ROLLINS was promoted to Senior Vice President, Real Estate in August
1996, after serving 12 years as Vice President, Real Estate. From 1978 to 1984,
he served as Real Estate Manager for Kroger in Houston. Mr. Rollins is
responsible for new store site evaluation and acquisition and leasing
arrangements for stores, warehouses and other facilities. In addition, he
negotiates the purchase and sale of real property. Mr. Rollins has a B.B.A.
degree from Texas Tech University.
LEE E. STRAUS joined the Company in August 1994 as Senior Vice
President-Finance, Secretary and Treasurer after more than 21 years in various
positions at Texas Commerce Bancshares. From 1989 to 1994, Mr. Straus served as
President of Texas Commerce Mortgage Company, and prior to that was Executive
Vice President, Chief Administrative Officer, of Texas Commerce Bancshares. He
has a M.B.A. from Stanford University.
JOHN W. SULLIVAN was named Senior Vice President, Houston Operations for
Randall's Food & Drugs, Inc. in August 1997. With seven years of prior
supermarket experience, he joined the Company in 1982 as a Manager Trainee and
worked his way up from Grocery Director to District Manager in Austin. From
August 1993 to August 1997, he served as Division Vice President in Austin and
in Houston. Mr. Sullivan attended St. Edward's University in Austin, TX.
HENRY R. KRAVIS is a Founding Partner of KKR and a managing member of the
Executive Committee of the limited liability company which serves as the general
partner of KKR. He is also a director of Amphenol Corporation, AutoZone, Inc.,
Borden, Inc., Bruno's, Inc., Evenflo & Spalding Holdings Corporation, Flagstar
Companies Inc., Flagstar Corporation, The Gillette Company, IDEX Corporation,
K-III Communications Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Merit Behavioral Care Corporation, Newsquest Capital
plc, Owens-Illinois Group, Inc., Owens-Illinois, Inc., Safeway Inc., Sotheby's
Holdings Inc., Union Texas Petroleum Holdings, Inc., and World Color Press, Inc.
GEORGE R. ROBERTS is a Founding Partner of KKR and a managing member of the
Executive Committee of the limited liability company which serves as the general
partner of KKR. He is also a director of Amphenol Corporation, AutoZone, Inc.,
Borden, Inc., Bruno's, Inc., Evenflo & Spalding Holdings
45
<PAGE>
Corporation, Flagstar Companies Inc., Flagstar Corporation, IDEX Corporation,
K-III Communications Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Merit Behavioral Care Corporation, Newsquest Capital
plc, Owens-Illinois Group, Inc., Owens-Illinois, Inc., Safeway Inc., Union Texas
Petroleum Holdings, Inc., and World Color Press, Inc.
PAUL E. RAETHER is a member of the limited liability company which serves as
the general partner of KKR. Prior thereto, he was an executive thereof. He is
also a director of Bruno's, Inc., Flagstar Companies, Inc., Flagstar
Corporation, IDEX Corporation and KSL Recreation Group, Inc.
JAMES H. GREENE, JR. is a member of the limited liability company which
serves as the general partner of KKR. Prior thereto, he was an executive
thereof. He is also a director of Bruno's, Inc., Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., Safeway Inc. and Union Texas Petroleum Holdings,
Inc.
NILS P. BROUS has been an executive of KKR since 1992. Prior thereto, he was
an associate at Goldman, Sachs & Co. Mr. Brous is also a director of Bruno's,
Inc., Canadian General Insurance Group Limited and KinderCare Learning Centers,
Inc.
Messrs. Kravis and Roberts are first cousins. Robert R. Onstead and R.
Randall Onstead are father and son.
BOARD COMPENSATION
All directors are reimbursed for their usual and customary expenses incurred
in attending all Board and committee meetings. It is anticipated that each
director who is not an employee of the Company will receive an aggregate annual
fee of $30,000. Directors who are also employees of the Company will receive no
remuneration for serving as directors.
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities for fiscal year 1997 for (i) the Chief Executive Officer of the
Company during such fiscal year, (ii) the Chairman of the Board of the Company
during such fiscal year and (iii) each of the five other most highly compensated
executive officers of the Company, determined as of June 28, 1997 (collectively,
the "Named Executive Officers").
46
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- -------------
FISCAL OTHER ANNUAL RESTRICTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS COMPENSATION
- ------------------------------------------- --------- ---------- --------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $
Robert R. Onstead.......................... 1997 500,096 0 35,385 -- 255,639(2)
Chairman of the Board
R. Randall Onstead......................... 1997 375,192 185,589 9,807 -- 272,544(2)(3)
Chief Executive Officer
Ron W. Barclay............................. 1997 200,192 92,125 16,812 -- 60,465(3)
Executive Vice President,
Chief Administrative Officer
& Assistant Secretary (4)
Michael M. Calbert......................... 1997 175,000 133,000 11,289 -- 58,382(3)
Senior Vice President,
Corporate Planning and
Development
Thomas K. Arledge.......................... 1997 175,192 89,000 19,762 -- 58,382(3)
Senior Vice President,
Retail Operations (5)
Terry P. Poyner............................ 1997 171,415 75,875 8,353 -- 49,627(3)
Senior Vice President,
Merchandising/Logistics
Lee E. Straus.............................. 1997 153,846 71,731 3,500 -- 46,708(3)
Senior Vice President,
Finance, Secretary and
Treasurer
</TABLE>
47
<PAGE>
- ------------------------
(1) The amounts shown in this column represent annual payments for club
allowance, car allowance and/ or reimbursement of medical expenses.
(2) Includes income recognized upon the purchase of a whole life insurance
policy for the benefit of the individual.
(3) Includes income recognized upon the vesting of restricted Common Stock as of
the Closing.
(4) Mr. Barclay retired from the Company effective as of August 16, 1997.
(5) Mr. Arledge terminated his employment with the Company effective as of
August 14, 1997.
STOCK OPTION AND RESTRICTED STOCK PLAN
The Company Stock Option and Restricted Stock Plan (the "Stock Plan")
provides for participation by key executives who are selected by the Company's
Executive Committee. There are 1.5 million shares available for awards under the
Stock Plan. To date, the following options have been granted: options to
purchase 35,928 shares at $9.65 per share; options to purchase 25,209 shares at
$11.90 per share; options to purchase 20,000 shares at $10.75 per share; options
to purchase 20,001 shares at $15.00 per share; and options to purchase 495,810
shares at $18.15 per share. As of June 28, 1997 approximately 76,295 shares
subject to options were exercisable.
OPTION GRANTS
On December 30, 1994, the Company granted options to purchase $1,300,000 of
Common Stock to each of Messrs. Calbert, Arledge and Straus (the "1994 Option
Grant"). The options granted to Messrs. Calbert and Arledge consisted of five
tranches of formula grants to be made on the last business day of five
consecutive calendar years commencing December 30, 1994. Mr. Arledge's options
were cancelled in connection with his resignation from the Company effective as
of August 14, 1997. With respect to vested options, he received aggregate
consideration of $27,255 (the difference between the respective exercise prices
of such options and $12.11 per share). Mr. Arledge's unvested options were
cancelled without any payment. The options granted to Mr. Straus consisted of
three tranches of formula grants to be made on the last business day of three
consecutive calendar years commencing December 30, 1994.
The number of options in each tranche of formula grants is determined by
dividing $100,000 by the value of a share of Common Stock at successive calendar
year ends. The exercise prices which have been fixed as of the present time are
$9.65, $11.90 and $15.00 for each of Messrs. Calbert and Straus. The exercise
prices of the two remaining tranches for Mr. Calbert will be determined on the
last business day of each of calendar years 1997 and 1998.
48
<PAGE>
The following Option Grants Table sets forth, as to the Named Executive
Officers, certain information relating to stock options granted during fiscal
year 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/ EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME SARS GRANTED FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------------------- ----------------- ----------------- ------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Onstead............... 0 0 -- -- -- --
R. Randall Onstead.............. 0 0 -- -- -- --
Ron W. Barclay(1)............... 0 0 -- -- -- --
Michael M. Calbert(2)........... 6,667 33 15.00 12/30/2004 36,202(3) 85,604(3)
Thomas K. Arledge(4)............ -- -- -- -- -- --
Terry P. Poyner................. 0 0 -- -- -- --
Lee E. Straus(2)................ 6,667 33 15.00 12/30/2004 36,202(3) 85,604(3)
</TABLE>
- ------------------------
(1) Mr. Barclay retired from the Company effective as of August 16, 1997.
(2) Represents the number of options granted on December 29, 1995 to each of
Messrs. Calbert, Arledge and Straus pursuant to the 1994 Option Grant.
(3) The value of the Common Stock was $12.30 based upon an appraisal of the
Common Stock as of April 5, 1997. Based upon the exercise prices, the
amounts shown in these columns are the potential realizable value of options
granted at assumed rates of stock price appreciation (5% and 10%, as set by
the executive compensation disclosure provisions of the proxy rules)
compounded annually over the option term and have not been discounted to
reflect the present value of such amounts. The assumed rates of stock price
appreciation are not intended to forecast the future appreciation of the
Common Stock.
(4) Mr. Arledge's options were cancelled in connection with his resignation from
the Company effective as of August 14, 1997. With respect to vested options,
he received aggregate consideration of $27,255 (the difference between the
respective exercise prices of such options and $12.11 per share). Mr.
Arledge's unvested options were cancelled without any payment.
49
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND OPTION VALUES AS OF JUNE
28, 1997
The following table sets forth certain information concerning the number of
stock options held by the Named Executive Officers as of June 28, 1997, and the
value of in-the-money options outstanding as of such date.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE- MONEY
OPTIONS AS OF OPTIONS AS
NUMBER OF SHARES JUNE 28, 1997 OF JUNE 28, 1997
ACQUIRED ON (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE) UNEXERCISABLE)
- ------------------------------------------ --------------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Robert R. Onstead......................... 0 $ 0 0 $ 0
R. Randall Onstead........................ 0 0 0 0
Ron W. Barclay(1)......................... 0 0 0 0
Michael M. Calbert(2)(3).................. 0 0 18,765/8,281 30,821/4,277
Thomas K. Arledge(4)...................... -- -- -- --
Terry P. Poyner........................... 0 0 0 0
Lee E. Straus(2).......................... 0 0 18,765/8,281 30,821/4,277
</TABLE>
- ------------------------
(1) Mr. Barclay retired from the Company effective as of August 16, 1997.
(2) The value of the Common Stock was $12.30 based upon an appraisal of the
Common Stock as of April 5, 1997.
(3) The number of unexercisable options does not include two tranches totaling
$200,000 of Common Stock granted to Mr. Calbert whose exercises price will
be fixed on December 31, 1997 and December 31, 1998, respectively. See
"--Option Grants."
(4) Mr. Arledge's options were cancelled in connection with his resignation from
the Company effective as of August 14, 1997. With respect to vested options,
he received aggregate consideration of $27,255 (the difference between the
respective exercise prices of such options and $12.11 per share). Mr.
Arledge's unvested options were cancelled without any payment.
In fiscal year 1997, the Company issued certain employees 139,382 shares of
restricted Common Stock, of which 5,000 have been forfeited. In addition, these
employees were granted options to purchase 523,355 shares of Common Stock at an
exercise price of $18.15 per share, of which 27,545 have been forfeited. These
options become exercisable on September 30, 2000 and expire on September 30,
2006.
1997 STOCK PURCHASE AND OPTION PLAN
The Company has adopted the 1997 Stock Purchase and Option Plan for Key
Employees of Randall's Food Markets, Inc. and Subsidiaries (the "1997 Plan").
Grants made pursuant to the Stock Plan will become subject to, and be
exercisable only in accordance with, the provisions of the 1997 Plan.
The 1997 Plan provides for the issuance of shares of authorized but unissued
or reacquired shares of Common Stock, subject to adjustment to reflect certain
events such as stock dividends, stock splits, recapitalizations, mergers or
reorganizations of or by the Company. The 1997 Plan is intended to assist the
Company in attracting and retaining employees of outstanding ability and to
promote the identification of their interests with those of the stockholders of
the Company. The 1997 Plan permits the issuance of Common Stock (the "1997 Plan
Purchase Stock") and the grant of Non-Qualified Stock Options and Incentive
Stock Options (the "1997 Plan Options") to purchase shares of Common Stock and
other stock-based awards (the issuance of 1997 Plan Purchase Stock and the grant
of 1997 Plan Options and other stock-based awards pursuant to the 1997 Plan
being a "1997 Plan Grant"). Unless sooner terminated by the Company's Board of
Directors, the 1997 Plan will expire ten years after its approval by the
Company's
50
<PAGE>
stockholders. Such termination will not affect the validity of any 1997 Plan
Grant outstanding on the date of the termination.
The Compensation Committee of the Board of Directors will administer the
1997 Plan, including, without limitation, the determination of the employees to
whom 1997 Plan Grants will be made, the number of shares of Common Stock subject
to each 1997 Plan Grant, and the various terms of 1997 Plan Grants. The
Compensation Committee of the Board of Directors may from time to time amend the
terms of any 1997 Plan Grant, but, except for adjustments made upon a change in
the Common Stock by reason of a stock split, spin-off, stock dividend, stock
combination or reclassification, recapitalization, reorganization,
consolidation, change of control, or similar event, such action shall not
adversely affect the rights of any participant under the 1997 Plan with respect
to the 1997 Plan Purchase Stock and the 1997 Plan Options without such
participant's consent. The Board of Directors will retain the right to amend,
suspend or terminate the 1997 Plan.
BONUS PLANS
Prior to the Recapitalization, the Company maintained a bonus plan covering
different executive populations at and above the district vice president level.
Bonus payments under these plans were part cash and part stock and were keyed to
relevant performance factors within each group. The maximum bonuses ranged from
40% of annual base salary for certain vice presidents to 100% of annual base
salary for the seven most senior executives. Performance criteria are a
combination of corporate performance, individual and district or division goals,
as appropriate. The bonus plans are only summarily described and are not set
forth in any formal documents. The Company expects that a new bonus plan will be
adopted during the current fiscal year by the Compensation Committee of the
Board of Directors, the parameters of which have not yet been established.
RETIREMENT PLANS
The Company maintains two qualified retirement plans. One, the Company's
hourly employees' retirement plan, is a defined benefit pension plan. The other
plan is the ESOP, which currently holds 2,275,622 shares of Common Stock. The
ESOP provides for pass through voting with respect to a potential change in
control. The Company also maintains the nonqualified Key Employee Stock Purchase
Plan (the "KeySOP") which provides benefits to key employees and highly
compensated employees whose benefits under the ESOP are limited due to Internal
Revenue Code requirements. As of June 28, 1997, this plan held 42,601 shares of
Common Stock, and the ESOP and KeySOP held an aggregate of 2,318,223 shares of
Common Stock, or approximately 7.7% of the outstanding shares of Common Stock as
of such date.
No additional shares of Common Stock will be purchased by the ESOP. Although
it will no longer acquire shares of Common Stock, the Company has combined the
ESOP with a 401(k) plan option with diversified investment alternatives. The
Company recently settled a class action lawsuit brought on behalf of the ESOP
and made a payment of $11.3 million in connection with such settlement. See
"Business-- Litigation." In addition, no additional shares of Common Stock will
be purchased by the KeySOP.
SAVINGS AND INVESTMENT PLAN
The Board of Directors of the Company adopted the Savings and Investment
Plan (the "Savings Plan") effective January 1, 1990. All full-time employees of
the Company and its subsidiaries are eligible to participate in the Savings Plan
upon completion of one year of service and the attainment of the age of 18.
Participants may contribute, in increments of 1%, up to 10% (6% before July 1,
1994) of their compensation to the Savings Plan. In accordance with the
provisions of the Savings Plan, the Board of Directors has elected, since April
1, 1991, not to match employee contributions. Pursuant to the Subscription
Agreement, subject to certain exceptions, the Company will continue to maintain
the Savings Plan and other
51
<PAGE>
benefit plans of the Company, or substitute plans that are no less favorable in
the aggregate to the employees of the Company than such existing plans, until
December 31, 1997.
EMPLOYEE WELFARE BENEFITS AND RETIREE INSURANCE BENEFITS
The Company provides welfare and other benefits only for its full-time
employees. In addition to health and medical insurance, the Company also
provides other standard benefits such as paid vacation and holidays, life
insurance and short and long-term disability coverage for eligible employees.
The Company is self-insured with respect to health, medical and other insurance
coverage for employees. The Company has stop loss policies in effect with
respect to its self-insured programs and no claim has ever been made under such
policies.
The Company does not generally provide retiree medical or retiree life
insurance benefits. However, the Company does have individual arrangements which
provide for health benefits for life with respect to four surviving family
members of the founders. These persons are Robert R. Onstead, Kay Onstead, Mabel
Frewin and Deloris Barclay.
EMPLOYMENT CONTRACTS
Effective April 1, 1997 (the "Effective Date"), the Company entered into
employment agreements with Robert R. Onstead, R. Randall Onstead and Ron W.
Barclay (the "Employment Agreements") which became effective upon consummation
of the Equity Investment and are subject to the terms and conditions described
below.
ROBERT R. ONSTEAD. The Employment Agreement with Robert R. Onstead provides
that Mr. Onstead will continue to serve as Chairman of the Board through July 1,
1998 (the "Initial Period"). From July 2, 1998, Mr. Onstead shall become
Chairman Emeritus for life and serve as a consultant until such time as 10% of
the Common Stock (or the common stock of a successor to the Company) is tradable
on a national stock exchange (the "Consulting Period"). In addition, Mr. Onstead
will continue to be nominated as a director (and the Company shall use its best
efforts to secure his election as such) until such time as his stock ownership
in the Company falls below 10% of the outstanding Common Stock.
During the Initial Period the Company will pay Mr. Onstead a monthly salary
of $41,667 and will generally continue to furnish the perquisites and benefits
that were available to Mr. Onstead prior to the Effective Date. During the
Consulting Period, the Company will pay Mr. Onstead a monthly fee of $16,667. In
addition, following the Initial Period, Mr. Onstead will receive monthly
retirement payments in the amount of $8,333 until Mr. Onstead owns less than 3%
of the outstanding Common Stock (or of the outstanding interest in a successor).
The Company will furnish Mr. Onstead (and his spouse) at no cost to them with
lifetime medical, dental and life insurance benefits. The Company will also
provide Mr. Onstead with certain office amenities for life; provided that the
annual cost thereof may not exceed $100,000.
In the event Mr. Onstead's employment or consulting engagement is terminated
(i) by the Company (A) due to his death or disability, (B) as a result of Mr.
Onstead's gross negligence or willful misconduct in the performance of his
duties and services or his material breach of any material provision of his
Employment Agreement which is not corrected within 30 days of notice thereof or
(C) in connection with the insolvency, liquidation or any other event which
results in the discontinuance of the existence of the Company without a
successor thereto, or (ii) by Mr. Onstead other than as a result of the
Company's material breach of any material provision of his Employment Agreement
which is not corrected within 30 days of notice thereof (a termination under
clause (i) or (ii) being hereinafter referred to as a "Non-Severance
Termination"), the Company will cease to pay Mr. Onstead's salary or consulting
fee (as applicable) upon such termination. In the event of a change of control
of the Company, Mr. Onstead's employment shall terminate 30 days after such
event and the Company (or its successor) will cease to pay Mr. Onstead's salary
or consulting fee (as applicable) upon such termination.
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<PAGE>
In the event Mr. Onstead incurs a termination other than a Non-Severance
Termination prior to the expiration of the Initial Period, the Company is
required to pay Mr. Onstead an amount equal to the sum of (x) the aggregate
amount of salary that he would have received for the remainder of the Initial
Period and (y) the economic value of the benefits he would have received during
such period.
In the event Mr. Onstead incurs a termination other than a Non-Severance
Termination during his consulting engagement, the Company is required to
continue to pay Mr. Onstead all amounts due in respect of his consulting
engagement on the same basis as if Mr. Onstead had remained a consultant through
the Consulting Period.
R. RANDALL ONSTEAD. The Employment Agreement with R. Randall Onstead
provides that Mr. Onstead will serve as President and Chief Executive Officer,
for which he will receive a minimum monthly base salary of $35,417. Pursuant to
his Employment Agreement, Mr. Onstead also will be granted options to purchase
371,594 shares of Common Stock at a price of $12.11 per share, with 50% of such
shares to vest 20% per year over five years and the remaining 50% to vest based
on the attainment of certain performance goals. In addition to receiving other
benefits and perquisites available to similarly situated executives of the
Company, Mr. Onstead will also be extended a $750,000 line of credit by the
Company which will be secured by his Common Stock and be payable 180 days after
termination of his Employment Agreement to the extent not satisfied out of (i)
any compensation due him and payable upon the termination of his employment and
(ii) the proceeds from the disposition of Common Stock and options by him.
In the event Randall Onstead incurs a Non-Severance Termination, the Company
will cease to pay Mr. Onstead's salary upon such termination. In the event Mr.
Onstead incurs a termination of employment other than a Non-Severance
Termination (which shall include a termination of employment by Mr. Onstead due
to the assignment to him by the Board of duties materially inconsistent with his
position) within two years of the Effective Date, he shall be entitled to a
severance payment in an amount equal to three times the sum of (i) his base
salary on the date of termination and (ii) the average annual bonus paid or
payable with respect to the immediately preceding three calendar years. He shall
also be entitled to three years continued medical and dental coverage at no cost
to him for himself, his spouse and his dependents. In the event Mr. Onstead
incurs a termination of employment other than a Non-Severance Termination after
two years following the Effective Date, he shall be entitled to a severance
payment in an amount equal to two times the sum of (i) his base salary on the
date of termination and (ii) the average annual bonus paid or payable with
respect to the immediately preceding two calendar years. He shall also be
entitled to two years continued medical and dental coverage at no cost to him
for himself, his spouse and his dependents. Regardless of the timing of any such
termination, if Mr. Onstead's employment is terminated without cause, he shall
be entitled to the Company's investment in certain life insurance policies.
RON W. BARCLAY. Ron. W. Barclay retired from the Company effective as of
August 16, 1997. The Employment Agreement with Mr. Barclay provides that,
following Mr. Barclay's termination, he is entitled to outplacement services for
a period of one year in an amount not to exceed $30,000. Mr. Barclay agrees not
to engage in any business activity in the United States which is in competition
with the business of the Company for a period of two years following his
termination. In consideration of the foregoing obligation, the Company will pay
Mr. Barclay a total of $200,000 in bi-weekly installments over such two-year
period. Furthermore, for a period of three years following his termination, Mr.
Barclay agrees not to solicit any employees of the Company or solicit any
suppliers of the Company in connection with any business that is in competition
with the Company.
Mr. Barclay's Employment Agreement provides for a consulting engagement for
a period of three years following his termination of employment. In respect of
such engagement, Mr. Barclay shall receive $6,000 per year payable in a lump sum
upon his termination of employment and shall receive continued medical and
dental insurance coverage during his consulting engagement.
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<PAGE>
In addition, Mr. Barclay executed a severance and release agreement to his
Employment Agreement (the "Severance and Release Agreement"), entitling him to
the following severance benefits: (i) continued salary from his date of
termination to the effective date of the Severance and Release Agreement reduced
by the amount of any payments made in respect of the non-competition obligation
described above and (ii) a lump sum payment equal to $647,857 reduced by any
payment made pursuant to clause (i) of this paragraph.
In the event Mr. Barclay dies during his consulting engagement, his estate
shall be entitled to receive a lump sum payment equal to the difference between
(i) $865,857 and (ii) any amounts paid in respect of Mr. Barclay's consulting
engagement and non-competition obligation. In the event of Mr. Barclay's death
during his consulting engagement the Company will provide 36 months continued
medical and dental insurance coverage for his qualified dependents.
TERMINATION AGREEMENT
Effective on or about April 1, 1997, the Company entered into a termination
agreement with Bob L. Gowens (the "Gowens Agreement"). Pursuant to the Gowens
Agreement, Mr. Gowens resigned from all positions with the Company and the
Company accepted such resignation. Mr. Gowens has received a severance payment
of $625,000 reduced by certain amounts. In addition, he is entitled to
outplacement services for a period of one year in an amount not to exceed
$30,000.
Mr. Gowens agrees not to engage in any business activity in the United
States which is in competition with the business of the Company for a period of
two years following his termination. In consideration of the foregoing
obligation, the Company will pay Mr. Gowens a total of $200,000 in bi-weekly
installments over such two-year period. Furthermore, for a period of three years
following his termination, Mr. Gowens agrees not to solicit any employees of the
Company or solicit any suppliers of the Company in connection with any business
that is in competition with the Company.
The Gowens Agreement provides for a consulting engagement for a period of
three years following his termination of employment. In respect of such
engagement, Mr. Gowens shall receive $25,000 per year payable in a lump sum upon
his termination of employment and shall receive continued medical and dental
insurance coverage during his consulting engagement. Under the terms of the
Gowens Agreement, the Company is released from all claims Mr. Gowens may have
against it.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning beneficial
ownership of shares of Common Stock as of June 28, 1997 by: (i) persons known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each person who is a director of the Company; (iii) each person who
is a Named Executive Officer; and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL PERCENTAGE
OWNERSHIP OF OF CLASS
NAME OF BENEFICIAL OWNER COMMON STOCK OUTSTANDING(A)
- ---------------------------------------------------------------------------- -------------- -----------------
<S> <C> <C>
KKR 1996 GP L.L.C.
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, NY 10019........................................................ 18,579,686 62.5%(b)
Robert R. Onstead(c)(d)..................................................... 6,054,165 20.4
Randall's Food Markets, Inc. Employee Stock Ownership Plan.................. 2,275,622 7.7
R. Randall Onstead(c)(e).................................................... 210,524 *
Ron W. Barclay(c)(f)........................................................ 240,744 *
Michael M. Calbert(c)(e).................................................... 20,656 *
Thomas K. Arledge(c)(e)(g).................................................. 3,241 *
Terry P. Poyner(c)(e)....................................................... 2,755 *
Lee E. Straus(c)(e)......................................................... 2,593 *
All directors and executive officers as group (15 persons).................. 25,486,492 85.8%
</TABLE>
- ------------------------
* Less than one percent.
(a) The amounts and percentage of Common Stock beneficially owned are reported
on the basis of regulations of the Commission governing the determination of
beneficial ownership of securities. Under the rules of the Commission, a
person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power," which includes the power to vote or to direct the
voting of such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed a beneficial owner of the same securities
and a person may be deemed to be a beneficial owner of securities as to
which he has no economic interest. The percentage of class outstanding is
based on the 29,714,261 shares of Common Stock outstanding as of June 28,
1997. In connection with the Subscription Agreement, the Company has agreed
to certain indemnities for the benefit of RFM Acquisition which are payable
in additional shares of Common Stock, and the percentages in the table do
not reflect any issuances thereunder. See "The Recapitalization."
(b) KKR 1996 GP L.L.C. will own approximately 62% of the Common Stock on a fully
diluted basis assuming exercise of the RFM Option and the expected issuance
of stock and options to certain members of management under the 1997 Plan.
(c) Does not include shares of Common Stock held by these individuals as part of
their participation in the ESOP and KeySOP.
(d) Includes shares held by Mr. Onstead's family partnership, his spouse and the
Onstead Foundation.
(e) Does not include shares of Common Stock that may be reserved for options and
other stock purchase rights that are anticipated to be granted to management
under the 1997 Plan.
(f) Mr. Barclay retired from the Company effective as of August 16, 1997.
(g) Mr. Arledge terminated his employment with the Company effective as of
August 14, 1997.
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<PAGE>
Shares of Common Stock shown as beneficially owned by KKR 1996 GP L.L.C. are
held by RFM Acquisition. KKR 1996 GP L.L.C. is the sole general partner of KKR
Associates 1996 L.P., a Delaware limited partnership. KKR Associates 1996 L.P.
is the sole general partner of KKR 1996 Fund L.P., a Delaware limited
partnership. KKR 1996 Fund L.P. is the sole member of RFM Acquisition. KKR 1996
GP L.L.C. is a limited liability company, the managing members of which are
Messrs. Henry R. Kravis and George R. Roberts and the other members of which are
Messrs. Robert I. MacDonnell, Paul E. Raether, Michael W. Michelson, James H.
Greene, Jr., Michael T. Tokarz, Perry Golkin, Clifton S. Robbins, Scott M.
Stuart and Edward A. Gilhuly. Messrs. Kravis, Roberts, Raether and Greene are
directors of the Company. Each of such individuals may be deemed to share
beneficial ownership of the shares shown as beneficially owned by KKR 1996 GP
L.L.C. Each of such individuals disclaims beneficial ownership of such shares.
Mr. Nils P. Brous is a limited partner of KKR Associates 1996 L.P. and also is a
director of the Company.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
KKR 1996 GP L.L.C. beneficially owns approximately 63% of the Company's
outstanding shares of Common Stock. The managing members of KKR 1996 GP L.L.C.
are Messrs. Henry R. Kravis and George R. Roberts and the other members of which
are Messrs. Robert I. MacDonnell, Paul E. Raether, Michael W. Michelson, Michael
T. Tokarz, James H. Greene, Jr., Perry Golkin, Clifton S. Robbins, Scott M.
Stuart and Edward A. Gilhuly. Messrs. Kravis, Roberts, Raether and Greene are
directors of the Company, as is Mr. Nils P. Brous, who is a limited partner of
KKR Associates 1996 L.P. Each of the members of KKR 1996 GP L.L.C. is also a
member of the limited liability company which serves as the general partner of
KKR and Mr. Brous is an executive of KKR. KKR, an affiliate of RFM Acquisition
and KKR 1996 GP L.L.C., received a fee of $8.0 million in cash for negotiating
the Recapitalization and arranging the financing therefor, plus the
reimbursement of its expenses in connection therewith, and, from time to time in
the future, KKR may receive customary investment banking fees for services
rendered to the Company in connection with divestitures, acquisitions and
certain other transactions. In addition, KKR has agreed to render management,
consulting and financial services to the Company for an annual fee of $1.0
million. See "Management--Directors and Executive Officers" and "Principal
Shareholders."
RFM Acquisition has the right, under certain circumstances and subject to
certain conditions, to require the Company to register under the Securities Act
shares of Common Stock held by it pursuant to a registration rights agreement
entered into at the Closing (the "RFM Registration Rights Agreement"). Such
registration rights will generally be available to RFM Acquisition until
registration under the Securities Act is no longer required to enable it to
resell the Common Stock owned by it. The RFM Registration Rights Agreement
provides, among other things, that the Company will pay all expenses in
connection with the first six demand registrations requested by RFM Acquisition
and in connection with any registration commenced by the Company as a primary
offering in which RFM Acquisition participates through piggy-back registration
rights granted under such agreement. RFM Acquisition's exercise of its
registration rights under the RFM Registration Rights Agreement will be subject
to the RFM Tag Along and the RFM Drag Along provided for in the Shareholders
Agreement. See "The Recapitalization-- Shareholders Agreement."
On March 1, 1997, the Company loaned $20,000 to the Onstead Family Trust.
This loan is evidenced by a promissory note, bears interest at a rate of 5% per
annum and is payable on March 1, 1998, or on the Company's earlier demand.
In connection with the Company's grant of $250,000 worth of restricted
Common Stock (25,907 shares) to Michael Calbert on December 30, 1994, the
Company loaned Mr. Calbert $100,000 on January 26, 1995 to pay related income
taxes. So long as Mr. Calbert is in active employment during the 15 days before
and after each payment date, the Company has agreed to forgive the scheduled
repayments. The loan is evidenced by a promissory note, bears interest at 8% per
annum and is payable in annual installments of $20,000 each, plus interest,
beginning December 1, 1995 and ending December 1, 1999. The note is secured by
the 25,907 shares, one-fifth of which are released each year beginning December
1, 1995.
Robert R. Onstead owns a 7% carried interest and the estate of Randall C.
Barclay owns a 3% carried interest in the limited partnership that developed and
owns a shopping center in which one of the Company's stores is the anchor
tenant. The base rent for this store is $392,796 per year, which is considered
market rent.
The Company purchases uniforms and other merchandise from Coastal Athletic
Supply ("Coastal"), which is majority owned by Ann and Preston Hill (Robert R.
Onstead's daughter and son-in-law). Purchases from Coastal during fiscal years
1995, 1996 and 1997 were $1,097,407, $775,609 and $1,152,483, respectively. In
addition, the Company guarantees the obligations of Coastal to Uniforms To You
("UTY") and M.J. Soffe Co. ("Soffe") for merchandise purchased on the Company's
behalf (the "Uniform Guarantees"). As of June 28, 1997, the obligations subject
to the Uniform Guarantees were $68,203 to UTY and $136,428 to Soffe,
respectively; the highest balances due with respect to such obligations were
$57,740 to UTY and $0 to Soffe, respectively, for fiscal year 1995, $69,892 to
UTY and $0 to Soffe, respectively, for fiscal year 1996, and $133,432 to UTY and
$136,428 to Soffe, respectively, for fiscal year 1997. The obligations subject
to the Uniform Guarantees are not interest bearing.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
CAPITAL STRUCTURE
The entire authorized capital stock of the Company consists of (i)
75,000,000 shares of Common Stock, (ii) 8,250 shares of Class A Preferred Stock,
and (iii) 5,000,000 shares of serial preferred stock with a par value of $10.00
per share (the "Serial Preferred Stock"). As of June 28, 1997, there were (i)
29,714,261 shares of Common Stock issued and outstanding; (ii) no shares of
Class A Preferred Stock or Serial Preferred Stock issued or outstanding; (iii)
710,243 shares of Common Stock reserved for issuance upon exercise of authorized
but unissued outstanding employee or director stock options to purchase shares
of Common Stock granted under any stock option or stock purchase plan, program
or arrangement of the Company; and (iv) 596,947 shares of Common Stock issuable
upon exercise of outstanding stock options (with an average exercise price of
$17.02).
REPURCHASE RIGHTS
SHAREHOLDER AGREEMENTS. Pursuant to shareholder agreements dated March 29,
1984 and April 8, 1985 among the Company and John N. Frewin, Norman P. Frewin,
Rosemary Frewin Gambino and certain other shareholders parties thereto (the
"Qualified Shareholders"), when a Qualified Shareholder desires to dispose of
shares of Common Stock, the Company has the right to acquire such shares for the
per share value most recently determined on behalf of the trustee of the ESOP.
In the event the Company does not exercise such election, other Qualified
Shareholders have the right to purchase the shares at such valuation. In the
event neither the Company nor the other Qualified Shareholders have exercised
the repurchase right, the selling Qualified Shareholders may require the Company
to repurchase such shares at the valuation. If a Qualified Shareholder becomes
totally disabled and is unable to continue employment with the Company, or if a
Qualified Shareholder is voluntarily or involuntarily terminated from employment
for any reason other than death, the repurchase procedures described above are
automatically operative as if such shareholder had intended to dispose of his or
her shares. Upon the death of a Qualified Shareholder, all shares of Common
stock owned by such shareholder must be sold to the Company at the valuation
referred to above. As of June 28, 1997, holders beneficially owning 346,941
shares of Common Stock possess such repurchase rights under such agreements. In
1992, an additional holder of Common Stock (6,053 shares as of June 28, 1997)
was granted similar repurchase rights.
CULLUM ACQUISITION. In connection with the Cullum Acquisition, the Company
granted the former Cullum shareholders put rights on the shares of Common Stock
issued in such transaction. Pursuant to the Registration Rights and Repurchase
Agreement dated as of August 24, 1992 (the "Former Cullum Shareholders
Agreement"), among the Company and the Morgan Stanley Leveraged Equity Fund II,
L.P. and the other former Cullum shareholders parties thereto (collectively, the
"Former Cullum Shareholders"), the Former Cullum Shareholders have the right to
require the Company to repurchase 60,028 shares of Common Stock for the per
share value most recently determined on behalf of the trustee of the ESOP. This
put right is exercisable commencing on October 15, 1997 and on each subsequent
October 15 to and including October 15, 2001.
REGISTRATION RIGHTS
RFM ACQUISITION. RFM Acquisition has the right, under certain circumstances
and subject to certain conditions, to require the Company to register under the
Securities Act shares of Common Stock held by it pursuant to the RFM
Registration Rights Agreement. Such registration rights will generally be
available to RFM Acquisition until registration under the Securities Act is no
longer required to enable it to resell the Common Stock owned by it. The RFM
Registration Rights Agreement provides, among other things, that the Company
will pay all expenses in connection with the first six demand registrations
requested by RFM Acquisition and in connection with any registration commenced
by the Company as a primary offering in which RFM Acquisition participates
through piggy-back registration rights granted under such agreement.
58
<PAGE>
RFM Acquisition's exercise of its registration rights under the RFM Registration
Rights Agreement will be subject to the RFM Tag Along and the RFM Drag Along
provided for in the Shareholders Agreement. See "The Recapitalization --
Shareholders Agreement."
FORMER CULLUM SHAREHOLDERS. The Former Cullum Shareholders Agreement
provides the Former Cullum Shareholders with customary "piggy-back" registration
rights. Should the Company register securities in connection with an offering of
common stock, then the Company must offer to register shares of Common Stock
(including shares of Common Stock issuable upon the conversion of shares of
Convertible Preferred Stock) held by the Former Cullum Shareholders. These
registration rights do not pertain to an offering on Form S-4 or S-8 or a
registration statement that is filed with respect to an exchange offer or an
offering that will be made solely to existing shareholders of the Company.
59
<PAGE>
DESCRIPTION OF CREDIT FACILITIES
The Credit Facilities are provided by a syndicate of banks and other
financial institutions (the "Lenders") led by The Chase Manhattan Bank, as
administrative agent (the "Administrative Agent"), Chase Securities Inc., as
arranger, National Westminster Bank Plc, as syndication agent, and Citicorp
Securities, Inc., as documentation agent. The Credit Facilities provide for the
Term Loan Facility of up to $125.0 million and the $225.0 million Revolving
Credit Facility. The Revolving Credit Facility includes borrowing capacity of up
to $25.0 million for letters of credit, and up to $25.0 million for short-term
borrowings. The Term Loan Facility matures on the date that is nine years after
the Closing and provides for nominal annual amortization. The final maturity of
loans under the Revolving Credit Facility will be the date that is seven years
after the Closing.
The interest rate under the Term Loan Facility fluctuates based on leverage
and initially will be adjusted LIBOR plus 1.50%. The interest rate under the
Revolving Credit Facility fluctuates based on leverage and initially will be ABR
plus 0.00%. The Company may elect interest periods of 1, 2, 3 or 6 months (or 9
or 12 months, to the extent available from all the Lenders under the relevant
Facility) for Adjusted LIBOR borrowings. Calculation of interest shall be on the
basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the
case may be, in the case of ABR loans based on the Prime Rate) and interest
shall be payable at the end of each interest period and, in any event, at least
every 3 months or 90 days, as the case may be. ABR is the Alternate Base Rate,
which is the highest of Chase's Prime Rate, the Federal Funds Effective Rate
plus 0.50% and the Base CD Rate plus 1.00%. Adjusted LIBOR and the Base CD Rate
will at all times include statutory reserves to the extent actually incurred
(and, in the case of the Base CD Rate, FDIC assessment rates).
The Company will pay a commitment fee at a rate which will fluctuate based
on leverage and initially will equal 0.25% per annum on the undrawn portion of
the commitments in respect of the Credit Facilities, commencing to accrue with
respect to each Lender's commitment upon the acceptance by the Company of such
Lender's commitment, paid initially at the Closing and quarterly in arrears
after the Closing. The commitment fees will at all times be calculated based on
the actual number of days elapsed over a 365-day year.
The Company will pay a letter of credit fee equal to a rate per annum equal
to the margin for Adjusted LIBOR loans under the Revolving Credit Facility, less
0.125%, on the aggregate face amount of outstanding letters of credit under the
Revolving Credit Facility, payable in arrears at the end of each quarter and
upon the termination of the Revolving Credit Facility, in each case for the
actual number of days elapsed over a 365-day year. In addition, the Company
shall pay to the Fronting Bank, for its own account, (a) a fronting fee of
0.125% per annum on the aggregate face amount of outstanding letters of credit,
payable in arrears at the end of each quarter and upon the termination of the
Revolving Credit Facility, in each case for the actual number of days elapsed
over a 365-day year, and (b) customary issuance, amendment and administration
fees.
The Credit Facilities contain provisions under which commitment fees and
interest rates will be adjusted in increments based on the ratio (the "Leverage
Ratio") of consolidated total debt to consolidated adjusted EBITDA in effect
from time to time. Subject to certain exceptions, the margin for Adjusted LIBOR
loans for the Term Loan Facility and the Revolving Credit Facility, and the
commitment fee rate thereunder, will be, in the case of a Leverage Ratio (i)
greater than or equal to 6.0:1, 2.75%, 2.25% and .500%, respectively, (ii)
greater than or equal to 5.5:1, 2.50%, 2.00% and .425%, respectively, (iii)
greater than or equal to 5.0:1, 2.25%, 1.75% and .375%, respectively, (iv)
greater than or equal to 4.5:1, 2.00%, 1.50% and .375%, respectively, (v)
greater than or equal to 4.0:1, 1.75%, 1.25% and .250%, respectively, (vi)
greater than or equal to 3.5:1, 1.50%, 1.00% and .250%, respectively, (vii)
greater than or equal to 3.0:1, 1.50%, .875% and .250%, respectively, and (viii)
less than 3.0:1, 1.50%, .750%, and .250%, respectively, with the margin for ABR
loans being .125% less than the corresponding margin for Adjusted LIBOR loans
(but not less than 0%).
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<PAGE>
The Term Loans are subject to mandatory prepayment with (a) 100% of the net
cash proceeds of certain non-ordinary-course asset sales or other dispositions
of property by the Company and its subsidiaries, except to the extent that such
proceeds are reinvested in the business of the Company and its subsidiaries
(subject to the line of business covenant) within a specified time period and
subject to certain other exceptions, (b) a portion of excess cash flow (as
defined in the Credit Facilities), to the extent not reinvested in the business
of the Company and its subsidiaries within six months after each yearly test
period and (c) 100% of the net proceeds of certain issuances of debt obligations
of the Borrower and its subsidiaries. Voluntary prepayments and Revolving Credit
Facility commitment reductions are permitted in whole or in part at the option
of the Company, in minimum principal amounts, without premium or penalty,
subject to reimbursement of certain of the Lenders' costs under certain
conditions.
The Company's obligations under the Credit Facilities are secured by a
perfected first priority pledge of and security interest in all the common stock
of each existing and subsequently acquired direct domestic subsidiary of the
Company and 65% of the common stock of each existing and subsequently acquired
direct foreign subsidiary and, in certain circumstances, non-cash consideration
received for certain sales of assets, in each case subject to certain
exceptions. In addition, indebtedness under the Credit Facilities is guaranteed
by each existing and subsequently acquired domestic subsidiary of the Company,
subject to certain exceptions. See "Description of the Exchange
Notes--Subordination" and "Risk Factors--Subordination" and "--Encumbrances on
Assets to Secure Credit Facilities."
The Credit Facilities contain customary covenants and restrictions on the
Company's ability to, among other things, incur debt, grant liens, sell assets,
pay dividends, make investments, prepay or redeem the Notes, enter into leases
or incur capital expenditures. In addition, the Credit Facilities provide that
the Company must meet or exceed a ratio of consolidated adjusted EBITDA to
consolidated adjusted interest expense and must not exceed a ratio of
consolidated total debt to consolidated adjusted EBITDA.
The Credit Facilities include customary events of default.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $150 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $150 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were issued on June 27, 1997 in a transaction exempt from the
registration requirements of the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold, or otherwise transferred unless so registered or
unless an applicable exemption from the registration and prospectus delivery
requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange Offer
not later than 100 days after the date of issuance of the Old Notes, and to use
its best efforts to cause the registration statement relating to the Exchange
Offer to become effective under the Securities Act not later than 200 days after
the date of issuance of the Old Notes and the Exchange Offer to be consummated
not later than 30 days after the date of the effectiveness of the Registration
Statement (or use its best efforts to cause to become effective by the 230th
calendar day after the Issuance Date a shelf registration statement with respect
to resales of the Old Notes). A copy of the Registration Rights Agreement has
been filed as an exhibit to the Registration Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further
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compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such Holder's business and that such Holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Exchange Notes.
See "--Resale of Exchange Notes." Each broker-dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the Commission has not considered the Exchange Offer in
the context of a no-action letter, there can be no assurance that the Staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Any holder who is an affiliate of the Company or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on such interpretation by the staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from June 27, 1997.
Tendering holders of the Old Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
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EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date") . The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer unless properly withdrawn. The Company does not anticipate
extending the Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "Certain Conditions to the Exchange Offer" which have not been waived by
the Company and (ii) amend the terms of the Exchange Offer in any manner which,
in its good faith judgment, is advantageous to the holders of the Old Notes,
whether before or after any tender of the Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other documents required by the Letter of Transmittal, to the Exchange
Agent at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer
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need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder, and the signature on
the endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature in the Letter of Transmittal
must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Old Notes are registered and, if possible, the certificate numbers of the
Old Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date, the Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ("Notice of Guaranteed
Delivery") which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any
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particular Old Notes not properly tendered or not to accept any particular Old
Notes which acceptance might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility. The Transferor further agrees that acceptance of any tendered
Old Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of certain of its
obligations under the Registration Rights Agreement. All authority conferred by
the Transferor will survive the death or
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incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of Exchange Notes. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of 90 days after the Expiration Date,
make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Notes to be withdrawn, (iv) include a statement that such holder is
withdrawing his election to have such Old Notes exchanged, (v) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered or as otherwise described above (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (vi) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. The Exchange Agent will return the properly withdrawn Old
Notes promptly following receipt of notice of withdrawal. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"Certain Conditions to the Exchange Offer" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral or written notice
thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-entry
confirmation of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Old Notes will be credited to an account
maintained with such book-entry transfer facility) as promptly as practicable
after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Old Notes and may terminate or
amend the Exchange Offer (by oral or written notice to the Exchange Agent or by
a timely press release) if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, any of
the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of the
Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
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have a material adverse effect on the contemplated benefits of the Exchange
Offer to the Company; or
(f) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any govermental agency or authority
which may adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iv) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of affecting,
the extension of credit by banks or other leading institutions in the United
States, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Exchange Offer, a material acceleration or worsening
thereof.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Exchange Offer for a minimum
of five business days from the date that the Company first gives notice, by
public announcement or otherwise, of such waiver or amendment, if the Exchange
Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
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EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
Marine Midland Bank Marine Midland Bank
Attn: Corporate Trust Operations Attn: Corporate Trust Operations
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
BY FACSIMILE:
(212) 658-2292
Attn.: Paulette Shaw
Telephone: (212) 658-5931
</TABLE>
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $500,000, which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction in which the securities laws or blue
sky laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdication.
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TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. All untendered Old Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the
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Company has not sought its own interpretive letter and there can be no assurance
that the Staff would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a Holder (other than any Holder
who is a broker-dealer or an "affiliate" of the Company within the meaning of
Rule 405 of the Securities Act) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holder's business and
that such Holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Notes. However, any holder who is an
"affiliate" of the Company or who has an arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, or any broker-dealer who purchased Old Notes from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act (i) could not rely on the applicable interpretations of the staff
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act. A broker-dealer who holds Old Notes that were acquired
for its own account as a result of market-making or other trading activities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of Exchange Notes. Each such broker-dealer
that receives Exchange Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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DESCRIPTION OF THE EXCHANGE NOTES
The Old Notes were issued and the Exchange Notes offered hereby will be
issued under the Indenture. The terms of the Exchange Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Exchange
Notes are subject to all such terms, and holders of the Exchange Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture describes the
material terms of the Indenture but does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture Act.
For definitions of certain capitalized terms used in the following summary, see
"--Certain Definitions." The Indenture is an exhibit to the Registration
Statement of which this Prospectus is a part.
On June 27, 1997, the Company issued $150 million aggregate principal amount
of Old Notes under the Indenture. The terms of the Exchange Notes are identical
in all material respects to the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Old Notes for Exchange Notes. The Trustee will authenticate and deliver Exchange
Notes for original issue only in exchange for a like principal amount of Old
Notes. Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the Exchange Notes, will be treated as a single
class of securities under the Indenture. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Exchange
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old Notes and
Exchange Notes then outstanding.
The Exchange Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future Senior
Indebtedness of the Company. As of June 28, 1997, the aggregate amount of the
Company's outstanding Senior Indebtedness was approximately $128.0 million. The
Indenture will permit the incurrence of additional Senior Indebtedness in the
future.
Operations of the Company are conducted primarily through its Subsidiaries
and, therefore, the Company is dependent upon the cash flow of its Subsidiaries
to meet its obligations, including its obligations under the Exchange Notes. The
Exchange Notes will be effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's Subsidiaries. Any right of the Company to receive assets of any of
its Subsidiaries upon the latter's liquidation or reorganization (and the
consequent right of the Holders to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors, except to
the extent that the Company is itself recognized as a creditor of such
Subsidiary, in which case the claims of the Company still would be subordinate
to any security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by the Company. As of June 28, 1997, the
Company's Subsidiaries had approximately $366.2 million of liabilities
(excluding guarantees of the Indebtedness under the Credit Facilities)
outstanding. See "Risk Factors--Adverse Consequences of Holding Company
Structure" and "--Subordination."
All of the Company's Subsidiaries will be Restricted Subsidiaries. However,
under certain circumstances, the Company will be able to designate current or
future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will
not be subject to any of the restrictive covenants set forth in the Indenture.
SUBORDINATION
The payment of the Subordinated Note Obligations is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash
equivalents of all Senior Indebtedness, whether outstanding on the date of the
Indenture or thereafter incurred. Upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, an assignment for the benefit of
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creditors or any marshalling of the Company's assets and liabilities, the
holders of Senior Indebtedness will be entitled to receive payment in full in
cash equivalents of such Senior Indebtedness before the Holders will be entitled
to receive any payment with respect to the Subordinated Note Obligations, and
until all Senior Indebtedness is paid in full in cash equivalents, any
distribution to which the Holders would be entitled shall be made to the holders
of Senior Indebtedness (except that Holders may receive (i) shares of stock and
any debt securities that are subordinated at least to the same extent as the
Exchange Notes to (a) Senior Indebtedness and (b) any securities issued in
exchange for Senior Indebtedness and (ii) payments made from the trusts
described under "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in such subordinated securities or from
the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a
default in the payment of the principal of, premium, if any, or interest on, or
of unreimbursed amounts under drawn letters of credit or in respect of bankers'
acceptances or fees relating to letters of credit or bankers' acceptances
constituting, Designated Senior Indebtedness occurs and is continuing beyond any
applicable period of grace (a "PAYMENT DEFAULT") or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity (a "NON-PAYMENT DEFAULT") and the Trustee
receives a notice of such default (a "PAYMENT BLOCKAGE NOTICE") from a
representative of holders of such Designated Senior Indebtedness. Payments on
the Exchange Notes, including any missed payments, may and shall be resumed (a)
in the case of a payment default, upon the date on which such default is cured
or waived or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full in cash equivalents and (b) in case
of a nonpayment default, the earlier of (x) the date on which such nonpayment
default is cured or waived, (y) 179 days after the date on which the applicable
Payment Blockage Notice is received (each such period, the "PAYMENT BLOCKAGE
PERIOD") or (z) the date such Payment Blockage Period shall be terminated by
written notice to the Trustee from the requisite holders of such Designated
Senior Indebtedness necessary to terminate such period or from their
representative. No new period of payment blockage may be commenced unless and
until 365 days have elapsed since the effectiveness of the immediately preceding
Payment Blockage Notice. However, if any Payment Blockage Notice within such
365-day period is given by or on behalf of any holders of Designated Senior
Indebtedness (other than the agent under the Senior Credit Facilities), the
agent under the Senior Credit Facilities may give another Payment Blockage
Notice within such period. In no event, however, may the total number of days
during which any Payment Blockage Period or Periods is in effect exceed 179 days
in the aggregate during any 365 consecutive day period. No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a period
of not less than 90 days.
If the Company fails to make any payment on the Exchange Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provision referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the Holders to accelerate the
maturity thereof.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Exchange Notes is accelerated because of
an Event of Default.
As a result of the subordination provisions described above, in the event of
insolvency, bankruptcy, administration, reorganization, receivership or similar
proceedings relating to the Company, Holders may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. In addition,
the Exchange Notes will be structurally subordinated to the liabilities of
Subsidiaries of the Company. At June 28, 1997, the Company had approximately
$128.0 million of Senior Indebtedness outstanding and the Company had additional
availability of $220.2 million (reduced by $1.8 million of outstanding letters
of credit) for borrowings under the Credit Facilities, all of which would be
Senior Indebtedness of the Company, and the Company's Subsidiaries had aggregate
outstanding liabilities of approximately $366.2 million, excluding guarantees of
the Indebtedness under the Credit Facilities. Although the Indenture
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contains limitations on the amount of additional Indebtedness that the Company
and its Subsidiaries may incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "--Certain Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock."
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Senior Indebtedness under the
Senior Credit Facilities and (ii) any other Senior Indebtedness permitted under
the Indenture the principal amount of which is $25.0 million or more and that
has been designated by the Company as Designated Senior Indebtedness.
"SENIOR INDEBTEDNESS" means (i) the Obligations under the Senior Credit
Facilities and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes, including, with respect to
clauses (i) and (ii), interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy, whether or
not such interest is an allowable claim in such bankruptcy proceeding.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (1) any liability for federal, state, local or other taxes owed
or owing by the Company, (2) any obligation of the Company to any of its
Subsidiaries, (3) any accounts payable or trade liabilities arising in the
ordinary course of business (including instruments evidencing such liabilities)
other than obligations in respect of letters of credit under the Senior Credit
Facilities, (4) any Indebtedness that is incurred in violation of the Indenture,
(5) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (6) any Indebtedness, guarantee or obligation of the Company which is
subordinate or junior to any other Indebtedness, guarantee or obligation of the
Company, (7) Indebtedness evidenced by the Notes and (8) Capital Stock of the
Company.
"SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if any, and
interest on the Notes payable pursuant to the terms of the Notes or upon
acceleration, together with and including any amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal, premium, if any, or interest on the
Notes.
The Exchange Notes will rank senior in right of payment to all Subordinated
Indebtedness of the Company. At the Issuance Date the Company had no
Subordinated Indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $150.0
million and will mature on July 1, 2007. Interest on the Exchange Notes will
accrue at the rate of 9 3/8% per annum and will be payable semi-annually in
arrears on January 1 and July 1, commencing on January 1, 1998, to Holders of
record on the immediately preceding December 15 and June 15. Interest on the
Exchange Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issuance Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Exchange Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, payment
of interest may be made by check mailed to the Holders at their respective
addresses set forth in the register of Holders; PROVIDED that all payments of
principal, premium, if any, and interest with respect to Exchange Notes
represented by one or more permanent global Exchange Notes registered in the
name of or held by The Depository Trust Company or its nominee will be made by
wire transfer of immediately available funds to the accounts specified by the
Holder or Holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Exchange Notes will be issued in denominations
of $1,000 and integral multiples thereof.
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MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Exchange Notes.
OPTIONAL REDEMPTION
Except as described below, the Exchange Notes will not be redeemable at the
Company's option prior to July 1, 2002. From and after July 1, 2002, the
Exchange Notes will be subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of each of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---------------------- -----------
<S> <C>
2002.................. 104.688%
2003.................. 103.125
2004.................. 101.563
2005 and thereafter... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to July 1, 2000,
the Company may, at its option, redeem up to 40% of the aggregate principal
amount of Exchange Notes originally issued under the Indenture on the Issuance
Date at a redemption price equal to 109.375% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net proceeds of one or more Equity Offerings; PROVIDED that at
least 60% of the aggregate principal amount of Exchange Notes originally issued
under the Indenture on the Issuance Date remains outstanding immediately after
the occurrence of each such redemption; PROVIDED FURTHER that each such
redemption occurs within 60 days of the date of closing of each such Equity
Offering. The Trustee shall select the Exchange Notes to be purchased in the
manner described under "Repurchase at the Option of Holders--Selection and
Notice."
At any time on or prior to July 1, 2002, the Exchange Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control or upon the acquisition, in one or a series of related transactions,
of 50% or more of the total Voting Stock of the Company by an Affiliate of KKR
or the sale, lease or transfer, in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, to an Affiliate of KKR, upon not less than 30 nor more than 60
days prior notice (but in no event more than 90 days after the occurrence of
such Change of Control or transfer event) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the date of redemption (the "Redemption Date")
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
"APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at July 1, 2002 (such redemption price being described under "--Optional
Redemption") plus (2) all required interest payments due on such Note through
July 1, 2002, computed using a discount rate equal to the Treasury Rate plus 75
basis points, over (B) the principal amount of such Note.
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
period from the Redemption Date to July 1, 2002; PROVIDED,
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HOWEVER, that if the period from the Redemption Date to July 1, 2002 is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to July 1, 2002 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. The Indenture provides that, upon the occurrence of a
Change of Control, unless the Company has elected to redeem the Exchange Notes
in connection with such Change of Control, the Company will make an offer to
purchase all or any part (equal to $1,000 or an integral multiple thereof) of
the Exchange Notes pursuant to the offer described below (the "CHANGE OF CONTROL
OFFER") at a price in cash (the "CHANGE OF CONTROL PAYMENT") equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase. The Indenture will provide that within 30 days
following any Change of Control, the Company will mail a notice to each Holder,
with a copy to the Trustee, with the following information: (1) a Change of
Control Offer is being made pursuant to the covenant entitled "Change of
Control," and that all Exchange Notes properly tendered pursuant to such Change
of Control Offer will be accepted for payment; (2) the purchase price and the
purchase date, which will be no earlier than 30 days nor later than 60 days from
the date such notice is mailed, except as may be otherwise required by
applicable law (the "CHANGE OF CONTROL PAYMENT DATE"); (3) any Exchange Note not
properly tendered will remain outstanding and continue to accrue interest; (4)
unless the Company defaults in the payment of the Change of Control Payment, all
Exchange Notes accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest on the Change of Control Payment Date; (5) Holders
electing to have any Exchange Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Exchange Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Exchange Notes
completed, to the paying agent specified in the notice at the address specified
in the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (6) Holders will be entitled to withdraw
their tendered Exchange Notes and their election to require the Company to
purchase such Exchange Notes, provided that the paying agent receives, not later
than the close of business on the last day of the Offer Period (as defined in
the Indenture), a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Exchange Notes tendered
for purchase, and a statement that such Holder is withdrawing his tendered
Exchange Notes and his election to have such Exchange Notes purchased; and (7)
that Holders whose Exchange Notes are being purchased only in part will be
issued new Exchange Notes equal in principal amount to the unpurchased portion
of the Exchange Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding Senior Indebtedness or obtain the
requisite consents, if any, under any outstanding Senior Indebtedness in each
case necessary to permit the repurchase of the Exchange Notes required by this
covenant.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Exchange Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The Indenture provides that on the Change of Control Payment Date, the
Company will, to the extent permitted by law, (1) accept for payment all
Exchange Notes or portions thereof properly tendered pursuant to the Change of
Control Offer, (2) deposit with the paying agent an amount equal to the
aggregate Change of Control Payment in respect of all Exchange Notes or portions
thereof so tendered
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and (3) deliver, or cause to be delivered, to the Trustee for cancellation the
Exchange Notes so accepted together with an Officers' Certificate stating that
such Exchange Notes or portions thereof have been tendered to and purchased by
the Company. The Indenture will provide that the paying agent will promptly mail
to each Holder the Change of Control Payment for such Exchange Notes, and the
Trustee will promptly authenticate and mail to each Holder a new Exchange Note
equal in principal amount to any unpurchased portion of the Exchange Notes
surrendered, if any, PROVIDED, that each such new Exchange Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Credit Facilities provide, and future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may, prohibit the Company from purchasing any Exchange Notes as a result of a
Change of Control and/or provide that certain change of control events with
respect to the Company would constitute a default thereunder. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing the Exchange Notes, the Company could seek the consent of its lenders
to the purchase of the Exchange Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing the Exchange Notes. In such case, the Company's failure to purchase
tendered Exchange Notes would constitute an Event of Default under the
Indenture. If, as a result thereof, a default occurs with respect to any Senior
Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the Holders.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
ASSET SALES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an
Asset Sale, unless (x) the Company, or its Restricted Subsidiaries, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company, or such Restricted Subsidiary, as the case may be, is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (a) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes), that are assumed by the transferee of any such assets, (b) any
securities received by the Company or such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received) within 180 days following the closing
of such Asset Sale and (c) any Designated Noncash Consideration received by the
Company or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (c) that is at that time
outstanding, not to exceed the greater of (x) $100 million or (y) 15% of Total
Assets at the time of the receipt of such Designated Noncash Consideration (with
the fair market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent changes in
value), shall be deemed to be cash for purposes of this provision and for no
other purpose.
Within 365 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted
Subsidiary, at its option, may (i) apply the Net Proceeds from such Asset Sale
to permanently reduce (x) Obligations under the Senior Credit Facilities (and to
correspondingly reduce commitments with respect thereto), (y) other Senior
Indebtedness or Pari Passu Indebtedness (PROVIDED that if the Company shall so
reduce Obligations under Pari Passu Indebtedness, it will equally and ratably
reduce Obligations under the Notes if the Notes are then prepayable or, if the
Notes may not be then prepaid, the Company shall make an offer (in accordance
with the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at 100% of the principal amount thereof,
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plus the amount of accrued but unpaid interest, if any, on, the amount of Notes
that would otherwise be prepaid) or (z) Indebtedness of a Wholly Owned
Restricted Subsidiary, (ii) apply the Net Proceeds from such Asset Sale to an
investment in any one or more businesses, capital expenditures or acquisitions
of other assets in each case, used or useful in a Similar Business (including
investments or purchases of non-capital assets in connection with the
construction or expansion of distribution facilities), (iii) in the case of a
sale of a store or stores, deem such Net Proceeds to have been applied to the
extent of any capital expenditures made to construct or acquire a replacement
store in the general vicinity of the store sold within 365 days preceding the
date of the Asset Sale; PROVIDED that Net Proceeds were not previously excluded
from the definition of Excess Proceeds as a result of the same capital
expenditures made to acquire or construct such replacement store and/or (iv)
apply the Net Proceeds from such Asset Sale to an investment in properties or
assets that replace the properties and assets that are the subject of such Asset
Sale. Pending the final application of any such Net Proceeds, the Company or
such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities. The Indenture provides that any Net
Proceeds from the Asset Sale that are not invested as provided and within the
time period set forth in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Company shall make an offer to all Holders (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes, that is an
integral multiple of $1,000, that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. The Company will commence an Asset Sale Offer with respect to Excess
Proceeds within ten Business Days after the date that Excess Proceeds exceeds
$15.0 million by mailing the notice required pursuant to the terms of the
Indenture, with a copy to the Trustee. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased in the manner described under the caption "Selection
and Notice" below. Upon completion of any such Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
Indenture, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Credit Facilities prohibit, and future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may prohibit, the Company from purchasing any Notes pursuant to this Asset Sales
covenant. In the event the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing the Exchange Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture. If, as a result thereof, a default occurs with
respect to any Senior Indebtedness, the subordination provisions in the
Indenture would likely restrict payments to the Holders.
SELECTION AND NOTICE. If less than all of the Notes are to be redeemed at
any time or if more Notes are tendered pursuant to an Asset Sale Offer than the
Company is required to purchase, selection of such Notes for redemption or
purchase, as the case may be, will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed, or, if such Notes are not so listed, on a pro rata basis,
by lot or by such other method as the Trustee shall deem
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fair and appropriate (and in such manner as complies with applicable legal
requirements); provided that no Exchange Notes of $1,000 or less shall be
purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder to be purchased or redeemed at such Holder's
registered address. If any Note is to be purchased or redeemed in part only, any
notice of purchase or redemption that relates to such Note shall state the
portion of the principal amount thereof that has been or is to be purchased or
redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date unless the Company defaults in payment of the
purchase or redemption price, interest shall cease to accrue on Notes or
portions thereof purchased or called for redemption.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions by the Company payable
in Equity Interests (other than Disqualified Stock) of the Company or (B)
dividends or distributions by a Restricted Subsidiary so long as, in the case of
any dividend or distribution payable on or in respect of any class or series of
securities issued by a Subsidiary other than a Wholly Owned Subsidiary, the
Company or a Restricted Subsidiary receives at least its pro rata share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities); (ii) purchase, redeem, defease or otherwise acquire or
retire for value any Equity Interests of the Company or any direct or indirect
parent of the Company; (iii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value in each case, prior
to any scheduled repayment, or maturity, any Subordinated Indebtedness (other
than Indebtedness permitted under clauses (g) and (h) of the covenant described
under "--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock"); or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness under the provisions of the first paragraph of
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issuance Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (iv) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that would have been paid pursuant to such clause if $5.0 million and $10.0
million were substituted in such clause for $10.0 million and $20.0 million,
respectively), (v), (viii), (ix) and (xiii) of the next succeeding
paragraph, but excluding all other Restricted Payments permitted by the next
succeeding paragraph), is less than the sum of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the fiscal quarter that first begins after the Issuance Date to the end
of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, in the case such Consolidated Net Income for such period is a deficit,
minus 100% of such deficit), PLUS (ii) 100% of the aggregate net cash
proceeds and the fair market value, as
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determined in good faith by the Board of Directors, of marketable securities
received by the Company since immediately after the closing of the
Recapitalization and the Financings from the issue or sale of Equity
Interests of the Company (including Retired Capital Stock (as defined
below), but excluding cash proceeds and marketable securities received from
the sale of (A) Equity Interests to members of management, directors or
consultants of the Company and its Subsidiaries after the Issuance Date to
the extent such amounts have been applied to Restricted Payments in
accordance with clause (iv) of the next succeeding paragraph, and (B)
Designated Preferred Stock) or debt securities of the Company that have been
converted into such Equity Interests of the Company (other than Refunding
Capital Stock (as defined below) or Equity Interests or convertible debt
securities of the Company sold to a Restricted Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), PLUS (iii) 100% of the aggregate amount of cash
and marketable securities contributed to the capital of the Company
following the Issuance Date, PLUS (iv) 100% of the aggregate amount received
in cash and the fair market value of marketable securities (other than
Restricted Investments) received from (A) the sale or other disposition
(other than to the Company or a Restricted Subsidiary) of Restricted
Investments made by the Company and its Restricted Subsidiaries and
repurchases and redemptions of such Restricted Investments from the Company
and its Restricted Subsidiaries by such Person and repayments of loans or
advances which constitute Restricted Investments to the Company and its
Restricted Subsidiaries or (B) a dividend from, or the sale (other than to
the Company or a Restricted Subsidiary) of the stock of, an Unrestricted
Subsidiary (other than an Unrestricted Subsidiary the Investment in which
was made by the Company or a Restricted Subsidiary pursuant to clauses (vi),
(x) or (xi) below).
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) (a) the redemption, repurchase, retirement or other acquisition of
any Equity Interests (the "RETIRED CAPITAL STOCK") or Subordinated
Indebtedness of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of the Company (other than any Disqualified Stock) (the
"REFUNDING CAPITAL STOCK"), and (b) the declaration and payment of dividends
on the Refunding Capital Stock in an aggregate amount per year no greater
than the aggregate amount of dividends per annum that was declarable and
payable on such Retired Capital Stock immediately prior to such retirement;
PROVIDED, HOWEVER, that at the time of the declaration of any such
dividends, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(iii) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, new Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired for value (PLUS the amount of any
premium required to be paid under the terms of the instrument governing the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired), (B) such Indebtedness is subordinated to the Senior Indebtedness
and the Notes at least to the same extent as such Subordinated Indebtedness
so purchased, exchanged, redeemed, repurchased, acquired or retired for
value, (C) such Indebtedness has a final scheduled maturity date equal to or
later than the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired and (D)
such Indebtedness has a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired;
(iv) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee, director or
consultant of the Company or any Subsidiary pursuant to any management
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equity plan or stock option plan or any other management or employee benefit
plan or agreement; PROVIDED, HOWEVER, that the aggregate Restricted Payments
made under this clause (iv) does not exceed in any calendar year $10.0
million (with unused amounts in any calendar year being carried over to
succeeding calendar years subject to a maximum (without giving effect to the
following proviso) of $20.0 million in any calendar year); PROVIDED FURTHER
that such amount in any calendar year may be increased by an amount not to
exceed (A) the cash proceeds from the sale of Equity Interests of the
Company to members of management, directors or consultants of the Company
and its Subsidiaries that occurs after the Issuance Date (to the extent the
cash proceeds from the sale of such Equity Interest have not otherwise been
applied to the payment of Restricted Payments by virtue of the preceding
paragraph (c)) plus (B) the cash proceeds of key man life insurance policies
received by the Company and its Restricted Subsidiaries after the Issuance
Date less (C) the amount of any, Restricted Payments previously made
pursuant to clauses (A) and (B) of this subparagraph (iv); and PROVIDED
FURTHER that cancellation of Indebtedness owing to the Company from members
of management of the Company or any of its Restricted Subsidiaries in
connection with a repurchase of Equity Interests of the Company will not be
deemed to constitute a Restricted Payment for purposes of this covenant or
any other provision of the Indenture;
(v) (A) the declaration and payment of dividends to holders of any class
or series of Designated Preferred Stock (other than Disqualified Stock)
issued after the Issuance Date or (B) the declaration and payment of
dividends on Refunding Capital Stock in excess of the dividends declarable
and payable thereon pursuant to clause (ii); PROVIDED, HOWEVER, in either
case, that for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
of issuance of such Designated Preferred Stock or the declaration of such
dividends on Refunding Capital Stock, after giving effect to such issuance
or declaration on a pro forma basis, the Company and its Restricted
Subsidiaries would have had a Fixed Charge Coverage Ratio of at least 1.75
to 1.00;
(vi) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, taken together with all other Investments made pursuant to
this clause (vi) that are at that time outstanding, not to exceed $25.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
(vii) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(viii) the payment of dividends on the Company's Common Stock, following
the first public offering of the Company's Common Stock after the Issuance
Date, of up to 6% per annum of the net proceeds received by the Company in
such public offering, other than public offerings with respect to the
Company's Common Stock registered on Form S-8;
(ix) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of Equity Interests of the Company in
existence on the Issuance Date and which are not held by KKR or any of its
Affiliates on the Issuance Date (including any Equity Interests issued in
respect of such Equity Interests as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise), PROVIDED
that the aggregate Restricted Payments made under this clause (ix) shall not
exceed $105 million; PROVIDED FURTHER that the aggregate amount expended
under this clause (ix) shall not exceed $35 million in the fiscal year
ending June 27, 1998; or $70 million in the two fiscal years ending June 26,
1999; PROVIDED FURTHER that notwithstanding the foregoing provisos, the
Company shall be permitted to make Restricted Payments under this clause
(ix) only if after giving effect thereto, the Company would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first sentence of the covenant
described under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock";
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(x) Investments in Unrestricted Subsidiaries that are made with Excluded
Contributions;
(xi) other Restricted Payments in an aggregate amount not to exceed
$20.0 million;
(xii) the payment of any amount in connection with the Recapitalization
and the Financings and the documents executed in connection therewith,
including, without limitation, payments in respect of the Putable Shares
Reserve Fund; and
(xiii) a Restricted Payment to pay for the repurchase, retirement or other
acquisition or retirement for value of Equity Interests owned by the
Employee Stock Ownership Plan or the Key Employee Stock Ownership Plan;
PROVIDED HOWEVER, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (iii) through (ix) and clauses (xi)
and (xiii), no Default or Event or Default shall have occurred and be continuing
or would occur as a consequence thereof.
As of the Issuance Date, all of the Company's Subsidiaries were Restricted
Subsidiaries. The Company will not permit any Unrestricted Subsidiary to become
a Restricted Subsidiary except pursuant to the second to last sentence of the
definition of "Unrestricted Subsidiary." For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid) in
the Subsidiary so designated will be deemed to be Restricted Payments in an
amount determined as set forth in the last sentence of the definition of
"Investments." Such designation will be permitted only if a Restricted Payment
in such amount would be permitted at such time (whether pursuant to the first
paragraph of this covenant or under clauses (vi) and (x) and (xi)) and if such
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Unrestricted Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Indenture.
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED
STOCK. The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "INCUR" and
collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) and that the Company will not issue any shares of Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock if the
Fixed Charge Coverage Ratio for the Company's and the Restricted Subsidiaries'
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 1.75 to 1.00, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, and the application of proceeds therefrom had occurred at the beginning of
such four-quarter period.
The foregoing limitations will not apply to:
(a) the incurrence by the Company of Indebtedness under Credit
Facilities and the issuance and creation of letters of credit and bankers'
acceptances thereunder (with letters of credit and bankers' acceptances
being deemed to have a principal amount equal to the face amount thereof) up
to an aggregate principal amount of $450 million outstanding at any one
time;
(b) the incurrence by the Company of Indebtedness represented by the
Notes;
(c) the Existing Indebtedness (other than Indebtedness described in
clauses (a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations) incurred by
the Company or any of its Restricted Subsidiaries, to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount which, when aggregated
with the principal amount of all other Indebtedness then outstanding and
incurred pursuant to this clause
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(d) and including all Refinancing Indebtedness incurred to refund, refinance
or replace any other Indebtedness incurred pursuant to this clause (d), does
not exceed 20% of Total Assets;
(e) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; PROVIDED, HOWEVER, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(f) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; PROVIDED, HOWEVER, that (i) such Indebtedness is
not reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause
(i)) and (ii) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(g) Indebtedness of the Company to a Restricted Subsidiary; PROVIDED
that any such Indebtedness is made pursuant to an intercompany note and is
subordinated in right of payment to the Notes; PROVIDED further that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such Indebtedness (except
to the Company or another Restricted Subsidiary) shall be deemed, in each
case to be an incurrence of such Indebtedness;
(h) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary; PROVIDED that (i) any such Indebtedness is made
pursuant to an intercompany note and (ii) if a Guarantor incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; PROVIDED FURTHER that any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case to be an incurrence of such Indebtedness;
(i) Hedging Obligations that are incurred in the ordinary course of
business for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the Indenture
to be outstanding;
(j) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(k) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(l) Indebtedness of the Company and any of its Restricted Subsidiaries
not otherwise permitted hereunder in an aggregate principal amount, which
when aggregated with the principal amount of all other Indebtedness then
outstanding and incurred pursuant to this clause (l), does not exceed $150.0
million at any one time outstanding; PROVIDED, HOWEVER, that the aggregate
principal amount of such Indebtedness which may be incurred by Restricted
Subsidiaries does not exceed $100.0 million at any one time outstanding; (it
being understood that any Indebtedness incurred under this clause (l) shall
cease to be deemed incurred or outstanding for purposes of this clause (l)
but shall be deemed to be incurred for purposes of the first paragraph of
this covenant from and after the first date on which the
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Company could have incurred such Indebtedness under the first paragraph of
this covenant without reliance upon this clause (l));
(m) (i) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the incurrence
of such Indebtedness incurred by such Restricted Subsidiary is permitted
under the terms of the Indenture and (ii) any Excluded Guarantee (as defined
below under "--Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries") of a Restricted Subsidiary;
(n) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness which serves to refund, refinance or restructure any
Indebtedness incurred as permitted under the first paragraph of this
covenant and clauses (b) and (c) above, or any Indebtedness issued to so
refund, refinance or restructure such Indebtedness including additional
Indebtedness incurred to pay premiums and fees in connection therewith (the
"REFINANCING INDEBTEDNESS") prior to its respective maturity; PROVIDED,
HOWEVER, that such Refinancing Indebtedness (i) has a Weighted Average Life
to Maturity at the time such Refinancing Indebtedness is incurred which is
not less than the remaining Weighted Average Life to Maturity of
Indebtedness being refunded or refinanced, (ii) to the extent such
Refinancing Indebtedness refinances Indebtedness subordinated or PARI PASSU
to the Notes, such Refinancing Indebtedness is subordinated or PARI PASSU to
the Notes at least to the same extent as the Indebtedness being refinanced
or refunded and (iii) shall not include (x) Indebtedness of a Subsidiary
that refinances Indebtedness of the Company or (y) Indebtedness of the
Company or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary; and PROVIDED FURTHER that subclauses (i) and (ii)
of this clause (n) will not apply to any refunding or refinancing of any
Senior Indebtedness;
(o) Indebtedness or Disqualified Stock of Persons that are acquired by
the Company or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of the Indenture;
PROVIDED that such Indebtedness or Disqualified Stock is not incurred in
contemplation of such acquisition or merger; and PROVIDED FURTHER that after
giving effect to such acquisition, either (i) the Company would be permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first sentence of this covenant
or (ii) the Fixed Charge Coverage Ratio is greater than immediately prior to
such acquisition; and
(p) Contingent Obligations in the form of guarantees, whether by
operation of law or otherwise, of Indebtedness of joint ventures in
existence on the Issuance Date to which the Company or its Restricted
Subsidiaries is a party.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
permitted Indebtedness described in clauses (a) through (p) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Indebtedness in any manner
that complies with this covenant and such item of Indebtedness will be treated
as having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof except as otherwise set forth in clause (l). Accrual of
interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
LIENS. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly create,
incur, assume or suffer to exist any Lien that secures obligations under any
Pari Passu Indebtedness or Subordinated Indebtedness on any asset or property of
the Company or such Restricted Subsidiary, or any income or profits therefrom,
or assign or convey any right to receive income therefrom, unless the Notes are
equally and ratably secured with the obligations so secured or until such time
as such obligations are no longer secured by a Lien.
The Indenture provides that no Guarantor will directly or indirectly create,
incur, assume or suffer to exist any Lien that secures obligations under any
Pari Passu Indebtedness or Subordinated Indebtedness of
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such Guarantor on any asset or property of such Guarantor or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
unless the Guarantee of such Guarantor is equally and ratably secured with the
obligations so secured or until such time as such obligations are no longer
secured by a Lien.
MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The
Indenture provides that the Company may not consolidate or merge with or into or
wind up into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to any Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any territory
thereof (the Company or such Person, as the case may be, being herein called the
"SUCCESSOR COMPANY"); (ii) the Successor Company (if other than the Company)
expressly assumes all the obligations of the Company under the Indenture and the
Notes pursuant to a supplemental indenture or other documents or instruments in
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) immediately after giving
pro forma effect to such transaction, as if such transaction had occurred at the
beginning of the applicable four-quarter period, (A) the Successor Company would
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant
described under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (B) the Fixed Charge Coverage Ratio for the Successor
Company and its Restricted Subsidiaries would be greater than such Ratio for the
Company and its Restricted Subsidiaries immediately prior to such transaction;
(v) each Guarantor, if any, unless it is the other party to the transactions
described above, in which case clause (ii) shall apply, shall have by
supplemental indenture confirmed that its Guarantee shall apply to such Person's
obligations under the Indenture and the Notes; and (vi) the Company shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture. The Successor Company will succeed
to, and be substituted for, the Company under the Indenture and the Notes.
Notwithstanding the foregoing clause (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (b) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
State of the United States so long as the amount of Indebtedness of the Company
and its Restricted Subsidiaries is not increased thereby.
Each Guarantor, if any, shall not, and the Company will not permit a
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless (i) such
Guarantor is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made is a corporation organized or existing under the laws of the United
States, any state thereof, the District of Columbia, or any territory thereof
(such Guarantor or such Person, as the case may be, being herein called the
"SUCCESSOR GUARANTOR"); (ii) the Successor Guarantor (if other than such
Guarantor) expressly assumes all the obligations of such Guarantor under the
Indenture and such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default exists;
and (iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture. The Successor Guarantor will succeed to, and be substituted for, such
Guarantor under the Indenture and such Guarantor's Guarantee.
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TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"AFFILIATE TRANSACTION") involving aggregate payments or consideration in excess
of $5.0 million, unless (a) such Affiliate Transaction is on terms that are not
materially less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (b) the
Company delivers to the Trustee with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, a resolution adopted by the majority of the Board of
Directors approving such Affiliate Transaction and set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (a)
above.
The foregoing provisions will not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries; (ii)
Restricted Payments permitted by the provisions of the Indenture described above
under the covenant "--Limitation on Restricted Payments"; (iii) the payment of
customary annual management, consulting and advisory fees and related expenses
to KKR and its Affiliates; (iv) the payment of reasonable and customary fees
paid to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary; (v) payments by the
Company or any of its Restricted Subsidiaries to KKR and its Affiliates made for
any financial advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which payments are approved by a
majority of the Board of Directors of the Company in good faith; (vi)
transactions in which the Company or any of its Restricted Subsidiaries, as the
case may be, delivers to the Trustee a letter from an Independent Financial
Advisor stating that such transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view or meets the requirements of clause
(a) of the preceding paragraph; (vii) payments or loans to employees or
consultants which are approved by a majority of the Board of Directors of the
Company in good faith; (viii) any agreement as in effect as of the Issuance Date
or any amendment thereto (so long as any such amendment is not disadvantageous
to the Holders in any material respect) or any transaction contemplated thereby;
(ix) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any stockholders
agreement (including any registration rights agreement or purchase agreement
related thereto) to which it is a party as of the Issuance Date and any similar
agreements which it may enter into thereafter; PROVIDED, HOWEVER, that the
existence of, or the performance by the Company or any of its Restricted
Subsidiaries of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Issuance Date
shall only be permitted by this clause (ix) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the Holders
in any material respect; (x) the Recapitalization and the Financings and the
payment of all fees and expenses related to the Recapitalization and the
Financings; and (xi) transactions with customers, clients, suppliers, or
purchasers or sellers of goods or services, in each case in the ordinary course
of business and otherwise in compliance with the terms of the Indenture which
are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of the Company or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or
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measured by, its profits, or (ii) pay any Indebtedness owed to the Company
or any of its Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries; except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the Issuance
Date, including, without limitation, pursuant to Existing Indebtedness or
the Senior Credit Facilities and their related documentation;
(2) the Indenture and the Notes;
(3) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person,
so acquired;
(6) contracts for the sale of assets, including, without limitation
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred pursuant to
the covenants described under "--Limitations on Incurrence of Indebtedness
and Issuance of Disqualified Stock" and "--Liens" that limit the right of
the debtor to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(9) other Indebtedness of Restricted Subsidiaries permitted to be
incurred subsequent to the Issuance Date pursuant to the provisions of the
covenant described under "--Limitations on Incurrence of Indebtedness and
Issuance of Disqualified Stock";
(10) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) any Mortgage Financing or Mortgage Refinancing that imposes
restrictions on the real property securing such Indebtedness;
(12) customary provisions contained in leases and other agreements
entered into in the ordinary course of business; or
(13) any encumbrances or restrictions of the type referred to in clauses
(a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (12) above, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the
Company's Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the dividend
or other payment restrictions prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. (a) The Indenture provides that the Company will not permit any
Restricted Subsidiary to guarantee the payment of any Indebtedness
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of the Company or any Indebtedness of any other Restricted Subsidiary unless (i)
such Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a Guarantee of payment of the Notes by
such Restricted Subsidiary except that with respect to a guarantee of
Indebtedness of the Company (A) if the Notes are subordinated in right of
payment to such Indebtedness, the Guarantee under the supplemental indenture
shall be subordinated to such Restricted Subsidiary's guarantee with respect to
such Indebtedness substantially to the same extent as the Notes are subordinated
to such Indebtedness under the Indenture and (B) if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such guarantee
of such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated in right of payment to such Restricted Subsidiary's Guarantee with
respect to the Notes substantially to the same extent as such Indebtedness is
subordinated to the Notes; (ii) such Restricted Subsidiary waives and will not
in any manner whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; and (iii) such Restricted Subsidiary
shall deliver to the Trustee an opinion of counsel to the effect that (A) such
Guarantee of the Notes has been duly executed and authorized and (B) such
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; PROVIDED that
this paragraph (a) shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time such Person became a Restricted
Subsidiary of the Company and (B) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
(y) that guarantees the payment of Obligations of the Company or any Restricted
Subsidiary under the Senior Credit Facilities or any other Senior Indebtedness
and any refunding, refinancing or replacement thereof, in whole or in part,
PROVIDED that such refunding, refinancing or replacement thereof constitutes
Senior Indebtedness and is not incurred pursuant to a registered offering of
securities under the Securities Act or a private placement of securities
(including under Rule 144A) pursuant to an exemption from the registration
requirements of the Securities Act, which private placement provides for
registration rights under the Securities Act (any guarantee excluded by
operations of this clause (y) being an "Excluded Guarantee").
(b) Notwithstanding the foregoing and the other provisions of the Indenture,
any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
guarantee which resulted in the creation of such Guarantee, except a discharge
or release by or as a result of payment under such guarantee.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture
provides that the Company will not, and will not permit any Guarantor to,
directly or indirectly, incur any Indebtedness (including Acquired Indebtedness)
that is subordinate in right of payment to any Indebtedness of the Company or
any Indebtedness of any Guarantor, as the case may be, unless such Indebtedness
is either (a) PARI PASSU in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be or (b) subordinate in right of payment to the
Notes, or such Guarantor's Guarantee, as the case may be, in the same manner and
at least to the same extent as the Notes are subordinate to Senior Indebtedness
or such Guarantor's Guarantee is subordinate to such Guarantor's Senior
Indebtedness, as the case may be.
REPORTS AND OTHER INFORMATION. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms PROVIDED for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the Securities and Exchange Commission (the "COMMISSION"), the Indenture
requires the Company to file with the Commission (and provide the Trustee and
Holders with copies thereof, without cost to each Holder, within 15 days after
it files them with the Commission), (a) within 90 days after the
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end of each fiscal year, annual reports on Form 10-K (or any successor or
comparable form) containing the information required to be contained therein (or
required in such successor or comparable form); (b) within 45 days after the end
of each of the first three fiscal quarters of each fiscal year, reports on Form
10-Q (or any successor or comparable form); (c) promptly from time to time after
the occurrence of an event required to be therein reported, such other reports
on Form 8-K (or any successor or comparable form); and (d) any other
information, documents and other reports which the Company would be required to
file with the Commission if it were subject to Section 13 or 15(d) of the
Exchange Act; PROVIDED, HOWEVER, the Company shall not be so obligated to file
such reports with the Commission if the Commission does not permit such filing,
in which event the Company will make available such information to prospective
purchasers of Notes, in addition to providing such information to the Trustee
and the Holders, in each case within 15 days after the time the Company would be
required to file such information with the Commission, if it were subject to
Sections 13 or 15(d) of the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute Events of Default under the Indenture:
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal of, or premium on, if any, the Notes
whether or not such payment shall be prohibited by the subordination
provisions relating to the Notes;
(ii) default for 30 days or more in the payment when due of interest on
or with respect to the Notes whether or not such payment shall be prohibited
by the subordination provisions relating to the Notes;
(iii) failure by the Company or any Guarantor for 30 days after receipt
of written notice given by the Trustee or the holders of at least 30% in
principal amount of the Notes then outstanding to comply with any of its
other agreements in the Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is created
after the Issuance Date, if both (A) such default either (1) results from
the failure to pay any such Indebtedness at its stated final maturity (after
giving effect to any applicable grace periods) or (2) relates to an
obligation other than the obligation to pay principal of any such
Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
to its stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in default
for failure to pay principal at stated final maturity (after giving effect
to any applicable grace periods), or the maturity of which has been so
accelerated, aggregate $20.0 million or more at any one time outstanding;
(v) failure by the Company or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $20.0 million, which final
judgments remain unpaid, undischarged and unstayed for a period of more than
60 days after such judgment becomes final, and in the event such judgment is
covered by insurance, an enforcement proceeding has been commenced by any
creditor upon such judgment or decree which is not promptly stayed;
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries; or
(vii) the Guarantee of any Significant Subsidiary shall for any reason
cease to be in full force and effect or be declared null and void or any
responsible officer of the Company or any Guarantor that is a Significant
Subsidiary denies that it has any further liability under its Guarantee or
gives notice to
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such effect (other than by reason of the termination of the Indenture or the
release of any such Guarantee in accordance with the Indenture).
If any Event of Default (other than of a type specified in clause (vi)
above) occurs and is continuing under the Indenture, the Trustee or the Holders
of at least 30% in principal amount of the then outstanding Notes may declare
the principal, premium, if any, interest and any other monetary obligations on
all the then outstanding Notes to be due and payable immediately; PROVIDED,
HOWEVER, that, so long as any Indebtedness permitted to be incurred pursuant to
the Senior Credit Facilities shall be outstanding, no such acceleration shall be
effective until the earlier of (i) acceleration of any such Indebtedness under
the Senior Credit Facilities or (ii) five business days after the giving of
written notice to the Company and the administrative agent under the Senior
Credit Facilities of such acceleration. Upon the effectiveness of such
declaration, such principal and interest will be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising under
clause (vi) of the first paragraph of this section, all outstanding Notes will
become due and payable without further action or notice. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Indenture provides that the Trustee may withhold from Holders notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, premium, if any, or interest) if it
determines that withholding notice is in their interest. In addition, the
Trustee shall have no obligation to accelerate the Notes if in the best judgment
of the Trustee acceleration is not in the best interest of the Holders of such
Notes.
The Indenture provides that the Holders of a majority in aggregate principal
amount of the then outstanding Notes issued thereunder by notice to the Trustee
may on behalf of the Holders of all of such Notes waive any existing Default or
Event of Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, premium, if any, or
the principal of any such Note held by a non-consenting Holder. In the event of
any Event of Default specified in clause (iv) above, such Event of Default and
all consequences thereof (including without limitation any acceleration or
resulting payment default) shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders, if within 20
days after such Event of Default arose (x) the Indebtedness or guarantee that is
the basis for such Event of Default has been discharged, or (y) the holders
thereof have rescinded or waived the acceleration, notice or action (as the case
may be) giving rise to such Event of Default, or (z) if the default that is the
basis for such Event of Default has been cured.
The Indenture provides that the Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required, within five Business Days, upon becoming aware of any
Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company or any Guarantor, to deliver
to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, shall have any liability for any obligations of the Company or
the Guarantors under the Exchange Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder by accepting an Exchange Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Exchange Notes. Such waiver may not be effective to waive liabilities under
the federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The obligations of the Company and the Guarantors, if any, under the
Indenture will terminate (other than certain obligations) and will be released
upon payment in full of all of the Notes. The Company may, at its option and at
any time, elect to have all of its obligations discharged with respect to the
outstanding
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Notes and have each Guarantor's obligation discharged with respect to its
Guarantee ("LEGAL DEFEASANCE") and cure all then existing Events of Default
except for (i) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due solely out of the trust created pursuant to the Indenture,
(ii) the Company's obligations with respect to Notes concerning issuing
temporary Notes, registration of such Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and each Guarantor released with respect to certain
covenants that are described in the Indenture ("COVENANT DEFEASANCE") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment on other
indebtedness, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest due on
the outstanding Notes on the stated maturity date or on the applicable
redemption date, as the case may be, of such principal, premium, if any, or
interest on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions, (A) the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling or (B)
since the Issuance Date, there has been a change in the applicable U.S.
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the Holders will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Legal
Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of such
deposit or with respect to certain bankruptcy or insolvency Events of
Default on the 91st day after such date of deposit;
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(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than the Indenture) to which, the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable U.S. federal or state law, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust) have been delivered to the Trustee for cancellation; or (b)
(i) all such Notes not theretofore delivered to such Trustee for cancellation
have become due and payable by reason of the making of a notice of redemption or
otherwise or will become due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with such Trustee
as trust funds in trust solely for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient without consideration of any reinvestment of
interest to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for principal, premium, if
any, and accrued interest to the date of maturity or redemption; (ii) no Default
or Event of Default with respect to the Indenture or the Notes shall have
occurred and be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a breach or violation
of, or constitute a default under, any other instrument to which the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound;
(iii) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under such Indenture; and (iv) the Company has delivered
irrevocable instructions to the Trustee under such Indenture to apply the
deposited money toward the payment of such Notes at maturity or the redemption
date, as the case may be. In addition, the Company must deliver an Officers'
Certificate and an opinion of counsel to the Trustee stating that all conditions
precedent to satisfaction and discharge have been satisfied.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder will be treated as the owner of it for all purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, any
Guarantee and the Notes issued thereunder may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a purchase of or tender offer or exchange offer for Notes).
The Indenture provides that without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder): (i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any such Note or alter or waive the provisions with respect to
the redemption of the Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of such Notes and a waiver of the payment default that resulted from such
acceleration), or in respect of a covenant or provision contained in the
Indenture or any Guarantee which cannot be amended or modified without the
consent of all Holders, (v) make any Note payable in money other than that
stated in such Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
make any change in the foregoing amendment and waiver provisions, (viii) impair
the right of any Holder to receive payment of principal of, or interest on such
Holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or (ix)
make any change in the subordination provisions of the Indenture that would
adversely affect the Holders.
The Indenture provides that, notwithstanding the foregoing, without the
consent of any Holder, the Company, any Guarantor (with respect to a Guarantee
or the Indenture to which it is a party) and the Trustee may amend or supplement
the Indenture, any Guarantee or the Notes (i) to cure any ambiguity, defect or
inconsistency, (ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes, (iii) to comply with the covenant relating to
mergers, consolidations and sales of assets, (iv) to provide for the assumption
of the Company's or any Guarantor's obligations to Holders, (v) to make any
change that would provide any additional rights or benefits to the Holders or
that does not adversely affect the legal rights under the Indenture of any such
Holder, (vi) to add covenants for the benefit of the Holders or to surrender any
right or power conferred upon the Company, (vii) to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, (viii) to evidence and provide for the acceptance
and appointment under the Indenture of a successor Trustee pursuant to the
requirements thereof, or (ix) to add a Guarantor under the Indenture.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
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The Indenture provides that the Holders of a majority in principal amount of
the outstanding Notes issued thereunder will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee, subject to certain exceptions. The Indenture provides
that in case an Event of Default shall occur (which shall not be cured), the
Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of such Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Guarantees, if any, are and will be,
subject to certain exceptions, governed by and construed in accordance with the
internal laws of the State of New York, without regard to the choice of law
rules thereof.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided. For
purposes of the Indenture, unless otherwise specifically indicated, the term
"consolidated" with respect to any Person refers to such Person consolidated
with its Restricted Subsidiaries, and excludes from such consolidation any
Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate
of such Person.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"ASSET SALE" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary (each referred to in this definition as a
"DISPOSITION") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities or
obsolete equipment in the ordinary course of business or inventory or goods
held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above
under "--Merger, Consolidation or Sale of All or Substantially All Assets"
or any disposition that constitutes a Change of Control pursuant to the
Indenture;
(c) any Restricted Payment that is permitted to be made, and is made,
under the first paragraph of the covenant described above under
"--Limitation on Restricted Payments";
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(d) any disposition of assets with an aggregate fair market value of
less than $1.0 million;
(e) any disposition of property or assets by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar Business;
(g) the lease, assignment or a lease or sub-lease of any real or
personal property in the ordinary course of business;
(h) any financing transaction with respect to property built or acquired
by the Company or any Restricted Subsidiary including, without limitation,
sale-leasebacks and asset securitizations;
(i) up to $10.0 million in the aggregate from (A) any disposition of
undeveloped land owned by the Company or its Restricted Subsidiaries on the
Issuance Date which the Company in good faith determines it will not use in
its consolidated operations and (B) the sale of interests in joint ventures
to which the Company or one of its Restricted Subsidiaries is a party on the
Issuance Date;
(j) foreclosures on assets; and
(k) any sale of Equity Interests in, or Indebtedness or other securities
of, an Unrestricted Subsidiary.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CAPITALIZED LEASE OBLIGATION"means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole; or
(ii) the Company becomes aware of (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy,
vote, written notice or otherwise) the acquisition by any Person or
group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the
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Exchange Act, or any successor provision), including any group acting
for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than the Permitted Holders and their Related Parties, in a
single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act, or any successor provision) of 50% or more of the total
Voting Stock of the Company.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash charges (excluding any noncash item that represents an
accrual, reserve or amortization of a cash expenditure for a future period) of
such Person and its Restricted Subsidiaries for such period on a consolidated
basis and otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the sum,
without duplication, of: (a) consolidated interest expense of such Person and
its Restricted Subsidiaries for such period (including amortization of original
issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments (if any) pursuant to Hedging
Obligations, excluding amortization of deferred financing fees) and (b)
consolidated capitalized interest of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income, of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and otherwise determined in accordance
with GAAP; PROVIDED, HOWEVER, that (i) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto) shall be excluded, (ii) the
Net Income for such period shall not include the cumulative effect of a change
in accounting principles during such period, (iii) any net after-tax income
(loss) from discontinued operations and any net after-tax gains or losses on
disposal of discontinued operations shall be excluded, (iv) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business (as determined
in good faith by the Board of Directors of the Company) shall be excluded, (v)
the Net Income for such period of any Person that is not a Subsidiary, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be included only to the extent of the amount of dividends or
distributions or other payments paid in cash (or to the extent converted into
cash) to the referent Person or a Wholly Owned Restricted Subsidiary thereof in
respect of such period, (vi) the Net Income of any Person acquired in a pooling
of interests transaction shall not be included for any period prior to the date
of such acquisition, (vii) the Net Income for such period of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, unless such restriction with
respect to the payment of dividends or in similar distributions has been legally
waived and (viii) non-recurring expenses which are not capitalized and which are
incurred in connection with the expansion of the Company's self-distribution
capabilities shall be excluded.
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
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of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation against loss in respect thereof.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facilities) or
commercial paper facilities with banks or other institutional lenders or
indentures providing for revolving credit loans, term loans, letters of credit
or other long-term indebtedness, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of the Company, less the amount of cash or Cash Equivalents
received in connection with a sale of such Designated Noncash Consideration.
"DESIGNATED PREFERRED STOCK" means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in paragraph
(c) of the "--Limitation on Restricted Payments" covenant.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a Change of Control or Asset Sale), pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof
(other than as a result of a Change of Control or Asset Sale), in whole or in
part, in each case prior to the date 91 days after the maturity date of the
Notes; PROVIDED, HOWEVER, that if such Capital Stock is issued to any plan for
the benefit of employees of the Company or its Subsidiaries or by any such plan
to such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (a) provision for taxes based on
income or profits of such Person for such period deducted in computing
Consolidated Net Income, plus (b) Consolidated Interest Expense of such Person
for such period to the extent the same was deducted in calculating such
Consolidated Net Income, plus (c) Consolidated Depreciation and Amortization
Expense of such Person for such period to the extent such depreciation and
amortization were deducted in computing Consolidated Net Income, plus (d) any
expenses or charges related to any Equity Offering, Permitted Investment or
Indebtedness permitted to be incurred by the Indenture (including such expenses
or charges related to the Recapitalization and the Financings) and deducted in
such period in computing Consolidated Net Income, plus (e) the amount of any
restructuring charge (including, without limitation, charges incurred in
connection with the closing or exchange of stores, which are accrued prior to
June 27, 1998) deducted in such period in computing Consolidated Net Income,
plus (f) without duplication, any other non-cash charges reducing Consolidated
Net Income for such period (excluding any such charge which requires an accrual
of a cash reserve for anticipated cash charges for any future period), plus (g)
the amount of any minority interest expense deducted in calculating Consolidated
Net Income, less, without duplication (h) non-cash items increasing Consolidated
Net Income of such Person for such period (excluding any items which represent
the reversal of any accrual of, or cash reserve for, anticipated cash charges in
any prior period).
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"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"EXCLUDED CONTRIBUTION" means the net cash proceeds received by the Company
from (a) contributions to its common equity capital and (b) the sale (other than
to a Subsidiary or to any Company or Subsidiary management equity plan or stock
option plan or any other management or employee benefit plan or agreement) of
Capital Stock (other than Disqualified Stock) of the Company, in each case
designated as Excluded Contributions pursuant to an Officers' Certificate
executed by the principal executive officer and the principal financial officer
of the Company on the date such capital contributions are made or the date such
Equity Interests are sold, as the case may be, the cash proceeds of which are
excluded from the calculation set forth in paragraph (c) under "--Limitation on
Restricted Payments."
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issuance Date, plus interest accruing thereon,
after application of the net proceeds of the sale of the Old Notes as described
in this Prospectus.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
(other than in the case of revolving credit borrowings, in which case interest
expense shall be computed based upon the average daily balance of such
Indebtedness during the applicable period) or issues or redeems Disqualified
Stock or preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of Disqualified Stock or
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter period. For purposes of making the computation referred to above,
Investments, acquisitions, dispositions, mergers, consolidations and
discontinued operations (as determined in accordance with GAAP) that have been
made by the Company or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Calculation Date shall be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (and the reduction of any
associated fixed charge obligations and the change in EBITDA resulting
therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, merger, consolidation or discontinued operation that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto for
such period as if such Investment, acquisition, disposition, merger,
consolidation or discontinued operation had occurred at the beginning of the
applicable four-quarter period. For purposes of this definition, whenever pro
forma effect is to be given to a transaction, the pro forma calculations shall
be made in good faith by a responsible financial or accounting officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the Calculation Date had been the applicable rate for
the entire period (taking into account any Hedging Obligations applicable to
such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by a responsible financial
or accounting officer of the Company to be the rate of
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interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
For purposes of making the computation referred to above, interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on Indebtedness that may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rate, shall be deemed to have been
based upon the rate actually chosen, or, if none, then based upon such optional
rate chosen as the Company may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(a) Consolidated Interest Expense of such Person for such period and (b) all
cash dividend payments (excluding items eliminated in consolidation) on any
series of preferred stock of such Person.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date. For the purposes of the
Indenture, the term "consolidated" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary.
"GOVERNMENT SECURITIES" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; PROVIDED that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Securities or the specific payment of principal of or interest on
the Government Securities evidenced by such depository receipt.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of the Company under the
Indenture and the Notes by any Person in accordance with the provisions of the
Indenture. When used as a verb, "Guarantee" shall have a corresponding meaning.
No Guarantees will be issued in connection with the initial offering and sale of
the Notes.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that upon the
release and discharge of such Person from its Guarantee in accordance with the
Indenture, such Person shall cease to be a Guarantor. No Guarantees will be
issued in connection with the initial offering of the Notes.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange or
interest rates.
"HOLDER" means a holder of the Notes.
"INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
unpaid of the purchase price of
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any property (including Capitalized Lease Obligations), except any such balance
that constitutes a trade payable or similar obligation to a trade creditor, in
each case accrued in the ordinary course of business or (iv) representing any
Hedging Obligations, if and to the extent of any of the foregoing Indebtedness
(other than letters of credit and Hedging Obligations) that would appear as a
liability upon a balance sheet (excluding the footnotes thereto) of such Person
prepared in accordance with GAAP, (b) to the extent not otherwise included, any
obligation by such Person to be liable for, or to pay, as obligor, guarantor or
otherwise, on the Indebtedness of another Person (other than by endorsement of
negotiable instruments for collection in the ordinary course of business) and
(c) to the extent not otherwise included, Indebtedness of another Person secured
by a Lien on any asset owned by such Person (whether or not such Indebtedness is
assumed by such Person); PROVIDED, HOWEVER, that Contingent Obligations incurred
in the ordinary course of business shall be deemed not to constitute
Indebtedness.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the judgment of the Company's Board
of Directors, qualified to perform the task for which it has been engaged.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may also
hold immaterial amounts of cash pending investment and/or distribution.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding advances to customers,
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities issued by any other Person
and investments that are required by GAAP to be classified on the balance sheet
of the Company in the same manner as the other investments included in this
definition to the extent such transactions involve the transfer of cash or other
property. For purposes of the definition of "Unrestricted Subsidiary" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments," (i) "Investments" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of a Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"ISSUANCE DATE" means the closing date for the sale and original issuance of
the Old Notes under the Indenture.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction); PROVIDED that in
no event shall an operating lease be deemed to constitute a Lien.
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"MANAGEMENT GROUP" means the group consisting of all or certain Officers of
the Company on the Issuance Date whether or not such person remains in that
capacity.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE FINANCING" means the incurrence by the Company or a Subsidiary of
the Company of any Indebtedness secured by a mortgage or other Lien on real
property acquired or improved by the Company or any Subsidiary of the Company
after the date of the Indenture.
"MORTGAGE REFINANCING" means the incurrence by the Company or a Subsidiary
of the Company of any Indebtedness secured by a mortgage or other Lien on real
property subject to a mortgage or other Lien existing on the date of the
Indenture or created or incurred subsequent to the date of the Indenture as
permitted by the terms of the Indenture and owned by the Company or any
Subsidiary of the Company.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of principal, premium (if any) and interest on Indebtedness
required (other than required by clause (i) of the second paragraph of "--
Repurchase at the Option of Holders--Asset Sales") to be paid as a result of
such transaction and any deduction of appropriate amounts to be provided by the
Company as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by the Company after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness.
"OFFICER" means the Chairman of the Board, the President, any Executive Vice
President, Senior Vice President or Vice President, the Treasurer or the
Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
by two officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company that meets the requirements set forth in the
Indenture.
"PARI PASSU INDEBTEDNESS" means (a) with respect to the Notes, Indebtedness
which ranks pari passu in right of payment to the Notes and (b) with respect to
any Guarantee, Indebtedness which ranks PARI PASSU in right of payment to such
Guarantee.
"PERMITTED HOLDERS" means KKR and any of its Affiliates and the Management
Group.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is engaged in a Similar Business if
as a result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related transactions, is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary; (d) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in connection with an Asset
Sale made pursuant to the provisions of "-- Repurchase at the Option of
Holders--Asset Sales" or any other disposition of assets not constituting an
Asset Sale; (e) any Investment existing on the Issuance Date; (f) advances to
employees not in excess of
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$10.0 million outstanding at any one time, in the aggregate; (g) any Investment
acquired by the Company or any of its Restricted Subsidiaries (i) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (ii) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (h) Hedging Obligations permitted under clause (i) of the "Limitation
of Incurrence of Indebtedness and Issuance of Disqualified Stock" covenant; (i)
loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; (j) any Investment in a Similar
Business (other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (j) that are at that time outstanding, not to exceed the
greater of (x) $75.0 million or (y) 15% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value); (k)
Investments the payment for which consists of Equity Interests of the Company
(exclusive of Disqualified Stock); PROVIDED, HOWEVER, that such Equity Interests
will not increase the amount available for Restricted Payments under clause (c)
of the "Limitation on Restricted Payments" covenant; (l) additional Investments
having an aggregate fair market value, taken together with all other Investments
made pursuant to this clause (l) that are at that time outstanding, not to
exceed the greater of (x) $30.0 million or (y) 5% of Total Assets at the time of
such Investment (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value); (m) any
Investment by Restricted Subsidiaries in Wholly Owned Restricted Subsidiaries
and Investments by Subsidiaries that are not Restricted Subsidiaries in other
Subsidiaries that are not Restricted Subsidiaries; (n) guarantees (including
Guarantees) of Indebtedness permitted under the covenant "--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock;" and (o) any
transaction to the extent it constitutes an investment that is permitted and
made in accordance with the provisions of the second paragraph of the covenant
described under "Certain Covenants--Transactions with Affiliates" (except
transactions described in clauses (ii), (vi), (vii) and (xi) of such paragraph).
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"RELATED PARTIES" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"REPURCHASE OFFER" means an offer made by the Company to purchase all or any
portion of a Holder's Notes pursuant to the provisions described under the
covenants entitled "--Repurchase at the Option of Holders-Change of Control" or
"--Repurchase at the Option of Holders--Asset Sales."
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; PROVIDED,
HOWEVER,that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"SENIOR CREDIT FACILITIES" means that certain term loan credit facility and
revolving credit facility described in this Prospectus among the Company and the
lenders from time to time party thereto, including any collateral documents,
instruments and agreements executed in connection therewith, and any amendments,
supplements, modifications, extensions, renewals, restatements or refundings
thereof and any indentures or credit facilities or commercial paper facilities
with banks or other institutional lenders that replace, refund or refinance any
part of the loans, notes, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility or indenture
that increases the amount borrowable thereunder or alters the maturity thereof,
PROVIDED, HOWEVER, that in connection with any facilities which refund, replace
or refinance the original term loan and revolving credit facilities there shall
not be more than one facility at any one time that is identified as the Senior
Credit Facilities and, if at any time there is more than one facility which
would constitute the Senior Credit Facilities, the Company will designate to the
Trustee which one of such facilities will be the Senior Credit Facilities for
purposes of the Indenture.
"SIMILAR BUSINESS" means the supermarket and retail food sale business and
any activity or business incidental, directly related or similar thereto, or any
line of business engaged in by the Company or its Subsidiaries on the Issuance
Date or any business activity that is a reasonable extension, development or
expansion thereof or ancillary thereto.
"SUBORDINATED INDEBTEDNESS" means (a) with respect to the Notes, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantee, any Indebtedness of
the applicable Guarantor which is by its terms subordinated in right of payment
to such Guarantee.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture
or limited liability company) of which more than 50% of the total voting power
of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time of determination owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person or a
combination thereof and (ii) any partnership, joint venture, limited liability
company or similar entity of which (x) more than 50% of the capital accounts,
distribution rights, total equity and voting interests or general or limited
partnership interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any Wholly
Owned Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"TOTAL ASSETS" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent balance sheet of the
Company.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company (including any existing Subsidiary and any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Equity Interests of, or
owns, or holds any Lien on, any property of, the Company or any Subsidiary of
the Company (other than any Subsidiary of the Subsidiary to be so designated),
PROVIDED that (a) any Unrestricted Subsidiary must be an entity of which shares
of the capital stock or other equity interests (including partnership interests)
entitled to cast at least a majority of the votes that may be cast by all shares
or equity interests having ordinary voting power for the election of directors
or other governing body are owned, directly or indirectly, by the Company, (b)
the Company certifies that such designation
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complies with the covenants described under "--Certain Covenants--Limitation on
Restricted Payments" and (c) each of (I) the Subsidiary to be so designated and
(II) its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED that, immediately after giving effect to
such designation, (i) the Company could incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test described under
"--Certain Covenants--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" or (ii) the Fixed Charge Coverage Ratio for the Company and
its Restricted Subsidiaries would be greater than such ratio for the Company and
its Restricted Subsidiaries immediately prior to such designation, in each case
on a pro forma basis taking into account such designation. Any such designation
by the Board of Directors shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
EXCHANGE OFFER; REGISTRATION RIGHTS
EXCHANGE OFFER. The Company and the Initial Purchasers entered into the
Registration Rights Agreement on the Issuance Date, pursuant to which the
Company agreed, for the benefit of the holders of the Old Notes, that it will,
at its own expense, (i) file the Exchange Offer Registration Statement with the
Commission with respect to the Exchange Offer to exchange the Old Notes for
Exchange Notes having substantially identical terms in all material respects to
the Old Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions or interest rate increases as described herein)
within 100 calendar days after the Issuance Date, (ii) use its best efforts to
cause the Exchange Offer Registration Statement to be declared effective by the
Commission under the Securities Act within 200 calendar days after the Issuance
Date and (iii) use its best efforts to consummate the Exchange Offer within 230
calendar days after the Issuance Date. Upon the Exchange Offer Registration
Statement being declared effective, the Company will offer the Exchange Notes in
exchange for surrender of the Old Notes. The Company will keep the Exchange
Offer open for at least 20 business days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to the Holders.
For each Old Note surrendered to the Company pursuant to the Exchange Offer, the
Holder who surrendered such Old Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Old Note. Interest on each
Exchange Note will accrue from the last interest payment date on which interest
was paid on the Old Note surrendered in exchange therefor or, if no interest has
been paid on such Old Note, from the Issuance Date. Under existing
interpretations of the staff of the Commission contained in several no-action
letters to third parties, the Exchange Notes would generally be freely
transferable after the Exchange Offer without further registration under the
Securities Act (subject to certain representations required to be made by each
Holder, as set forth below). However, any purchaser of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange
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Notes (i) will not be able to rely on the interpretations of the staff of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer
and (iii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any sale or transfer of the Old Notes
unless such sale or transfer is made pursuant to an exemption from such
requirements. In addition, in connection with any resales of Exchange Notes, any
broker-dealer (a "Participating Broker-Dealer") which acquired the Old Notes for
its own account as a result of market making or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Exchange Notes (other
than a resale of an unsold allotment from the original sale of the Old Notes)
with the prospectus contained in the Exchange Offer Registration Statement. The
Company will agree to make available for a period of up to 90 days after
consummation of the Exchange Offer a prospectus meeting the requirements of the
Securities Act to any Participating Broker- Dealer and any other persons, if
any, with similar prospectus delivery requirements, for use in connection with
any resale of Exchange Notes. A Participating Broker-Dealer or any other person
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations thereunder).
Each holder of the Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes, (iii) it is not an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company or,
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable and (iv) it
is not acting on behalf of any person who could not truthfully make the
foregoing representations.
SHELF REGISTRATION. In the event that (i) any changes in law or the
applicable interpretations of the staff of the Commission do not permit the
Company to effect the Exchange Offer, (ii) for any other reason the Exchange
Offer is not consummated within 230 calendar days after the Issuance Date, (iii)
under certain circumstances, if the Initial Purchasers shall so request or (iv)
any holder of the Old Notes (other than the Initial Purchasers) is not eligible
to participate in the Exchange Offer, the Company will upon receipt of notice
within specified time periods of one or more of the preceding events, at its
expense, use its best efforts (a) to file and cause to become effective by the
230th calendar day after the Issuance Date a Shelf Registration Statement (or in
the case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Staff of the Commission, if
later, within 45 days after publication of the change in law or interpretations
but in no event before 100 calendar days after the Issuance Date) and (b) to
keep effective the Shelf Registration Statement until the earlier of two years
from the Issuance Date (or one year from the date the Shelf Registration
Statement is declared effective if such Shelf Registration Statement is filed
upon the request of any Initial Purchaser pursuant to clause (iii) above) or
such shorter period ending when all Old Notes covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Shelf Registration Statement or when the Old Notes become eligible for resale
pursuant to Rule 144 under the Securities Act without volume restrictions, if
any. The Company, will, in the event of the filing of the Shelf Registration
Statement, provide to each holder of the Old Notes copies of the prospectus
which is a part of the Shelf Registration Statement, notify each such holder of
the Old Notes when the Shelf Registration Statement has become effective and
take certain other actions as are required to permit unrestricted resales of the
Old Notes. A holder of the Old Notes that sells its Old Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such a
holder (including certain indemnification rights and obligations thereunder). In
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addition, each holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and to benefit from the provisions regarding
any increase in interest applicable to the Old Notes set forth in the following
paragraph.
Although the Company intends to file the registration statements described
above, as required, there can be no assurance that such registration statements
will be filed, or, if filed, that they will become effective. In the event that
(a) the Exchange Offer Registration Statement has not been filed with the
Commission on or prior to the 100th calendar day following the Issuance Date,
(b) the Exchange Offer Registration Statement is not declared effective on or
prior to the 200th calendar day following the Issuance Date, or (c) the Exchange
Offer is not consummated or a Shelf Registration Statement is not declared
effective on or prior to the 230th calendar day following the Issuance Date, the
interest rate borne by the Old Notes shall be increased by one-quarter of one
percent per annum following such 100-day period in the case of clause (a) above,
following such 200-day period in the case of clause (b) above, or following such
230-day period in the case of clause (c) above (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
applicable interpretations of the Staff of the Commission, if later, within a
45-day period after publication of the change in law or interpretations but in
no event before 100 calendar days after the Issuance Date), which rate will be
increased by an additional one-quarter of one percent per annum for each 90-day
period that any additional interest continues to accrue; PROVIDED that the
aggregate increase in such annual interest rate may in no event exceed one
percent. Upon (x) the filing of the Exchange Offer Registration Statement after
the 100-day period described in clause (a) above, (y) the effectiveness of the
Exchange Offer Registration Statement after the 200-day period described in
clause (b) above, or (z) the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, after the
230-day period described in clause (c) above (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
applicable interpretations of the Staff of the Commission, if later, following
such 45-day period after publication of the change in law or interpretations but
in no event before 100 calendar days after the Issuance Date), the interest rate
borne by the Old Notes from the date of such effectiveness, consummation or that
the applicable registration statement again becomes effective and usable, as the
case may be, will be reduced to the original interest rate if the Company is
otherwise in compliance with this paragraph; PROVIDED, HOWEVER, that if, after
any such reduction in interest rate, a different event specified in clause (a),
(b) or (c) above occurs, the interest rate may again be increased and thereafter
decreased pursuant to the foregoing provisions. Notwithstanding the foregoing,
the Company may issue a notice that the Shelf Registration Statement is unusable
pending the announcement of a material corporate transaction and may issue any
notice suspending use of the Shelf Registration Statement required under
applicable securities laws to be issued and, in the event that the aggregate
number of days in any consecutive twelve-month period for which all such notices
are issued and effective exceeds 30 days in the aggregate, then the interest
rate borne by the Old Notes will be increased by one quarter of one percent per
annum following the date that such Shelf Registration Statement ceases to be
usable beyond the 30-day period permitted above, which rate shall be increased
by an additional one quarter of one percent per annum at the beginning of each
subsequent 90-day period that such additional interest continues to accrue;
PROVIDED that the aggregate increase in such annual interest rate may in no
event exceed one percent per annum. Upon the Company declaring that the Shelf
Registration Statement is usable after the period of time described in the
preceding sentence, the interest rate borne by the Old Notes will be reduced to
the original interest rate if the Company is otherwise in compliance with this
paragraph.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement. The
Registration Rights Agreement is an exhibit to the Registration Statement of
which this Prospectus is a part.
107
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes should not constitute a
recognition event for federal income tax purposes. Consequently, no gain or loss
will be recognized by Holders upon receipt of the Exchange Notes, the holding
period of the Exchange Notes will include the holding period of the Old Notes,
and a Holder's basis in Exchange Notes will be the same as such Holder's basis
in the Old Notes immediately before the exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR EXCHANGE
NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTIONS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. To the extent any such broker-dealer participates in
the Exchange Offer and so notifies the Company, or causes the Company to be so
notified in writing, the Company has agreed for a period of 90 days after the
date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to such broker-dealer for use in connection with any
such resale, and will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. In addition, until , 1997
(90 days after the date of this Prospectus), all dealers effecting transactions
in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at prevailing market prices at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers or any such Exchange Notes. Any broker-dealer that
resells Exchange Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such Exchange Notes may be deemed to be an "underwriter" within the meaning
of the Securities Act, and any profit on any such resale of Exchange Notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer of
Exchange Notes, and acknowledges and agrees that, upon receipt of notice from
the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
or which may impose upon the Company disclosure obligations that may have a
material adverse effect on the Company (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Prospectus until the Company has notified such broker-dealer that delivery
of the Prospectus may resume and has furnished copies of any amendment or
supplement to the Prospectus to such broker-dealer.
108
<PAGE>
BOOK ENTRY; DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. The Exchange Notes initially will be represented by a single,
permanent global Exchange Note, in definitive, fully registered form without
interest coupons (the "Global Exchange Note") and will be deposited with the
Trustee as custodian for The Depository Trust Company, New York, New York
("DTC") and registered in the name of a nominee of DTC.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants (the "Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants").
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Exchange
Note for all purposes under the Indenture. No beneficial owner of an interest in
the Global Exchange Note will be able to transfer that interest except in
accordance with DTC's procedures, in addition to those provided for under the
Indenture with respect to the Exchange Notes.
Payments of the principal of, premium (if any), and interest on, the Global
Exchange Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records,
relating to or payments made on account of beneficial ownership interests in the
Global Exchange Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest (including liquidated damages) on the
Global Exchange Note, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Exchange Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Exchange Note held through such Participants
will be governed by standing instructions and customary practice, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Exchange Notes to
persons in states which require physical delivery of the Exchange Notes, or to
pledge such securities, such holder must transfer its interest in the Global
Exchange Note, in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Exchange Note are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such Participant or Participants has or have given
such direction. However, if there is an Event of
109
<PAGE>
Default under the Indenture, DTC will exchange the Global Exchange Note for
Certificated Securities, which it will distribute to its Participants.
Upon the issuance of the Global Exchange Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Exchange Note to the
accounts of persons who have accounts with such depositary. Such accounts
initially will be designated by or on behalf of the Initial Purchasers.
Ownership of beneficial interests in the Global Exchange Note will be limited to
Participants or persons who hold interests through Participants. Ownership of
beneficial interests in the Global Exchange Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of Participants (with respect to interests of persons other than Participants).
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Note among Participants, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its Participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Note and a successor depositary is not appointed by the
Company within 90 days, Certificated Securities will be issued in exchange for
the Global Exchange Note.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Simpson Thacher
& Bartlett (a partnership which includes professional corporations), New York,
New York. Certain partners of Simpson Thacher & Bartlett and related persons
have an indirect interest, through KKR 1996 Fund L.P., in less than 1% of the
Common Stock.
EXPERTS
The consolidated balance sheet as of June 28, 1997 and the related
consolidated statements of operations, redeemable stock and stockholders' equity
and cash flows for fiscal year 1997 of Randall's Food Markets, Inc. included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing. The consolidated balance sheet as of June 29, 1996 and
the related consolidated statements of operations, redeemable stock and
stockholders' equity and cash flows for fiscal years 1996 and 1995 of Randall's
Food Markets, Inc. included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
110
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITORS' REPORTS.............................................................................. F-2
Consolidated Balance Sheets As of June 28, 1997 and June 29, 1996.......................................... F-4
Consolidated Statements of Operations for the Fiscal Years Ended June 28, 1997, June 29, 1996 and June 24,
1995..................................................................................................... F-5
Consolidated Statements of Redeemable Stock and Stockholders' Equity for the Fiscal Years Ended June 28,
1997, June 29, 1996 and June 24, 1995.................................................................... F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 28, 1997, June 29, 1996 and June 24,
1995..................................................................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Randall's Food Markets, Inc.:
We have audited the accompanying consolidated balance sheet of Randall's
Food Markets, Inc. and subsidiaries (the "Company") as of June 28, 1997, and the
related consolidated statements of operations, redeemable stock and
stockholders' equity, and cash flows for the fiscal year ended June 28, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Randall's Food Markets, Inc.
and subsidiaries as of June 28, 1997, and the results of their operations and
their cash flows for the fiscal year ended June 28, 1997, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
August 15, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Randall's Food Markets, Inc.:
We have audited the accompanying consolidated balance sheet of Randall's
Food Markets, Inc. and subsidiaries (the "Company") as of June 29, 1996, and the
related consolidated statements of operations, redeemable stock and
stockholders' equity, and cash flows for the fiscal years ended June 29, 1996
and June 24, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our auditor's report dual-dated September 19, 1996 and April 5, 1997, our
opinion was modified with an emphasis-of-a-matter paragraph discussing the
Company's violations of certain debt covenants. As discussed in Notes 2 and 5,
the Company received an Equity Investment and refinanced all such debt on June
27, 1997.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Randall's Food Markets, Inc.
and subsidiaries as of June 29, 1996, and the results of their operations and
their cash flows for the fiscal years ended June 29, 1996 and June 24, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
September 19, 1996 (except with respect
to the matter discussed in the eighth
paragraph of Note 5, as to which the
date is June 27, 1997)
F-3
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 24, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 28, JUNE 29, JUNE 24,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................................................... $ 2,344,983 $ 2,368,645 $ 2,328,247
COST OF SALES........................................................... 1,710,345 1,737,987 1,728,698
------------ ------------ ------------
Gross profit.................................................... 634,638 630,658 599,549
------------ ------------ ------------
OPERATING EXPENSES:
Store operating, selling and administrative expenses................ 558,065 507,894 501,634
Depreciation and amortization....................................... 48,875 45,814 47,447
Litigation and severance/benefits................................... 14,012 1,000 --
Estimated store closing costs....................................... 32,790 1,215 --
------------ ------------ ------------
Total operating expenses........................................ 653,742 555,923 549,081
------------ ------------ ------------
OPERATING INCOME (LOSS)................................................. (19,104) 74,735 50,468
INTEREST EXPENSE, net................................................... 36,828 38,981 43,411
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM................ (55,932) 35,754 7,057
BENEFIT (PROVISION) FOR INCOME TAXES.................................... 15,215 (16,316) (7,020)
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................................. (40,717) 19,438 37
EXTRAORDINARY ITEM--Loss on early extinguishment of debt (Net of taxes
of $6,006)............................................................ (9,798) -- --
------------ ------------ ------------
NET INCOME (LOSS)....................................................... $ (50,515) $ 19,438 $ 37
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 24, 1995
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCKHOLDERS'
REDEEMABLE STOCK EQUITY
------------------------------------- -----------
<S> <C> <C> <C> <C>
8%
CLASS A CONVERTIBLE
PREFERRED PREFERRED COMMON COMMON
STOCK STOCK STOCK STOCK
----------- ----------- ----------- -----------
BALANCE, JUNE 25, 1994............................................... $ 825 $ 6,045 $ 9,227 $ 3,723
Issuance of common stock........................................... 262
Issuance of restricted stock.......................................
Earned portion of restricted stock compensation....................
Reversal of contingent shares of Tom Thumb acquisition............. (128)
Accretion to redemption value...................................... 986 1,794
Reduction of deferred cost of Employee Stock Option Plan...........
Net income.........................................................
----- ----------- ----------- -----------
BALANCE, JUNE 24, 1995............................................... 825 6,903 11,021 3,985
Preferred stock dividends..........................................
Issuance of common stock........................................... 11
Reversal of contingent shares of Tom Thumb acquisition............. (10)
Accretion to redemption value...................................... 4,720 7,586
Earned portion of restricted stock compensation....................
Net income.........................................................
----- ----------- ----------- -----------
BALANCE, JUNE 29, 1996............................................... 825 11,613 18,607 3,996
Preferred stock dividends..........................................
Issuance of restricted stock....................................... 34
Issuance of common stock........................................... 4,645
Accretion to redemption value...................................... (3,865) (5,404)
Earned portion of restricted stock compensation....................
Purchase of treasury stock.........................................
Retirement of treasury stock....................................... (13)
Purchase and retirement of ESOP and Non-ESOP shares................ (1,346)
Redemption of common stock......................................... (93)
Redemption of putable common stock................................. (8,201)
Redemption of preferred stock...................................... (825) (7,748)
Impairment of loan to ESOP.........................................
Net loss...........................................................
----- ----------- ----------- -----------
BALANCE, JUNE 28, 1997............................................... $ $ $ 5,002 $ 7,223
----- ----------- ----------- -----------
----- ----------- ----------- -----------
<CAPTION>
<S> <C>
ADDITIONAL
PAID-IN RETAINED RESTRICTED TREASURY
CAPITAL EARNINGS STOCK STOCK
----------- ----------- ----------- -----------
BALANCE, JUNE 25, 1994............................................... $ 28,920 $ 96,522
Issuance of common stock........................................... 9,348
Issuance of restricted stock....................................... $ (250)
Earned portion of restricted stock compensation.................... 125
Reversal of contingent shares of Tom Thumb acquisition............. (1,154)
Accretion to redemption value...................................... (2,780)
Reduction of deferred cost of Employee Stock Option Plan...........
Net income......................................................... 37
----------- ----------- ----------- -----
BALANCE, JUNE 24, 1995............................................... 37,114 93,779 (125)
Preferred stock dividends.......................................... (5,886)
Issuance of common stock........................................... 608
Reversal of contingent shares of Tom Thumb acquisition............. (93)
Accretion to redemption value...................................... (12,306)
Earned portion of restricted stock compensation.................... 125
Net income......................................................... 19,438
----------- ----------- ----------- -----
BALANCE, JUNE 29, 1996............................................... 37,629 95,025
Preferred stock dividends.......................................... (2,407)
Issuance of restricted stock....................................... 2,405 (2,439)
Issuance of common stock........................................... 220,355
Accretion to redemption value...................................... 9,269
Earned portion of restricted stock compensation.................... 29 2,439
Purchase of treasury stock......................................... $ (919)
Retirement of treasury stock....................................... (906) 919
Purchase and retirement of ESOP and Non-ESOP shares................ (84,810)
Redemption of common stock......................................... (4,407)
Redemption of putable common stock................................. 4,995
Redemption of preferred stock...................................... (20,052)
Impairment of loan to ESOP......................................... (472)
Net loss........................................................... (50,515)
----------- ----------- ----------- -----
BALANCE, JUNE 28, 1997............................................... $ 169,823 $ 36,315 $ $
----------- ----------- ----------- -----
----------- ----------- ----------- -----
<CAPTION>
DEFERRED
COSTS OF
EMPLOYEE
STOCK
OWNERSHIP
PLAN
-----------
BALANCE, JUNE 25, 1994............................................... $ (1,000)
Issuance of common stock...........................................
Issuance of restricted stock.......................................
Earned portion of restricted stock compensation....................
Reversal of contingent shares of Tom Thumb acquisition.............
Accretion to redemption value......................................
Reduction of deferred cost of Employee Stock Option Plan........... 1,000
Net income.........................................................
-----------
BALANCE, JUNE 24, 1995...............................................
Preferred stock dividends..........................................
Issuance of common stock...........................................
Reversal of contingent shares of Tom Thumb acquisition.............
Accretion to redemption value......................................
Earned portion of restricted stock compensation....................
Net income.........................................................
-----------
BALANCE, JUNE 29, 1996...............................................
Preferred stock dividends..........................................
Issuance of restricted stock.......................................
Issuance of common stock...........................................
Accretion to redemption value......................................
Earned portion of restricted stock compensation....................
Purchase of treasury stock.........................................
Retirement of treasury stock.......................................
Purchase and retirement of ESOP and Non-ESOP shares................
Redemption of common stock.........................................
Redemption of putable common stock.................................
Redemption of preferred stock......................................
Impairment of loan to ESOP.........................................
Net loss...........................................................
-----------
BALANCE, JUNE 28, 1997............................................... $
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 28, 1997, JUNE 29, 1996 AND JUNE 24, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 28, JUNE 29, JUNE 24,
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss):............................................................... $ (50,515) $ 19,438 $ 37
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization.................................................. 48,874 45,814 47,447
Amortization of debt issuance costs............................................ 662 360 503
LIFO reserve................................................................... 3,434 2,092 1,067
Loss on early extinguishment of debt........................................... 15,804 -- --
Settlement of ESOP litigation.................................................. 10,500 -- --
Severance/benefits............................................................. 3,594 -- --
Loss (gain) from sale of assets................................................ (905) 793 (1,046)
Store closing costs............................................................ 32,790 -- --
Earned portion of restricted stock compensation................................ 2,468 125 125
Equity in earnings of unconsolidated joint ventures............................ (137) (69) (51)
Deferred tax (benefit)/provision............................................... (13,735) (9,552) 2,812
(Increase) decrease in receivables............................................. (2,291) (1,777) 3,746
Increase (decrease) in merchandise inventories................................. 184 (10,005) (650)
(Increase) decrease in prepaid expenses and other.............................. (1,216) (2,798) 2,423
Increase in note receivable from ESOP.......................................... (2,250) (1,500) --
Increase in federal income tax receivable...................................... (16,409) -- --
(Increase) decrease in other assets............................................ (15,963) (1,423) 802
Increase (decrease) in accounts payable........................................ 23,308 7,163 (8,129)
Increase (decrease) in accrued expenses and other.............................. (18,994) 10,453 13,244
Increase (decrease) in accrued income taxes.................................... (3,366) 2,549 825
Increase (decrease) in other long-term liabilities............................. 2,555 2,183 (9,647)
--------- ----------- -----------
Net cash provided by operating activities.................................... 18,392 63,846 53,508
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.............................................. (104,455) (66,131) (59,850)
Proceeds from sale of assets..................................................... 55,434 30,317 59,332
Contributions to joint ventures.................................................. (138) (13) (12)
Proceeds from sale of joint ventures............................................. 524 1,808 --
Distributions from joint ventures................................................ 167 237 422
--------- ----------- -----------
Net cash used in investing activities........................................ (48,468) (33,782) (108)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt............................................................... (399,524) (50,711) (61,408)
Cost of early extinguishment of debt............................................. (15,804) -- --
Proceeds from issuance of debt................................................... 178,000 27,000 --
Proceeds from issuance of senior subordinated notes.............................. 149,755 -- --
Additions to (reductions in) obligations under capital leases.................... 5,390 (2,251) (2,283)
Proceeds from issuance of common stock........................................... 225,000 619 9,360
Redemption of common stock....................................................... (89,363) -- --
Redemption of preferred stock.................................................... (28,645) -- --
Purchase of treasury stock....................................................... (919) -- --
Preferred dividends paid......................................................... (2,385) (5,886) --
--------- ----------- -----------
Net cash provided by (used in) financing activities.......................... 21,505 (31,229) (54,331)
NET DECREASE IN CASH AND CASH EQUIVALENTS.......................................... (8,571) (1,165) (931)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................... 31,686 32,851 33,782
--------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................................... $ 23,115 $ 31,686 $ 32,851
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CONCENTRATION RISK--The consolidated financial statements
include the accounts of Randall's Food Markets, Inc., a Texas corporation, and
its wholly owned subsidiaries, Randalls Food and Drugs, Inc. (d.b.a. Randalls
Food and Pharmacy or Randalls and Tom Thumb Food and Pharmacy or Tom Thumb) and
Randalls Properties, Inc. (collectively referred to as the Company).
The Company operates in a highly competitive marketplace with its retail
grocery stores concentrated in north, central and southeast Texas. The debt
agreements relating to debt outstanding until June 27, 1997 contained numerous
financial and operating covenants for which waivers had been obtained for
certain matters of non-compliance (see Note 5). In connection with the Equity
Investment described in Note 2, such debt was refinanced. The Company is also
subject to certain litigation and administrative matters (see Note 10).
PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES--All significant
intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
STATEMENTS OF CASH FLOWS--The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. The statements of cash flows provide information about changes
in cash and cash equivalents and excludes the effects of noncash transactions.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's most significant
financial instruments are long-term debt obligations which are reflected in the
accompanying financial statements at approximately $281 million and $352 million
at June 28, 1997, and June 29, 1996, respectively, which management believes
approximates fair value at those dates. The fair value of debt was estimated by
discounting the future cash flows using rates currently available for debt of
similar terms and maturity. Management believes the fair values of all other
financial instruments are not materially different from their carrying values.
RECEIVABLES--Receivables consist of federal income tax receivable and
amounts due from charge customers, vendor promotions, manufacturer coupons and
returned checks and are net of an allowance for uncollectible amounts totaling
$3.1 million and $1 million at June 28, 1997 and June 29, 1996, respectively.
FISCAL YEAR--The Company's fiscal year ends on the last Saturday in June of
each calendar year, resulting in either a 52- or 53-week fiscal year. There are
53 weeks in the fiscal year ended June 29, 1996.
MERCHANDISE INVENTORIES--The Company uses the last-in first-out ("LIFO")
method of costing for all of its inventories in fiscal years 1997 and 1996 and
for a significant portion of its inventories in fiscal year 1995.
At June 24, 1995, inventories consisted of approximately $129 million costed
under the LIFO method and approximately $31 million costed under the first-in
first-out ("FIFO") method. If the FIFO method had been used for costing all
inventories, the valuation assigned to inventories would have been approximately
$19.0 million and $15.5 million higher as of June 28, 1997 and June 29, 1996,
respectively.
In 1997 the Internal Revenue Service ("IRS") approved the Company's
application for a change in accounting method, effective at the beginning of
fiscal year 1996, relating to the costing of inventories under the LIFO method.
At June 28, 1997 and June 29, 1996, inventories have been recorded in
F-8
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accordance with the change requested. This method change did not have a
significant effect on the consolidated financial statements.
DEPRECIATION AND AMORTIZATION--Property and equipment are stated at cost.
The Company uses the straight-line method of accounting to provide for
depreciation over the estimated useful lives of buildings and improvements (20
years) and fixtures, leaseholds and equipment (3 to 10 years). Properties held
under capital leases are amortized over the lease terms. Maintenance, repairs
and minor replacements are charged to expense as incurred; major replacements
and betterments are capitalized. The net book value of assets sold, retired or
otherwise disposed of is removed from the accounts at the time of disposition,
and any resulting gain or loss is reflected in operations for that period.
Goodwill associated with the August 1992 Tom Thumb acquisition of $256
million is being amortized on a straight-line basis over 40 years. Goodwill was
reduced by approximately $103,000 in fiscal year 1996 and $1.2 million in fiscal
year 1995 as amounts recorded for shares contingently issuable for the Tom Thumb
acquisition were reversed upon resolution of a contingency. The accumulated
amortization was $31.8 million and $25.4 million at June 28, 1997 and June 29,
1996, respectively.
ACCRUED EXPENSES AND OTHER--Accrued expenses and other as of June 28, 1997
and June 29, 1996, consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Payroll and related benefits $ 39,875 32,322
Rent 7,527 6,439
Property taxes 6,480 4,083
Insurance and related costs 17,957 14,439
Deferred income, current 3,288 1,439
Legal and other contingencies 6,947 11,212
Accrual for planned store closings 34,005 1,215
Accrued transaction costs 5,800 --
Other 9,857 13,970
---------- ---------
$ 131,736 $ 85,119
---------- ---------
---------- ---------
</TABLE>
COST OF SALES--Cost of sales includes cost of merchandise sold and warehouse
salaries and benefits.
STORE OPENING AND CLOSING COSTS--The costs associated with opening new store
locations are expensed in the period the store is opened. Estimated costs
associated with closing a store are recognized in the period the Company
determines to close the store. During the fiscal year ended June 28, 1997, the
Company decided to close approximately 20 stores and accrued costs relating to
inventory losses, lease termination costs and the write-off of certain store
assets. At fiscal year end 1997, 2 of the 20 stores accrued for were closed.
ACCOUNTING FOR JOINT VENTURES--The Company accounts for its investment in
joint ventures under the Equity Method.
NEW PRONOUNCEMENTS--In March 1995 the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," effective for financial statements for fiscal
F-9
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
years beginning after December 15, 1995. The Company has adopted this standard
for fiscal year 1997, effective June 30, 1996. The adoption of this standard did
not have a significant impact on the consolidated financial position or
operating results of the Company.
In October 1995 the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation," effective for financial statements for fiscal years beginning
after December 15, 1995. This statement defines a fair value-based method of
accounting for employee stock options or similar equity instruments. As the
statement permits, the Company will continue to account for these types of
instruments using the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion ("APB") 25, "Accounting for Stock Issued to
Employees." The adoption of this statement did not have a material affect on
reported amounts for net income (loss) and earnings (loss) per share in fiscal
years 1997 and 1996.
In February 1997 the FASB issued SFAS 128, "Earnings Per Share". SFAS 128,
which is effective for the Company for the year ended June 27, 1998, specifies
the computation, presentation and disclosure requirements of earnings per share
("EPS") and supersedes APB 15. SFAS 128 requires a dual presentation of basic
and diluted EPS. Basic EPS, which excludes the impact of common share
equivalents, replaces primary EPS. Diluted EPS, which utilizes the average
market price per share as opposed to the greater of the average market price per
share or ending market price per share when applying the treasury stock method
in determining common share equivalents, replaces fully diluted EPS. Also in
February 1997, the FASB issued SFAS 129, "Disclosure of Information About
Capital Structure," which establishes standards for disclosing information about
an entity's capital structure. This statement is effective for the Company for
the year ended June 27, 1998. Management is evaluating what, if any, additional
disclosures may be required upon the implementation of SFAS 128 and 129.
RECLASSIFICATIONS--Certain reclassifications have been made to amounts
related to the years ended June 29, 1996 and June 24, 1995 to conform with the
current year's presentation.
2. EQUITY INVESTMENT
The Company and its majority stockholder entered into a subscription
agreement dated April 1, 1997 (the "Subscription Agreement"), with RFM
Acquisition LLC ("RFM Acquisition"). RFM Acquisition is a Delaware limited
liability company formed at the direction of Kohlberg Kravis Roberts & Co., L.P.
(KKR). Following approval of the stockholders of the Company at a special
meeting held in June 1997, RFM Acquisition paid an aggregate of $225 million to
the Company (the Equity Investment) as consideration for the Company's issuance
to RFM Acquisition of 18,579,686 shares of common stock and a 25-year option to
purchase 3,606,881 shares of common stock at $12.11 per share, subject to
adjustments. Subsequent to this transaction, approximately 63 percent of the
common stock of the Company is owned by RFM Acquisition.
F-10
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment at June 28, 1997 and June 29, 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land.................................................................................... $ 51,115 $ 51,429
Buildings and improvements.............................................................. 42,399 49,004
Fixtures, leaseholds and equipment...................................................... 374,022 317,921
Property held under capital leases...................................................... 91,921 95,081
Construction-in-progress................................................................ 22,560 36,449
----------- -----------
582,017 549,884
Accumulated depreciation................................................................ (245,469) (220,833)
----------- -----------
Property and equipment, net............................................................. $ 336,548 $ 329,051
----------- -----------
----------- -----------
</TABLE>
4. JOINT VENTURES
The Company participates as a general partner in various joint ventures for
the purpose of developing shopping centers in which store facilities are
located. The Company's ownership interests range from 50 percent to 83.3
percent. Joint ventures that are greater than 50 percent owned are consolidated
in the accompanying consolidated financial statements from the date that the
majority interest was acquired. The following represents the activity in
investments in unconsolidated joint ventures for the years ended June 28, 1997,
June 29, 1996 and June 24, 1995 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period $ (3,208) $ (5,188) $ (4,829)
Equity in earnings of unconsolidated joint ventures 137 69 51
Contributions made 138 13 12
Distributions received (524) (237) (422)
Sales of certain joint ventures (167) 2,135 --
--------- --------- ---------
Balance at end of period $ (3,624) $ (3,208) $ (5,188)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The balance for investments in unconsolidated joint ventures is included in
other assets. The unconsolidated joint ventures have debt outstanding at June
28, 1997 and June 29, 1996 of approximately $20.6 million and $20.5 million,
respectively, that is nonrecourse. The debt outstanding at June 28, 1997 and
June 29, 1996 represents 100 percent of the joint ventures debt.
During fiscal year 1995, the Company's three consolidated joint ventures
sold substantially all of their assets and retired the related debt which
resulted in an insignificant gain. During fiscal year 1996, the Company sold its
interest in two unconsolidated joint ventures for approximately $1.8 million.
The Company continues to operate stores at each of these locations which are
accounted for as sale leaseback transactions. A gain of approximately $3.9
million related to these transactions was deferred and is being recognized over
the remaining lease terms. During fiscal 1997, the Company sold its interest in
one unconsolidated joint venture and is recognizing the sale on a cash basis. As
of June 28, 1997, approximately $167,000 had been recognized. Additional cash
receipts will be recorded as a reduction of the asset and subsequently, a gain
or loss, as appropriate. The Company does not operate a store at this location.
F-11
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. JOINT VENTURES (CONTINUED)
The Company paid to the joint ventures approximately $3.4 million, $4.1
million and $4.8 million in fiscal years 1997, 1996 and 1995, respectively, in
rent, common area maintenance and other lease-related costs for shopping centers
owned by the joint ventures.
5. LONG-TERM DEBT
At June 28, 1997 and June 29, 1996, long-term debt consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Senior subordinated notes--
Unsecured, with interest at 9.375% payable semiannually, principal matures on July 1,
2007.................................................................................. $ 150,000 $ --
Discount on senior subordinated notes................................................... (245) --
Notes payable to banks:
Principal due in annual installments beginning June 27, 1998 and interest due in
quarterly installments, final installment due June 27, 2006 , interest at the London
Interbank Offered Rate ("LIBOR") plus an adjustable margin rate (1.5%), interest at
7.187% at June 28, 1997............................................................... 125,000 169,500
Principal due June 27, 2004, interest due in quarterly installments, principal balance
not to exceed $225 million, interest at LIBOR plus an adjustable margin rate at 6.9%
at June 29, 1996...................................................................... -- 40,000
Principal due June 22, 2004, interest due in quarterly installments beginning September
30, 1997, interest at Alternate Base Rate plus an adjustable margin rate (0%),
interest at 8.5% at June 28, 1997..................................................... 3,000 --
Other................................................................................... -- 955
---------- ----------
Total notes payable to banks........................................................ 128,000 210,455
---------- ----------
Notes payable to insurance companies:
Principal was due in annual installments beginning December 1998, note paid in full in
June 1997............................................................................. -- 135,500
Principal and interest due in monthly installments, final installment due in 2005,
interest from 8.3% to 9.0%............................................................ 2,748 6,317
---------- ----------
Total notes payable to insurance companies.......................................... 2,748 141,817
---------- ----------
Total long-term debt...................................................................... 280,503 352,272
Less--current maturities of long-term debt................................................ 774 29,586
---------- ----------
Long-term debt, net of current maturities................................................. $ 279,729 $ 322,686
---------- ----------
---------- ----------
</TABLE>
F-12
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
Aggregate principal payments applicable to existing long-term debt
outstanding as of June 28, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
FISCAL YEAR ENDING
- ------------------------------------------------------------------------------------------------------
1998.............................................................................................. $ 774
1999.............................................................................................. 774
2000.............................................................................................. 774
2001.............................................................................................. 774
2002.............................................................................................. 774
Thereafter.......................................................................................... 276,633
----------
Total............................................................................................. $ 280,503
----------
----------
</TABLE>
The senior subordinated notes (the "Notes") are redeemable, in whole or in
part, at specified redemption prices together with accrued and unpaid interest,
if any, to the date of redemption. In addition, at any time on or prior to July
1, 2000, the Company may redeem up to $60 million of the original aggregate
principal amount of the Notes at a redemption price equal to 109.375% of the
aggregate principal amount to be redeemed, together with accrued and unpaid
interest, if any, to the date of redemption, provided that at least $90 million
of the original aggregate principal amount of the Notes remains outstanding
immediately after each such redemption.
Upon the occurrence of a change of control or certain transfer events, the
Company will have the option, at any time prior to July 1, 2002, to redeem the
Notes, in whole but not in part, at a redemption price equal to 100% of the
aggregate principal amount thereof plus a premium, together with accrued and
unpaid interest, if any, to the date of redemption.
The Notes are unsecured and are subordinated in right of payment to all
existing and future senior indebtedness of the Company.
The indenture under which the Notes were sold contains covenants that limit
the ability of the Company to (i) pay dividends or make certain other restricted
payments; (ii) incur additional indebtedness and issue disqualified stock and
preferred stock; (iii) create liens on assets; (iv) merge, consolidate or sell
all or substantially all assets; (v) enter into certain transactions with
affiliates; (vi) restrict dividends or other payments by subsidiaries to the
Company or its subsidiaries; (vii) permit guarantees of indebtedness by
subsidiaries of the Company; and (viii) incur other senior subordinated
indebtedness. At June 28, 1997, the Company was in compliance with all such
covenants.
Pursuant to a registration rights agreement entered into between the Company
and the purchasers of the Notes, the Company agreed to file a registration
statement with the Securities and Exchange Commission with respect to an offer
to exchange the senior subordinated notes for Series B senior subordinated notes
of the Company having substantially identical terms in all material respects.
The Notes are subject to the payment of additional interest if the Company does
not comply with its obligations under the registration rights agreement within
specified time periods.
In November 1993 the Company entered into a credit agreement with various
banks and a note purchase agreement with certain insurance companies. The banks
provided a term loan commitment for $225 million, and the insurance companies
provided three series of private placement debt for a total of $135.5 million.
In March 1997 the Company obtained waivers for certain debt covenants for the
period
F-13
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
from January 12, 1997, through April 5, 1997. The Company refinanced all such
debt in conjunction with the equity investment described in Note 2. On June 27,
1997, the Company paid in full the notes payable to the insurance companies and
the term loan to the banks. In connection with this early extinguishment of
debt, a make whole premium, including accrued interest, of approximately $14.9
million was paid to the insurance companies. This payment is shown as an
extraordinary item of $8.5 million, which is net of taxes of $6.0 million, in
the accompanying statement of operations for the year ended June 28, 1997.
As part of the credit agreement dated June 27, 1997, a revolving credit
commitment for $225 million, a swingline credit commitment for $25 million and a
letter of credit limit of $25 million were established, with the outstanding
revolving credit loans, swingline borrowings and the letters of credit loans not
to exceed $225 million. As of June 28, 1997, the Company had no borrowings under
the revolver, $3 million of borrowings under the swingline and $1.8 million of
letters of credit outstanding. As of June 29, 1996, the Company had
approximately $40 million under the revolver and $5.1 million of letters of
credit outstanding, and approximately $39.9 million was available under these
facilities. There are no scheduled reductions to the amounts available to the
Company prior to June 27, 2004. There is an annual credit commitment fee of 0.25
percent charged on the unused portion of the revolver.
The bank debt agreements contain covenants, the more significant of which
require the Company to maintain certain debt ratios which are calculated based
on EBITDA (earnings before interest, taxes, depreciation and amortization). The
Company is also restricted as to maximum lease expense and the capital
expenditures it can make. At June 28, 1997, the Company was in compliance with
all such covenants.
Cash interest paid during fiscal years 1997, 1996 and 1995 was $29.4
million, $39.2 million and $40.1 million, respectively. Interest capitalized
associated with construction was $556,000, $115,000 and $513,000 in fiscal years
1997, 1996 and 1995, respectively.
6. INCOME TAXES
The Company files a consolidated federal income tax return. Deferred income
taxes are provided to recognize temporary differences between financial and tax
reporting.
The provision for income taxes for the years ended June 28, 1997, June 29,
1996 and June 24, 1995, is summarized below (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Current (benefit) provision...................................................... $ (7,486) $ 25,868 $ 4,208
Deferred (benefit) provision..................................................... (13,735) (9,552) 2,812
---------- --------- ---------
Total tax (benefit) provision.................................................... (21,221) 16,316 7,020
Less: tax (benefit) on extraordinary item........................................ 6,006 -- --
---------- --------- ---------
Total tax (benefit) provision, net of extraordinary item..................... $ (15,215) $ 16,316 $ 7,020
---------- --------- ---------
---------- --------- ---------
</TABLE>
F-14
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Deferred tax liabilities and assets result from differences in the basis of
assets and liabilities for income tax and financial reporting purposes. The
cumulative tax effect of these items at June 28, 1997 and June 29, 1996, are as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Assets:
Deferred income......................................................................... $ (8,422) $ (6,390)
Employee benefits....................................................................... (11,723) (12,996)
Insurance............................................................................... (6,824) (5,703)
Alternative minimum tax credit carryforward............................................. -- (418)
Closed store accruals................................................................... (12,922) --
Other................................................................................... (5,137) (6,370)
---------- ----------
Total gross deferred tax assets..................................................... (45,028) (31,877)
---------- ----------
Liabilities:
Property and equipment.................................................................. 11,035 13,246
Tax benefit lease....................................................................... 5,206 6,250
LIFO.................................................................................... 13,051 12,197
Other................................................................................... 5,694 3,877
---------- ----------
Total gross deferred tax liabilities................................................ 34,986 35,570
Net deferred income tax (asset) liability................................................. (10,042) 3,693
Current deferred income tax asset......................................................... (21,109) (9,631)
---------- ----------
Long-term deferred income tax liability................................................... $ 11,067 $ 13,324
---------- ----------
---------- ----------
</TABLE>
The actual (benefit) provision for income taxes from continuing operations
differs from the U.S. federal corporate tax rate as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Taxes at federal statutory tax rate.............................................. $ (25,108) $ 12,514 $ 2,470
Increase (decrease) in income taxes resulting from:
Goodwill....................................................................... 2,233 2,271 2,266
State taxes based on income.................................................... (2,152) 1,899 1,136
Nondeductible transaction costs................................................ 2,800 -- --
Previously overprovided taxes and other, net................................... 1,006 (368) 1,148
---------- --------- ---------
Total tax (benefit) provision................................................ $ (21,221) $ 16,316 $ 7,020
---------- --------- ---------
---------- --------- ---------
</TABLE>
Income taxes paid were approximately $17.7 million, $23.3 million and $3.3
million in fiscal years 1997, 1996 and 1995, respectively.
F-15
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. BENEFIT PLANS
DEFINED BENEFIT PENSION PLAN--The Company has a defined benefit pension plan
which is a noncontributory plan for all full-time hourly employees who are at
least 21 years of age and have completed one year of continuous employment
consisting of at least 1,000 hours of service as of year end. The Company makes
annual contributions to the plan equal to the amounts actuarially required to
fund current pension costs.
Net periodic pension costs for the years ended June 28, 1997, June 29, 1996
and June 24, 1995 include the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost/benefits earned during the year................... $ 1,796 $ 1,677 $ 1,889
Interest cost on projected benefit obligation.................. 1,354 1,180 1,076
Actual return on assets........................................ (1,969) (1,601) (1,354)
Amortization of unrecognized net transition asset and net
losses....................................................... 672 537 844
Change in assumed discount rate................................ -- -- (273)
--------- --------- ---------
Net periodic pension expense................................... $ 1,851 $ 1,793 $ 2,182
--------- --------- ---------
--------- --------- ---------
The following table sets forth the plan's funded status and the amount recognized in the
Company's consolidated balance sheets at June 28, 1997, June 29, 1996 and June 24, 1995 (in
thousands):
Actuarial present value of benefit obligations:
Vested....................................................... $ 13,023 $ 11,075 $ 9,850
--------- --------- ---------
--------- --------- ---------
Accumulated.................................................. $ 14,847 $ 12,801 $ 11,502
--------- --------- ---------
--------- --------- ---------
Projected.................................................... $ (18,814) $ (15,454) $ (14,438)
Plan assets at fair value.................................... 17,491 15,765 11,539
--------- --------- ---------
Excess of plan assets (estimated benefit obligations).......... (1,323) 311 (2,899)
Unrecognized net loss.......................................... 5 223 2,416
--------- --------- ---------
Accrued pension asset (liability) recognized in the
accompanying consolidated balance sheets..................... $ (1,318) $ 534 $ (483)
--------- --------- ---------
--------- --------- ---------
Contributions by the Company to the plan....................... $ 705 $ 2,810 $ 3,718
--------- --------- ---------
--------- --------- ---------
</TABLE>
Assumptions used in determining the actuarial present value of plan benefits
reflect a weighted average discount rate of 8.0 percent, 7.9 percent and 8.0
percent for fiscal years 1997, 1996 and 1995, respectively, and an investment
rate of return of 9.0 percent for fiscal years 1997, 1996 and 1995. The assumed
rate of salary increase averaged 5.0 percent for fiscal year 1997 and averaged
6.0 percent for fiscal years 1996 and 1995.
EMPLOYEE STOCK OWNERSHIP PLAN--On April 1, 1997 the Employee Stock Ownership
Plan ("ESOP") was amended and restated to become Randall's ESOP/401k Savings
Plan. The ESOP/401k Savings Plan is for all full-time employees who are at least
21 years of age and have completed one year of continuous service.
F-16
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
Participants in the ESOP/401k may elect to contribute up to 5 percent of their
compensation, which will be matched 100 percent by the Company. Participants in
the ESOP/401k may make voluntary contributions up to an additional 10 percent of
their compensation, unmatched by the Company. The Company also has a Key
Employee Stock Purchase Plan ("KeySop") to provide specified benefits to
eligible managers and highly compensated employees. The Company's cash
contributions to the ESOP/401k for fiscal years 1997, 1996 and 1995 totaled
approximately $3.3 million, $3.4 million and $2.4 million, respectively. The
Company's cash contributions to the KeySop were $0 for fiscal year 1997, $3,500
for fiscal year 1996 and $94,000 for fiscal year 1995.
The Company loaned $2.25 million and $1.5 million to the ESOP in 1997 and
1996, respectively. The notes receivable are included in prepaid expenses and
other in fiscal year end 1997 and other assets in fiscal year end 1996. The
notes receivable are secured by 244,482 shares of the Company's common stock. At
fiscal year-end 1997, the value of the common stock was not adequate to secure
the fair value of the note. Due to the impairment of the note, a $472,000
reduction in equity was recorded. The notes receivable do not bear interest and
mature in April 1998. No shares of the Company's common stock were purchased by
the ESOP during fiscal year 1997.
During fiscal year 1996, the ESOP purchased 43,000 shares of the Company's
common stock for approximately $619,000 and, during fiscal year 1995, the ESOP
purchased 1,007,998 shares for total consideration of approximately $9.2
million.
The Company was a defendant in a lawsuit related to the ESOP. As further
discussed in Note 10, a settlement was reached that provides for cash payments
and changes in the operation of the ESOP, including the addition of a 401(k)
feature offering a variety of professionally managed mutual fund investments and
the cessation of additional investments by the ESOP in the Company's common
stock. Court approval of the settlement was granted in June 1997.
TOM THUMB PROFIT-SHARING AND RETIREMENT PLANS--In fiscal year 1994, the
Cullum Companies, Inc. and Affiliated Companies Profit Sharing Plan was
terminated by the Board of Directors, and the participants were given the
opportunity to transfer their balances into the Company's ESOP.
The Board of Directors of Tom Thumb terminated a management security plan
("MSP") and a senior corporate officer plan effective December 31, 1992. With
respect to the participants who retired prior to the termination of the plans,
the present value of the remaining obligation (approximately $5.5 million) is
recorded, net of the current portion of $1.1 million, as other long-term
liabilities as of June 28, 1997, based on a discount rate of 8.56 percent. As
further discussed in Note 10, certain MSP participants who received payments in
connection with the MSP's termination have instituted a claim against the
Company.
8. REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY
PREFERRED STOCK--The Class A Redeemable preferred stock, which was redeemed
in June 1997, had a par value of $10 per share, and 8,250 shares authorized,
issued and outstanding in 1996 and 1995. This class of stock was nonvoting and
dividends accrued at $10.50 per year per share. These dividends were payable
quarterly and before dividends were declared or paid on the common stock. The
liquidation value was $100 per share plus all accrued and unpaid dividends.
The 8 percent convertible preferred stock, which was redeemed in June 1997,
had a par value of $10 per share, with 5,000,000 shares authorized and 292,043
shares issued at June 29, 1996. There were 212,043
F-17
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
shares outstanding at June 24, 1995, and there were 80,000 contingent shares
related to the Tom Thumb acquisition. During fiscal year 1995, the contingent
shares were reduced to 67,185 shares, based on the anticipated resolution of the
contingency, and goodwill was reduced $1.2 million for the amount assigned to
the 12,815 shares. During fiscal year 1996, a total of 66,158 shares of
convertible preferred stock was issued upon resolution of these contingencies,
and goodwill was reduced $103,000 for the amount assigned to the remaining 1,027
shares. At June 29, 1996, 278,201 shares of 8 percent convertible preferred
stock were outstanding. This class of stock was nonvoting and dividends accrued
at $8 per year per share. These dividends were payable quarterly before
dividends were declared or paid on the common stock. Upon resolution of the
contingency and issuance of the shares, dividends were paid on the issued shares
as if they had been issued on August 24, 1992. The liquidation value was $100
per share plus all accrued and unpaid dividends. The excess of the liquidation
value over the redemption value is recorded as a charge to retained earnings.
Each convertible preferred share is convertible at the rate of 2.3 shares of
common stock for each full convertible share. Shares were redeemable at the
liquidation value at the option of the Company and were required to be either
redeemed or converted by October 15, 1999. All of the preferred stockholders had
agreed in principle not to require the redemption on October 15, 1999 it would
cause the Company to be in default of its loan agreements.
In connection with the equity investment described in Note 2, the Class A
preferred stock and the 8 percent convertible preferred stock were redeemed at
liquidation value for a total of $28.7 million.
COMMON STOCK--In connection with the acquisition of Tom Thumb, certain
shares of common stock are subject to an agreement between the Company and
certain stockholders, whereby the stockholders have the right to sell such
shares to the Company at the most recently appraised fair value beginning
October 15, 1997 and each October 15 up to and including October 15, 2001. At
June 28, 1997, there were 60,028 shares of common stock subject to this
agreement and outstanding.
The Company also has 935,038 shares of redeemable common stock, not
associated with the acquisition, subject to an agreement between the Company and
certain stockholders whereby the stockholders have the option to sell such
shares to the Company at the most recently appraised fair value if first refused
by the other existing stockholders. During fiscal year 1997, certain
stockholders canceled their redeemable rights on 571,411 shares of redeemable
common stock and one stockholder redeemed 10,500 shares at a purchase price of
$15 per share for $157,500. At June 28, 1997, 352,994 shares of redeemable
common stock (not associated with the Tom Thumb acquisition) remained
outstanding.
During fiscal year 1997, the Company purchased an additional 53,027 shares
of its common stock from certain stockholders for approximately $919,023. These
treasury shares were purchased at the then estimated fair values. At the end of
fiscal year 1997, all treasury shares had been retired.
STOCK OPTION AND RESTRICTED STOCK PLAN--The Company has adopted the
Randall's Food Markets, Inc. Stock Option and Restricted Stock Plan which
provides for the issuance of incentive stock options, nonqualified stock options
and restricted stock to the Company's key employees and directors. A total of
1,500,000 shares of the Company's common stock, subject to an antidilution
adjustment, may be issued under this plan as determined by the Executive
Committee of the Board of Directors. All options granted through June 29, 1996,
were exercisable for a ten-year period. At June 28, 1997, approximately 710,243
shares of common stock are available for future issuances of options or
restricted stock under this plan.
During December 1994, the Company granted options to purchase $1,300,000 of
the Company's common stock to certain employees. The number of shares which may
be issued to the employees is based
F-18
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
on the estimated fair value of the common stock at each vesting date. These
options vest at $300,000 of total value on December 31, 1995, 1996 and 1997, and
$200,000 of total value on December 31, 1998 and 1999. At June 28, 1997, an
additional 25,209 shares vested with an exercise price of $11.90. At June 29,
1996, 31,088 shares vested with an exercise price of $9.65. The unvested portion
of the grant would be issuable into approximately 53,000 shares of common stock
based on the most recent estimated fair value. The difference between the
exercise price and the estimated fair value at the measurement dates was not
significant. Also during December 1994, the Company granted 25,907 shares of
restricted stock. The $250,000 estimated aggregate fair value of the restricted
stock is being recognized as compensation expense over two years, the period in
which the restrictions lapse.
During fiscal year 1996, the Company granted certain employees options to
purchase 37,500 shares of the Company's common stock at an exercise price of
$10.75 per share, the estimated fair value at the grant date. The options were
fully vested at the date of grant and are exercisable at June 29, 1996. During
fiscal year 1997, the difference between the exercise price and the then
estimated fair value of 17,500 of these options was paid to departing employees
and was charged as compensation expense.
In fiscal year 1997, the Company granted certain employees 139,382 shares of
restricted stock, of which 5,000 have been forfeited. The $2.4 million estimated
aggregate fair value of the restricted stock was recognized as compensation
expense in the fiscal year ended June 28, 1997. In addition, these employees
were granted options to purchase 523,355 shares, of which 27,545 have been
forfeited, of the Company's common stock at $18.15, the then estimated fair
value. These options become exercisable on September 30, 2000 and expire on
September 30, 2006.
As a result of the Equity Investment discussed in Note 2, the Company issued
to KKR a 25-year option to purchase 3,606,881 shares of common stock at $12.11
per share, subject to adjustments.
9. LEASE COMMITMENTS
LEASES--Minimum rental commitments for future periods are as follows (in
thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR ENDING TOTAL LEASES LEASES
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
1998 $ 56,746 $ 45,678 $ 11,068
1999 56,683 45,671 11,012
2000 55,443 44,577 10,866
2001 55,350 44,484 10,866
2002 53,014 43,388 9,626
Thereafter 577,908 464,023 113,885
---------- ---------- ----------
$ 855,144 $ 687,821 167,323
---------- ----------
---------- ----------
Amount representing interest 85,678
----------
Present value of net minimum lease payments including current maturities
of $4,166: $ 81,645
----------
----------
</TABLE>
F-19
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LEASE COMMITMENTS (CONTINUED)
The Company leases substantially all of its store facilities and some equipment.
Included in the above operating lease commitments are future minimum rentals to
the joint ventures discussed in Note 4 aggregating approximately $36.1 million.
The store leases generally cover an initial term of 20 to 30 years with renewal
options for 5 to 15 additional years. Most leases require the payment of fixed
minimum rentals as well as payment of property taxes and insurance, or a
percentage of sales, whichever is greater.
Included in store operating, selling and administrative expense for the
fiscal years ended June 28, 1997, June 29, 1996 and June 24, 1995 is rent
expense comprised of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Minimum rental................................................................... $ 47,073 $ 42,998 $ 35,859
Percentage rental................................................................ 939 713 1,281
--------- --------- ---------
$ 48,012 $ 43,711 $ 37,140
--------- --------- ---------
--------- --------- ---------
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
LITIGATION--On November 28, 1995, two individuals filed a lawsuit on behalf
of the ESOP and certain participants and former participants in and
beneficiaries of the ESOP. The lawsuit alleged that the Company, certain
employees thereof and certain entities which engaged in a variety of services
relating to the ESOP, including Arthur Andersen LLP, had violated various
federal and state laws in connection with the operation of the ESOP, including
transactions by the ESOP involving the common stock. During fiscal year 1997,
the plaintiffs' representatives, the Company and the other defendants agreed to
settle the litigation, although the defendants continue to deny all charges of
wrongdoing or liability against them.
The Company and other defendants elected to settle the suit for $16.5
million, of which the Company was liable for $11.3 million plus $0.2 million in
administrative expenses. Net of insurance proceeds, the Company paid $10.5
million in the aggregate in connection with the settlement and has increased its
existing litigation reserves by $9.5 million during the year ended June 28, 1997
to fully reserve for such matter. In addition, the settlement provides for
certain changes in the operation of the ESOP, including the addition of a 401(k)
feature offering a variety of professionally managed mutual fund investments and
the cessation of additional investments by the ESOP in the Company's common
stock. The U.S. District Court granted preliminary approval of the settlement on
April 2, 1997 and final approval on June 18, 1997. Upon approval of the
settlement, the litigation was dismissed with prejudice and the Company and the
other defendants were released from further liability relating to the litigation
by all the members of the plaintiffs' class.
The Company has received the approval of the Equal Employment Opportunity
Commission (the "EEOC") and the federal district court of a consent decree (the
"Consent Decree") settling a charge by the EEOC Commissioner filed in 1989 that
the Company violated Title VII of the Civil Rights Act of 1964, as amended.
Under the terms of the Consent Decree, the Company is required to pay
$2,255,000, representing back pay and interest, into a fund to be divided among
entry level claimants, and $245,000 into a fund to be divided among grocery
department management trainee claimants. The Company bears the costs of
administering the settlement, which the Company estimates to be approximately
$750,000. The Consent Decree includes certain requirements to properly notify
potential claimants and certain enhanced reporting requirements. The Consent
Decree is effective for a two-year period, except that the obligations to
distribute back pay, offer employment, retain information and make reports
extend beyond the two-year term. The Company has accrued $3,250,000 in full
settlement of this matter.
F-20
<PAGE>
RANDALL'S FOOD MARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Following the Tom Thumb acquisition, the Company terminated the MSP and in
respect of such terminations paid participants the greater of (i) the amount of
such participant's deferral and (ii) the present value of the participant's
accrued benefit (prorated for the years of service compared to the years
required to reach the age of 65). Thirty of the former MSP participants have
instituted a claim against the Company on behalf of all persons who were
participants in the MSP on its date of termination (which is alleged by
plaintiffs to be approximately 250 persons). On May 7, 1997, the plaintiffs
filed an amended complaint for the court to recognize their action as a class
action, to recover additional amounts under the MSP, for a declaration of rights
under an employee pension benefit plan and for breach of fiduciary duty. The
plaintiffs assert that the yearly plan agreement executed by each participant in
the MSP was a contract for a specified retirement and death benefit set forth in
such plan agreements and that such benefits were vested and nonforfeitable.
Summary judgment motions have been filed by both parties with respect to various
matters, and judicial rulings on such motions are currently pending. The trial
is scheduled to commence during the 1997 calendar year. Although there can be no
assurance that the Company will prevail in respect of this claim, the Company
believes that it has meritorious defenses and intends to vigorously contest it.
A judgment against the Company on the MSP litigation could have a materially
adverse effect on the Company's financial position and results of operations.
Other than the matter relating to the termination of the MSP, the Company
believes it is not a party to any pending legal proceedings, including ordinary
litigation incidental to the conduct of its business and the ownership of its
property, the adverse determination of which would have a materially adverse
effect on the Company, its operations, its financial condition or its cash
flows.
INSURANCE--The Company maintains a self-insurance program covering portions
of workers' compensation (employee safety program) and general and automobile
liability costs. The amounts in excess of the self-insured levels are fully
insured. Self-insurance accruals are based on claims filed and an estimate for
significant claims incurred but not reported.
ARBITRATION--The Company has initiated a legal action against Fleming, one
of its long-time suppliers. In the action, the Company alleges, among other
things, that Fleming violated the terms of a supply agreement signed in 1993.
Under the terms of the supply agreement, the Company was to purchase groceries
and other items at Fleming's cost, plus a small markup. Among the violations
alleged by the Company are claims that Fleming wrongfully manipulated its
costing procedures, which resulted in overcharges, and then unilaterally changed
the overall pricing formula. Additionally, the Company alleged that Fleming
failed to provide supporting documentation for purchases as required under the
contract. Since 1993 when the supply agreement was signed, the Company has
purchased approximately $2.0 billion in products from Fleming. Based on the
supporting documents provided to the Company by Fleming to date, the Company
will be seeking a substantial amount of damages from Fleming and termination of
the supply agreement. Fleming has filed an answer denying each allegation and a
counterclaim alleging that the Company failed to purchase the quantities
required by the supply agreement.
COMMITMENTS--The Company purchases a significant portion of its products
from Fleming and has signed a purchase commitment to buy certain levels of the
products from Fleming. If certain levels of purchases are not achieved, the
Company can incur certain penalties, none of which are material at this time.
The Company entered into severance and employment agreements with certain
officers and employees. Management has determined the expected severance
payments and postemployment benefits to approximate $4.5 million, which has been
accrued and reflected in the accompanying consolidated financial statements as
of June 28, 1997.
The Company is continually evaluating possible additional site locations and
related financing opportunities.
******
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... i
Prospectus Summary.............................. 1
Risk Factors.................................... 11
The Recapitalization............................ 17
Use of Proceeds................................. 18
Capitalization.................................. 19
Pro Forma Consolidated Condensed Financial
Statement..................................... 20
Selected Historical Consolidated Condensed
Financial and Other Data...................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 24
Business........................................ 30
Management...................................... 44
Principal Shareholders.......................... 55
Certain Relationships and Related
Transactions.................................. 57
Description of Capital Stock.................... 58
Description of Credit Facilities................ 60
The Exchange Offer.............................. 62
Description of the Exchange Notes............... 73
Exchange Offer; Registration Rights............. 105
Certain U.S. Federal Income Tax Consequences.... 108
Plan of Distribution............................ 108
Book Entry; Delivery and Form................... 109
Legal Matters................................... 110
Experts......................................... 110
Index to Financial Statements................... F-1
</TABLE>
-------------------------------------------
PROSPECTUS
----------------------------
$150,000,000
[LOGO]
RANDALL'S FOOD MARKETS, INC.
OFFER TO EXCHANGE $150,000,000 OF ITS
9 3/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2007, WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT, FOR $150,000,000 OF ITS
OUTSTANDING 9 3/8% SENIOR SUBORDINATED
NOTES DUE 2007.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1.B of the Texas Business Corporation Act, as amended (the
"TBCA"), grants to a corporation the power to indemnify a person who was, is or
is threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director of the corporation against judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable expenses
actually incurred in connection therewith, only if it is determined that the
person (1) conducted himself in good faith; (2) reasonably believed that (a) in
the case of conduct in his official capacity as a director of the corporation,
his conduct was in the corporation's best interests, and (b) in all other cases,
his conduct was at least not opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, he had no reasonable cause to
believe that his conduct was unlawful. Article 2.02-1.C limits the allowable
indemnification by providing that, except to the extent permitted by Article
2.02-1.E, a director may not be indemnified in respect of a proceeding in which
the person was found liable (1) on the basis that he improperly received a
personal benefit, whether or not the benefit resulted from an action taken in
his official capacity, or (2) to the corporation. Article 2.02-1.E provides that
if a director is found liable to the corporation or is found liable on the basis
that he received a personal benefit, the permissible indemnification (1) is
limited to reasonable expenses actually incurred by the person in connection
with the proceeding, and (2) shall not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the corporation. Finally, Article
2.02-1.H provides that a corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director if he has
been wholly successful, on the merits or otherwise, in defense of the
proceeding.
With respect to the officers of a corporation, Article 2.02-1.O of the TBCA
provides that a corporation may indemnify and advance expenses to an officer of
the corporation to the same extent that it may indemnify and advance expenses to
directors under Article 2.02-I. Further, Article 2.02-1.O provides that an
officer of a corporation shall be indemnified as, and to the same extent,
provided by Article 2.02-1.H for a director.
The Articles of Incorporation and Bylaws of the Registrant provide for
indemnification of officers and directors as and to the fullest extent permitted
by the TBCA. In addition, the Registrant maintains officers' and directors'
insurance covering certain liabilities that may be incurred by officers and
directors in the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereto, which, individually or in
II-1
<PAGE>
the aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on September 12, 1997.
RANDALL'S FOOD MARKETS, INC.
BY: *
-----------------------------------------
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 12th day of September, 1997 by the following
persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
* Chief Executive Officer and
- ------------------------------ Director (Principal
R. Randall Onstead, Jr. Executive Officer)
Senior Vice President of
/s/ LEE E. STRAUS Finance, Secretary and
- ------------------------------ Treasurer (Principal
Lee E. Straus Financial Officer)
* Vice President, Corporate
- ------------------------------ Controller (Principal
Curtis D. McClellan Accounting Officer)
* Director
- ------------------------------
Henry R. Kravis
Director
- ------------------------------
George R. Roberts
* Director
- ------------------------------
Paul E. Raether
Director
- ------------------------------
James H. Greene, Jr.
Director
- ------------------------------
Nils P. Brous
* Director
- ------------------------------
Robert R. Onstead
*BY: /s/ LEE E. STRAUS
.........................
ATTORNEY-IN-FACT
II-3
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Randall's Food Markets, Inc.,
do hereby constitute and appoint R. Randall Onstead, Jr., Lee E. Straus and
Curtis D. McClellan, or any of them, our true and lawful attorneys and agents,
to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
Corporation to comply with the Securities Act of 1933 and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but without limitation,
power and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 12th day of September, 1997 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
/s/ R. RANDALL ONSTEAD, JR. Chief Executive Officer and
- ------------------------------ Director (Principal
R. Randall Onstead, Jr. Executive Officer)
Senior Vice President of
/s/ LEE E. STRAUS Finance, Secretary and
- ------------------------------ Treasurer (Principal
Lee E. Straus Financial Officer)
Vice President and
/s/ CURTIS D. MCCLELLAN Corporate Controller
- ------------------------------ (Principal Accounting
Curtis D. McClellan Officer)
/s/ HENRY R. KRAVIS Director
- ------------------------------
Henry R. Kravis
Director
- ------------------------------
George R. Roberts
/s/ PAUL E. RAETHER Director
- ------------------------------
Paul E. Raether
Director
- ------------------------------
James H. Greene, Jr.
Director
- ------------------------------
Nils P. Brous
/s/ ROBERT R. ONSTEAD Director
- ------------------------------
Robert R. Onstead
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Subscription Agreement dated as of April 1, 1997, among Randall's Food Markets, Inc. ("Randall's"),
Robert R. Onstead and RFM Acquisition LLC ("RFM Acquisition").
2.2 Letter Agreement dated as of April 1, 1997 between Randall's and RFM Acquisition relating to certain
indemnification obligations of Randall's.
2.3 Letter Agreement dated as of June 18, 1997 between Randall's and RFM Acquisition relating to certain
indemnification obligations of Randall's.
3.1 Amended and Restated Articles of Incorporation of Randall's.
3.2 By-Laws of Randall's.
4.1 Indenture dated as of June 27, 1997 between Randall's and Marine Midland Bank, as Trustee (the
'Indenture').
4.2 Form of 9 3/8% Senior Subordinated Note due 2007 (included in Exhibit 4.1).
4.3 Form of 9 3/8% Series B Senior Subordinated Note due 2007 (included in Exhibit 4.1).
4.4 Registration Rights Agreement dated as of June 27, 1997 among Randall's, BT Securities Corporation,
Chase Securities Inc., Goldman, Sachs & Co. and PaineWebber Incorporated.
4.5 First Supplemental Indenture to the Indenture, dated as of September 8, 1997 between Randall's and
Marine Midland Bank, as Trustee.
5 Opinion of Simpson Thacher & Bartlett.
8 Tax opinion of Simpson Thacher & Bartlett.
10.1 Settlement Agreement among Randall's and the other parties named therein relating to the Randall's
Food Markets, Inc. Employee Stock Ownership Plan.
10.2 Voting, Repurchase and Shareholders Agreement, dated as of April 1, 1997, between RFM Acquisition and
the shareholders party thereto.
10.3 Credit Agreement, dated as of June 27, 1997, among Randall's, the several lenders from time to time
parties thereto, and The Chase Manhattan Bank, as administrative agent.
10.4 Registration Rights Agreement, dated as of June 27, 1997, between RFM Acquisition and Randall's.
10.5 Employment Agreement of Robert R. Onstead.
10.6 Employment Agreement of R. Randall Onstead, Jr.
10.7 Employment Agreement of Ron W. Barclay.
10.8 Termination Agreement of Bob L. Gowens.
10.9 Registration Rights and Repurchase Agreement dated as of August 24, 1992 among Randall's, the Morgan
Stanley Leveraged Equity Fund II, L.P. and certain other shareholders parties thereto.
10.10 Shareholder Agreement dated March 29, 1984 among Randall's and John N. Frewin, Rosemary Frewin
Gambino and certain other shareholders parties thereto.
10.11 Shareholder Agreement dated April 8, 1985 among Randall's and John N. Frewin, Rosemary Frewin Gambino
and certain other shareholders parties thereto.
10.12 Randall's Food Markets, Inc. Corporate Incentive Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.13(a) Randall's Food Markets, Inc. Key Employee Stock Purchase Plan.
10.13(b) First Amendment to Randall's Food Markets, Inc. Key Employee Stock Purchase Plan.
10.13(c) Second Amendment to Randall's Food Markets, Inc. Key Employee Stock Purchase Plan.
10.13(d) Third Amendment to Randall's Food Markets, Inc. Key Employee Stock Purchase Plan.
10.14 Supply Agreement dated as of August 20, 1993 between Fleming Foods of Texas, Inc. and Randall's.
*10.15 Form of 1997 Stock Purchase and Option Plan for Key employees of Randall's Food Markets, Inc. and
Subsidiaries (the "1997 Plan").
*10.16 Form of Management Stockholder's Agreement to be executed by certain employees of Randall's in
connection with the 1997 Plan.
*10.17 Form of Non-Qualified Stock Option Agreement to be executed by certain employees of Randall's in
connection with the 1997 Plan.
*10.18 Form of Sale Participation Agreement to be executed by certain employees of Randall's in connection
with the 1997 Plan.
*10.19 Form of Pledge Agreement to be executed by certain employees of Randall's in connection with the 1997
Plan.
12 Computation of Ratio of Earnings to Fixed Charges.
*16 Letter regarding change in certifying accountant.
21 Subsidiaries.
23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit 5 hereto).
23.2 Consent of Deloitte & Touche LLP, independent certified public accountants.
23.3 Consent of Arthur Andersen LLP, independent certified public accountants.
24 Powers of Attorney (included on page II-5).
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Marine Midland Bank, as
Trustee.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
* To be filed by amendment.
<PAGE>
EXHIBIT 2.1
===============================================================================
SUBSCRIPTION AGREEMENT
dated as of April 1, 1997
among
RFM ACQUISITION LLC,
RANDALL'S FOOD MARKETS, INC.
and
ROBERT R. ONSTEAD
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions...................................... 2
SECTION 1.02. Other Defined Terms.............................. 7
SECTION 1.03. Other Definitional Provisions.................... 9
ARTICLE II.
PURCHASE AND SALE
SECTION 2.01. The Purchase and Sale............................ 9
SECTION 2.02. Purchase Price and Payment....................... 9
SECTION 2.03. Closing.......................................... 9
SECTION 2.04. Closing Deliveries by Seller..................... 9
SECTION 2.05. Closing Deliveries by Buyer...................... 10
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. Organization, Standing and Corporate
Power.......................................... 10
SECTION 3.02. Subsidiaries..................................... 10
SECTION 3.03. Capital Structure................................ 11
SECTION 3.04. Cash and Indebtedness............................ 13
SECTION 3.05. Authority; Noncontravention...................... 14
SECTION 3.06. Financial Information............................ 15
SECTION 3.07. No Undisclosed Liabilities....................... 16
SECTION 3.08. Absence of Certain Changes or Events............. 16
SECTION 3.09. Litigation; Compliance with Laws................. 19
SECTION 3.10. Employees........................................ 20
SECTION 3.11. Tax Returns and Tax Payments..................... 25
SECTION 3.12. Properties....................................... 26
SECTION 3.13. Environmental Matters............................ 29
SECTION 3.14. Contracts........................................ 31
SECTION 3.15. Intellectual Property............................ 33
SECTION 3.16. Insurance........................................ 33
SECTION 3.17. Brokers.......................................... 34
SECTION 3.18. Agreements to Sell Assets, Merge or
Consolidate.................................... 34
SECTION 3.19. Transactions with Certain Persons................ 34
SECTION 3.20. Food Depot, Inc.................................. 35
SECTION 3.21. Board Recommendation............................. 35
SECTION 3.22. Required Seller Vote............................. 35
SECTION 3.23. Information Supplied............................. 35
SECTION 3.24. State Takeover Statutes.......................... 35
SECTION 3.25. Books and Records................................ 36
SECTION 3.26. Effect of Transaction............................ 36
SECTION 3.27. Full Disclosure.................................. 36
i
<PAGE>
Page
----
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Organization, Standing and Corporate
Power.......................................... 36
SECTION 4.02. Authority; Noncontravention...................... 37
SECTION 4.03. Purchase for Investment.......................... 38
SECTION 4.04. Brokers.......................................... 38
ARTICLE V.
COVENANTS
SECTION 5.01. Conduct of Business of Seller.................... 38
SECTION 5.02. Prepayment of Indebtedness and
Redemption of Preferred Stock.................. 39
SECTION 5.03. Additional Financial Statements.................. 40
SECTION 5.04. WARN............................................. 40
SECTION 5.05. Articles of Incorporation........................ 40
SECTION 5.06. Preparation of Proxy/Tender Offer
Statement; Shareholders Meeting................ 40
SECTION 5.07. Access to Information;
Confidentiality................................ 42
SECTION 5.08. Best Efforts..................................... 42
SECTION 5.09. Public Announcements............................. 43
SECTION 5.10. No Solicitation.................................. 44
SECTION 5.11. Directors........................................ 45
SECTION 5.12. Certain Agreements............................... 45
SECTION 5.13. Settlement Agreement............................. 45
SECTION 5.14. ESOP Amendment................................... 45
ARTICLE VI.
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Obligations of Buyer............... 46
SECTION 6.02. Conditions to Obligation of Seller............... 48
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination...................................... 49
SECTION 7.02. Effect of Termination............................ 50
SECTION 7.03. Amendment........................................ 50
SECTION 7.04. Extension; Waiver................................ 50
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01. Survival......................................... 50
SECTION 8.02. Indemnification.................................. 51
SECTION 8.03. Indemnification Procedures....................... 53
SECTION 8.04. Tax Limitations.................................. 54
SECTION 8.05. Tax Matters...................................... 54
ii
<PAGE>
Page
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. Fees and Expenses................................ 55
SECTION 9.02. Notices.......................................... 56
SECTION 9.03. Interpretation................................... 57
SECTION 9.04. Counterparts..................................... 58
SECTION 9.05. Entire Agreement; No Third-Party
Beneficiaries.................................. 58
SECTION 9.06. GOVERNING LAW; ARBITRATION....................... 58
SECTION 9.07. Assignment....................................... 58
SECTION 9.08. Enforcement...................................... 59
SECTION 9.09. No Recourse...................................... 59
EXHIBITS
Exhibit A Form of Option
Exhibit B-1 Settlement Agreement
Exhibit B-2 Pleadings
Exhibit C Form of Amendment to Articles of Incorporation
of Seller
Exhibit D Form of Amended and Restated ESOP
iii
<PAGE>
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of April 1, 1997, among RFM
Acquisition LLC, a Delaware limited liability company ("Buyer"), Randall's Food
Markets, Inc., a Texas corporation ("Seller"), and, solely for purposes of
Sections 8.02(a) and 8.02(b), Robert R. Onstead.
W I T N E S S E T H :
WHEREAS, the Board of Directors of Seller has approved, and deemed
to be advisable and in the best interests of Seller's shareholders, a series of
transactions (the "Transactions") which will result in, among other things (i)
Seller's issuance to Buyer of 18,579,686 newly-issued shares (the "Shares") of
voting common stock of the par value of $0.25 per share of Seller (the "Common
Stock") and of an option to purchase 3,606,881 shares of Common Stock pursuant
to the Option substantially in the form of Exhibit A hereto (the "Option"), (ii)
Seller's incurrence of indebtedness and the making of the Debt Prepayment and
the Preferred Stock Redemption (each as defined herein), and (iii) Seller's
repurchase of up to 1,104,336 shares of Common Stock from Seller's Employee
Stock Ownership Plan (the "ESOP"), up to the 200,435 Putable Shares, and up to
4,280,415 Non-ESOP Shares pursuant to a tender offer (the "Tender Offer")
(provided that the numbers of shares referenced in this clause (iii) shall be
subject to reduction pursuant to Section 5.06(c)) and, if fewer than 4,280,415
Non-ESOP Shares (as such number may be reduced pursuant to Section 5.06(c))
shall be purchased in the Tender Offer, Seller's repurchase of the balance of
such Non-ESOP Shares pursuant to the conditional repurchase commitment of
certain shareholders of Seller pursuant to the Voting, Repurchase and
Shareholders Agreement dated as of the date hereof (the "Shareholders
Agreement") between Seller and certain shareholders of Seller;
WHEREAS, the issuance of the Shares, the shares of Common Stock
issuable upon exercise of the Option (the "Option Shares") and any shares of
Common Stock which may be issuable pursuant to Section 8.02(b) (the "Additional
Shares") require Seller's articles of incorporation (the "Articles") to be
amended to increase the number of authorized shares of Common Stock (the
"Amendment");
WHEREAS, the Board of Directors of Seller has adopted a resolution
approving this Agreement, the Transactions and the Amendment and directing that
such matters (the "Shareholder Approval Matters") be submitted to a vote at a
special meeting (the "Shareholders Meeting") of the holders of Common Stock (the
"Common Shareholders");
<PAGE>
2
WHEREAS, approval of the Shareholder Approval Matters requires the
affirmative vote of a majority of the shares of the issued and outstanding
Common Stock (the "Shareholder Approval") and certain shareholders of Seller
have agreed, pursuant to the Shareholders Agreement, to vote in favor of the
Shareholder Approval Matters and to take other steps to support the
Transactions;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Buyer's willingness to enter into
this Agreement, Buyer and certain shareholders of Seller have entered into the
Shareholders Agreement;
WHEREAS, Buyer and Seller desire to make certain representations,
warranties, covenants and agreements in connection with the Transactions and
also to prescribe various conditions to the Transactions; and
WHEREAS, it is intended that the Transactions be recorded as a
recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement:
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Entity.
"Affiliate" shall mean an "affiliate" as defined in Rule 12b-2 under
the Exchange Act.
"Agreement" shall mean this Subscription Agreement (together with
all Schedules and Exhibits referenced herein), as amended, modified or
supplemented from time to time.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
The City of New York.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
<PAGE>
3
"Confidentiality Agreement" shall mean the confidentiality
agreement, dated as of October 15, 1996, between KKR and Seller.
"Environmental Claim" shall mean any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including liability or potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or penalties)
arising out of, relating to, based on or resulting from (a) the presence,
discharge, emission, release or threatened release of any Hazardous Materials at
any location, whether or not owned, leased or operated by Seller or any of the
Subsidiaries or (b) circumstances forming the basis of any violation or alleged
violation of any Environmental Law or Environmental Permit or (c) otherwise
relating to Liabilities under any Environmental Laws.
"Environmental Laws" shall mean all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees, judgements and
common law relating in any manner to contamination, pollution or protection of
human health or the environment, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste Disposal Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state laws.
"Environmental Permits" shall mean all permits, licenses,
registrations and other governmental authorizations required for Seller and the
Subsidiaries and the operations of Seller's and the Subsidiaries' facilities and
otherwise to conduct their business under Environmental Laws.
"Environmental Report" shall mean any report, study, assessment,
audit or similar document that addresses any issue of actual or potential
noncompliance with, or actual or potential Liability under, any Environmental
Law that may in any way affect Seller or any Subsidiary.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ESOP Shares" shall mean shares of Common Stock held by the ESOP.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
<PAGE>
4
"Fair Market Value" shall mean, as of any determination date, the
average for the second Trading Day preceding such date of the high and low
reported sales prices regular way of one share of Common Stock on such Trading
Day or, in case no such reported sale takes place on such Trading Day, the
average of the reported closing bid and asked prices regular way of a share of
Common Stock on such Trading Day, in either case on the principal national
securities exchange in the United States on which the shares of Common Stock are
listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange on such Trading Day, on NASDAQ, or if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange or quoted on NASDAQ on such Trading Day, the average of the closing bid
and asked prices of a share of Common Stock in the over-the-counter market on
such Trading Day as furnished by any New York Stock Exchange member firm
selected by Buyer and Seller. If, as of any determination date, the Common Stock
is not quoted or listed by any such organization, exchange or market, the Fair
Market Value of one share of Common Stock as of such date shall be (i) the most
recent valuation of one share of Common Stock made in accordance with the
provisions of the ESOP (or any successor 401(k) plan), excluding any adjustment
for minority interest made by such valuation, or (ii) if the valuation of Common
Stock shall no longer be required by the ESOP (or any successor 401(k) plan), as
determined by a nationally recognized investment banking firm, which shall be
mutually acceptable to Buyer and Seller and whose fees and expenses shall be
paid by Seller.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect as of the date hereof.
"Governmental Entity" shall mean any Federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign.
"Governmental Order" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" shall mean all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials, substances and forces,
including but not limited to electromagnetic fields, regulated pursuant to, or
that could form the basis of liability under, any Environmental Law.
<PAGE>
5
"Indebtedness" shall mean, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, but not including trade payables incurred in the ordinary course of
business, (c) all other indebtedness of such Person evidenced by notes, bonds,
debentures or other similar instruments and (d) all indebtedness of others
referred to in clauses (a) through (c) above guaranteed directly or indirectly
in any manner by such Person.
"Intellectual Property" shall mean any copyright, copyright
permission, patent, exclusive right under copyright, trade name, trademark or
service mark, proprietary right, brand name or design, or any registration
(granted or pending) or applications therefor.
"KKR" shall mean Kohlberg Kravis Roberts & Co. L.P.
"Knowledge" shall mean, with respect to Seller, the actual knowledge
of the officers and employees (as well as any of their successors) of Seller and
the Subsidiaries and, without duplication, the employees in charge of
environmental, tax, labor, employee benefits and real estate matters or any of
the foregoing, in each case after reasonable investigation and inquiry.
"Law" shall mean any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" shall mean any and all Indebtedness and other
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured.
"Lien" shall mean any pledge, mortgage, claim, lien, charge,
encumbrance and security interests of any kind or nature whatsoever.
"Material Adverse Change" or "Material Adverse Effect" shall mean
any change or effect that either individually or in the aggregate with all other
such changes or effects (i) could reasonably be expected to be materially
adverse to the business, assets, operations, properties, condition (financial or
otherwise), results of operations or prospects of Seller and the Subsidiaries,
taken as a whole, (ii) could reasonably be expected to be materially adverse to
Seller's ability to perform its obligations under this Agreement, or (iii) could
reasonably be expected to prevent, hinder or materially delay Seller's ability
to consummate any of the Transactions.
"NASDAQ" shall mean the National Association of Securities Dealers
Automatic Quotation System.
<PAGE>
6
"Non-ESOP Shares" shall mean shares of Common Stock (other than
Putable Shares) held by holders of Common Stock other than the ESOP.
"Non-Withdrawable Shares" shall mean ESOP Shares which are not
Withdrawable Shares.
"Permits" shall mean all licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings with and
under all Federal, state, local or foreign laws and governmental or regulatory
bodies and all industry or other non-governmental self-regulatory organizations
(including Environmental Permits).
"Permitted Changes" shall mean: (i) the authorization of the Shares,
the Option, the Option Shares and the Additional Shares, (ii) the issuance of
the Shares and the Option, (iii) the issuance of any shares of Common Stock upon
exercise or conversion of Stock Options or Convertible Preferred Stock, as the
case may be and in each case outstanding on the date of this Agreement and in
accordance with their terms in effect on the date of this Agreement and (iv) the
redemption of shares of Class A Preferred Stock and Convertible Preferred Stock
pursuant to the Preferred Stock Redemption.
"Permitted Liens" shall mean: (a) Liens for taxes, assessments and
governmental charges or levies not yet due and payable, (b) Liens imposed by
Law, (c) pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations, (d)
minor survey exceptions, reciprocal easement agreements, rights-of-way,
restrictions and other similar encumbrances on title to real property which do
not detract from the value of the property subject thereto or interfere with the
conduct of business at such property substantially as the same is currently
being conducted or would interfere with the sale, transfer or financing of the
property subject thereto or affected thereby and (e) as to any property in which
Seller and the Subsidiaries have valid leasehold interests, any Lien affecting
the fee interest of the lessor thereof so long as the lease with respect to such
leasehold interest contains a non-disturbance clause; provided that none of the
foregoing, individually or in the aggregate, materially adversely affect the
value of the property to which they relate or materially adversely affect the
continued use of the property to which they relate in the conduct of the
business currently conducted thereat.
"Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other enterprise or entity.
<PAGE>
7
"Pleadings" shall mean the pleadings necessary to seek preliminary
and final approval of the proposed settlement, including the form of release to
be included in the final judgment entered by the court, attached as Exhibit B-2
hereto.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Settlement Agreement" shall mean the Conditional Settlement
Agreement dated as of February 23, 1997 among Seller and the other parties
thereto attached as Exhibit B-1 hereto.
"Subsidiaries" shall mean all corporations, partnerships, joint
ventures, associations, trusts, unincorporated organizations, or other
enterprises or entities which Seller controls, directly or indirectly through
one or more intermediaries. For purposes of this definition, "control" shall
mean "control" as defined in Rule 12b-2 under the Exchange Act.
"Trading Day" shall mean each weekday other than any day on which
any Common Stock is not traded on any national securities exchange, on NASDAQ or
in the over-the-counter market.
"Withdrawable Shares" shall mean ESOP Shares which are attributable
to employee contributions and are subject to the withdrawal provisions of
Section 7.13 of the ESOP.
SECTION 1.02. Other Defined Terms. The following terms shall have
the meanings defined for such terms in the Sections set forth below:
Term Section
- ---- -------
"AAA" 9.06
"Additional Shares" Recitals
"Aetna" 3.09(b)
"Amendment" Recitals
"Annual Financial Statements" 3.06(a)(i)
"Articles" Recitals
"Assigned Shares" 5.06(c)
"Balance Sheet" 3.06(a)(ii)
"Balance Sheet Date" 3.06(a)(ii)
"Buyer" Recitals
"Bylaws" 3.01
"CapEx Budget" 3.08(d)
"Class A Preferred Stock" 3.03(a)
"Closing" 2.03
"Closing Date" 2.03
"Common Shareholders" Recitals
"Common Stock" Recitals
"Consolidated Group" 3.11
"Convertible Preferred Stock" 3.03(a)
"Credit Agreement" 3.04(b)
"Damages" 8.02(a)
<PAGE>
8
"Debt Prepayment" 5.02
"Development Agreements" 3.12(d)
"ESOP" Recitals
"Financial Statements" 3.06(a)
"Financing" 5.08(c)
"Food Depot" 3.20
"Food Depot Interest" 3.20
"Indemnitee" 8.03(a)
"Indemnitor" 8.03(a)
"Insurance Policies" 3.16
"Interim Financial Statements" 3.06(a)(ii)
"Leased Real Property" 3.12(b)
"Note Purchase Agreement" 3.04(b)
"Notice" 8.03(a)
"Option" Recitals
"Option Shares" Recitals
"Owned Real Property" 3.12(a)
"PBGC" 3.10(d)
"Popp Action" 3.10(j)
"Preferred Stock Redemption" 5.02
"Proxy/Tender Offer Statement" 3.23
"Purchase" 2.01
"Purchase Price" 2.02
"Putable Shares" 3.03(c)
"Real Property Leases" 3.12(b)
"Restricted Shares" 3.03(a)
"Revolving Credit Facility" 3.04(b)
"Seller" Recitals
"Seller Plans" 3.10(a)
"Senior Notes" 3.04(b)
"Serial Preferred Stock" 3.03(a)
"Series A Senior Notes" 3.04(b)
"Series B-1 Senior Notes" 3.04(b)
"Series B-2 Senior Notes" 3.04(b)
"Shareholders Agreement" Recitals
"Shareholder Approval" Recitals
"Shareholder Approval Matters" Recitals
"Shareholders Meeting" Recitals
"Shares" Recitals
"Stock Options" 3.03(a)
"Stock Plans" 3.03(a)
"Taxes" 3.11
"Tax Return" 3.11
"Tender Offer" Recitals
"Tender Offer Price" 5.06(c)
"TBCA" 3.05(b)
"Third Party Leases" 3.12(c)
"Transaction Proposals" 5.10
"Transactions" Recitals
"WARN" 5.04
<PAGE>
9
SECTION 1.03. Other Definitional Provisions. (a) The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Article, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.01. The Purchase and Sale. Subject to the terms and
conditions hereof and on the basis of the representations, warranties, covenants
and agreements contained herein, Seller agrees to issue and sell the Shares and
the Option to Buyer, and Buyer agrees to purchase the Shares and the Option from
Seller (the "Purchase").
SECTION 2.02. Purchase Price and Payment. In consideration for the
issuance and sale of the Shares and the Option, and subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall pay to Seller $225
million, payable by wire transfer in immediately available funds, to a bank
account which Seller shall designate in writing to Buyer no less than two
Business Days prior to the Closing Date (the "Purchase Price").
SECTION 2.03. Closing. Upon the terms and subject to the conditions
of this Agreement, the sale and purchase of the Shares contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017, at 10:00 a.m., New York City time on the second Business Day following
the satisfaction or waiver of all conditions to the obligations of the parties
set forth in Article VII, or at such other place or at such other time or on
such other date as Seller and Buyer may mutually agree upon in writing (the day
on which the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by Seller. At the Closing, Seller
shall deliver to Buyer:
(a) stock certificate evidencing the Shares registered in the name
of Buyer or its nominee, in form satisfactory to Buyer and with all required
stock transfer tax stamps affixed;
(b) the Option;
<PAGE>
10
(c) a receipt for the Purchase Price; and
(d) the certificate required to be delivered pursuant to Section
6.01(d).
SECTION 2.05. Closing Deliveries by Buyer. At the Closing, Buyer
shall deliver to Seller:
(a) the Purchase Price by wire transfer in immediately available
funds to Seller;
(b) a receipt for the Shares and the Option; and
(c) the certificate required to be delivered pursuant to Section
6.02(d).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.01. Organization, Standing and Corporate Power. Seller and
each Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated or otherwise organized,
which jurisdiction is set forth on Schedule 3.01, and has full power and
authority to own its properties and to carry on its business as now being
conducted. Each of Seller and each Subsidiary is duly qualified or licensed to
do business as a foreign corporation in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) would
not have a Material Adverse Effect. Included on Schedule 3.01 are complete and
correct copies of the Articles, as amended, and Bylaws, as amended (the
"Bylaws"), of Seller, in each case as in effect as of the date hereof. Seller
has delivered to Buyer complete and correct copies of the articles of
incorporation (or other organizational documents) and bylaws of each of the
Subsidiaries, in each case as amended to the date of this Agreement.
SECTION 3.02. Subsidiaries. Set forth on Schedule 3.02 is a list of
the Subsidiaries and the number of authorized, issued and outstanding shares of
capital stock, partnership interests, membership interests, joint venture
interests or other equity interests of each Subsidiary. All the outstanding
shares of capital stock, partnership interests, membership interests, joint
venture interests or other equity interests of each Subsidiary are validly
issued, fully paid and non-assessable,
<PAGE>
11
have not been issued in violation of any preemptive or similar rights, and,
except as disclosed on Schedule 3.02, are owned (of record and beneficially) by
Seller or a Subsidiary, free and clear of any Liens. Except for the ownership
interests set forth on Schedule 3.02, neither Seller nor any Subsidiary (as
indicated on Schedule 3.02), directly or indirectly, owns any capital stock or
other ownership interest in any Person (including in any joint venture).
SECTION 3.03. Capital Structure. (a) The entire authorized capital
stock of Seller consists of (i) 25,000,000 shares of Common Stock, (ii) 8,250
shares of Class A preferred stock of the par value of $10.00 per share of Seller
(the "Class A Preferred Stock"), and (iii) 5,000,000 shares of serial preferred
stock of the par value of $10.00 per share (the "Serial Preferred Stock"), of
which 292,043 shares have been designated as 8% convertible preferred stock (the
"Convertible Preferred Stock"). There are, and subject to any Permitted Changes
as of the Closing Date there shall be, (i) 17,093,155.3104 shares of Common
Stock issued and outstanding (excluding shares held in the treasury of Seller),
135,382 of which shares are currently subject to restrictions on transfer (the
"Restricted Shares"); (ii) 52,226.6896 shares of Common Stock held in the
treasury of Seller; (iii) 8,250 shares of Class A Preferred Stock issued and
outstanding; (iv) 278,201 shares of Convertible Preferred Stock issued and
outstanding and no other shares of Serial Preferred Stock issued or outstanding;
(v) 762,161 shares of Common Stock reserved for issuance upon exercise of
authorized but unissued outstanding employee or director stock options to
purchase shares of Common Stock ("Stock Options") granted under any stock option
or stock purchase plan, program or arrangement of Seller (the "Stock Plans");
(vi) 602,457 shares of Common Stock issuable upon exercise of outstanding Stock
Options (with an average exercise price of $17.03 and those other options
determined by formula specifically described on Schedule 3.03(b); and (vii)
639,863 shares of Common Stock reserved for issuance upon conversion of the
Convertible Preferred Stock.
(b) Schedule 3.03(b) contains a list, as of the date of this
Agreement, of each record holder of Common Stock, Class A Preferred Stock and
Convertible Preferred Stock and the number of shares of each of such securities
held by each such holder (including an indication of whether any such securities
are Restricted Shares), and a list, as of the date of this Agreement, of each
holder of Stock Options and the number of shares of Common Stock issuable upon
exercise of such Stock Options to each such holder. Schedule 3.03(b) also
describes the restrictions related to each of the Restricted Shares and the
periods over which such restrictions lapse in accordance with the terms of the
Seller Plans or agreements, as applicable, governing such Restricted Shares. All
such restrictions shall lapse as a result of the consummation of the Purchase.
Except as set forth above, no shares of capital stock or other equity securities
of Seller
<PAGE>
12
are issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of Seller are, and all shares which may be issued pursuant to the
Stock Plans or upon conversion of the Convertible Preferred Stock will be when
issued, duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive or similar rights. Except for the Convertible Preferred
Stock and Stock Options, there are no outstanding bonds, debentures, notes or
other Indebtedness or other securities of Seller or any Subsidiary having the
right to vote (or convertible into, exercisable or exchangeable for, securities
having the right to vote) on any matters on which shareholders of Seller may
vote. Except as set forth above or as described on Schedule 3.03(b), there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Seller or any of
the Subsidiaries is a party or by which any of them is bound obligating Seller
or any of the Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity or voting
securities of Seller or of any of the Subsidiaries or obligating Seller or any
of the Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
Except as set forth on Schedule 3.03(b), no shares of capital stock of Seller
have been issued or may be issued in connection with Seller's acquisition of
Cullum Companies, Inc., including upon the occurrence of any tax contingency.
(c) Other than pursuant to this Agreement, the Stock Options and the
Shareholders Agreement and other than as described on Schedule 3.03(c), (i)
there are no outstanding contractual obligations, commitments, understandings or
arrangements of Seller or any of the Subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of any shares of capital stock
of Seller or any of the Subsidiaries, other than Seller's obligation to
repurchase an aggregate of 613,457 shares of Common Stock (the "Putable Shares")
at a price equal to the fair value per share (as determined in the most recent
valuation of the Common Stock held by the ESOP (or any successor 401(k) Plan),
which determination shall have been made in accordance with the provisions of
the ESOP (or such successor 401(k) Plan)), upon exercise by the respective
holders thereof of such holders' put rights in respect of such shares (the
shares subject to such put rights are described on Schedule 3.03(c) and such
Schedule identifies the holders of such shares, the applicable put prices of
such shares and the applicable agreement pursuant to which the applicable put
rights may be exercised), and (ii) to the Knowledge of Seller, there are no
irrevocable proxies with respect to shares of capital stock of Seller or any of
the Subsidiaries. Schedule B of the Shareholders Agreement, which sets forth the
record and, to the Knowledge of Seller, beneficial ownership of, and voting
power in respect of, the capital stock of Seller with respect to the signatories
to the
<PAGE>
13
Shareholders Agreement, is accurate in all material respects. Except for the
Shareholders Agreement and except as described on Schedule 3.03(c), there are no
agreements or arrangements pursuant to which Seller is or could be required to
register shares of Common Stock or other securities under the Securities Act or
other agreements or arrangements with or among any securityholders of Seller
with respect to securities of Seller.
(d) The Shares, the Option Shares and the Additional Shares have
been duly and validly authorized, and, when issued and delivered pursuant to
this Agreement, such Shares, Option Shares and Additional Shares shall be duly
and validly issued and fully paid and non-assessable, and not subject to
preemptive or similar rights. The transfer and delivery of the Shares, the
Option Shares and the Additional Shares by Seller to Buyer as contemplated by
this Agreement will transfer good title to the Shares, the Option Shares and the
Additional Shares to Buyer, free and clear of any Liens, except Liens arising as
a result of any action taken by Buyer.
SECTION 3.04. Cash and Indebtedness. (a) As of February 8, 1997,
Seller had $34.352 million of cash on a consolidated basis.
(b) As of February 8, 1997, the only outstanding Indebtedness of
Seller or any of the Subsidiaries was (i) $152.0 million aggregate principal
amount of loans under a term loan facility provided pursuant to the Credit
Agreement dated as of November 1, 1993, as amended, among Seller, certain of the
Subsidiaries, the banks party thereto and Texas Commerce Bank National
Association, as agent (the "Credit Agreement"), (ii) an Interest Rate Swap
Agreement dated as of June 6, 1995 between Seller and Texas Commerce Bank
National Association with a notional amount of $50 million, (iii) $38.0 million
aggregate principal amount of loans under a $65 million revolving credit
facility (the "Revolving Credit Facility") provided pursuant to the Credit
Agreement, (iv) $39.5 million aggregate principal amount of 8.70% Series A
Senior Notes Due December 1, 2003 (the "Series A Senior Notes") issued pursuant
to the Note Purchase Agreement dated as of November 1, 1993, as amended, among
Seller, certain of the Subsidiaries and the insurance companies party thereto
(the "Note Purchase Agreement"), (v) $71.0 million aggregate principal amount of
9.16% Series B-1 Senior Notes Due December 1, 2005 (the "Series B-1 Senior
Notes") issued pursuant to the Note Purchase Agreement, (vi) $25.0 million
aggregate principal amount of 9.16% Series B-2 Senior Notes Due December 1, 2003
(the "Series B-2 Senior Notes", together with the Series A Senior Notes and the
Series B-1 Notes, the "Senior Notes") issued pursuant to the Note Purchase
Agreement, (vii) Other Long-Term Debt in the amount of $6.010 million relating
to the mortgages on the fee properties of Seller as set forth on Schedule
3.12(a), (viii) $92.176 million of obligations under capitalized leases as of
February 8, 1997 as set forth on Schedule 3.04(b), and (ix)
<PAGE>
14
$20.250 million of mortgage Indebtedness as of February 8, 1997 relating to
joint ventures of Seller as set forth on Schedule 3.12(a). The Senior Notes and
all Indebtedness under the Credit Agreement are prepayable in full by Seller as
of the date of this Agreement, and will be prepayable as of the Closing, in
accordance with their respective terms, subject, in the case of the Senior
Notes, to the payment of the Make-Whole Price (as defined in the Note Purchase
Agreement) which shall be calculated in accordance with the methodology set
forth on Schedule 3.04(b) and which shall not exceed the amount calculated
pursuant to such methodology. As of February 8, 1997, there were $1.818 million
aggregate principal amount of letters of credit issued pursuant to the Credit
Agreement under the Revolving Credit Facility. Other than the Senior Notes and
the Indebtedness under the Credit Agreement, no Indebtedness of Seller or any
Subsidiary contains any restriction upon the incurrence of Indebtedness by
Seller or any of the Subsidiaries or restricts the ability of Seller or any of
the Subsidiaries to grant any Liens on its properties or assets.
SECTION 3.05. Authority; Noncontravention. (a) Seller has the
corporate power and authority to execute and deliver this Agreement and the
Settlement Agreement, to perform its obligations hereunder and thereunder,
subject to obtaining the Shareholder Approval with respect to this Agreement and
the Transactions. The execution and delivery of this Agreement and the
Settlement Agreement by Seller, the performance by Seller of its obligations
hereunder and thereunder, and the consummation by Seller of the Transactions and
the transactions contemplated by the Settlement Agreement have been duly
authorized by all necessary corporate action on the part of Seller, subject to
obtaining the Shareholder Approval with respect to this Agreement and the
Transactions. Each of this Agreement and the Settlement Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other Laws relating to or affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
(b) Except as disclosed on Schedule 3.05(b)I, the execution and
delivery of this Agreement or the Settlement Agreement by Seller do not, and the
consummation of the Transactions and compliance with the provisions hereof or
thereof by Seller will not, conflict with, result in any breach or violation of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give rise to a right of termination,
amendment or acceleration of a "put" right with respect to any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Seller or any
<PAGE>
15
of the Subsidiaries under, (i) the Articles or Bylaws or the comparable charter
or organizational documents of any of the Subsidiaries, (ii) any loan or credit
agreement, note, note purchase agreement, bond, mortgage, indenture, lease,
contract, joint venture or other agreement, instrument, permit, concession,
franchise or license applicable to Seller or any of the Subsidiaries or any of
their respective properties or assets, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Law,
Governmental Order or arbitration award applicable to Seller or any of the
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii) and (iii) with respect to this Agreement and the
Transactions (but not the Settlement Agreement or any of the transactions
contemplated thereby), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that could not, individually or in the aggregate, have a
Material Adverse Effect, provided, however, that Buyer acknowledges having
received the leases set forth on Schedule 3.05(b)(II) and confirms that no
consent is required by such leases to consummate the Purchase. No consent,
approval, order or authorization of, action by, or registration, declaration or
filing with, or notice to, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement or the Settlement
Agreement by Seller or the consummation by Seller of the Transactions or the
transaction contemplated by the Settlement Agreement, except for (a) with
respect to this Agreement and the Transactions, (i) the notification
requirements of the HSR Act, (ii) the filing of the Amendment executed in
accordance with the relevant provisions of the Texas Business Corporation Act
(the "TBCA") with the Secretary of State of the State of Texas, (iii) those that
may be required by the nature of the business or ownership of the Shares by
Buyer and (iv) those the failure of which to obtain would not, individually or
in the aggregate, have a Material Adverse Effect and (b) with respect to the
Settlement Agreement and the transactions contemplated thereby, receipt of final
judicial approval.
SECTION 3.06. Financial Information. (a) Schedule 3.06 contains
copies of the following (collectively, the "Financial Statements"):
(i) the audited consolidated balance sheets of Seller and the
Subsidiaries for the fiscal years ended June 29, 1996, June 24, 1995 and
June 25, 1994, and the related audited consolidated statements of
earnings, stockholders' equity and cash flows for each of the fiscal years
then ended, together with the report thereon of Arthur Andersen LLP,
including notes thereto (collectively, the "Annual Financial Statements"),
and
<PAGE>
16
(ii) the unaudited consolidated balance sheet of Seller and the
Subsidiaries for the 32-week period ended February 8, 1997 (the "Balance
Sheet" and the date thereof, the "Balance Sheet Date"), and the related
unaudited consolidated statements of earnings and cash flows for the
period then ended (the "Interim Financial Statements").
(b) The Financial Statements are based on the books and records of
Seller, present fairly the consolidated financial condition and results of
operations of Seller as of the respective dates thereof and for the periods
covered thereby, all in accordance with GAAP applied on a consistent basis,
except that the Interim Financial Statements do not contain footnote disclosures
and are subject to normal recurring year-end adjustments which are not,
individually or in the aggregate, material.
SECTION 3.07. No Undisclosed Liabilities. Except as described on
Schedule 3.07, there are no Liabilities that individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect, other than
Liabilities (a) reflected or reserved against on the Balance Sheet, (b) incurred
since the Balance Sheet Date in the ordinary course of business and not in
violation of this Agreement, (c) relating to executory obligations pursuant to
leases or contracts listed on Schedules 3.12(b) or 3.14(a) or leases or
contracts entered into in the ordinary course of business which are not required
to be listed on such Schedules, or (d) relating to obligations to employees or
obligations to employees not required to be listed pursuant to Section 3.10.
SECTION 3.08. Absence of Certain Changes or Events. Except as
expressly contemplated by this Agreement or as described on Schedule 3.08 or
Schedule 3.09, since June 29, 1996, Seller and each of the Subsidiaries have
conducted their respective businesses only in the ordinary course of business
consistent with past practice, and there is not and has not been (a) any
Material Adverse Change or (b) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or give rise to a Material Adverse Change. Without
limiting the generality of the foregoing, except as expressly contemplated by
this Agreement or except as described on Schedule 3.08 or Schedule 3.09, neither
Seller nor any of the Subsidiaries has, since June 29, 1996:
(a) incurred any material damage, destruction or loss (whether or
not covered by insurance);
(b) (i) except to the extent specifically required by any Seller
Plan, increased the compensation or benefits of any of the current or
former directors, officers or employees of Seller or any Subsidiary
(except for increases
<PAGE>
17
in compensation or benefits to employees who are not directors or officers
of Seller or any Subsidiary in the ordinary course of business consistent
with past practice) or paid to any such individuals any benefit not
required by a Seller Plan or an existing agreement, (ii) granted any
severance or termination pay or entered into any employment or severance
agreement or arrangement with any present or former director, officer or
employee of Seller or any Subsidiary or amendment of any such arrangement
or agreement (including any increase or acceleration of any benefit
payable under Seller's or any Subsidiary's pay policies in effect on the
date hereof), (iii) accelerated the vesting of any stock options, settled
any stock options for cash or authorized the lapse of any restrictions on
any Restricted Shares, or (iv) established, adopted, entered into, amended
or terminated any (1) collective bargaining agreement or (2) plan or
agreement to provide bonuses, profit sharing, stock options, restricted
stock, pensions, retirement benefits, deferred compensation, employment or
benefits upon termination for the benefit of any directors, officers or
any employees of Seller or any Subsidiary, including any amendment to the
ESOP;
(c) incurred any Indebtedness other than Indebtedness incurred in
the ordinary course of business consistent with past practice under the
Revolving Credit Facility, or, other than in the ordinary course of
business consistent with past practice and in an aggregate amount not
exceeding $100,000, incurred, assumed or guaranteed or taken any other act
to become responsible for any Liability of any other Person or made any
loan or advance to any Person;
(d) except as described in Seller's annual capital expenditures
budget for fiscal 1997 (a true and complete copy of which is included on
Schedule 3.08(d)) (the "CapEx Budget"), made any capital expenditure or
commitment for any capital expenditure, other than expenditures in the
ordinary course of business consistent with past practice (provided that
any expenditure or commitment for new stores, store remodelling, store
expansions, warehouse and distribution expansions, property purchases or
leases or sale/leasebacks shall not be considered to be ordinary course);
(e) merged or consolidated with, acquired an interest in, or
purchased any securities or assets of, any Person or otherwise acquired
any assets, except for acquisitions in the ordinary course of business
consistent with past practice;
(f) entered into a joint venture, partnership or similar arrangement
with any Person;
<PAGE>
18
(g) leased, sold, assigned or otherwise disposed of any properties
or assets, except for dispositions in the ordinary course of business
consistent with past practice;
(h) terminated, discontinued, closed or disposed of any facility or
business operation or otherwise changed the general character or conduct
of its business;
(i) except for Permitted Changes, authorized, issued, sold or
repurchased any capital stock, notes, bonds or other securities, or any
option, warrant or other right to acquire the same;
(j) declared, set aside or paid any dividends or distributions
(whether in cash, stock or property) in respect of any capital stock of
Seller or any such Subsidiary;
(k) amended its articles of incorporation, bylaws or other
comparable charter or organizational documents;
(l) made any change in the financial or accounting practices or
policies customarily followed by it;
(m) written down the value of any tangible assets or written off as
uncollectible any debt, notes or accounts receivable, or made any other
write-downs or write-offs, except write-downs and write-offs made in the
ordinary course of business in accordance with GAAP and consistent with
past practice;
(n) licensed, mortgaged, pledged or otherwise encumbered or
subjected to any Lien any assets, other than pursuant to Permitted Liens;
(o) let lapse or terminate or failed to renew any Permit, other than
with respect to Permits the failure of which to be in effect would not
have, individually or in the aggregate, a Material Adverse Effect;
(p) entered into any vendor allowance contract or agreement or
similar contract or agreement with a term in excess of one year (including
pursuant to any renewal provision) and which provides for payments (or
pursuant to which payments can reasonably be expected to be made) in
excess of $100,000 during the term of the contract or agreement or taken
any significant steps with respect to entering into any of the foregoing;
(q) entered into any merchandising or distribution or similar
contract or agreement or taken any significant steps with respect to
entering into any of the foregoing, other than in the ordinary course
consistent with past practice
<PAGE>
19
with respect to contracts or agreements which do not provide for payments
(or pursuant to which payments can reasonably be expected to be made) in
excess of $100,000 during any one-year period or $250,000 during the term
of the contract or agreement;
(r) other than in the ordinary course consistent with past practice,
engaged in any forward buying or made any change in its customary selling,
pricing, advertising, billing or return practices;
(s) waived, settled or compromised any rights having a value
exceeding $10,000 individually or $50,000 in the aggregate, or settled any
pending or threatened Action in an amount in excess of $10,000
individually or $50,000 in the aggregate;
(t) cancelled any Indebtedness or repaid any Indebtedness;
(u) failed to pay any creditor any amount owed to such creditor when
due (after the expiration of any applicable grace periods) other than in
the ordinary course of business consistent with past practice;
(v) paid any Liability before the same became due in accordance with
its terms other than in the ordinary course of business consistent with
past practice; or
(w) entered into any contract, agreement or arrangement, or made any
commitment, to do any of the foregoing.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as
disclosed on Schedule 3.09(a), there is (i) no Action pending or, to the
Knowledge of Seller, threatened against Seller or any of the Subsidiaries and to
the Knowledge of Seller, no basis for any such Action that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
and (ii) neither Seller nor any Subsidiary is a party to or subject to or in
default under any Governmental Order or order of an arbitrator which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect.
(b) Seller has provided Buyer with a true and complete copy of the
Settlement Agreement and the Pleadings for its review prior to the date hereof.
A true and complete copy of the Settlement Agreement and the Pleadings is
attached as Exhibits B-1, and B-2, respectively. The Settlement Agreement has
been signed by all parties to the related Action and the Settlement Agreement
remains in full force and effect. Seller is not (and, to the Knowledge of
Seller, no other party is) in breach of or default under the Settlement
Agreement and, to the Knowledge of
<PAGE>
20
Seller, no event has occurred that, with or without notice or lapse of time or
both, would result in a breach or a default thereunder. Each of the conditions
set forth in paragraphs (a), (b), (c), (d) and (i) of Section 7 of the
Settlement Agreement has been satisfied. The presiding judge in the Action
related to the Settlement Agreement has approved sending a summary of the terms
of the Settlement Agreement to the class members described in the Settlement
Agreement and has scheduled a hearing to be held on June 2, 1997 to approve the
Settlement Agreement. Seller has provided Buyer with a true and complete copy of
the letter agreement dated March 13, 1997 between David H. Brown of Vinson &
Elkins L.L.P. on behalf of Seller and Donald H. Bacon of Friday, Eldredge &
Clark on behalf of the Aetna Casualty and Surety Company ("Aetna") relating to
the payments to be made by Aetna in connection with the settlement of the Popp
Action. Such letter agreement is in full force and effect and constitutes the
entire agreement of Seller and Aetna with respect to Aetna's payment obligations
under Aetna's Pension & Welfare Fund Fiduciary Responsibility Insurance Policy
No. 71 FF 100990553 BCA in connection with the Popp Action. Seller has no reason
to believe that Aetna will not make the payments contemplated by such letter
agreement.
(c) Except as disclosed on Schedule 3.09(c), Seller and each
Subsidiary is in compliance, and the conduct of their respective businesses are
in compliance, with all Laws applicable thereto, except where the failure to so
comply, individually or in the aggregate, has not had or would not reasonably be
expected to have, a Material Adverse Effect.
(d) No adverse development has occurred with respect to the final
approval by the General Counsel of the U.S. Equal Employment Opportunity
Commission of the consent decree (in the form previously provided to Buyer)
settling the charges described as item 3 of Schedule 3.09.
SECTION 3.10. Employees. (a) Schedule 3.10(a) contains a true and
complete list of each "employee benefit plan" (within the meaning of ERISA
section 3(3) (including multiemployer plans within the meaning of ERISA section
3(37)), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred compensation
and all other employee benefit plans, agreements, programs, policies or other
arrangements relating to employment, benefits or entitlements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the Transactions or otherwise), whether
formal or informal, oral or written, legally binding or not under which any
employee or former employee of Seller has any present or future right to
benefits or under which Seller has any present or future liability. All such
plans, agreements, programs, policies and arrangements shall be collectively
referred to as the "Seller Plans".
<PAGE>
21
(b) With respect to each Seller Plan, Seller will deliver to Buyer a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) thereof and, to the extent applicable, (i) any related
trust agreement, annuity contract or other funding instrument; (ii) the most
recent determination letter; (iii) any summary plan description and other
written communications (or a description of any oral communications) by Seller
to its employees concerning the extent of the benefits provided under a Seller
Plan; and (iv) for the most recent year (1) the Form 5500 and attached
schedules, (2) audited financial statements, (3) actuarial valuation reports,
and (4) attorney's response to auditors' requests for information.
(c) Except as disclosed on Schedule 3.10(c), each Seller Plan has
been established and administered in accordance with its terms, and in
compliance with the applicable provisions of ERISA, the Code and other
applicable Laws in all material respects; (ii) each Seller Plan which is
intended to be qualified within the meaning of Section 401(a) of the Code is so
qualified and has received a favorable determination letter as to its
qualification and, to the Knowledge of Seller, nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification;
(iii) with respect to any Seller Plan, no Actions (other than routine claims for
benefits in the ordinary course) are pending or, to the Knowledge of Seller,
threatened, and no facts or circumstances exist which could give rise to any
such Actions and Seller will promptly notify Buyer in writing of any pending
claims or, to the Knowledge of Seller, any threatened claims arising between the
date hereof and the Closing; (iv) neither Seller nor any other party has engaged
in a prohibited transaction, as such term is defined under Section 4975 of the
Code or ERISA section 406, which would subject Seller or Buyer to any taxes,
penalties or other Liabilities under Section 4975 of the Code or ERISA sections
409 or 502(i) that could, individually or in the aggregate, have a Material
Adverse Effect; (v) no event has occurred and no condition exists which would
subject Seller, either directly or by reason of its affiliation with any member
of its Controlled Group (defined as any organization which is a member of a
controlled group of organizations within the meaning of Sections 414(b), (c),
(m) or (o) of the Code), to any tax, fine or penalty imposed by ERISA, the Code
or other applicable Laws including, but not limited to, the taxes imposed by
Sections 4971, 4972, 4977, 4979, 4980B, 4976(a) of the Code or the fine imposed
by ERISA section 502(c) that could, individually or in the aggregate, have a
Material Adverse Effect; (vi) all insurance premiums required to be paid with
respect to Seller Plans as of the Closing have been or will be paid prior
thereto and adequate reserves have been provided for on the Balance Sheet for
any premiums (or portions thereof) attributable to service on or prior to the
Closing Date; (vii) for each Seller Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the
<PAGE>
22
matters covered by the most recent Form 5500 since the date thereof; (viii)
except as disclosed on Schedule 3.10(c), all contributions required to be made
prior to the Closing under the terms of any Seller Plan, the Code, ERISA or
other applicable Laws have been or will be timely made and adequate reserves
have been provided for on the Balance Sheet for all benefits attributable to
service on or prior to the Closing; (ix) no Seller Plan provides for an increase
in benefits on or after the Closing; (x) each Seller Plan may be amended or
terminated without obligation or liability (other than those Liabilities for
which specific assets have been set aside in a trust or other funding vehicle or
reserved for on the Balance Sheet or obligations under plans required by
contracts with labor unions); and (xi) no employee of Seller will be entitled to
any additional benefits or any acceleration of the time of payment or vesting of
any benefits under any Seller Plan as a result of the Transactions.
(d) Except as disclosed on Schedule 3.10(d) and except to the extent
each of the following, individually or in the aggregate, could not result in a
Material Adverse Effect, with respect to any Seller Plan maintained by or
contributed to by Seller or any Subsidiary within six years prior to the date of
this Agreement (i) no "accumulated funding deficiency" as such term is defined
in ERISA section 302 and Section 412 of the Code (whether or not waived) has
been incurred; (ii) no event or condition exists which could be deemed a
reportable event within the meaning of ERISA section 4043 which could result in
a liability to Seller or any member of its Controlled Group and no condition
exists which could subject Seller or any member of its Controlled Group to a
fine under ERISA section 4071; (iii) as of the Closing, Seller and each member
of its Controlled Group have made all required premium payments when due to the
Pension Benefit Guaranty Corporation (the "PBGC"); (iv) neither Seller nor any
member of its Controlled Group is subject to any liability to the PBGC for any
plan termination occurring on or prior to the Closing; (v) no amendment has
occurred which has required or could require Seller or any member of its
Controlled Group to provide security pursuant to Section 401(a)(29) of the Code;
and (vi) neither Seller nor any member of its Controlled Group has engaged in a
transaction which could subject it to liability under ERISA section 4069.
(e) With respect to each of Seller Plans which is not a
multiemployer plan within the meaning of section 4001(a)(3) of ERISA but is
subject to Title IV of ERISA, as of the Closing, except as disclosed on Schedule
3.10(e), the assets of each such Seller Plan are at least equal in value to the
present value of the accrued benefits (vested and unvested) of the participants
in such Seller Plan on an accumulated benefits obligation basis as defined by
SFAS 87.
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23
(f) Except as disclosed on Schedule 3.10(f), with respect to any
multiemployer plan (within the meaning of section 4001(a)(3) of ERISA) to which
Seller or any member of its Controlled Group has any liability or contributes
(or has within six years prior to the date of this Agreement contributed or had
an obligation to contribute): (i) Seller and each member of its Controlled Group
has or will have, as of the Closing, made all contributions to each such
multiemployer plan required by the terms of such multiemployer plan or any
collective bargaining agreement; (ii) neither Seller nor any member of its
Controlled Group has incurred any withdrawal liability under Title IV of ERISA
or would be subject to such liability if, as of the Closing, Seller or any
member of its Controlled Group were to engage in a complete withdrawal (as
defined in ERISA section 4203) or partial withdrawal (as defined in ERISA
section 4205) from any such multiemployer plan that could, individually or in
the aggregate, have a Material Adverse Effect; (iii) no such multiemployer plan
is in reorganization or insolvent (as those terms are defined in ERISA sections
4241 and 4245, respectively); and (iv) neither Seller nor any member of its
Controlled Group has engaged in a transaction which could subject it to
liability under ERISA section 4212(c) that could, individually or in the
aggregate, have a Material Adverse Effect.
(g) (i) Each Seller Plan which is intended to meet the requirements
for tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the
Code meets such requirements; and (ii) Seller has received a favorable
determination from the Internal Revenue Service with respect to any trust
intended to be qualified within the meaning of Section 501(c)(9) of the Code.
Seller does not have any Knowledge of any facts or circumstances that could
cause the Internal Revenue Service to deny the request made by Seller on June
22, 1995 for a favorable determination letter regarding the qualified status of
the ESOP.
(h) Schedule 3.10(h) sets forth, on a plan by plan basis, the
present value of benefits payable presently or in the future to present or
former employees of Seller under each unfunded Seller Plan.
(i) The valuations of the Common Stock held by the ESOP were most
recently determined as of October 19, 1996 and January 11, 1997, such
determinations were made in accordance with the provisions of the ESOP and such
Common Stock was determined to have a fair value of $15 per share as of October
19, 1996 and $15 per share as of January 11, 1997. There are not more than
1,050,000 Withdrawable Shares.
(j) Subject to the effectiveness of the Settlement Agreement upon
receipt of final judicial approval, except for Liabilities expressly imposed by
the Settlement Agreement and Liabilities in an aggregate amount not to exceed
$25,000 to present or former ESOP participants who have opted out of the
<PAGE>
24
class described in the Settlement Agreement, none of Seller or any Subsidiary
shall have any Liability arising out of, resulting from or relating to any act
or failure to act by Seller or any of the Subsidiaries or any of its other
Affiliates or any director, officer, employee, representative of agent or
Seller, any Subsidiary or any such Affiliate in connection with the ESOP or any
facts or circumstances relating to the ESOP, including any Liability alleged in
Popp v. Randalls Food Markets, Inc., C.V. H-95-5400 (S.D. Tex., Houston Div.)
(the "Popp Action").
(k) Except as disclosed on Schedule 3.10(k), (i) to the Knowledge of
Seller, neither Seller nor any of the Subsidiaries is the subject of any
proceeding asserting that it or any Subsidiary has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment; (ii) there is no strike, work stoppage or
other labor dispute involving Seller or any of the Subsidiaries pending or, to
the Knowledge of Seller, threatened and, since January 1, 1992, there has not
been any such action; (iii) no Action brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of Seller's employees or any Governmental Entity (including the
Equal Employment Opportunity Commission) is pending or, to the Knowledge of
Seller, threatened against Seller or any of the Subsidiaries; (iv) no grievance
is pending or, to the Knowledge of Seller, threatened against Seller or any of
the Subsidiaries relating to employment matters; (v) to the Knowledge of Seller,
no Governmental Entity intends to conduct an investigation relating to any
employees of Seller or any Subsidiary and no such investigation is in progress;
(vi) neither Seller nor any of the Subsidiaries is a party to, or otherwise
bound by, any consent decree with, or citation by, or any other Governmental
Order of, any Governmental Entity (including the Equal Employment Opportunity
Commission) relating to employees or employment practices; (vii) Seller and each
Subsidiary is in compliance with all applicable Laws, agreements, contracts, and
policies relating to employment, employment practices, wages, hours, and terms
and conditions of employment except for failures to comply, if any, that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect; (viii) Seller has paid in full to all employees of
Seller and the Subsidiaries all wages, salaries, commissions, bonuses, benefits
and other compensation due to such employees or otherwise arising under any
policy, practice, agreement, plan, program or Law; (ix) Seller is not liable for
any severance pay or other payments to any employee or former employee arising
from the termination of employment under any benefit or severance policy,
practice, agreement, plan, or program of Seller, nor will Seller have any
liability which exists or arises, or may be deemed to exist or arise, under any
applicable Law or otherwise, as a result of or in connection with the
Transactions or as a result of the termination by Seller of any persons employed
by Seller or any of the Subsidiaries on or prior to the Closing; and
<PAGE>
25
(x) to the Knowledge of Seller, no union organizational campaign is in progress
with respect to the employees of Seller or a Subsidiary and no question
concerning representation exists respecting such employees.
SECTION 3.11. Tax Returns and Tax Payments. Except for matters that
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or matters that are disclosed on Schedule 3.11 or in the
Financial Statements, (a) Seller and each of the Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Seller or any of the Subsidiaries is or has been a member (a "Consolidated
Group") has timely filed all Tax Returns required to be filed by it, has paid
all Taxes due and has provided adequate reserves in the Financial Statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns; (b) all such Tax Returns were and are in all respects true, complete
and correct; (c) neither Seller nor any Subsidiary has requested any extension
of time within which to file any Tax Return, which Tax Return has not since been
filed; (d) except for Taxes not yet due, no claim for unpaid Taxes has become a
Lien against the property of Seller or any of the Subsidiaries or is being
asserted against Seller or any of the Subsidiaries; (e) no audit of any Tax
Return of Seller or any of the Subsidiaries is being conducted by a Tax
authority with regard to any Taxes or Tax Returns of Seller or any Subsidiary
and no issue has been raised by any Tax authority that could, by application of
the same or similar principles, reasonably be expected to result in an
adjustment to any Taxes or Tax Returns of Seller or any Subsidiary in any
subsequent period; (f) no extension of the statute of limitations on the
assessment of any Taxes has been granted by Seller or any of the Subsidiaries
and is currently in effect; (g) no consent under Section 341(f) of the Code has
been filed with respect to Seller or any of the Subsidiaries; (h) neither Seller
nor any of the Subsidiaries is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or deemed payment by
Seller or any Subsidiary of any "excess parachute payments" within the meaning
of Section 280G of the Code; (i) neither Seller nor any of the Subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by Seller or
any Subsidiary, and the Internal Revenue Service has not proposed any such
adjustment or change in accounting method; (j) none of Seller or the
Subsidiaries has been at any time a member of any partnership or joint venture
or the holder of a beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired; (k) Seller has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (l) none of Seller or the Subsidiaries is doing
business in or engaged in a trade or business in any jurisdiction in which it
<PAGE>
26
has not filed all required income or franchise tax returns; (m) Seller and each
of the Subsidiaries have made all payments of estimated Taxes required to be
made under Section 6655 of the Code and any comparable state, local or foreign
Tax provision; (n) all Taxes required to be withheld, collected or deposited by
or with respect to Seller and each of the Subsidiaries have been timely
withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant taxing authority; (o) neither Seller
nor any of the Subsidiaries has issued or assumed (i) any obligations described
in Section 279(a) of the Code, (ii) any applicable high yield discount
obligations, as defined in Section 163(i) of the Code, or (iii) any
registration-required obligations, within the meaning of Section 163(f)(2) of
the Code, that is not in registered form; (p) there are no written requests from
any Tax authority for information currently outstanding that could reasonably be
expected to affect the Taxes of Seller or any of the Subsidiaries; (q) no power
of attorney that is currently in force has been granted with respect to any
matter relating to Taxes that could affect the Tax liability of Seller or one of
the Subsidiaries; (r) neither Seller nor any Subsidiary is a party to any
agreement relating to the allocation, indemnification or sharing of Taxes; (s)
none of Seller and the Subsidiaries has been a member of an affiliated group
filing consolidated federal income Tax Returns (other than a group the common
parent of which was Seller); and (t) neither Seller nor any of the Subsidiaries
has any liability for Taxes of any Person other than Seller and the Subsidiaries
(i) under Treasury Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor, (ii) by contract, or
(iii) otherwise. As used herein, "Taxes" shall mean all taxes of any kind,
including those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity. As
used herein, "Tax Return" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes.
SECTION 3.12. Properties. (a) Schedule 3.12(a) sets forth, by
address, owner and usage, all of the real property owned by Seller and the
Subsidiaries, including all land, easements or rights of way granted to Seller
or the Subsidiaries, any reciprocal easement, operating agreement, management
agreement whereby a third party manages any real property, mortgages and leases
relating thereto, true and complete copies (including all amendments and
supplements thereto) of which have been delivered to Buyer (collectively, the
"Owned Real Property"). Each of Seller and the Subsidiaries has good and
sufficient, valid and marketable fee title to the Owned Real
<PAGE>
27
Property free and clear of all Liens, options to purchase or lease, leases,
conditions of limitation, easements, covenants, rights-of-way and other similar
restrictions of any nature whatsoever, except for Permitted Liens and Liens
described on Schedule 3.12(a). Except as set forth on Schedule 3.12(a), there
are (i) no outstanding contracts for any improvements to the Owned Real Property
which have not been fully paid that, other than any such contracts which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect and (ii) no expenses of any kind (including brokerage
and leasing commissions) pertaining to the Owned Real Property which have not
been fully paid. Seller has furnished Buyer with copies of all recorded deeds,
surveys and owner's title policies for the Owned Real Property in the possession
of Seller or any Subsidiary. Seller has furnished Buyer with all Environmental
Reports prepared since January 1, 1992.
(b) Schedule 3.12(b) sets forth, by address, owner and usage, a true
and complete list of all real property agreements (including any amendments
thereto) pursuant to which Seller or the Subsidiaries lease, sublease or
otherwise occupy any real property (the "Real Property Leases" and the property
leased thereunder, the "Leased Real Property"), true and complete (including all
amendments and supplements thereto) copies of which have been furnished to
Buyer. Each of the Real Property Leases is a valid agreement and is in full
force and effect in accordance with the terms thereof. Pursuant to the Real
Property Leases, Seller and the Subsidiaries, as the case may be, have validly
existing and enforceable leasehold, subleasehold or occupancy interests in the
property leased thereunder, in each case free and clear of all Liens, except for
Permitted Liens, and free from defaults and events which with the passage of
time or notice or both would constitute a default, except for defaults which,
individually or in the aggregate, have not had or would not reasonably be
expected to have, a Material Adverse Effect. Subject to the proviso contained in
Section 3.05(b), the consummation of any of the Transactions will not require
any consent or approval of any landlord under any such lease, result in any
increase in rent or penalty to the party which is a tenant thereunder or result
in the early termination of any Real Property Lease. None of Seller or the
Subsidiaries has transferred, assigned, hypothecated, pledged or encumbered any
of its rights or interest under any Real Property Lease.
(c) Schedule 3.12(c) sets forth, by address, owner and usage, a true
and complete list of all real property agreements (including any amendments
thereto) pursuant to which Seller or any of the Subsidiaries leases, subleases
or otherwise permits any third party to occupy any Owned Real Property or Leased
Real Property (collectively, the "Third Party Leases"). Each of the Third Party
Leases is in full force and effect and in each case free and clear of all Liens,
except for Permitted Liens, and free from defaults by Seller or any Subsidiary
and, to the Knowledge
<PAGE>
28
of Seller, defaults by any other party thereto and events which with the passage
of time or notice or both would constitute a default (by landlord or tenant
thereunder) except in any instance for defaults which, individually or in the
aggregate, have not had or would not reasonably be expected to have, a Material
Adverse Effect. Except as set forth on Schedule 3.12(c), none of Seller or the
Subsidiaries have transferred, assigned, hypothecated, pledged or encumbered any
of its rights under any of the Third Party Leases. Except as set forth on
Schedule 3.12(c), (i) none of the Third Party Leases grant any options or other
rights to the tenant thereunder to purchase any of the Owned Real Property or
Leased Real Property, and (ii) neither party has any option, right of possession
or interest of any kind in or to any Owned Real Property or Leased Real Property
(except pursuant to the Third Party Leases and except for the terms of the
Leased Real Property as set forth in the applicable Real Property Leases).
(d) Schedule 3.12(d) sets forth a true and complete list of all
agreements and build and lease agreements, including any amendments thereto (as
amended, the "Development Agreements"), pursuant to which (i) any third party
has been given the right (exclusive or otherwise) to develop any real property
for Seller or any of the Subsidiaries or (ii) Seller or any of the Subsidiaries
has agreed to develop, construct or occupy in the future (whether by lease or
other occupancy agreement) any real property. Except as set forth on Schedule
3.12(d), each of the Development Agreements is in full force and effect and in
each case free from defaults by Seller or any Subsidiary and, to the Knowledge
of Seller, defaults by any other party thereto and events which with the passage
of time or notice or both would constitute a default thereunder.
(e) To the Knowledge of Seller, each of Seller and the Subsidiaries
has all Permits and certificates of occupancy necessary to own or operate its
Owned Real Property and Leased Real Property as such is currently being operated
and used. No such Permits will be required, as a result of any of the
Transactions, to be issued, modified or supplemented after the Closing in order
to permit Seller following the Transactions to continue to own or operate its
Owned Real Property and Leased Real Property as such is currently being operated
and used, other than any such Permits which are ministerial in nature.
(f) To the Knowledge of Seller, the operation of the businesses and
all current uses of the Owned Real Property and the Leased Real Property fully
comply with all applicable zoning laws and ordinances affecting the Owned Real
Property and the Leased Real Property other than those, the failure with which
to comply, had not had or would not reasonably be expected to have a Material
Adverse Effect. There are no actual, or to the Knowledge of Seller, threatened
or imminent changes in the present zoning of the Owned Real Property or the
Leased Real
<PAGE>
29
Property or any part thereof or any restrictions, limitations or regulations
issued, or to the Knowledge of Seller, proposed or under consideration by any
Governmental Entity having or asserting jurisdiction over the Owned Real
Property or the Leased Real Property or the ownership thereof.
(g) Except as set forth on Schedule 3.12(g), neither Seller nor the
Subsidiaries has received, with respect to any Owned Real Property or Leased
Real Property, any written notice of default or any written notice of
noncompliance with respect to applicable Laws relating to zoning, building,
fire, use restriction or safety or health codes which have not been remedied in
all respects which have had or could reasonably be expected to have, a Material
Adverse Effect. There is no pending or to the Knowledge of Seller, threatened
condemnation, expropriation, eminent domain or other governmental taking of all
or any part of any of the Owned Real Property or Leased Real Property and none
of Seller or the Subsidiaries has received any oral or written notice of any of
the same.
(h) Seller or a Subsidiary is in possession of and has good and
marketable title to, or has valid leasehold interests in, all tangible personal
property used in the business of Seller and the Subsidiaries. All such tangible
personal property is free and clear of all Liens, except for Permitted Liens and
as described on Schedule 3.12(h), and is in all material respects in good
working order and normal operating condition and repair, ordinary wear and tear
excepted. Seller and each Subsidiary has good and marketable title to its
respective inventory and accounts receivable, free and clear of all Liens,
except for Permitted Liens and Liens described on Schedule 3.12(h).
(i) To the Knowledge of Seller, all components of buildings,
structures and other improvements included within the Owned Real Property and
the Leased Real Property, including, but not limited to, the roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking, and systems and facilities included therein, are in good working order
and repair and free of structural defects (normal wear and tear excepted).
SECTION 3.13. Environmental Matters. Except as disclosed on Schedule
3.13, which disclosed items of non-compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect:
(a) Seller and the Subsidiaries hold and formerly held, and are, and
have been, in compliance with, all Environmental Permits, and Seller and the
Subsidiaries are, and have been, otherwise in compliance with all applicable
Environmental Laws and, to the Knowledge of Seller, there are no existing
conditions that might prevent or interfere with such
<PAGE>
30
compliance in the future, except for items of non-compliance or existing
conditions which could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect;
(b) To the Knowledge of Seller, none of Seller or the Subsidiaries
has received any Environmental Claim, and none of Seller or the Subsidiaries is
aware after reasonable inquiry, of any threatened Environmental Claim or of any
circumstances, conditions or events that could reasonably be expected to give
rise to an Environmental Claim, against Seller or any of the Subsidiaries;
(c) None of Seller or the Subsidiaries has entered into or agreed to
any consent decree, order or agreement under any Environmental Law, and none of
Seller or the Subsidiaries is subject to any material judgment, decree, order or
other material requirement relating to compliance with any Environmental Law or
to investigation, cleanup, remediation or removal of regulated substances under
any Environmental Law;
(d) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyls, (iii) asbestos or asbestos-containing materials, (iv)
urea-formaldehyde insulation, (v) sumps, (vi) surface impoundments, (vii)
landfills, (viii) sewers or septic systems or (ix) Hazardous Materials present
at or about any facility currently or formerly owned, leased, operated or
otherwise used by Seller or any of the Subsidiaries that could, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect;
(e) There are no past (including with respect to assets or
businesses formerly owned, leased or operated by Seller or any of the
Subsidiaries) or present actions, activities, events, conditions or
circumstances, including the release, threatened release, emission, discharge,
generation, treatment, storage or disposal of Hazardous Materials, or the
presence of wetlands, that could, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect or materially restrict the
use or further development of any asset currently owned, leased or operated by
Seller or any of the Subsidiaries under any Environmental Laws or any contract
or agreement;
(f) No modification, revocation, reissuance, alteration, transfer,
or amendment of the Environmental Permits, or any review by, or approval of, any
third party of the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of the Transactions
or the continuation of the business of Seller and the Subsidiaries following
such consummation;
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31
(g) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be released at, on, from
or under any of the properties or facilities currently or formerly owned, leased
or otherwise used by Seller or any of the Subsidiaries, in violation of or in a
manner or to a location that could, individually or in the aggregate, result in
a Material Adverse Effect;
(h) Seller and the Subsidiaries have not assumed, contractually or
by operation of Law, any Liabilities under any Environmental Laws; and
(i) Seller and the Subsidiaries have accrued or otherwise provided,
in accordance with general accepted accounting principles, for all damages,
Liabilities, penalties or costs that they may incur in connection with any claim
pending or threatened against them, or any requirement that is or may be
applicable to them, under any Environmental Laws, and such accrual or other
provision is reflected in the Balance Sheet.
SECTION 3.14. Contracts. (a) Except as described on Schedule 3.14(a)
or as specifically described on Schedules 3.12(a), (b) or (c), as of the date of
this Agreement, none of Seller or any Subsidiary is a party to any, written or
oral:
(i) contract or agreement containing covenants limiting the freedom
of Seller or any Subsidiary after the date hereof to engage in any line of
business in any geographic area or to compete with any Person, including
limitations on Seller's freedom to enter into other contracts;
(ii) contract, agreement or instrument (including take-or-pay or
keep-well agreements) under which (1) Seller or any Subsidiary has
incurred any Indebtedness, (2) any Person has directly or indirectly
guaranteed any Liabilities of Seller or a Subsidiary, or (3) Seller or a
Subsidiary has directly or indirectly guaranteed any Liabilities of any
Person;
(iii) mortgage, pledge, security agreement, deed of trust or other
instrument creating or purporting to create a Lien (including with respect
to properties acquired under conditional sales, capital leases or other
title retention or security devices), other than any mortgage, pledge,
security agreement, deed of trust or other instrument creating or
purporting to create a Lien on assets with an aggregate fair market value
which does not exceed $50,000;
<PAGE>
32
(iv) contract, agreement or instrument providing for indemnification
by Seller or a Subsidiary of any Person with respect to any Liabilities
other than any contract, agreement or instrument entered into in the
ordinary course of business consistent with past practice;
(v) vendor allowance, merchandising, distribution or similar
contract or agreement which provides for payments (or pursuant to which
payments can reasonably be expected to be made) in excess of $100,000
during the term of the contract or agreement;
(vi) any partnership, joint venture, shareholders' or other similar
contract or agreement with any Person;
(vii) contract, option, right of first refusal, purchase contract or
other contractual right or agreement relating to the disposition or
acquisition or leasing of any properties or assets (other than inventory)
after the date hereof;
(viii) contract or agreement (other than this Agreement) that (1)
limits or contains restrictions on the ability of Seller or any Subsidiary
to declare or pay dividends on, to make any other distribution in respect
of or to issue or purchase, redeem or otherwise acquire its capital stock,
to incur Indebtedness, to incur or suffer to exist any Lien, to change the
lines of business in which it participates or engages or to engage in any
merger or business combination or (2) requires Seller or any Subsidiary to
maintain specified financial ratios or levels of net worth or other
indicia of financial condition;
(ix) contract or agreement which is terminable by the other party
thereto, or gives such other party any right of amendment or acceleration
or pursuant to which Seller or any Subsidiary would lose any benefit
under, upon a change of control or recapitalization of Seller or one of
the Subsidiaries;
(x) power of attorney or similar instrument not made in the ordinary
course of business consistent with past practice since December 31, 1994;
and
(xi) contract or agreement which provides for payments (or pursuant
to which payments can reasonably be expected to be made) after the date
hereof in excess of $100,000 during any one-year period or $200,000 during
the term of the contract or agreement and which is not otherwise listed on
Schedules 3.03(c), 3.10(a), 3.12(a), 3.12(b), 3.12(c), 3.12(d), 3.14(a) or
3.19.
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33
(b) Except as set forth on Schedule 3.14(b), neither Seller nor any
Subsidiary is (and, to the Knowledge of Seller, no other party is) in breach of
or default under any contract or agreement listed on Schedules 3.03(c), 3.10(a),
3.12(a), 3.12(b), 3.12(c), 3.12(d), 3.14(a) or 3.19, and, to the Knowledge of
Seller, no event has occurred that, with or without notice or lapse of time or
both, would result in a breach or a default thereunder, in each case except for
breaches, defaults or events which, individually or in the aggregate, have not
had or would not reasonably be expected to have a Material Adverse Effect.
Seller has delivered to Buyer true and complete copies of all the written
contracts or agreements described on the Schedules listed in the preceding
sentence and written summaries of any oral contract or agreement described on
any such Schedule.
SECTION 3.15. Intellectual Property. Except as set forth on Schedule
3.15, to the Knowledge of Seller, Seller or one of the Subsidiaries owns (in
each case, free and clear of any Liens) all rights to all Intellectual Property
used by Seller and each of the Subsidiaries, including the exclusive right to
use the trade names "Randall's", "Tom Thumb" and "Simon David" and any
variations thereof used by Seller or the Subsidiaries. Except as set forth on
Schedule 3.15, Seller and the Subsidiaries have the exclusive right to use in
the State of Texas the trade names "Randall's", "Tom Thumb" and "Simon David"
and any variations thereof used by Seller or the Subsidiaries. Except as set
forth on Schedule 3.15, to the Knowledge of Seller, no other Person has a United
States trademark registration in effect, or to the Knowledge of Seller, a United
States trademark application pending, in respect of any of such Intellectual
Property. Except as disclosed on Schedule 3.15, (a) to the Knowledge of Seller,
the use of any Intellectual Property by Seller or the Subsidiaries does not
infringe on the rights of any Person, (b) to the Knowledge of Seller, no Person
is infringing on any right of Seller or any of the Subsidiaries with respect to
any of Seller's Intellectual Property, (c) there is no decree, undertaking or
agreement limiting the scope of Seller's right to use any of its Intellectual
Property and (d) Seller has not granted any license to any Person for the use of
any of Seller's Intellectual Property. Except as set forth on Schedule 3.15, all
trademark registrations are valid and subsisting and in full force and effect
and all affidavits of continuing use have been filed on a timely basis. Except
as set forth on Schedule 3.15, to the Knowledge of Seller, there are no
infringing or diluting uses of Seller's or any Subsidiary's Intellectual
Property.
SECTION 3.16. Insurance. Schedule 3.16 contains a true and complete
list of all insurance policies (the "Insurance Policies") that insure the
business, operations or employees of Seller or any Subsidiary or affect or
relate to the ownership, use or operation of any of the properties of Seller or
any Subsidiary, including a description of whether such insurance policies are
"occurrence based" or "claims made" policies. The
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Insurance Policies are in such amounts, with such deductibles and against such
risks and losses as are reasonable to insure the businesses, properties, assets
and employees of Seller and the Subsidiaries. None of the Insurance Policies
will terminate or lapse by reason of any of the Transactions. Each of the
Insurance Policies is valid and binding and in full force and effect, no
premiums thereunder have not been paid (within any applicable grace period) and
neither Seller nor any Subsidiary is in default thereunder in any material
respect. No insurer under any such policy has cancelled or generally disclaimed
liability under any such policy or indicated any intent to do so or to
materially increase the premiums payable or not to renew any such policy. All
material claims of which notice has been given to an insurance company under any
Insurance Policy filed since January 1, 1994 are listed on Schedule 3.16 and
have been filed in a timely fashion.
SECTION 3.17. Brokers. No broker, investment banker, financial
advisor or other Person, other than PaineWebber Incorporated, the fees and
expenses of which will be paid by Seller (pursuant to a fee agreement, a copy of
which has been provided to Buyer), is entitled to any brokerage, finder's,
financial advisor's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Seller.
SECTION 3.18. Agreements to Sell Assets, Merge or Consolidate.
Except as set forth on Schedule 3.18, none of Seller or any Subsidiary has any
agreement, absolute or contingent, with any other Person to sell the capital
stock, assets (other than sales of assets that would not be prohibited under
Section 3.08(g)) or business of Seller or any Subsidiary or to effect any
merger, consolidation (other than mergers and consolidations that would not be
prohibited under Section 3.08(e)) or other reorganization of Seller or any
Subsidiary or to enter into any agreement with respect thereto.
SECTION 3.19. Transactions with Certain Persons. Except as set forth
on Schedule 3.19, no officer, director or employee of Seller or any Subsidiary
nor any Affiliate of any such Person nor any member of any such Person's
immediate family is a party to any contract, agreement, transaction or other
arrangement with Seller or any Subsidiary, (i) providing for the furnishing of
services (except in such Person's capacity as an officer, director or employee)
by, (ii) providing for the rental of real or personal property, (iii) providing
for a loan or advance of funds, or (iv) otherwise requiring payments to (other
than for services as officers, directors or employees of Seller or any
Subsidiary) or from any such Person.
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35
SECTION 3.20. Food Depot, Inc.. The 51% interest in Food Depot,
Inc., a Texas corporation ("Food Depot"), held by Lew Harpold (the "Food Depot
Interest") is freely transferrable without any loss or impairment of any Permits
held by Food Depot as long as the provisions of the Texas Alcoholic Beverage
Code and related regulations, including those setting criteria as to who may own
an entity which has been issued such Permits, are met. Randall's Food & Drugs,
Inc. holds the other 49% interest in Food Depot. Food Depot holds all Permits
necessary for the beer and wine operations conducted on the premises of Seller
and the Subsidiaries and is the owner of the beer and wine inventory located on
such premises.
SECTION 3.21. Board Recommendation. The Board of Directors of
Seller, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (a)
determined that this Agreement and the Transactions, including the Amendment,
the Purchase, the Option, the Financing and the Tender Offer, taken together are
fair to and in the best interests of the Common Shareholders, and (b) resolved
to recommend that the Common Shareholders approve the foregoing, provided, that
such recommendation need not include a recommendation that the Common
Shareholders accept the Tender Offer.
SECTION 3.22. Required Seller Vote. The approval of the Transactions
by the affirmative vote of a majority of the outstanding shares of Common Stock
is the only vote of the holders of any class or series of Seller's securities
necessary to enable Seller to consummate the Transactions. There is no vote of
the holders of any class or series of Seller's securities necessary to approve
the Shareholders Agreement.
SECTION 3.23. Information Supplied. None of the information supplied
or to be supplied by Seller for inclusion in any proxy statement, tender offer
statement or other communication to the Common Shareholders relating to or in
connection with the Shareholder Approval or the Tender Offer (the "Proxy/Tender
Offer Statement") will, as of the date it is first mailed to the Common
Shareholders, at the time of the Shareholders Meeting or at the time any shares
of Common Stock are purchased pursuant to the Tender Offer, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
SECTION 3.24. State Takeover Statutes. No state takeover statute or
similar statute or regulation of the State of Texas (and, to the Knowledge of
Seller after due inquiry, of any other state or jurisdiction) applies or
purports to apply to the Agreement or any of the Transactions. No provision of
the Articles, Bylaws or other governing instruments of Seller or the
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36
articles of organization, bylaws or other governing instruments of any of the
Subsidiaries would, directly or indirectly, restrict or impair the ability of
Buyer or its Affiliates to vote, or otherwise to exercise the rights of a
shareholder with respect to, securities of Seller and the Subsidiaries that may
be acquired or controlled by Buyer or its Affiliates or permit any shareholder
to acquire securities of Seller on a basis not available to Buyer in the event
that Buyer were to acquire securities of Seller, and neither Seller nor any of
the Subsidiaries has any shareholders rights plan, preferred stock or similar
arrangement which have any of the aforementioned consequences.
SECTION 3.25. Books and Records. The minute books and other similar
records of Seller and the Subsidiaries as made available to Buyer prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all actions taken at all meetings and by all written consents in
lieu of meetings of the shareholders and the boards of directors (or similar
governing bodies) of Seller and the Subsidiaries. The stock transfer ledgers and
other similar records of Seller and the Subsidiaries as made available to Buyer
prior to the execution of this Agreement accurately reflect all record transfers
prior to the execution of this Agreement in the capital stock of Seller and the
Subsidiaries.
SECTION 3.26. Effect of Transaction. To the Knowledge of Seller, as
of the date of this Agreement, no creditor, employee, client, customer or other
Person having a material business relationship with Seller or any Subsidiary has
informed Seller or any Subsidiary in writing that such Person intends to change
such relationship because of the Agreement or the Transactions.
SECTION 3.27. Full Disclosure. No representation or warranty of
Seller in this Agreement, nor any statement or certificate furnished or to be
furnished to Buyer pursuant to this Agreement, or in connection with the
Transactions, contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not false or misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
SECTION 4.01. Organization, Standing and Corporate Power. Buyer is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has full power and authority to own its properties and to
carry on its
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37
business as now being conducted. Buyer is duly qualified or licensed to do
business as a foreign entity in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
material adverse effect on the ability of Buyer to perform its obligations
hereunder.
SECTION 4.02. Authority; Noncontravention. (a) Buyer has the power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the Transactions. The execution and
delivery of this Agreement by Buyer, the performance by Buyer of its obligations
hereunder, and the consummation by Buyer of the Transactions have been duly
authorized by all necessary action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other Laws relating to or affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
(b) Except for the filings required under the HSR Act, the execution
and delivery of this Agreement by Buyer does not, and the consummation of the
Transactions and compliance with the provisions hereof by Buyer will not,
conflict with, result in any breach or violation of, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under, or give rise to a right of termination, amendment or
acceleration of a "put" right with respect to any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Buyer under, (i) organizational documents of Buyer, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease, contract,
joint venture or other agreement, instrument, permit, concession, franchise or
license applicable to Buyer or its properties or assets, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any Law, Governmental Order or arbitration award applicable to Buyer or its
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
could not, individually or in the aggregate, prevent, hinder or materially delay
the ability of Buyer to consummate the Transactions. No consent, approval, order
or authorization of, action by, or registration, declaration or filing with, or
notice to, any Governmental Entity is required by or with respect to Buyer in
connection with the execution, delivery or performance of this Agreement by
Buyer or the consummation by Buyer of the Transactions, except for (i) the
notification requirements of the HSR Act and (ii) such other
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consents, approvals, orders, authorizations, registrations, declarations,
filings or notices as may be required.
SECTION 4.03. Purchase for Investment. Buyer acknowledges that the
Shares have not been registered under the Securities Act or under any state
securities laws. Buyer (i) is not an underwriter as such term is defined under
the Securities Act, (ii) is acquiring the Shares solely for investment with no
present intention to distribute any of the Shares to any Person and (iii) will
not sell or otherwise dispose of any of the Shares, except in compliance with
the registration requirements or exemption provisions of the Securities Act and
any other applicable securities laws.
SECTION 4.04. Brokers. No unaffiliated broker, investment banker,
financial advisor or other Person is entitled to any brokerage, finder's,
financial advisor's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Buyer or its
Affiliates.
ARTICLE V.
COVENANTS
SECTION 5.01. Conduct of Business of Seller. During the period from
the date of this Agreement to the Closing (except as specifically required by
this Agreement), Seller shall, and shall cause the Subsidiaries to, conduct
their respective businesses only in the ordinary course of business consistent
with past practice (including with respect to advertising, promotions, capital
expenditures, inventory levels, payment of employee and officer compensation,
payment of payables and the collection of receivables), and use its and their
respective best efforts to preserve intact its and their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, advertisers, distributors and others having business dealings with
them to the end that their goodwill and ongoing businesses shall be unimpaired
at the Closing. Without limiting the generality of the foregoing, except as
specifically required by this Agreement or except as described on Schedule 5.01,
Seller shall not, and shall cause the Subsidiaries to not, do any of the
following without the prior written consent of Buyer:
(a) terminate or amend in any material respect any contract or
agreement listed on Schedules 3.03(c), 3.10(a), 3.12(a), 3.12(b), 3.12(c),
3.12(d), 3.14(a) or 3.19;
(b) enter into any contract or agreement of the type described in
Sections 3.03(c), 3.10(a), 3.12(a) 3.12(b), 3.12(c), 3.12(d), 3.14(a) or 3.19,
which contract or agreement would be
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39
required to be set forth on any such Schedule if such contract or agreement were
in effect as of the date of this Agreement;
(c) terminate or amend (in any material respect) any Seller Plan or
implement or enter into any plan, agreement, program, policy or arrangement that
would be a Seller Plan if implemented;
(d) grant to any employee, if the annual salary payable to such
employee is at least $75,000, any increase in compensation or benefits, except
as may be required under agreements in effect as of the date of this Agreement
or any Seller Plan;
(e) make any election with respect to Taxes;
(f) amend the CapEx Budget;
(g) make any capital expenditure or commitment for any capital
expenditure, except (i) prior to June 29, 1997, (A) as described in the CapEx
Budget or (B) which does not exceed $100,000 in respect of any project and (ii)
on or after June 29, 1997, which does not exceed $100,000 in respect of any
project, provided, that (1) in no event shall the aggregate amount of capital
expenditures or commitments for capital expenditures in respect of the projects
referenced in clause (i)(B) and (ii) exceed $2 million and (2) no expenditure or
commitment for any expenditure shall be made for new stores, property purchases
or leases or sale/leasebacks without Buyer's prior written consent; or
(h) take any action which could cause any representation or warranty
of Seller contained in this Agreement (including those set forth in Section
3.08) to be or become untrue at Closing or could result in any breach of any
covenant made by Seller in this Agreement.
SECTION 5.02. Prepayment of Indebtedness and Redemption of Preferred
Stock. Seller shall take such action as Buyer may reasonably request, in order
to facilitate the (a) the elimination of any non-compliance by Seller or any
Subsidiary with any of the terms of and the prepayment of the obligations of
Seller and the Subsidiaries under the Credit Agreement and the Note Purchase
Agreement at the Closing including, with respect to the Note Purchase Agreement,
the payment of the Make-Whole Price, in accordance with the terms thereof (the
"Debt Prepayment"), and (b) redemption of the Class A Preferred Stock and the
Convertible Preferred Stock at the Closing, in accordance with the terms thereof
(the "Preferred Stock Redemption").
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SECTION 5.03. Additional Financial Statements. As soon as reasonably
practicable after the end of the applicable period, Seller shall furnish to
Buyer (a) the quarterly financial statements of Seller and each of the
Subsidiaries for all fiscal periods subsequent to the Balance Sheet Date, which
shall have been prepared in accordance with GAAP applied on a basis consistent
with the Interim Financial Statements, subject to normal year-end adjustments
and the absence of footnote disclosure, (b) all four week period financial
statements of Seller and each of the Subsidiaries (for periods subsequent to
January 11, 1997), which shall have been prepared in a manner consistent with
past practice, and (c) any other financial information of Seller or the
Subsidiaries as may reasonably be requested by Buyer.
SECTION 5.04. WARN. Neither Seller nor any of the Subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN"), affecting in
whole or in part any site of employment, facility, operating unit or employee of
Seller or any Subsidiary, without notifying Buyer or its Affiliates in advance
and without complying with the notice requirements and other provisions of WARN.
SECTION 5.05. Articles of Incorporation. As soon as practicable
following the receipt of the Shareholder Approval, Seller shall file the
Amendment in accordance with the TBCA. The Amendment shall become effective at
such time as the Amendment is duly filed with the Secretary of State of the
State of Texas. The Articles, as amended, shall read in their entirety
substantially in the form set forth as Exhibit C hereto, and, as so amended and
until thereafter further amended as provided therein and under the TBCA, shall
be the articles of incorporation of Seller following the Closing.
SECTION 5.06. Preparation of Proxy/Tender Offer Statement;
Shareholders Meeting. Seller shall, as promptly as practicable following the
date of this Agreement and in consultation with Buyer:
(a) Prepare the Proxy/Tender Offer Statement and cause it to be
mailed to each Common Shareholder of record entitled to vote at the Shareholders
Meeting in accordance with the TBCA. Seller shall not mail the Proxy/Tender
Offer Statement without obtaining the prior approval thereof by Buyer. The
information provided and to be provided by Buyer and Seller, respectively, for
use in the Proxy/Tender Offer Statement shall, at the time that it is given to
the Common Shareholders, on the date of the Shareholders Meeting, and at the
time the shares of Common Stock are purchased pursuant to the Tender Offer, be
true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not misleading, and Seller and Buyer each agree
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41
to correct any information provided by it for use in the Proxy/Tender Offer
Statement which shall have become false or misleading. The Proxy/Tender Offer
Statement shall set forth the proposed Amendment and the terms of the Tender
Offer or a summary thereof.
(b) Duly call, give notice of, convene and hold the Shareholders
Meeting. Subject to its fiduciary duties under the TBCA, the Board of Directors
of Seller shall recommend approval of the Shareholder Approval Matters to the
Common Shareholders. Seller shall use its best efforts to hold the Shareholders
Meeting as soon as practicable after the date hereof.
(c) Commence the Tender Offer for three separate pools of Common
Stock, the first for up to 1,104,336 ESOP Shares, the second for up to 200,435
Putable Shares and the third for up to 4,280,415 Non-ESOP Shares, each at a
price equal to $16.00 per share of Common Stock, to the Common Shareholders in
cash (the "Tender Offer Price"). Provided that this Agreement shall not have
been terminated in accordance with Section 7.01, Seller shall consummate the
Tender Offer and accept for payment and purchase the shares of Common Stock
tendered pursuant to the Tender Offer concurrently with the consummation of the
Purchase. Without the prior written consent of Buyer, Seller shall not change
the Tender Offer Price, change the number of shares of Common Stock being sought
in the Tender Offer or in any of its component pools, change the form of
consideration payable in the Tender Offer, add additional conditions to the
Tender Offer, or make any other change in the terms or conditions of the Tender
Offer. The Tender Offer shall be made by means of the Proxy/Tender Offer
Statement, which document shall not be supplemented or amended without Buyer's
prior approval. Upon the terms and subject to the conditions of the Tender
Offer, Seller shall purchase all the shares of Common Stock which are validly
tendered on or prior to the expiration of the Tender Offer and not withdrawn,
provided, that, subject to the next two sentences (i) as to any tendered ESOP
Shares attributable to a particular ESOP participant, the ESOP, in respect of
ESOP Shares attributable to such participant, shall be deemed to have tendered
all of the Withdrawable Shares attributable to such participant prior to having
tendered any of the Non-Withdrawable Shares attributable to such participant,
(ii) subject to the provisions of clause (i), if the Tender Offer shall be
oversubscribed by holders of ESOP Shares, Seller shall accept for payment and
purchase the validly tendered (and not withdrawn) shares of Common Stock by such
holders on a pro rata basis, (iii) if the Tender Offer shall be oversubscribed
with respect to the Putable Shares, Seller shall accept for payment and purchase
the validly tendered (and not withdrawn) Putable Shares on a pro rata basis and
(iv) if the Tender Offer shall be oversubscribed by holders of Non-ESOP Shares,
Seller shall accept for payment and purchase the validly tendered (and not
withdrawn) shares of Common Stock by such holders on a pro rata basis (after
giving
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effect to any assignment described below). The Proxy/Tender Offer Statement will
describe procedures pursuant to which any holder of Non-ESOP Shares may assign
such holder's right to have purchased by Seller in the Tender Offer all or a
portion of such Non-ESOP Shares which have been actually accepted for purchase
by Seller in the Tender Offer (the Non-ESOP Shares subject to any such
assignment, "Assigned Shares"), provided that an assignee cannot as a result of
any such attempted assignment sell as Assigned Shares Shares of such assignee
that have otherwise been accepted for purchase in the Tender Offer. For purposes
of this Section 5.06(c) the term "ESOP" includes any plan, entity or other
Person who succeeds the ESOP as holder of the Common Stock held by the ESOP.
SECTION 5.07. Access to Information; Confidentiality. (a) Seller
shall, and shall cause the Subsidiaries, officers, employees, counsel, financial
advisors and other representatives to, afford to Buyer and its representatives
and to potential financing sources reasonable access during normal business
hours prior to the Closing to its properties, books, contracts, commitments,
personnel and records and, during such period, Seller shall, and shall cause the
Subsidiaries, officers, employees and representatives to, furnish promptly to
Buyer all information concerning its business, properties, financial condition,
operations and personnel as Buyer may from time to time reasonably request.
Except as required by Law, each of Seller and Buyer will hold, and will cause
its respective directors, officers, employees, accountants, counsel, financial
advisors and other representatives and Affiliates to hold, any nonpublic
information in confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement.
(b) No investigation pursuant to this Section shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 5.08. Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of Seller and Buyer agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Purchase and the
other Transactions. Buyer and Seller will use their best efforts and cooperate
with one another (i) in promptly determining whether any filings are required to
be made or consents, approvals, waivers, Permits (including all beer, wine
and/or liquor licenses), or authorizations are required to be obtained (or,
which if not obtained, would result in an event of default, termination or
acceleration of any agreement or any "put" right under any agreement) under any
applicable Law or from any Governmental Entity or Person, including parties to
loan
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agreements or other debt instruments, in connection with the Agreement and the
Transactions, and (ii) in promptly making any such filings, in furnishing
information required in connection therewith and in timely seeking to obtain any
such consents, approvals, Permits or authorizations.
(b) Seller shall cooperate with any reasonable requests of Buyer
related to the recording of the Transactions as a recapitalization for financial
reporting purposes. In furtherance of the foregoing, Seller shall provide to
Buyer for the prior review of Buyer's advisors any description of the
Transactions which is meant to be disseminated.
(c) Seller agrees to provide, and will cause the Subsidiaries and
its and their respective officers and employees to provide, all necessary
cooperation in connection with the arrangement of any financing to be
consummated contemporaneous with or at or after the Closing, including financing
in respect of the Transactions and financing to provide for the working capital
needs of Seller following the consummation of the Transactions (the
"Financing"), including participation in meetings, due diligence sessions, road
shows, the preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents, the execution and delivery of any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing documents, or other requested certificates or
documents, including a certificate of the chief financial officer of Seller with
respect to solvency matters, comfort letters of accountants and legal opinions
customarily delivered in connection with comparable financings, in each case as
may be requested by Buyer.
(d) Buyer agrees to act in good faith and to use its reasonable best
efforts to arrange the Financing, including using its reasonable best efforts
(i) to assist Seller in the negotiation of definitive agreements with respect
thereto and (ii) to satisfy all conditions applicable to Buyer in such
definitive agreements. Buyer will keep Seller informed of the status of its
efforts to arrange the Financing.
SECTION 5.09. Public Announcements. Neither Buyer, on the one hand,
nor Seller, on the other hand, shall issue any press release or public statement
with respect to the Agreement and Transactions without the other party's prior
consent, except as may be required by applicable Law or court process. In
addition to the foregoing, Buyer and Seller will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
such press release or other public statements with respect to the Agreement and
Transactions. The parties agree that the initial press release or releases to be
issued with respect to the Transactions shall be mutually agreed upon prior to
the issuance thereof.
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SECTION 5.10. No Solicitation. Neither Seller nor any of the
Subsidiaries shall (whether directly or indirectly through advisors, agents or
other intermediaries), nor shall Seller or any of the Subsidiaries authorize or
permit any of its or their officers, directors, agents, representatives or
advisors to (a) solicit, initiate or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any Person relating to any
acquisition or purchase of more than 10% of the assets of Seller or any of the
Subsidiaries or of more than 10% of any class of equity securities of Seller or
any of the Subsidiaries or any tender offer (including a self tender) or
exchange offer that if consummated would result in any Person beneficially
owning 10% or more of any class of equity securities of Seller or any of the
Subsidiaries, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving Seller or any of the Subsidiaries (other than the
Transactions) or any other transaction the consummation of which would or could
reasonably be expected to impede, interfere with, prevent or materially delay
any of the Transactions or which would or could reasonably be expected to
materially dilute the benefits to Buyer of the Transactions (collectively,
"Transaction Proposals") or agree to or endorse any Transaction Proposal, or (b)
enter into or participate in any discussions or negotiations regarding any of
the foregoing, or furnish to any other Person any information with respect to
its business, properties or assets or any of the foregoing, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing;
provided, however, that the foregoing shall not prohibit Seller from (i)
furnishing information pursuant to an appropriate confidentiality letter
(provided for informational purposes only to Buyer) concerning Seller and its
businesses, properties or assets to a third party who has made an unsolicited
Transaction Proposal, (ii) engaging in discussions or negotiations with such a
third party, (iii) following receipt of a Transaction Proposal, failing to make
or withdrawing or modifying its recommendation referred to in Section 3.21,
and/or (iv) taking any nonappealable, final action ordered to be taken by Seller
by any court of competent jurisdiction, but in each case referred to in the
foregoing clauses (i) through (iv) only to the extent that the Board of
Directors of Seller shall have concluded in good faith on the basis of written
advice from outside counsel that such action is required to prevent the Board of
Directors of Seller from breaching its fiduciary duties to the Common
Shareholders under the TBCA; provided, further, that the Board of Directors of
Seller shall not take any of the foregoing actions referred to in clauses (i)
through (iii) until after reasonable notice to Buyer with respect to such action
and that such Board of Directors shall, to the extent it may do so without
breaching such fiduciary duties, continue to advise Buyer after taking such
action and, in addition, if the Board of Directors of Seller
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receives a Transaction Proposal, then Seller shall promptly inform Buyer of the
terms and conditions of such proposal and the identity of the Person making it.
Seller will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
SECTION 5.11. Directors. Prior to the Closing, Seller shall deliver
to Buyer evidence satisfactory to Buyer of the resignation of all directors of
Seller and any Subsidiary (other than those individuals listed on Schedule 5.11)
and the appointment as directors of Seller of those individuals designated by
Buyer to Seller no later than two Business Days prior to Closing, which
resignations and appointments shall be effective as of the Closing.
SECTION 5.12. Certain Agreements. Neither Seller nor any Subsidiary
will waive or fail to enforce any provision of any confidentiality or standstill
or similar agreement to which it is a party without the prior written consent of
Buyer.
SECTION 5.13. Settlement Agreement. Seller shall use its best
efforts to obtain final judicial approval of the Settlement contemplated by the
Settlement Agreement and the Pleadings as promptly as practicable following the
date hereof. Seller shall (a) comply with all of its obligations under the
Settlement Agreement and the Pleadings, (b) not amend or modify the Settlement
Agreement or the Pleadings, (c) not waive compliance by any other party to the
Settlement Agreement with any provision thereof, (d) obtain the written consent
of Buyer prior to the appointment of any new auditor, appraiser or trustee for
the ESOP (which consent shall not be unreasonably withheld) and (e) obtain the
written consent of Buyer prior to any withdrawal by Seller from the settlement
contemplated by the Settlement Agreement or termination of the Settlement
Agreement or such settlement.
SECTION 5.14. ESOP Amendment. Seller shall cause the Amended and
Restated ESOP attached as Exhibit D hereto to be effective as of April 1, 1997.
Seller agrees that, after giving effect thereto (i) the transactions set forth
in Section 5.06(c) will be able to be effectuated, (ii) no additional shares of
Common Stock will be purchased by the ESOP or allocated to the account of any
participant thereunder and (iii) the ESOP will be converted to a 401(k) plan
with diversified investment alternatives. As promptly as practicable following
the date hereof, Seller agrees to enter into a new trust agreement related to
the ESOP which reflects the changes to the ESOP reflected in the Amended and
Restated ESOP, provided, that Seller shall obtain the written consent of Buyer
prior to entering into such trust agreement (which consent shall not be
unreasonably withheld).
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ARTICLE VI.
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the Transactions is subject to the following conditions:
(a) Shareholder Approval and the Amendment. The Shareholder Approval
shall have been obtained and the Amendment shall have become effective in
accordance with the TBCA.
(b) HSR Act. The waiting period (including any extension thereof)
applicable under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition preventing the consummation of
the Transactions, including the Purchase, shall be in effect; provided, however,
that the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Representations, Warranties and Covenants. All representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations and warranties expressly relate to an earlier date)
as of the Closing Date as if such representations and warranties were made on
and as of the Closing Date, except for changes permitted or contemplated by this
Agreement. Seller shall have performed in all material respects all agreements
and covenants required hereby to be performed by it prior to or at the Closing
Date. There shall be delivered to Buyer a certificate of Seller (signed by an
executive officer of Seller) to the foregoing effect.
(e) Consents. Such Permits (including the continued availability of
all beer, wine and/or liquor licenses), consents, approvals, authorizations,
qualifications and orders of Governmental Entities and other third parties as
are necessary in connection with the Transactions shall have been obtained,
except such Permits, consents, approvals, authorizations, qualifications and
orders which are not, individually or in the aggregate, material to Buyer or
Seller or the failure of which to have received would not (as compared to the
situation in which such Permit, consent, approval, authorization, qualification
or order had been obtained) materially dilute the aggregate benefits to Buyer of
the Transactions.
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47
(f) No Litigation. There shall not be pending or threatened by any
Governmental Entity or any Person any Action, (i) challenging or seeking to
restrain or prohibit the consummation of the Purchase or any of the other
Transactions or seeking to obtain from Buyer or any of its Affiliates any
damages that are material to any such party, (ii) seeking to prohibit or limit
the ownership or operation by Seller or any of the Subsidiaries of any material
portion of the business or assets of Seller or any of the Subsidiaries, or
seeking to dispose of or hold separate any material portion of the business or
assets of Seller or any of the Subsidiaries, as a result of the Purchase or any
of the other Transactions or the Shareholders Agreement, or (iii) seeking to
impose limitations on the ability of Buyer to acquire or hold, or exercise full
rights of ownership of, any shares of Common Stock, including the right to vote
Common Stock on all matters properly presented to the Common Shareholders.
(g) Board of Directors. The Board of Directors of Seller shall
consist of those persons listed on Schedule 5.11 and those individuals
designated by Buyer pursuant to Section 5.11.
(h) Financing. Seller shall have received the proceeds of the
Financing on terms reasonably satisfactory to Buyer in an amount equal to or in
excess of $475 million.
(i) Indebtedness and Preferred Stock. Seller shall have consummated
the Debt Prepayment and the Preferred Stock Redemption.
(j) Shareholders Agreement. The Shareholders Agreement shall be in
full force and effect.
(k) Option. Seller shall have executed and delivered the Option to
Buyer.
(l) Settlement Agreement. The Settlement Agreement shall be in full
force and effect, Seller shall have complied with all its obligations thereunder
which are required to be complied with on or prior to the Closing Date, no
provision of the Settlement Agreement or the Pleadings shall have been amended
or modified and Seller shall not have waived compliance by any other party
thereto with any provision thereof or withdrawn from the settlement contemplated
by the Settlement Agreement. In addition, Buyer shall not be required to
consummate the Transactions unless (a) Seller has complied with its obligations
pursuant to the first sentence of Section 5.13, (b) the United States district
court shall have approved the settlement in accordance with its terms and the
terms of the Pleadings and (c) Buyer shall not have any reasonable basis to
believe that final judicial approval will not be obtained.
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48
(m) Transfer of Food Depot Interest. Upon request, Seller shall have
caused the Food Depot Interest to be transferred to Buyer or its designee
(without payment of any consideration, other than the Purchase Price).
(n) ESOP Valuations. As of the date of the commencement of the
Tender Offer and the Closing Date, the Common Stock held by the ESOP (or any
successor 401(k) Plan) shall have been determined to have a fair value of no
more than the Tender Offer Price and such determination shall have been made in
accordance with the provisions of the ESOP (or such 401(k) Plan).
SECTION 6.02. Conditions to Obligation of Seller. The obligation of
Seller to consummate the Transactions is subject to the following conditions:
(a) Shareholder Approval and the Amendment. The Shareholder Approval
shall have been obtained and the Amendment shall have become effective in
accordance with the TBCA.
(b) HSR Act. The waiting period (including any extension thereof)
applicable under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition preventing the consummation of
the Transactions, including the Purchase, shall be in effect; provided, however,
that the parties hereto shall use their best efforts to have any such
injunction, order, restraint or prohibition vacated.
(d) Representations, Warranties and Covenants. All representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties expressly relate to an earlier date) as of
the Closing Date as if such representations and warranties were made on and as
of the Closing Date, except for changes permitted or contemplated by this
Agreement. Buyer shall have performed in all material respects all agreements
and covenants required hereby to be performed by it prior to or at the Closing
Date. There shall be delivered to Seller a certificate of Buyer (signed by an
executive officer of Buyer) to the foregoing effect.
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49
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated and
abandoned at any time prior to the Closing, whether before or after approval of
the Shareholder Approval Matters by the Common Shareholders:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller in the event that any Governmental
Entity shall have issued a final, nonappealable order, decree or ruling or taken
any other final, nonappealable action enjoining, restraining or otherwise
prohibiting the Transactions and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) by either Buyer or Seller if the Closing shall not have occurred
on or before October 1, 1997 (other than due to the failure of the party seeking
to terminate this Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Closing);
(d) by Buyer, if the Shareholder Approval shall not have been
obtained at the Shareholders Meeting;
(e) by Buyer, if Seller shall have (i) withdrawn, modified or
amended in any respect adverse to Buyer its approval or recommendation of this
Agreement or any of the Transactions, (ii) failed as soon as practicable to mail
the Proxy/Tender Offer Statement to the Common Shareholders or failed to include
in such statement such recommendation, (iii) recommended any Transaction
Proposal from a Person other than Buyer or any of its Affiliates, or (iv)
resolved to do any of the foregoing;
(f) by Buyer, if (i) Seller shall have exercised a right specified
in the first proviso to Section 5.10 with respect to any Transaction Proposal
and shall, directly or through agents or representatives, continue discussions
with any third party concerning such Transaction Proposal for more than 10
Business Days after the date of receipt of such Transaction Proposal; (ii)
Seller shall have taken any action described in clause (iv) of the first proviso
to Section 5.10; or (iii) (1) a Transaction Proposal that is publicly disclosed
shall have been commenced, publicly proposed or communicated to Seller which
contains a proposal as to price (without regard to the specificity of such price
proposal) and (2) Seller shall not have rejected such proposal within 10
Business Days of its receipt or the date its existence first becomes publicly
disclosed, if sooner; or
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50
(g) by Seller, if Seller exercises, pursuant to Section 5.10 of this
Agreement, the right specified in clause (iii) of the first proviso to Section
5.10.
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement by either Seller or Buyer as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Buyer or Seller, other than the provisions of
Section 3.17, the last sentence of Section 5.07(a), this Section 7.02, Section
9.01 and Section 9.05 and 9.06. Nothing contained in this Section 7.02 shall
relieve any party for any breach of the representations, warranties, covenants
or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement (including the Exhibits and
Schedules hereto) may be amended by the parties at any time before or after any
required approval by the Common Shareholders of matters presented to them in
connection with the Transactions; provided, however, that after any such
approval, there shall be made no amendment that by Law requires further approval
by the Common Shareholders without the further approval of the Common
Shareholders. This Agreement (including the Exhibits and Schedules hereto) may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the Closing,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to Section 7.03,
waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01. Survival. Buyer has the right to rely fully upon the
representations, warranties, covenants and agreements of Seller contained in
this Agreement. Seller has the right to rely fully upon the representations,
warranties, covenants and agreements of Buyer contained in this Agreement. All
the representations and warranties of the parties contained in this Agreement
shall be deemed to be repeated at the Closing for purposes of this Article VIII
and shall survive the execution
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51
and delivery hereof and the Closing, and, except as set forth in the proviso
below and in the last sentence of this Section, all the representations,
warranties, covenants and agreements of the parties contained in this Agreement
shall expire on the one-year anniversary of the Closing Date; provided, however,
that any representation, warranty, covenant or agreement shall survive the time
it would otherwise terminate pursuant to this Section 8.01 to the extent that
notice of a breach thereof giving rise to a right of indemnification shall have
been given by a party hereto in accordance with Section 8.03 prior to such time.
All of the covenants and agreements of the parties contained in this Agreement
to be performed on or after the date of this Agreement shall survive the Closing
without limitation as to time. The indemnity contained in clause (iv) of Section
8.02(a) shall expire on the six-year anniversary of the Closing.
SECTION 8.02. Indemnification. (a) Subject to Section 8.02(b),
Seller and Robert R. Onstead shall defend, indemnify and hold harmless Buyer and
its Affiliates (including KKR), each director, officer and employee of Buyer and
such Affiliates, and Buyer's representatives and advisors against any loss,
damage, claim, liability, judgment or settlement of any nature or kind,
including all costs and expenses relating thereto, including interest, penalties
and reasonable attorneys' fees (collectively "Damages"), arising out of,
resulting from or relating to:
(i) subject to Section 8.01, the breach of any representation or
warranty of Seller contained in this Agreement (other than in Sections
3.09(b), 3.10(i) or 3.10(j)) or any certificate delivered pursuant hereto;
provided, however, that Seller shall not be obligated for any
indemnification pursuant to this clause unless, and then only to the
extent that, the aggregate Damages indemnifiable under this clause (i)
exceed $2,500,000;
(ii) subject to Section 8.01, the breach of any representation or
warranty of Seller contained in Section 3.09(b), Section 3.10(i) or
Section 3.10(j) of this Agreement or any certificate delivered pursuant
hereto to the extent such certificate relates to Section 3.09(b), Section
3.10(i) or Section 3.10(j);
(iii) subject to Section 8.01, the breach of any covenant or
agreement (whether to be performed prior to or after the Closing) of
Seller contained in this Agreement or any certificate delivered pursuant
hereto; or
(iv) subject to Section 8.01, any Liability of Seller or any
Subsidiary for any Taxes of Seller and the Subsidiaries relating to the
pre-Closing operations of the ESOP.
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52
(b) To the extent any amount is payable by Seller or Robert R.
Onstead pursuant to Section 8.02(a), such obligation shall be satisfied as
follows: (i) in respect of the first $10,000,000 of Damages which are
indemnifiable pursuant to Section 8.02(a) (which Damages would be in excess of
the $2,500,000 deductible referenced in the proviso of clause (i) of such
Section with respect to Damages covered by the indemnity under such clause), by
Seller's issuance of Additional Shares to Buyer or its designee calculated in
accordance with Section 8.02(c) or 8.02(d), as appropriate, and (ii) in respect
of the next $3,000,000 of such Damages, by the contribution of cash by Robert R.
Onstead to Buyer, in the case of Damages relating to a breach of any
representation or warranty contained in Section 3.03, and otherwise to Seller.
The foregoing amounts shall be payable only in respect of Damages for which a
Notice (as defined in Section 8.03(a)) shall have been delivered to Seller (a)
with respect to clause (i) of the foregoing sentence, prior to the six-year
anniversary of the Closing Date and (b) with respect to clause (ii) of the
foregoing sentence, the one-year anniversary of the Closing Date. Any issuance
of Additional Shares pursuant to this Section shall be deemed to be an
adjustment to the number of shares of Common Stock purchased under this
Agreement and any payment to Buyer or its designee pursuant to this Section
shall be deemed to be an adjustment to the Purchase Price. Except as described
in this Section 8.02(b), no amount shall be payable by Seller or any other
Person pursuant to Section 8.02(a) or 8.02(b).
(c) In the case of Damages relating to a breach of any
representation or warranty contained in Section 3.03, the number of Additional
Shares to be issued pursuant to Section 8.02(b) from time to time shall equal
(1) the amount of Damages incurred by the Indemnitee (as defined in Section
8.03(a)) divided by the Fair Market Value of one share of Common Stock as of the
date such Additional Shares are to be issued divided by (2) 1 minus the quotient
obtained by dividing (A) the sum of (i) such Damages plus (ii) the product of
the Fair Market Value of one share of Common Stock as of such date multiplied by
the number of shares of Common Stock then held by Buyer and its Affiliates by
(B) the product of the Fair Market Value of one share of Common Stock multiplied
by the number of shares of Common Stock outstanding as of the date such
Additional Shares are to be issued.
(d) Except as otherwise provided in Section 8.02(c), the number of
Additional Shares to be issued pursuant to Section 8.02(b) from time to time
shall equal (1) a fraction (A) the numerator of which shall equal the number of
shares of Common Stock outstanding as of the date such Additional Shares are to
be issued minus the number of shares of Common Stock then held by Buyer and its
Affiliates, and (B) the denominator of which shall equal 1 minus a fraction, (i)
the numerator of which shall equal the number of shares of Common Stock then
held by Buyer and its Affiliates multiplied by the Fair Market Value of one
share of
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53
Common Stock as of such date, and (ii) the denominator of which shall equal (a)
the number of shares of Common Stock then outstanding multiplied by the Fair
Market Value of one share of Common Stock as of such date minus (b) the amount
of Damages incurred by the Indemnitee minus (2) the number of shares of Common
Stock then outstanding.
(e) For purposes of clause (i) of Section 8.02(a), a "Material
Adverse Effect" (as such term is used in any representation or warranty
contained in Article III) shall be deemed to have occurred if the aggregate of
all Damages related to any such representation or warranty shall exceed $10,000.
(f) The term "Damages" as used in this Article VIII is not limited
to matters asserted by third parties against any party entitled to be
indemnified under this Article VIII, but includes Damages incurred or sustained
by any such party in the absence of third party claims.
SECTION 8.03. Indemnification Procedures. (a) In the event that a
party shall incur or suffer any Damages in respect of which indemnification may
be sought hereunder, such party (the "Indemnitee") may assert a claim for
indemnification by written notice (the "Notice") to the party from whom
indemnification is being sought (the "Indemnitor"), stating the amount of
Damages, if known, and the nature and basis of such claim. In the case of
Damages arising or which may arise by reason of any third party Action, promptly
after receipt by the Indemnitee of written notice of the assertion or the
commencement of any Action with respect to any matter in respect of which
indemnification may be sought hereunder, the Indemnitee shall give Notice to the
Indemnitor with respect thereto, provided that failure of the Indemnitee to give
the Indemnitor prompt notice as provided herein shall not relieve the Indemnitor
of any of its obligations hereunder, except to the extent that the Indemnitor is
materially prejudiced by such failure. If the Indemnitor acknowledges in writing
its obligation to indemnify the Indemnitee hereunder, the Indemnitor shall be
entitled to assume the defense thereof, at its sole expense, by written notice
of its intention to do so to the Indemnitee within 30 days after receipt of the
Notice. If the Indemnitor shall assume the defense of such Action, it shall not
settle such Action or consent to the entry of any judgment without the prior
written consent of the Indemnitee, unless such settlement or judgment (i)
includes as an unconditional term thereof the giving by the claimant or the
plaintiff of a release of the Indemnitee from all liability with respect to such
Action and (ii) does not involve the imposition of equitable remedies or the
imposition of any obligations on such Indemnitee and does not otherwise
adversely affect the Indemnitee, other than as a result of the imposition of
financial obligations for which such Indemnitee will be indemnified hereunder.
As long as the Indemnitor is contesting any such Action in good faith and on a
timely basis, the Indemnitee shall not pay or settle any claims
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54
brought under such Action. Notwithstanding the assumption by the Indemnitor of
the defense of any Action as provided in this Section, the Indemnitee shall be
permitted to participate in the defense of such Action and to employ counsel at
its own expense; provided, however, that if such Indemnitee shall have
reasonably concluded that counsel selected by Indemnitor has a conflict of
interest because of the availability of different or additional defenses to such
Indemnitee, such Indemnitee shall have the right to select separate counsel to
participate in the defense of such Action on its behalf, at the expense of the
Indemnitor.
(b) If the Indemnitor shall fail to notify the Indemnitee of its
desire to assume the defense of any such Action within the prescribed period of
time, or shall notify the Indemnitee that it will not assume the defense of any
such Action, then the Indemnitee may assume the defense of any such Action, in
which event it may do so acting in good faith in such manner as it may deem
appropriate, and the Indemnitor shall be bound by any determination made in such
Action. The Indemnitor shall be permitted to join in the defense of such Action
and to employ counsel at its own expense.
(c) Amounts payable by the Indemnitor to the Indemnitee in respect
of any Damages for which such party is entitled to indemnification hereunder
shall be payable by the Indemnitor as incurred by the Indemnitee.
SECTION 8.04. Tax Limitations. The amount of any Damages or other
liability for which indemnification is provided under this Agreement shall be
(a) increased to take account of any Tax cost incurred (grossed up for such
increase) by the Indemnitee arising from the receipt of indemnity payments
hereunder and (b) reduced to take account of any Tax benefit realized by the
Indemnitee arising from the incurrence or payment of any such Damages or other
liability. Such Tax cost or Tax benefit, as the case may be, shall be computed
for any year using the Indemnitee's actual tax liability (or the liability of
its partners or members if the Indemnitee is a pass-thru entity) with and
without (a) the incurrence or payment of any Damages or other liability for
which indemnification is provided under this Agreement or (b) the payment of any
indemnification payments made pursuant to this Agreement in such year. In the
event that the Indemnitee will actually realize a Tax cost or Tax benefit for a
year(s) subsequent to the year in which the indemnity payment is made, a payment
in respect of such Tax cost or Tax benefit shall be made in such subsequent
year(s).
SECTION 8.05. Tax Matters. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
City Transfer Tax and any similar tax imposed in other states or subdivisions),
shall be paid by Seller when due, and Seller shall file, at its own
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55
expense, all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, Buyer will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01. Fees and Expenses. (a) If this Agreement shall have
been terminated by either party pursuant to Section 7.01(d), Section 7.01(e),
Section 7.01(f) or Section 7.01(g), unless Buyer shall then be in material
breach of its obligations hereunder, Seller shall pay Buyer or its designee a
fee of $15 million in immediately available funds no later than one Business Day
following such termination. No amount payable pursuant to any of the other
provisions of this Section 9.01 shall reduce the amount of the fee payable
pursuant to this paragraph (a).
(b) If this Agreement shall have been terminated by either party
pursuant to Section 7.01(b) or Section 7.01(c) and if prior to any such
termination any Person (other than Buyer or its Affiliates) shall have made, or
proposed, communicated or disclosed in a manner which is or otherwise becomes
public (or which, directly or indirectly, privately or publicly, is made,
proposed or communicated to Seller, any member of its Board of Directors, any 5%
or greater Common Shareholder, any members of senior management or any
representatives of Seller) a bona fide intention to make a Transaction Proposal
(including by making such a Transaction Proposal), unless Buyer shall then be in
material breach of its obligations hereunder, Seller shall pay Buyer or its
designee a fee of $15 million in immediately available funds no later than one
Business Day following such termination; provided, that if Seller and its
representatives take no action to respond to or encourage any such Transaction
Proposal prior to termination pursuant to Section 7.01(b) or Section 7.01(c), no
fee shall be payable pursuant to this Section 9.01(b) unless, on or prior to the
second anniversary of the termination of this Agreement pursuant to Section
7.01(b) or Section 7.01(c), a Transaction Proposal (whether or not related to
the pre-termination Transaction Proposal) is consummated or any agreement or
understanding with respect thereto is entered into (in which event the fee
payable pursuant to this Section 9.01(b) shall be payable no later than one
Business Day following the earlier of the date of such agreement or
understanding or the date of consummation of such Transaction Proposal). Only
one fee in the aggregate of $15 million shall be payable pursuant to Section
9.01(a) or Section 9.01(b). No amount payable pursuant
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56
to any of the other provisions of this Section 9.01 shall reduce the amount of
the fee payable pursuant to this paragraph (b).
(c) In addition to any other amounts which may be payable or become
payable pursuant to any other paragraph of this Section 9.01, unless Buyer shall
then be in material breach of its obligations hereunder, no later than one
Business Day following termination of this Agreement (or from time to time
thereafter), Seller shall reimburse Buyer or its designee for all out-of-pocket
expenses and fees paid or payable by or on behalf of Buyer or its Affiliates
(including KKR), including fees and expenses payable to all banks, investment
banking firms and other financial institutions, and their respective agents and
counsel, and all fees and expenses of counsel, accountants, experts and
consultants to Buyer and its Affiliates (including KKR), whether incurred prior
to, on or after the date hereof, in connection with this Agreement and the
Transactions, but in no event to exceed $2.5 million in the aggregate, provided,
that no amount shall be payable pursuant to this paragraph (c) if (i) this
Agreement shall have been terminated pursuant to Section 7.01(c) and (ii) at the
time of any such termination the waiting period (including any extension
thereof) applicable under the HSR Act shall not have been terminated or expired.
(d) If the Purchase shall be consummated in accordance with this
Agreement, Seller shall pay to KKR or its designee a fee of $8 million in
immediately available funds on the Closing Date. No amount payable pursuant to
any of the other provisions of this Section 9.01 shall reduce the amount payable
pursuant to this paragraph (d).
(e) Except as provided otherwise in this Agreement, all costs and
expenses incurred in connection with the Agreement and the Transactions shall be
paid by the party incurring such expenses, except that Seller shall pay all
costs and expenses (i) in connection with printing and mailing the Proxy/Tender
Offer Statement and (ii) of obtaining any consents of any third party.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
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57
(a) if to Buyer, to
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Attention: Nils P. Brous
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
(b) if to Seller, to
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Financial Officer
with a copy to:
Vinson & Elkins
1001 Fannin Street
Houston, Texas 77002
Attention: Robert H. Whilden, Jr., Esq.
(c) if to Robert R. Onstead, to
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Robert R. Onstead
with a copy to:
Vinson & Elkins
1001 Fannin Street
Houston, Texas 77002
Attention: Robert H. Whilden, Jr., Esq.
SECTION 9.03. Interpretation. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
<PAGE>
58
SECTION 9.04. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.05. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein or executed
contemporaneously herewith constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement. This Agreement, other than
as provided in Section 9.07 and in the provisions of Article VIII relating to
indemnification, is not intended to confer upon any Person other than the
parties any rights or remedies.
SECTION 9.06. GOVERNING LAW; ARBITRATION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN
THAT STATE. ANY CONTROVERSY, DISPUTE, OR CLAIM OF WHATEVER NATURE ARISING OUT
OF, IN CONNECTION WITH, OR RELATING TO THIS AGREEMENT, INCLUDING THE EXISTENCE,
VALIDITY, INTERPRETATION OR BREACH THEREOF AND ANY CLAIM BASED ON CONTRACT, TORT
OR STATUTE, SHALL BE RESOLVED AT THE REQUEST OF EITHER PARTY, BY FINAL AND
BINDING ARBITRATION CONDUCTED IN WASHINGTON, D.C. PURSUANT TO THE FEDERAL
ARBITRATION ACT AND IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION ("AAA"). ARBITRATION HEREUNDER SHALL BE
CONDUCTED BY A SINGLE ARBITRATOR SELECTED JOINTLY BY THE PARTIES HERETO. IF
WITHIN 30 DAYS AFTER A DEMAND FOR ARBITRATION IS MADE, THE PARTIES HERETO ARE
UNABLE TO AGREE ON A SINGLE ARBITRATOR, THREE ARBITRATORS SHALL BE APPOINTED.
EACH PARTY SHALL SELECT ONE ARBITRATOR AND THOSE TWO ARBITRATORS SHALL THEN
SELECT WITHIN 30 DAYS A THIRD NEUTRAL ARBITRATOR. IF THE ARBITRATORS SELECTED BY
THE PARTIES CANNOT AGREE ON THE THIRD ARBITRATOR, THE SELECTION SHALL BE IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF AAA. THE PARTIES AGREE TO
SHARE EQUALLY THE FEES AND EXPENSES OF THE ARBITRATOR(S) HEREUNDER. ANY
DISCOVERY IN CONNECTION WITH ARBITRATION HEREUNDER SHALL BE LIMITED TO
INFORMATION DIRECTLY RELEVANT TO THE CONTROVERSY OR CLAIM IN ARBITRATION.
JUDGMENT UPON ANY ARBITRATION AWARD RENDERED MAY BE ENTERED IN ANY COURT OF
COMPETENT JURISDICTION. AN ARBITRATION AWARD HEREUNDER CANNOT INCLUDE PUNITIVE
DAMAGES. EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.
SECTION 9.07. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of Law or otherwise by any of the parties without
the prior written consent of the other party, provided, that Buyer may assign,
in whole or in part, any of its rights and obligations hereunder and under
<PAGE>
59
the Option to one or more of its Affiliates without the consent of Seller.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 9.08. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
SECTION 9.09. No Recourse. Notwithstanding anything that may be
expressed or implied in this Agreement, Seller covenants, agrees and
acknowledges that no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement or any of the
Transactions shall be had against any current or future director, officer,
employee, general or limited partner, member, Affiliate (including KKR) or
assignee of Buyer or any of the foregoing, whether by the enforcement of any
assessment or by any legal or equitable proceeding, or by virtue of any statute,
regulation or other applicable law, it being expressly agreed and acknowledged
that no personal liability whatsoever shall attach to, be imposed on or
otherwise be incurred by any current or future officer, agent or employee of
Buyer or any current or future member of Buyer or any current or future
director, officer, employee, general or limited partner, member, Affiliate
(including KKR) or assignee of any of the foregoing, as such for any obligation
of Buyer under this Agreement or any documents or instruments delivered in
connection with this Agreement or any of the Transactions or for any claim based
on, in respect of or by reason of such obligations or their creation.
<PAGE>
60
IN WITNESS WHEREOF, the parties have signed this Agreement, or
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
RFM ACQUISITION LLC
By: /s/ Paul E. Raether
-----------------------------------------
Name: Paul E. Raether
Title: Chief Executive Officer
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead, Jr.
-----------------------------------------
Name: R. Randall Onstead, Jr.
Title: President and CEO
/s/ Robert R. Onstead
--------------------------------------------
Robert R. Onstead
solely for purposes of
Sections 8.02(a) and 8.02(b); Mr. Onstead
shall not be deemed a "party" to this
Agreement for any other purposes.
<PAGE>
Exhibit 2.2
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
As of April 1, 1997
RFM Acquisition LLC
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Attention: Nils P. Brous
Dear Sirs:
Reference is made to (i) the Subscription Agreement dated as of the
date hereof among RFM Acquisition LLC ("BUYER"), Randall's Food Markets, Inc.
("SELLER") and Robert R. Onstead (the "SUBSCRIPTION AGREEMENT"), (ii) the Credit
Agreement dated as of November 1, 1993, as amended, among Seller, certain
subsidiaries of Seller, the banks party thereto and Texas Commerce Bank National
Association, as agent (the "CREDIT AGREEMENT"), and (iii) the Note Purchase
Agreement dated as of November 1, 1993, as amended, among the Company, certain
subsidiaries of the Company and the insurance companies party thereto (such
agreement, together with the notes issued pursuant thereto, the "NOTE PURCHASE
AGREEMENT"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Subscription Agreement.
In addition to the indemnification obligations of Seller and Robert R.
Onstead under the Subscription Agreement, and without in any way limiting such
obligations, Seller hereby agrees to defend, indemnify and hold harmless Buyer
and its Affiliates (including KKR), each director, officer and employee of Buyer
and such Affiliates, and Buyer's representatives and advisors against any loss,
damage, claim, liability, judgment or settlement of any nature or kind,
including all costs and expenses relating thereto, including interest, penalties
and reasonable attorneys' fees, incurred after the date hereof (collectively
"DAMAGES"), arising out of, resulting from or relating to (i) any default or
event of default under the Credit Agreement or the Note Purchase Agreement, (ii)
any breach by Seller or any of its subsidiaries of any obligations under the
Credit Agreement or the Note Purchase Agreement and (iii) any waiver, amendment
or consent relating to the Credit Agreement or the Note Purchase Agreement,
PROVIDED, HOWEVER, that Seller shall not be obligated for any indemnification
pursuant to this Letter Agreement unless the aggregate Damages indemnifiable
under this Letter Agreement exceed $50,000, and if such Damages exceed $50,000,
then Seller shall be obligated for all such Damages. Without limiting the
generality of the foregoing, Damages shall include (a) any increase in the
amount of interest payable under
<PAGE>
the Credit Agreement or the Note Purchase Agreement in connection with any of
the items described in clauses (i), (ii) or (iii) above, (b) any incremental
cost in connection with the prepayment of amounts owing under the Credit
Agreement or the Note Purchase Agreement or the shortening of the maturities of
the loans under the Credit Agreement or the notes issued pursuant to the Note
Purchase Agreement, in any case in connection with any of the items described in
clauses (i), (ii) or (iii) above, and (c) any fees or expenses incurred by the
banks, agent or insurance companies referenced above in connection with any of
the items described in clauses (i), (ii) or (iii) above which fees or expenses
are paid or payable by or on behalf of Seller or its subsidiaries.
To the extent any amount is payable by Seller pursuant to this Letter
Agreement, such obligation shall be satisfied by Seller's issuance of additional
shares ("ADDITIONAL SHARES") of Seller's common stock to Buyer or its designee
calculated as set forth below. Any issuance of Additional Shares pursuant to
this Letter Agreement shall be deemed to be an adjustment to the number of
shares of Common Stock purchased under the Subscription Agreement.
The number of Additional Shares to be issued pursuant to this Letter
Agreement from time to time shall equal (1) a fraction (A) the numerator of
which shall equal the number of shares of Common Stock outstanding as of the
date such Additional Shares are to be issued minus the number of shares of
Common Stock then held by Buyer and its Affiliates, and (B) the denominator of
which shall equal 1 minus a fraction, (i) the numerator of which shall equal the
number of shares of Common Stock then held by Buyer and its Affiliates
multiplied by the Fair Market Value of one share of Common Stock as of such
date, and (ii) the denominator of which shall equal (a) the number of shares of
Common Stock then outstanding multiplied by the Fair Market Value of one share
of Common Stock as of such date minus (b) the amount of Damages incurred by the
Indemnitee minus (2) the number of shares of Common Stock then outstanding.
Additional Shares shall be issued pursuant to this Letter Agreement at
the Closing and from time to time thereafter as Damages are incurred, provided
that (i) no Additional Shares shall be issued if the Closing shall not occur and
(ii) for purposes of the calculation contained in the preceding paragraph, any
Additional Shares issued at the Closing shall be deemed to be issued immediately
after the consummation of the Purchase pursuant to the Subscription Agreement
and after giving effect to consummation of the Tender Offer.
The term "Damages" as used in this Letter Agreement is not limited to
matters asserted by third parties against any party entitled to be indemnified
under this Letter Agreement, but includes Damages incurred or sustained by any
such party in the absence of third party claims.
<PAGE>
The provisions of Article IX of the Subscription Agreement (other than
Section 9.01) are deemed to be incorporated in this Letter Agreement as if
explicitly stated herein.
If you are in agreement with the foregoing, please sign the enclosed
copy of this Letter Agreement and return it to the undersigned.
Very truly yours,
RANDALL'S FOOD MARKETS, INC.
/s/ R. RANDALL ONSTEAD, JR.
------------------------------------
Name: R. Randall Onstead, Jr.
Title: Chief Executive Officer
AGREED:
RFM ACQUISITION LLC
/s/ PAUL E. RAETHER
- ------------------------------
Name: Paul E. Raether
Title: President
<PAGE>
Exhibit 2.3
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
June 18, 1997
RFM Acquisition LLC
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Attention: Nils P. Brous
Dear Sirs:
Reference is made to the Subscription Agreement dated as of the date
hereof among RFM Acquisition LLC ("BUYER"), Randall's Food Markets, Inc.
("SELLER") and Robert R. Onstead (the "SUBSCRIPTION AGREEMENT"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Subscription Agreement.
In addition to the indemnification obligations of Seller and Robert R.
Onstead under the Subscription Agreement and under the Letter Agreement dated as
of April 1, 1997 between the parties hereto, and without in any way limiting
such obligations, Seller hereby agrees to defend, indemnify and hold harmless
Buyer and its Affiliates (including KKR), each director, officer and employee of
Buyer and such Affiliates, and Buyer's representatives and advisors against any
loss, damage, claim, liability, judgment or settlement of any nature or kind,
including all costs and expenses relating thereto, including interest and
penalties and including Legal Fees, in each case whether incurred prior to or
after the date hereof and whether incurred by Seller, any Subsidiary or any
indemnitee hereunder (collectively "DAMAGES"), arising out of or resulting from
any current or future litigation, disputes or claims relating to the Cullum
Companies Management Security Plan, including in connection with JOE CARRABBA,
JR. V. TOM THUMB FOOD & DRUGS, INC. (the "MSP LITIGATION"), PROVIDED, HOWEVER,
that Damages shall not include Legal Fees incurred by Seller unless the
aggregate amount of such Legal Fees exceeds $2,000,000 (and then only to the
extent of such excess). For purposes of this Letter Agreement, the term "Legal
Fees" shall mean attorneys' fees and expenses, the fees and expenses of expert
witnesses and litigation consultants and court costs. Amounts reserved as a
liability on the financial statements of Seller shall in no way reduce Seller's
indemnification obligations pursuant to this Letter Agreement.
The amount of any Damages shall be reduced (i) first, to the extent of
funds, if any, actually received by Seller in respect of such Damages from any
insurance carrier or third party
<PAGE>
2
indemnitor or contributor with respect to the subject matter of the indemnity
described in this Letter Agreement ("THIRD PARTY PROCEEDS") but only if, and
only to the extent that, such Third Party Proceeds exceed the lesser of Legal
Fees or $2,000,000 and (ii) second, after giving effect to clause (i) above, by
the amount of any federal or state income tax benefit actually received by
Seller relating to any Damages calculated in accordance with the preceding
paragraph.
To the extent any amount is payable by Seller pursuant to this Letter
Agreement, such obligation shall be satisfied by Seller's issuance of additional
shares ("ADDITIONAL SHARES") of Seller's common stock to Buyer or its designee
calculated as set forth below. Any issuance of Additional Shares pursuant to
this Letter Agreement shall be deemed to be an adjustment to the number of
shares of Common Stock purchased under the Subscription Agreement.
The number of Additional Shares to be issued pursuant to this Letter
Agreement from time to time shall equal (1) a fraction (A) the numerator of
which shall equal the number of shares of Common Stock outstanding as of the
date such Additional Shares are to be issued minus the number of shares of
Common Stock then held by Buyer and its Affiliates, and (B) the denominator of
which shall equal 1 minus a fraction, (i) the numerator of which shall equal the
number of shares of Common Stock then held by Buyer and its Affiliates
multiplied by the Fair Market Value of one share of Common Stock as of such
date, and (ii) the denominator of which shall equal (a) the number of shares of
Common Stock then outstanding multiplied by the Fair Market Value of one share
of Common Stock as of such date minus (b) the amount of Damages incurred by the
Indemnitee minus (2) the number of shares of Common Stock then outstanding.
Additional Shares shall be issued pursuant to this Letter Agreement at
the Closing and from time to time thereafter as Damages are incurred, provided
that (i) no Additional Shares shall be issued if the Closing shall not occur and
(ii) for purposes of the calculation contained in the preceding paragraph, any
Additional Shares issued at the Closing shall be deemed to be issued immediately
after the consummation of the Purchase pursuant to the Subscription Agreement
and after giving effect to consummation of the Tender Offer.
The term "Damages" as used in this Letter Agreement is not limited to
matters asserted by third parties against any party entitled to be indemnified
under this Letter Agreement, but includes Damages incurred or sustained by any
such party in the absence of third party claims.
In addition, if there are any members of the Board of Directors of
Seller who are not partners, executives or employees of KKR, the parties agree
that the MSP Litigation shall not be
<PAGE>
3
settled by Seller without the approval of a majority of such members.
The provisions of Article IX of the Subscription Agreement (other than
Section 9.01) are deemed to be incorporated in this Letter Agreement as if
explicitly stated herein.
If you are in agreement with the foregoing, please sign the enclosed
copy of this Letter Agreement and return it to the undersigned.
Very truly yours,
RANDALL'S FOOD MARKETS, INC.
/s/ R. RANDALL ONSTEAD, JR.
------------------------------------
Name: R. Randall Onstead, Jr.
Title: Chief Executive Officer
AGREED:
RFM ACQUISITION LLC
/s/ PAUL E. RAETHER
- -------------------------------
Name: Paul E. Raether
Title: Chief Executive Officer
<PAGE>
EXHIBIT 3.1
[GRAPHIC OMITTED]
THE STATE OF TEXAS
SECRETARY OF STATE
IT IS HEREBY CERTIFIED that the attached is/are true and correct copies of
the following described document(s) on file in this office:
RANDALL'S FOOD MARKETS, INC.
CHARTER #539315-00
ARTICLES OF INCORPORATION NOVEMBER 13, 1980
ARTICLES OF AMENDMENT FEBRUARY 20, 1985
CHANGE OF REGISTERED OFFICE AND/OR AGENT JULY 23, 1985
ARTICLES OF AMENDMENT JULY 9, 1986
RESTATED ARTICLES OF INCORPORATION JULY 9, 1986
ARTICLES OF AMENDMENT NOVEMBER 22, 1988
CHANGE OF REGISTERED OFFICE AND/OR AGENT JULY 19, 1989
STATEMENT ESTABLISHING SERIES OF SHARES AUGUST 21, 1992
ARTICLES OF MERGER DECEMBER 28, 1992
ARTICLES OF AMENDMENT DECEMBER 28, 1992
STATEMENT OF CANCELLATION OF TREASURY SHARES JUNE 24, 1993
ARTICLES OF AMENDMENT JUNE 16, 1995
ARTICLES OF AMENDMENT NOVEMBER 20, 1996
CONTINUED ON PAGE 2
IN TESTIMONY WHEREOF, I have hereunto
signed my name officially and caused to
be impressed hereon the Seal of State at
my office in the City of Austin, on JUNE
24, 1997.
[Seal of The State of Texas]
/s/ Antonio 0. Garza, Jr.
--------------------------------------
Antonio 0. Garza, Jr.
Secretary of State DH
<PAGE>
[GRAPHIC OMITTED]
THE STATE OF TEXAS
SECRETARY OF STATE
Continued From Page One
RANDALL'S FOOD MARKETS, INC.
IT IS HEREBY FURTHER CERTIFIED that the records of this office reveal the
subsequent filing of an amendment which was filed on JUNE 13, 1997. A copy of
the document is unavailable at this time because it is being processed for
permanent retention as a public record.
IN TESTIMONY WHEREOF, I have hereunto
signed my name officially and caused to
be impressed hereon the Seal of State at
my office in the City of Austin, on June
24, 1997.
[Seal of The State of Texas]
/s/ Antonio 0. Garza, Jr.
--------------------------------------
Antonio 0. Garza, Jr.
Secretary of State DEE
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
NOV 13 1980
CLERK [ILLEGIBLE]
Corporation Division
ARTICLES OF INCORPORATION
OF
RANDALL'S MANAGEMENT CORPORATION, INC.
The undersigned natural person of the age of eighteen (18) years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for such corporation:
ARTICLE I.
The name of the Corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLE II.
The period of its duration is perpetual.
ARTICLE III.
The purpose or purposes for which the Corporation is organized are:
To lease, purchase, sell and subdivide real estate within towns,
cities and villages, and their suburbs, not extending more than two (2)
miles beyond their corporate limits;
To purchase, manufacture, assemble, fabricate, produce, import,
receive, lease as lessee or otherwise acquire, own, hold, store, use,
repair, service, maintain, mortgage, pledge or otherwise encumber or
otherwise dispose of and generally deal with and in as principal, agent,
broker, investor or otherwise, goods, wares, merchandise, securities and
personal property, tangible or intangible, of all kinds and descriptions;
<PAGE>
To establish, maintain and conduct any sales, services, agency,
brokerage, franchise, investment or merchandising business in all its
aspects for the purpose of selling, purchasing, licensing, renting,
leasing, operating, franchising and otherwise dealing with personal
services, instruments, machines, appliances, inventions, securities,
trademarks, trade names, patents, privileges, processes, improvements,
copyrights, contract rights and personal property, tangible and
intangible, of all kinds and descriptions;
To serve as manager, consultant, representative, agent, broker or
advisor for other persons, associations, corporations, partnerships and
firms;
To enter into partnerships or into any arrangement for sharing of
profits, union of interests, cooperation, joint venture, reciprocal
concession or otherwise with any person, firm or corporation carrying on
or engaged in or about to carry on or engage in any business or
transaction which the Corporation is authorized to carry on or engage in;
To carry out the purposes above set forth in any state, territory,
district or possession of the United States or in any foreign country to
the extent that such purposes are not forbidden by the law of such state,
territory, district or possession of the United States or by such foreign
country; and
In general, to transact any or all lawful business for which
corporations may be organized under the Texas Business Corporation Act.
ARTICLE IV.
The total number of shares of all classes of stock which the Corporation
shall be authorized to issue is thirty million (30,000,000) shares, divided into
the following: (i) five million (5,000,000) shares of Class A preferred stock of
the par value of Ten and no/100 Dollars ($10.00) per share (hereinafter called
"Class A Preferred Stock"); (ii) five million (5,000,000) shares of Class B
preferred stock of the par value
2.
<PAGE>
of Ten and no/100 Dollars ($10.00) per share (hereinafter called "Class B
Preferred Stock"); (iii) five million (5,000,000) shares of Class A voting
common stock of the par value of Ten and no/100 Dollars ($10.00) per share
(hereinafter called "Class A Common Stock"); (iv) five million (5,000,000)
shares of Class B nonvoting common stock of the par value of Five and no/100
Dollars ($5.00) per share (hereinafter called "Class B Common Stock"); (v) five
million (5,000,000) shares of Class C nonvoting common stock of the par value of
Five and no/100 Dollars ($5.00) per share (hereinafter called "Class C Common
Stock"); and (vi) five million (5,000,000) shares of Class D nonvoting common
stock of the par value of Five and no/100 Dollars ($5.00) per share (hereinafter
called "Class D Common Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, limitations and relative rights of such classes of
stock and the limitations on or denial of the voting rights of the shares of
such classes of stock are as follows:
A. CLASS A PREFERRED STOCK
1. Dividends. The holders of Class A Preferred Stock shall be entitled to
receive dividends of Ten and 50/100 Dollars ($10.50) per share, out of any funds
legally available for the payment therefor, and no more, payable in cash
(quarterly on the first days of July, October, January and April, or at such
3.
<PAGE>
intervals as the Board of Directors may from time to time determine). Such
dividends shall accrue from the date of issuance of the respective Class A
Preferred Stock and shall be deemed to accrue from day to day whether or not
earned or declared. Such dividends shall be payable before any dividends shall
be paid, declared or set apart for the Class A, B, C and D Common Stock or Class
B Preferred Stock and shall be cumulative so that, if for any dividend period
dividends on the outstanding Class A Preferred Stock equal to Ten and 50/100
Dollars ($10.50) per annum are not paid or declared and an amount equal to the
dividend declaration set apart for payment, the deficiency shall be fully paid
or declared and set apart for payment, without interest, before any
distribution, by dividend or otherwise, shall be paid on, declared or an amount
set apart by the Corporation for payment to the Class A, B, C and D Common Stock
or Class B Preferred Stock.
2. Preferences on Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the then outstanding Class A Preferred Stock shall be entitled to
receive One Hundred and no/100 Dollars ($100.00) per share, plus all accrued and
unpaid dividends as a liquidation preference (hereinafter in this Section A of
Article IV called "Liquidation Preference"), and no more, before any amount
shall be paid to the holders of the Class A, B, C and D Common Stock or Class B
Preferred Stock. In
4.
<PAGE>
the event that the assets of the Corporation are insufficient to permit full
payment of the Liquidation Preference to the Class A Preferred shareholders as
herein provided, then the assets of the Corporation shall be distributed ratably
among the holders of the outstanding Class A Preferred Stock. A consolidation or
merger of the Corporation with or into any other corporation, or a sale of all
or substantially all of the assets of the Corporation, shall not be deemed a
liquidation, dissolution or winding up of the Corporation within the meaning of
these provisions.
3. Redemption Rights of the Corporation. The whole or any part of the
outstanding Class A Preferred Stock may be redeemed by the Corporation at any
time after three (3) years from the date of issuance upon thirty (30) days'
written notice by the Board of Directors sent via certified mail, return receipt
requested, to the holders of shares which are to be redeemed by paying therefor
the Liquidation Preference fixed in Paragraph 2, Section A, of Article IV
hereof. The Corporation may redeem the whole or any part of such shares;
provided, however, that if at any time the Corporation elects to redeem less
than the whole of the Class A Preferred Stock then outstanding, the particular
shares to be redeemed shall be determined by lot or by such other equitable
method as may be determined by the Board of Directors. If, on the redemption
date specified in any such notice, funds necessary for redemption shall have
been set aside by the Corporation, separate and apart from its other funds, in
5.
<PAGE>
trust for the pro rata benefit of the holders of the Class A Preferred Stock to
be redeemed, then, notwithstanding that any certificate for shares so redeemed
shall not have been surrendered for cancellation, the shares so redeemed shall
no longer be deemed to be outstanding, the right to receive dividends thereon
shall cease to accrue from and after the date so fixed and all rights of holders
of Class A Preferred Stock notified of the redemption of their shares shall
forthwith after such redemption date cease and terminate, excepting only the
right of the holders thereof to receive the redemption price thereof, but
without interest. If, before the redemption date specified in any notice of
redemption of the Class A Preferred Stock, the Corporation shall deposit in
trust with a bank or trust company in the City of Houston, Texas, having a
capital and surplus of at least Three Million and no/100 Dollars ($3,000,000.00)
according to its last published statement of condition, an amount adequate to
pay the Liquidation Preference to the Class A Preferred shareholders, then from
and after the date of such deposit the Class A Preferred Stock so redeemed shall
cease and terminate, excepting only the rights of holders thereof to receive the
redemption price therefor, but without interest. Any interest accrued on funds
so deposited shall be paid to the Corporation from time to time. In case the
holder of shares which shall have been redeemed shall not, within six (6) years
after making such deposit, claim the amount deposited with respect to the
redemption of such
6.
<PAGE>
shares, the bank or trust company in which such deposit was made shall, upon
demand, pay over to the Corporation the unclaimed amounts and thereupon such
bank or trust company shall be relieved of all responsibility in respect thereof
to such holder. Class A Preferred Stock redeemed or otherwise retired by the
Corporation shall, upon the filing of a statement as may be required by law,
assume the status of authorized but unissued Class A Preferred Stock and may
thereafter be reissued in the same manner as other authorized but unissued Class
A Preferred Stock, except that any shares of any series purchased or redeemed
pursuant to the requirements of any sinking fund or purchase fund provided for
such series shall not be reissued.
4. Redemption Rights of Shareholders. Any holder of Class A Preferred
Stock may, at any time after three (3) years from the date of issuance, by
written request mailed to the Corporation at its registered office, cause the
Corporation, to the extent it may lawfully do so, to redeem all shares of Class
A Preferred Stock owned by the holder at the time and to pay the holder therefor
the Liquidation Preference fixed in Paragraph 2, Section A, of this Article IV.
The written request shall state the name and address of the holder and the
number of shares owned by him and shall be accompanied by the certificates
representing all such shares of Class A Preferred Stock, duly endorsed in blank
or accompanied by appropriate stock powers. Such redemption shall be consummated
within ninety (90) days after
7.
<PAGE>
the date of the written request. Class A Preferred Stock redeemed, purchased or
otherwise retired by the Corporation shall, upon the filing of a statement as
may be required by law, assume the status of authorized but unissued Class A
Preferred Stock and may thereafter be reissued in the same manner as other
authorized but unissued Class A Preferred Stock.
5. Voting Rights. The holders of Class A Preferred Stock shall not be
entitled to vote on any matter to be voted upon by the shareholders of the
Corporation.
B. CLASS B PREFERRED STOCK
1. Dividends. Subject to the holders of Class A Preferred Stock and Class
B, C and D Common Stock first receiving dividends for the quarter in which the
dividends are intended to be paid, and further subject to all the rights,
restrictions and conditions set forth in Sections A, C, D, E and F of this
Article IV, the holders of Class B Preferred Stock at the time outstanding shall
be entitled to receive when and as declared to be payable by the Board of
Directors, out of any funds legally available for the payment thereof, dividends
not to exceed Thirteen and no/100 Dollars ($13.00) per share of such Class B
Preferred Stock in any year, and no more, payable quarterly on the first days of
July, October, January and April in each year.
2. Preferred Dividends Noncumulative. Dividends on all Class B Preferred
Stock shall be noncumulative; provided, however, no dividends shall be declared
or paid on the Class B
8.
<PAGE>
Preferred Stock unless dividends on all Class A Preferred Stock and Class B, C
and D Common Stock then outstanding for the current quarterly dividend period
have been declared and either paid or a sum sufficient for the payment therefor
has been set apart by the Corporation.
3. Preferences on Liquidation. In the event of any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
the holders of the then outstanding Class B Preferred Stock shall, subject to
the preference on liquidation of the Class A Preferred Stock, be entitled to
receive One Hundred and no/100 Dollars ($100.00) per share plus any dividends
declared but unpaid on such shares as a liquidation preference (hereinafter in
this Section B of Article IV called "Liquidation Preference"). After payment to
the holders of the Class A and B Preferred Stock and Class A Common Stock as
hereinafter described, the remaining assets and funds of the Corporation shall
be distributed among the holders of the Class B, C and D Common Stock in the
manner hereinafter stated. A consolidation, merger or reorganization of the
Corporation with any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation, shall not be considered a
dissolution, liquidation or winding up of the Corporation within the meaning of
these provisions.
4. Redemption Rights of the Corporation. The whole or any part of the
outstanding Class B Preferred Stock may be
9.
<PAGE>
redeemed at any time after three (3) years from the date of issuance at the
option of the Corporation exercisable by the Board of Directors upon thirty (30)
days' written notice sent via certified mail, return receipt requested, to the
holders of the Class B Preferred shares which are to be redeemed by paying
therefor the Liquidation Preference fixed in Paragraph 3, Section B, of Article
IV hereof. The Corporation may redeem the whole or any part of the shares;
provided, however, that if at any time the Corporation elects to redeem less
than the whole of the Class B Preferred Stock then outstanding, the particular
shares to be redeemed shall be determined by lot or by such other equitable
method as may be determined by the Board of Directors. If, on the redemption
date specified in any such notice, funds necessary for redemption shall have
been set aside by the Corporation, separate and apart from its other funds, in
trust for the pro rata benefit of the holders of the Class B Preferred Stock to
be redeemed, then, notwithstanding that any certificate for shares so redeemed
shall not have been surrendered for cancellation, the shares so redeemed shall
no longer be deemed to be outstanding, the right to receive dividends thereon
shall cease to accrue from and after the date so fixed and all rights of holders
of the Class B Preferred Stock notified of the redemption of their shares shall
forthwith after such redemption date cease and terminate, excepting only the
right of the holders thereof to receive the redemption price
10.
<PAGE>
thereof, but without interest. If, before the redemption date specified in any
notice of redemption of the Class B Preferred Stock, the Corporation shall
deposit in trust with a bank or trust company in the City of Houston, Texas,
having a capital and surplus of at least Three Million and no/100 Dollars
($3,000,000.00) according to its last published statement of condition, an
amount adequate to pay the Liquidation Preference to the Class B Preferred
shareholders, then from and after the date of such deposit the Class B Preferred
Stock so redeemed shall cease and terminate, excepting only the rights of
holders thereof to receive the redemption price therefor, but without interest.
Any interest accrued on funds so deposited shall be paid to the Corporation from
time to time. In case the holder of shares which shall have been redeemed shall
not, within six (6) years after making such deposit, claim the amount deposited
with respect to the redemption of such shares, the bank or trust company in
which such deposit was made shall, upon demand, pay over to the Corporation the
unclaimed amounts and thereupon such bank or trust company shall be relieved of
all responsibility in respect thereof to such holder. Class B Preferred Stock
redeemed or otherwise retired by the Corporation shall, upon the filing of a
statement as may be required by law, assume the status of authorized but
unissued Class B Preferred Stock and may thereafter be reissued in the same
manner as other authorized but unissued Class B Preferred Stock, except that any
11.
<PAGE>
shares of any series purchased or redeemed pursuant to the requirements of any
sinking fund or purchase fund provided for such series shall not be reissued.
5. Redemption Rights of Shareholders. Any holder of Class B Preferred
Stock may, at any time after three (3) years from the date of issuance, by
written request mailed to the Corporation at its registered office, cause the
Corporation, to the extent it may lawfully do so, to redeem all shares of Class
B Preferred Stock owned by the holder at the time and to pay the holder therefor
the Liquidation Preference fixed in Paragraph 3, Section B, of Article IV
hereof. The written request shall state the name and address of such holder and
the number of shares owned by him and shall be accompanied by the certificates
representing all such shares of Class B Preferred Stock, duly endorsed in blank
or accompanied by appropriate stock powers. Such purchase shall be consummated
within ninety (90) days after the date of such written request. Class B
Preferred Stock redeemed, purchased or otherwise retired by the Corporation
shall, upon the filing of a statement as may be required by law, assume the
status of authorized but unissued Class B Preferred Stock and may thereafter be
reissued in the same manner as other authorized but unissued Class B Preferred
Stock.
6. Voting Rights. The holders of the Class B Preferred Stock shall not be
entitled to vote on any matter to be voted on by the shareholders of the
Corporation. Notwithstanding the
12.
<PAGE>
foregoing, if, during any five (5) year period, the Corporation fails to pay
quarterly dividends as provided for in Paragraphs 1 and 2, Section B, of this
Article IV in an amount equal to at least eight (8) quarterly dividends (which
amount shall hereinafter be called the "Dividend Factor"), the Class B
Preferred Stock shall automatically acquire voting rights equal in power to the
aggregate voting rights of the Class A Common Stock. The Corporation shall have
the right at any time (including the last day) during each five (5) year period
to pay to the holders of the Class B Preferred Stock an amount in excess of the
quarterly dividend for that quarter; however, such amount shall not exceed the
difference between the sum of the dividends which could have been paid during
each previous quarter of that five (5) year period and the amount of the
dividends actually paid during that particular five (5) year period. If such a
payment is made, it shall be taken into account in determining whether the
Dividend Factor has been met and whether the Class B Preferred Stock has
acquired voting rights. For purposes of determining whether or not voting rights
have vested pursuant to this Paragraph 6, Section B, of Article IV, the
Corporation's operations shall be divided into five (5) year periods, with the
first five (5) years of operation constituting the initial five (5) year period
and each successive five (5) years constituting additional periods. The voting
rights of the Class B Preferred Stock shall be computed separately for each vote
of the shareholders on the
13.
<PAGE>
basis of each share of Class B Preferred Stock having that percentage of one (1)
vote calculated by dividing the total number of shares of the Class A Common
Stock outstanding at the time of the vote by the total number of shares of the
Class B Preferred Stock then outstanding. After the initial five (5) year
period, voting rights shall attach to the shares of Class B Preferred Stock only
if the quotient determined by dividing the amount of the dividends which have
been paid during complete five (5) year periods by the number of complete five
(5) year periods shall be less than the Dividend Factor. Once voting rights have
attached to the shares of Class B Preferred Stock, the voting rights shall
continue until the moving average (hereinafter called "Moving Average") of the
dividends paid during any preceding five (5) years shall equal the Dividend
Factor. For purposes of determining the point in time at which Class B Preferred
Stock is divested of previously acquired voting rights, the Moving Average
defined in the previous sentence shall be determinative and initial or
successive five (5) year periods shall not be considered.
7. Conversion. The Class B Preferred Stock may be converted at any time
into shares of the Class A Preferred Stock subject only to the prior approval of
a majority of the Board of Directors. The rate of conversion of each share of
Class B Preferred Stock into Class A Preferred Stock shall be one (1) for one
(1). The right of conversion of the Class B Preferred
14.
<PAGE>
Stock granted by these Articles of Incorporation shall not be unreasonably
prohibited by the Board of Directors.
C. CLASS A COMMON STOCK
1. Dividends. Subject to the holders of Class A and B Preferred Stock and
Class B, C, and D Common Stock first receiving dividends for the quarter in
which the dividends are intended to be paid, and further subject to all the
rights, restrictions and conditions set forth in Sections A, B, D, E and F of
this Article IV, the holders of the Class A Common Stock shall be entitled to
receive dividends payable in cash, stock or otherwise when, as and if declared
by the Board of Directors. The Board of Directors shall not declare any dividend
on the Class A Common Stock unless it has obtained approval therefor from the
holders of a majority of the issued and outstanding shares of each class of
Class B, C and D Common Stock. The requisite approval by the holders of the
Class B, C and D Common Stock shall be obtained at a special meeting called for
the purpose of said holders of the issued and outstanding Class B, C and D
Common Stock voting for or against a proposal to declare a dividend on the
issued and outstanding shares of Class A Common Stock.
2. Voting Rights. Each holder of Class A Common Stock shall be entitled to
one (1) vote for each share held.
3. Preferences on Liquidation. In the event of any dissolution,
liquidation or winding up of the Corporation,
15.
<PAGE>
whether voluntary or involuntary, the holders of the then outstanding shares of
Class A Common Stock initially issued in the incorporation of the Corporation
shall be entitled as a liquidation preference (hereinafter in this Section C of
Article IV called "Liquidation Preference") to receive for each outstanding
share the sum of the greater of Ten and no/100 Dollars ($10.00) or the amount
determined by dividing the number of shares of Class A Common Stock issued in
conjunction with the incorporation of the Corporation and outstanding on the
date of liquidation into the appraised value of the Class A Common Stock issued
in the incorporation transaction, plus any dividends declared but unpaid on said
shares. Any share of Class A Common Stock issued after the date of incorporation
shall possess such preferences on liquidation as determined by the Board of
Directors at the time of issuance. The holders of all shares of Class A Common
Stock shall be entitled to be paid only after full payment has been made to the
holders of the Class A and B Preferred Stock but prior to any payment being made
to the holders of the Class B, C or D Common Stock.
4. Redemption or Purchase. Neither the whole nor any part of the
outstanding Class A Common Stock may be redeemed by the Corporation except upon
death of the initial holder thereof and then only if there is a written
agreement with such deceased shareholder or upon the written consent of the
present holder
16.
<PAGE>
thereof, in which event the Class A Common Stock shall be redeemable by paying
therefor the Liquidation Preference fixed in Paragraph 3, Section C, of this
Article IV. In the event of a redemption of any shares of the Class A Common
Stock, the procedure for effecting the redemption shall be the same as that for
the Class A and B Preferred Stock. Class A Common Stock redeemed, purchased or
otherwise acquired by the Corporation shall be restored to the status of
authorized but unissued Class A Common Stock upon the filing of a statement as
may be required by law and may thereafter be reissued in the same manner as
other authorized but unissued Class A Common Stock.
D. CLASS B COMMON STOCK
1. Dividends. Subject to dividends first being declared and paid on the
Class A Preferred Stock for the quarter in which the dividends are intended to
be paid, and further subject to the conditions set forth in Sections A, B, C, E
and F of this Article IV, the holders of the Class B Common Stock shall be
entitled to receive dividends payable in cash, stock or otherwise when, as and
if declared by the Board of Directors, out of funds legally available therefor.
2. Voting Rights. The holders of the Class B Common Stock shall have no
right to vote on any matter voted upon by shareholders other than the right to
vote at a special meeting of the holders of the Class B, C and D Common Stock
called by the Board of Directors for the purpose of declaring a dividend
17.
<PAGE>
on the Class A Common Stock as provided in Paragraph 1, Section C, of this
Article IV.
3. Preferences on Liquidation. After payments have been made to the
holders of the Class A and B Preferred Stock and Class A Common Stock, upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, the remaining assets of the Corporation shall be distributed
one-third (1/3) each to the holders of the Class B, C and D Common Stock in
accordance with their respective holdings of each class of Class B, C and D
Common Stock.
4. Redemption or Purchase. The Class B Common Stock shall not be
redeemable or the subject of a purchase by the Corporation without the agreement
of the holder thereof.
E. CLASS C COMMON STOCK
1. Dividends. Subject to dividends first being declared and paid on the
Class A Preferred Stock for the quarter in which the dividends are intended to
be paid and further subject to the restrictions and conditions set forth in
Sections A, B, C, D and F of this Article IV, the holders of the Class C Common
Stock shall be entitled to receive dividends payable in cash, stock or otherwise
when, as and if declared by the Board of Directors out of funds legally
available therefor.
2. Voting Rights. The holders of the Class C Common Stock shall have no
right to vote on any matter voted upon by shareholders other than the right to
vote at a special meeting
18.
<PAGE>
of the holders of the Class B, C and D Common Stock called by the Board of
Directors for the purpose of declaring a dividend on the Class A Common Stock as
provided in Paragraph 1, Section C, of this Article IV.
3. Preferences on Liquidation. After making the payments to the holders of
the Class A and B Preferred Stock and Class A Common Stock, upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, the remaining assets of the Corporation shall be distributed
one-third (1/3) each to the holders of the Class B, C and D Common Stock in
accordance with their respective holdings of each class of Class B, C and D
Common Stock.
4. Redemption or Purchase. The Class C Common Stock shall not be
redeemable or the subject of a purchase by the Corporation without the agreement
of the holder thereof.
F. CLASS D COMMON STOCK
1. Dividends. Subject to dividends being first paid on the Class A
Preferred Stock for the quarter in which the dividends are intended to be paid
and further subject to the conditions set forth in Sections A, B, C, D and E of
this Article IV, the holders of the Class D Common Stock shall be entitled to
receive dividends payable in cash, stock or otherwise when, as and if declared
by the Board of Directors, out of funds legally available therefor.
2. Voting Rights. The holders of the Class D Common Stock shall have no
right to vote on any matter voted upon by
19.
<PAGE>
shareholders other than the right to vote at a special meeting of the holders of
the Class B, C and D Common Stock called by the Board of Directors for the
purpose of declaring a dividend on the Class A Common Stock as provided in
Paragraph 1, Section C, of this Article IV.
3. Preferences on Liquidation. After making the payments to the holders of
the Class A and B Preferred Stock and Class A Common Stock, upon any
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, the remaining assets of the Corporation shall be distributed
one-third (1/3) each to the holders of the Class B, C and D Common Stock in
accordance with their respective holdings of each class of Class B, C and D
Common Stock.
4. Redemption or Purchase. The Class D Common Stock shall not be
redeemable or the subject of a purchase by the Corporation without the agreement
of the holder thereof.
G. PROVISIONS APPLICABLE TO ALL CLASSES
1. Preemptive Rights. Ownership of shares of any class of the capital
stock of the Corporation shall entitle the holders thereof to preemptive rights
to subscribe for or purchase, or have offered to them for subscription or
purchase, any additional shares of capital stock of any class of the
Corporation, or any securities convertible into any class of the capital stock
of the Corporation, however acquired, issued or sold by the Corporation.
20.
<PAGE>
2. Cumulative Voting. No shareholder of the Corporation shall have the
right of cumulative voting at any election of directors or upon any other
matter.
3. Authority to Purchase Own Shares. Except as otherwise noted herein, the
Corporation shall have the authority to purchase, directly or indirectly, its
own shares to the extent of the aggregate of unrestricted capital surplus
available therefor and unrestricted reduction surplus available therefor.
4. Terms of Redemption or Purchase. The Corporation shall have the option
of either paying cash or giving a promissory note (or a combination thereof) in
payment for any redeemed or purchased shares of any class of stock. Any such
promissory note shall be for a term as determined by the Board of Directors but
in no event for a term of not less than three (3) nor more than five (5) years,
unsecured, and shall bear interest at issuance date at the then current rate of
interest at which the Corporation can borrow money from local banks.
ARTICLE V.
If, with respect to any action taken by the shareholders of the
Corporation, any provision of the Texas Business Corporation Act would, but for
this Article V, require the vote or concurrence of the holders of shares having
more than a majority of the votes entitled to be cast thereon, or of any class
or series thereof, the vote or concurrence of the holders of shares having only
a majority of the votes entitled to be cast thereon, or of
21.
<PAGE>
any class or series thereof, shall be required with respect to any such action.
ARTICLE VI.
The Corporation shall indemnify every director or officer, his heirs,
executors and administrators, against expenses actually and reasonably incurred
by him, as well as any amount paid upon a judgment, in connection with any
action, suit or proceeding, civil or criminal, to which he may be made a party
by reason of his being or having been a director or officer of the Corporation,
or at the request of the Corporation, having been a director or officer of any
other corporation of which the Corporation was at such time a shareholder or
creditor and from which other corporation he is not entitled to be indemnified,
except in relation to matters as to which he shall be finally adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in
performance of duty to the Corporation. In the event of a settlement,
indemnification shall be provided only in connection with such matters covered
by the settlement as to which the Corporation is advised by its counsel that the
person to be indemnified did not commit such a breach of duty. The foregoing
right of indemnification shall not be exclusive of other rights to which he may
be entitled.
ARTICLE VII.
No contract or other transaction between the Corporation and any other
corporation shall be affected by the fact that one
22.
<PAGE>
(1) or more of the directors or officers of this Corporation is interested in or
is a director or officer of such other corporation, and any director or officer
individually may be a party to or may be interested in any contract or
transaction of this Corporation. No contract or transaction of this Corporation
with any person or persons, firm or association shall be affected by the fact
that any director or officer of this Corporation is a party to or interested in
such contract or transaction, or in any way connected with such person or
persons, firm or association, provided that the interest in any such contract or
other transaction of any such director or officer shall be fully disclosed and
that such contract or other transaction shall be authorized or ratified by the
vote of a sufficient number of directors of the Corporation not so interested.
In the absence of fraud, no director or officer having such adverse interest
shall be liable to the Corporation or to any shareholder or creditor thereof, or
to any other person, for any loss incurred by it under or by reason of such
contract or transaction, nor shall any such director or officer be accountable
for any gains or profits realized thereon. In any case described in this Article
VII, any such director may be counted in determining the existence of a quorum
at any meeting of the Board of Directors which shall authorize or ratify any
such contract or transaction.
ARTICLE VIII.
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the
23.
<PAGE>
value of not less than One Thousand and no/100 Dollars ($1,000.00), consisting
of money, labor done or property actually received.
ARTICLE IX.
The post office address of the Corporation's initial registered office is
9444 Long Point, Houston, Texas 77055, and the name of its initial registered
agent at such address is Bobby L. Gowens.
ARTICLE X.
The number of directors constituting the initial Board of Directors is six
(6); and the names and addresses of the persons who are to serve as directors
until the first annual meeting of the shareholders or until their successors are
elected and qualify are:
Robert R. Onstead 9444 Long Point
Houston, Texas 77055
Randall C. Barclay 9444 Long Point
Houston, Texas 77055
Bobby L. Gowens 9444 Long Point
Houston, Texas 77055
Norman N. Frewin 9444 Long Point
Houston, Texas 77055
Kay M. Onstead 9444 Long Point
Houston, Texas 77055
Lew W. Harpold 9444 Long Point
Houston, Texas 77055
24.
<PAGE>
ARTICLE XI.
The name and address of the incorporator is:
Patrick Wm. Johnson 1100 Milam Street, 28th Floor
Houston, Texas 77002
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of November,
1980.
/s/ PATRICK Wm. JOHNSON
-----------------------------------
PATRICK Wm. JOHNSON
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
I, LINDA MAHAFFEY, the undersigned, a Notary Public, do hereby certify
that on this 11th day of November, 1980, personally appeared before me PATRICK
Wm. JOHNSON, who being by me first duly sworn, declared that he is the person
who signed the foregoing document as incorporator and that the statements
therein contained are true.
SUBSCRIBED AND SWORN TO before me this 11th day of November, 1980.
/s/ Linda Mahaffey
----------------------------------------
NOTARY PUBLIC IN AND FOR
HARRIS COUNTY, T E X A S
LINDA MAHAFFEY
Notary Public in Harris County, Texas
My Commission Expires June 14, 1981
25.
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
FEB 20 1985
Clerk II S
Corporations Section
RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
ARTICLE ONE
The name of the corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the Corporation on November 7, 1983, and October 29, 1984,
to reduce the par value of Class A voting common stock, Class B nonvoting common
stock, Class C nonvoting common stock and Class D nonvoting common stock.
The amendment alters or changes Article IV, (iii), (iv), (v) and (vi) of
the original or amended Articles of Incorporation and the full text of each
provision as it is amended reads as follows:
"... (iii) five million (5,000,000) shares of Class A voting common stock
of the par value of One and No/100 Dollars ($1.00) per share (hereinafter
called "Class A Common Stock"); (iv) five million (5,000,000) shares of
Class B nonvoting common stock of the par value of Fifty Cents ($0.50) per
share (hereinafter called "Class B Common Stock"); (v) five million
(5,000,000) shares of Class C nonvoting common stock of the par value of
Fifty Cents ($0.50) per share (hereinafter called "Class C Common Stock");
and (vi) five million (5,000,000) shares of Class D nonvoting common stock
of the par value of Fifty Cents ($0.50) per share (hereinafter called
"Class D Common Stock")."
ARTICLE THREE
The number of shares of the common stock of the Corporation outstanding at
the time of such adoption, on November 7, 1983, was 386,720; and, on October 29,
1984, it was 3,086,720; and, on October 29, 1983, the number of shares entitled
to vote thereon was 86,720 voting shares; and, on November 7, 1983, there were
300,000 Class B, Class C and Class D nonvoting shares, which were entitled to
vote only on Article IV, (iv), (v) and (vi) of the aforesaid amendment pursuant
to Article 4.03(2) of the Texas Business Coropration Act.
The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows:
Class Number of Shares Date of Adoption
----- ---------------- ----------------
A Voting 86,720 October 29, 1984
B Nonvoting 100,000 November 7, 1983
C Nonvoting 100,000 November 7, 1983
D Nonvoting 100,000 November 7, 1983
<PAGE>
DATED November 15, 1984.
RANDALL'S MANAGEMENT CORPORATION, INC.
By /s/ Robert R. Onstead
-----------------------------------
Robert R. Onstead, President
By /s/ Kenneth A. Branch
-----------------------------------
Kenneth A. Branch, Secretary
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, a notary public, on this day personally appeared Robert R.
Onstead, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements therein
contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 23rd day of January, 1985
/s/ Janice R. Schilmoeller
----------------------------
Janice R. Schilmoeller
My commission expires 3/1/86
----------------------------
(Print Name)
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
(S E A L)
My Commission Expires:
3-1-86
- -----------------------
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, a notary public, on this day personally appeared Kenneth A.
Branch, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements therein
contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 23rd day of January, 1985
/s/ Janice R. Schilmoeller
----------------------------
Janice R. Schilmoeller
My commission expires 3/1/86
----------------------------
(Print Name)
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
(S E A L)
My Commission Expires:
3-1-86
- -----------------------
-2-
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUL 23 1985
Clerk II-[ILLEGIBLE]
Corporations Section
STATEMENT OF CHANGE OF
REGISTERED OFFICE AND
REGISTERED AGENT OF
RANDALL'S MANAGEMENT CORPORATION, INC.
1. The name of the Corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
2. The address, including street and number, of its present registered office as
shown in the records of the Secretary of State of the State of Texas prior to
filing this is 9444 Long Point, Houston, Harris County, Texas 77055.
3. The address, including street and number, to which its registered office is
to be changed is 16000 Barker's Point Lane, Suite 200, Houston, Harris County,
Texas 77079-4094.
4. The name of its present registered agent, as shown in the records of the
Secretary of State of the State of Texas, prior to filing this statement is
Bobby L. Gowens.
5. The name of its new registered agent is Bob L. Gowens.
6. The address of its registered office and the address of the business office
of the registered agent, as changed, will be identical.
7. Such change was authorized by the Executive Committee of the Board of
Directors of Randall's Management Corporation, Inc., pursuant to Article 9.10(B)
of the Texas Business Corporation Act giving their unanimous written consent.
/s/ Robert R. Onstead
--------------------------------------
Robert R. Onstead, President
Randall's Management Corporation, Inc.
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared ROBERT R. ONSTEAD, President
of Randall's Management Corporation, Inc., a Texas corporation, known to me to
<PAGE>
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that he executed the same as the act and deed of such
corporation, for the purposes therein expressed, in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 15th day of July, 1985.
/s/ Betty Stolarski
----------------------------
BETTY STOLARSKI
----------------------------
(Print Name)
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
(S E A L)
My Commission Expires:
3/31/89
- -----------------------
- 2 -
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUL 09 1986
Clerk II-G
Corporations Section
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
RANDALL'S MANAGEMENT CORPORATION, INC.
Randall's Management Corporation, Inc. ("Corporation"), pursuant to the
provisions of Article 4.04 of the Texas Business Corporation Act, hereby adopts
the following Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is Randall's Management Corporation, Inc.
ARTICLE TWO
The following amendments to the Articles of Incorporation were adopted by
the shareholders of the Corporation on April 24, 1986:
(A) Article IV, which sets forth the Corporation's authorized
shares, is hereby amended by deleting the language therein contained in its
entirety and substituting the following therefor:
"ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall be authorized to
<PAGE>
issue is 30,008,250 shares, divided into the following: (i) 8,250 shares
of Class A preferred stock of the par value of $10.00 per share
(hereinafter called "Class A Preferred Stock"); (ii) 5,000,000 shares of
serial preferred stock of the par value of $10.00 per share issuable in
series (hereinafter called "Serial Preferred Stock"); and (iii) 25,000,000
shares of voting common stock of the par value of $1.00 per share
(hereinafter called the "Common Stock").
A description of the respective classes of stock and a statement of
the designations, preferences, limitations and relative rights, including
voting rights, of the respective classes of stock are as follows:
A. CLASS A PREFERRED STOCK
1. Dividends. The holders of Class A Preferred Stock shall be
entitled to receive dividends of $10.50 per share, out of any funds
legally available for the payment therefor, and no more, payable in cash
(quarterly on the first days of July, October, January and April, or at
such intervals as the Board of Directors may from time to time determine).
Such dividends shall accrue
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from the date of issuance of the respective Class A Preferred Stock and
shall be deemed to accrue from day to day whether or not earned or
declared. Such dividends shall be payable before any dividends shall be
paid, declared or set apart for the Serial Preferred Stock or Common Stock
and shall be cumulative so that, if for any dividend period dividends on
the outstanding Class A Preferred Stock equal to $10.50 per annum are not
paid or declared and an amount equal to the dividend declaration set apart
for payment, the deficiency shall be fully paid or declared and set apart
for payment, without interest, before any distribution, by dividend or
otherwise, shall be paid on, declared or an amount set apart by the
Corporation for payment to the Serial Preferred Stock or Common Stock.
2. Preferences on Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the then outstanding Class A Preferred Stock shall be entitled
to receive $100.00 per share, plus all accrued and unpaid dividends as a
liquidation preference (hereinafter in this Part A
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<PAGE>
of Article IV called "Liquidation Preference"), and no more, before any
amount shall be paid to the holders of the Serial Preferred Stock or
Common Stock. In the event that the assets of the Corporation are
insufficient to permit full payment of the Liquidation Preference to the
Class A Preferred shareholders as herein provided, then the assets of the
Corporation shall be distributed ratably among the holders of the
outstanding Class A Preferred Stock. A consolidation or merger of the
Corporation with or into any other corporation, or a sale of all or
substantially all of the assets of the Corporation, shall not be deemed a
liquidation, dissolution or winding up of the Corporation within the
meaning of these provisions.
3. Redemption Rights of the Corporation. The whole or any part of
the outstanding Class A Preferred Stock may be redeemed by the Corporation
at any time after three years from the date of issuance upon 30 days'
written notice by the Board of Directors sent via certified mail, return
receipt requested, to the holders of shares which are to be redeemed by
paying therefor the
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Liquidation Preference fixed in Paragraph 2, Part A, of Article IV hereof.
The Corporation may redeem the whole or any part of such shares; provided,
however, that if at any time the Corporation elects to redeem less than
the whole of the Class A Preferred Stock then outstanding, the particular
shares to be redeemed shall be determined by lot or by such other
equitable method as may be determined by the Board of Directors. If, on
the redemption date specified in any such notice, funds necessary for
redemption shall have been set aside by the Corporation, separate and
apart from its other funds, in trust for the pro rata benefit of the
holders of the Class A Preferred Stock to be redeemed, then,
notwithstanding that any certificate for shares so redeemed shall not have
been surrendered for cancellation, the shares so redeemed shall no longer
be deemed to be outstanding, the right to receive dividends thereon shall
cease to accrue from and after the date so fixed and all rights of holders
of Class A Preferred Stock notified of the redemption of their shares
shall forthwith after such redemption date cease and terminate,
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excepting only the right of the holders thereof to receive the redemption
price thereof, but without interest. If, before the redemption date
specified in any notice of redemption of the Class A Preferred Stock, the
Corporation shall deposit in trust with a bank or trust company in good
standing organized under the laws of the United States of America or the
State of Texas in the City of Houston, Texas, having a capital, surplus
and undivided profits of at least $5,000,000 according to its last
published statement of condition, an amount adequate to pay the
Liquidation Preference to the Class A Preferred shareholders, then from
and after the date fixed for redemption the Class A Preferred Stock so
redeemed shall cease and terminate, excepting only the rights of holders
thereof to receive the redemption price therefor, but without interest.
Any interest accrued on funds so deposited shall be paid to the
Corporation from time to time. In case the holder of shares which shall
have been redeemed shall not, within six years after making such deposit,
claim the amount deposited with respect to the redemption of such shares,
the bank
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or trust company in which such deposit was made shall, upon demand, pay
over to the Corporation the unclaimed amounts and thereupon such bank or
trust company shall be relieved of all responsibility in respect thereof
to such holder.
4. Redemption Rights of Shareholders. Any holder of Class A
Preferred Stock may, at any time after three years from the date of
issuance, by written request mailed to the Corporation at its registered
office, cause the Corporation, to the extent it may lawfully do so, to
redeem all shares of Class A Preferred Stock owned by the holder at the
time and to pay the holder therefor the Liquidation Preference fixed in
Paragraph 2, Part A, of this Article IV. The written request shall state
the name and address of the holder and the number of shares owned by him
and shall be accompanied by the certificate representing all such shares
of Class A Preferred Stock, duly endorsed in blank or accompanied by
appropriate stock powers. Such redemption shall be consummated within 90
days after the date of the written request.
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<PAGE>
5. Terms of Redemption or Purchase. The Corporation shall have the
option of either paying cash or giving a promissory note (or a combination
thereof) in payment for any redeemed or purchased shares of Class A
Preferred Stock. Any such promissory note shall be for a term as
determined by the Board of Directors but in no event for a term of not
less than three nor more than five years, unsecured, and shall bear
interest at issuance date at the then current rate of interest at which
the Corporation can borrow money from local banks.
6. Reacquired Shares. No share of Class A Preferred Stock that is
purchased, redeemed or otherwise acquired by the Corporation shall be
reissued. The Corporation shall file all statements required by law in
connection with the purchase, redemption or other acquisition of shares of
Class A Preferred Stock.
7. Voting Rights. Except as required by law, the holders of Class A
Preferred Stock shall not be entitled to vote on any matter to be voted
upon by the shareholders of the Corporation.
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<PAGE>
B. SERIAL PREFERRED STOCK
1. Issuance in Series. The Serial Preferred Stock may be divided
into and issued in one or more series. The Board of Directors is hereby
vested with authority from time to time to establish and designate such
series, and within the limitations prescribed by law or set forth herein,
to fix and determine the relative rights and preferences of the shares of
any series so established and to increase or decrease the number of shares
within each such series; provided that the Board of Directors may not
decrease the number of shares within a series below the number of shares
within such series that is then issued.
2. Relative Rights and Preferences of Each Series. The relative
rights and preferences of the shares of Serial Preferred Stock may vary
between series in any and all respects, and the shares of Serial
Preference Stock as a class need not be identical in any respect so long
as all shares of the same series of Serial Preference Stock are identical
in all respects.
3. Reference to External Facts. Any of the designations,
preferences, limitations or relative
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rights, including voting rights, of any series of Serial Preference Stock
may be dependent upon facts ascertainable outside these Articles of
Incorporation, as amended from time to time, provided that the manner in
which such facts operate upon the designations, preferences, limitations
and relative rights, including voting rights, of any series of Serial
Preference Stock is clearly and expressly set forth in the resolution
adopted by the Board of Directors setting forth the designation of such
series and fixing and determining the relative rights and preferences
thereof.
C. COMMON STOCK
1. Dividends. After the requirements with respect to preferential
dividends from the Class A Preferred Stock and the Serial Preferred Stock
have been met, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the Board
of Directors.
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<PAGE>
2. Voting Rights. Each holder of Common Stock shall be entitled to
one vote for each share held.
D. PROVISIONS APPLICABLE TO ALL CLASSES
1. Denial of Preemptive Rights. No shareholder of the Corporation
shall have any preemptive right to acquire additional, unissued or
treasury shares of the Corporation, or securities of the Corporation
convertible into or carrying a right to subscribe to or acquire any such
shares.
2. Voting Rights. Subject to the voting rights, if any, expressly
conferred upon the holders of Serial Preferred Stock pursuant to Part B of
this Article IV, and except as otherwise required by law, the holders of
the Common Stock shall exclusively possess full voting power for the
election of directors and for all other purposes.
3. Cumulative Voting. No shareholder of the Corporation shall have
the right of cumulative voting at any election of directors or upon any
other matter.
4. Authority to Purchase Shares. Except as otherwise noted herein
and without the necessity
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for action by its shareholders, the Corporation shall have the authority
to purchase, directly or indirectly, its own shares to the extent of the
aggregate of unrestricted capital surplus available therefor and
unrestricted reduction surplus available therefor."
(B) Article VI, concerning indemnification, is hereby amended by
deleting the language therein contained in its entirety and substituting the
following therefor:
"ARTICLE VI
1. Indemnification. As permitted by Section G of Article 2.02-1 of
the Texas Business Corporation Act as in effect on the date of the filing
of these Articles of Amendment with the Secretary of State of the State of
Texas ("Indemnification Article"), the Corporation:
(a) makes mandatory the indemnification permitted under
Section B of the Indemnification Article as contemplated by Section
G thereof;
(b) agrees to advance the reasonable expenses of a director
upon such director's compliance with the requirements of
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Sections K and L of the Indemnification Article; and
(c) extends the mandatory indemnification and the obligation
to advance reasonable expenses to all officers of the Corporation
and to all persons who are or were serving at the request of the
Corporation as a director, officer, partner or trustee of another
foreign or domestic corporation, partnership, joint venture, trust
or employee benefit plan to the same extent that the Corporation has
agreed to indemnify and advance expenses to directors under the
Indemnification Article.
2. Non-Exclusivity. The provisions of Section 1 of this Article VI
shall not be deemed exclusive of any other rights to which any such
director, officer or other person may be entitled under any other
agreement, pursuant to a vote of directors or any committee thereof or a
vote of shareholders, as a matter of law or otherwise, either as to action
in his official capacity or as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director or officer and shall inure
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to the benefit of the heirs, executors and administrators of such a
person. No person shall be entitled to indemnification pursuant to this
Article VI in relation to any matter as to which indemnification shall not
be permitted by law.
3. Defined Terms. Terms used herein that are defined in the
Indemnification Article shall have the respective meanings set forth in
the Indemnification Article."
(C) Article VII, concerning transactions with interested parties, is
hereby amended by deleting the language therein contained in its entirety and
substituting the following therefor:
"ARTICLE VII
1. Interested Transactions. No contract or other transaction between
the Corporation and one or more of its directors, officers or
securityholders or between the Corporation and another corporation,
partnership, joint venture, trust or other enterprise of which one or more
of the Corporation's directors, officers or securityholders are members,
officers, securityholders, directors or employees or in which they are
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<PAGE>
otherwise interested, directly or indirectly, shall be invalid solely
because of such relationship, or solely because such a director, officer
or securityholder is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
other transaction, or solely because his or their votes are counted for
such purpose, if (A) the material facts as to his relationship or interest
and as to the contract or other transaction are known or disclosed to the
Board of Directors or committee thereof, and such board or committee in
good faith authorizes the contract or other transaction by the affirmative
vote of a majority of the disinterested directors even though the
disinterested directors be less than a quorum, or (B) the material facts
as to his relationship or interest and as to the contract or other
transaction are known or disclosed to the shareholders entitled to vote
thereon, and the contract or other transaction is approved in good faith
by vote of the shareholders, or (C) the contract or other transaction is
fair as to the Corporation as of the time it is entered into.
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<PAGE>
2. Reliance by Directors. In performing his duties, a director of
the Corporation shall be entitled to rely on information, opinions,
reports or statements, including financial statements and other financial
data, in each case prepared or presented by (A) one or more officers or
employees of the Corporation whom the director reasonably believes to be
reliable and competent in the matters presented, (B) counsel, public
accountants or other persons as to matters which the director reasonably
believes to be within such person's professional or expert competence, or
(C) a committee of the Board of Directors upon which he does not serve,
duly designated in accordance with a provision of the by-laws, as to
matters within its designated authority, which committee the director
deems to merit confidence; provided that a director shall not be
considered to be acting in good faith if he has knowledge concerning the
matter in question that would cause such reliance to be unwarranted. A
person who so performs his duties shall have no liability to the
Corporation (whether asserted directly or derivatively) by
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reason of being or having been a director of the Corporation."
(D) Article IX, concerning the registered office and agent of the
Corporation, is hereby amended by deleting the language therein contained in its
entirety and substituting the following therefor:
"ARTICLE IX
The address of the registered office of the Corporation is 16000
Barkers Point Lane, Suite 200, Houston, Texas 77079, and the name of the
registered agent of the Corporation at that address is Bob L. Gowens."
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of
such adoption was 3,900,450; and the designation and number of outstanding
shares of each class entitled to vote thereon as a class were as follows:
CLASS NUMBER OF SHARES OUTSTANDING
----- ----------------------------
Class A Preferred 8,250
Class B Preferred 25,000
Class A Common Stock 867,200
Class B Common Stock 1,000,000
Class C Common Stock 1,000,000
Class D Common Stock 1,000,000
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<PAGE>
ARTICLE FOUR
The holders of all of the shares outstanding and entitled to vote on
said amendments have signed a consent in writing adopting said amendments.
ARTICLE FIVE
The manner in which the reclassification of the Corporation's issued
shares shall be effected upon the filing of these Articles of Amendment with the
Secretary of State of the State of Texas ("Effective Date") is as follows:
(A) Each of the issued shares (including any shares then held in the
treasury of the Corporation) of Class B Preferred Stock, $10.00 par value
("Class B Preferred Stock"), shall, without any action on the part of the
Corporation or the respective holders thereof, be reclassified as and become
3.3167 shares of Common Stock, which shares shall be entitled to all the rights
and subject to all the restrictions specified in Article IV of the Articles of
Incorporation of the Corporation, as then amended, relating to the Common Stock.
No fractional shares shall be issued but each fractional share shall be rounded
to the next higher whole share. Each certificate then outstanding representing
shares of Class B Preferred Stock shall automatically, and without the necessity
of presenting the same
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for exchange, represent thereafter the number of shares of Common Stock into
which the number of shares of Series B Preferred Stock referred to therein were
reclassified.
(B) Each of the issued shares (including any shares then held in the
treasury of the Corporation) of Class A Common Stock, $1.00 par value ("Class A
Common Stock"), shall, without any action on the part of the Corporation or the
respective holders thereof, be reclassified as and become one share of Common
Stock, which shares shall be entitled to all the rights and subject to all the
restrictions specified in Article IV of the Articles of Incorporation of the
Corporation, as then amended, relating to the Common Stock. Each certificate
then outstanding representing shares of Class A Common Stock shall
automatically, and without the necessity of presenting the same for exchange,
represent thereafter the same number of shares of Common Stock.
(C) Each of the issued shares (including any shares then held in the
treasury of the Corporation) of Class B Common Stock, Class C Common Stock and
Class D Common Stock, each $.50 par value per share (collectively, the "Other
Common Stock"), shall, without any action on the part of the Corporation or the
respective holders thereof, be reclassified as and become one share of Common
Stock,
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which shares shall be entitled to all the rights and subject to all the
restrictions specified in Article IV of the Articles of Incorporation of the
Corporation, as then amended, relating to the Common Stock. Each certificate
then outstanding representing shares of Other Common Stock shall automatically,
and without the necessity of presenting the same for exchange, represent
thereafter the same number of shares of Common Stock.
(D) The 8,250 shares of Class A Preferred Stock issued and
outstanding immediately prior to the Effective Date shall not be affected by the
reclassification referred to herein and shall remain issued and outstanding on
the Effective Date.
ARTICLE SIX
As a result of the consummation of the foregoing amendments and the
reclassifications referred to in Article Five above, the stated capital of the
Corporation attributable to the Common Stock will be $3,950,119.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
24th day of April, 1986.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By: /s/ Bob L. Gowens
----------------------------------
Exec Vice President
and
By: /s/ Kenneth A. Branch
----------------------------------
Secretary
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, a notary public, on this day personally appeared Bob L. Gowens
and Kenneth A. Branch, known to me to be the persons whose names are subscribed
to the foregoing document and, being by me first duly sworn, declared that the
statements therein contained are true and correct. Given under my hand and seal
of office this 24th day of April, 1986.
/s/ Janice R. Schilmoeller
--------------------------------
Name: Janice R. Schilmoeller
Notary Public in and for
The State of T E X A S
My Commission Expires: 3-1-90
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<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUL 9 1986
CLERK [ILLEGIBLE]
Corporations Section
RESTATED ARTICLES OF INCORPORATION
OF
RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLE ONE
Randall's Management Corporation, Inc. (Corporation), pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act, hereby adopts
the following Restated Articles of Incorporation which accurately copy the
Articles of Incorporation and all amendments thereto that are in effect to date,
and which contain no change in any provision thereof.
ARTICLE TWO
The Restated Articles of Incorporation were adopted by resolution of the
Board of Directors of the Corporation on the 24th day of April, 1986.
ARTICLE THREE
The Corporation's Articles of Incorporation and all amendments and
supplements thereto are hereby superseded by the following Restated Articles of
Incorporation which accurately copy the entire text thereof:
<PAGE>
ARTICLE I.
The name of the Corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLE II.
The period of its duration is perpetual.
ARTICLE III.
The purpose or purposes for which the Corporation is organized are:
To lease, purchase, sell and subdivide real estate within towns,
cities and villages, and their suburbs, not extending more than two miles
beyond their corporate limits;
To purchase, manufacture, assemble, fabricate, produce, import,
receive, lease as lessee or otherwise acquire, own, hold, store, use,
repair, service, maintain, mortgage, pledge or otherwise encumber or
otherwise dispose of and generally deal with and in as principal, agent,
broker, investor or otherwise, goods, wares, merchandise, securities and
personal property, tangible or intangible, of all kinds and descriptions;
To establish, maintain and conduct any sales, services, agency,
brokerage, franchise, investment or
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merchandising business in all its aspects for the purpose of selling,
purchasing, licensing, renting, leasing, operating, franchising and
otherwise dealing with personal services, instruments, machines,
appliances, inventions, securities, trademarks, trade names, patents,
privileges, processes, improvements, copyrights, contract rights and
personal property, tangible and intangible, of all kinds and descriptions;
To serve as manager, consultant, representative, agent, broker or
advisor for other persons, associations, corporations, partnerships and
firms;
To enter into partnerships or into any arrangement for sharing of
profits, union of interests, cooperation, joint venture, reciprocal
concession or otherwise with any person, firm or corporation carrying on
or engaged in or about to carry on or engage in any business or
transaction which the Corporation is authorized to carry on or engage in;
To carry out the purposes above set forth in any state, territory,
district or possession of the United States or in any foreign country to
the extent that such purposes are not forbidden by the law of such state,
territory, district or possession of the United States or by such foreign
country; and
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<PAGE>
In general, to transact any or all lawful business for which
corporations may be organized under the Texas Business Corporation Act.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
shall be authorized to issue is 30,008,250 shares, divided into the following:
(i) 8,250 shares of Class A preferred stock of the par value of $10.00 per share
(hereinafter called "Class A Preferred Stock"); (ii) 5,000,000 shares of serial
preferred stock of the par value of $10.00 per share issuable in series
(hereinafter called "Serial Preferred Stock"); and (iii) 25,000,000 shares of
voting common stock of the par value of $1.00 per share (hereinafter called the
"Common Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, limitations and relative rights, including voting
rights, of the respective classes of stock are as follows:
A. CLASS A PREFERRED STOCK
1. Dividends. The holders of Class A Preferred Stock shall be
entitled to receive dividends of $10.50 per share, out of any funds
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<PAGE>
legally available for the payment therefor, and no more, payable in cash
(quarterly on the first days of July, October, January and April, or at
such intervals as the Board of Directors may from time to time determine).
Such dividends shall accrue from the date of issuance of the respective
Class A Preferred Stock and shall be deemed to accrue from day to day
whether or not earned or declared. Such dividends shall be payable before
any dividends shall be paid, declared or set apart for the Serial
Preferred Stock or Common Stock and shall be cumulative so that, if for
any dividend period dividends on the outstanding Class A Preferred Stock
equal to $10.50 per annum are not paid or declared and an amount equal to
the dividend declaration set apart for payment, the deficiency shall be
fully paid or declared and set apart for payment, without interest, before
any distribution, by dividend or otherwise, shall be paid on, declared or
an amount set apart by the Corporation for payment to the Serial Preferred
Stock or Common Stock.
2. Preferences on Liquidation. In the event of any voluntary or
involuntary liquidation,
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dissolution or winding up of the Corporation, the holders of the then
outstanding Class A Preferred Stock shall be entitled to receive $100.00
per share, plus all accrued and unpaid dividends as a liquidation
preference (hereinafter in this Part A of Article IV called "Liquidation
Preference"), and no more, before any amount shall be paid to the holders
of the Serial Preferred Stock or Common Stock. In the event that the
assets of the Corporation are insufficient to permit full payment of the
Liquidation Preference to the Class A Preferred shareholders as herein
provided, then the assets of the Corporation shall be distributed ratably
among the holders of the outstanding Class A Preferred Stock. A
consolidation or merger of the Corporation with or into any other
corporation, or a sale of all or substantially all of the assets of the
Corporation, shall not be deemed a liquidation, dissolution or winding up
of the Corporation within the meaning of these provisions.
3. Redemption Rights of the Corporation. The whole or any part of
the outstanding Class A Preferred Stock may be redeemed by the Corporation
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at any time after three years from the date of issuance upon 30 days'
written notice by the Board of Directors sent via certified mail, return
receipt requested, to the holders of shares which are to be redeemed by
paying therefor the Liquidation Preference fixed in Paragraph 2, Part A,
of Article IV hereof. The Corporation may redeem the whole or any part of
such shares; provided, however, that if at any time the Corporation elects
to redeem less than the whole of the Class A Preferred Stock then
outstanding, the particular shares to be redeemed shall be determined by
lot or by such other equitable method as may be determined by the Board of
Directors. If, on the redemption date specified in any such notice, funds
necessary for redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit
of the holders of the Class A Preferred Stock to be redeemed, then,
notwithstanding that any certificate for shares so redeemed shall not have
been surrendered for cancellation, the shares so redeemed shall no longer
be deemed to be outstanding, the right to receive dividends
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thereon shall cease to accrue from and after the date so fixed and all
rights of holders of Class A Preferred Stock notified of the redemption of
their shares shall forthwith after such redemption date cease and
terminate, excepting only the right of the holders thereof to receive the
redemption price thereof, but without interest. If, before the redemption
date specified in any notice of redemption of the Class A Preferred Stock,
the Corporation shall deposit in trust with a bank or trust company in
good standing organized under the laws of the United States of America or
the State of Texas in the City of Houston, Texas, having a capital,
surplus and undivided profits of at least $5,000,000 according to its last
published statement of condition, an amount adequate to pay the
Liquidation Preference to the Class A Preferred shareholders, then from
and after the date fixed for redemption the Class A Preferred Stock so
redeemed shall cease and terminate, excepting only the rights of holders
thereof to receive the redemption price therefor, but without interest.
Any interest accrued on funds so deposited shall be paid to the
Corporation from time to time. In
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case the holder of shares which shall have been redeemed shall not, within
six years after making such deposit, claim the amount deposited with
respect to the redemption of such shares, the bank or trust company in
which such deposit was made shall, upon demand, pay over to the
Corporation the unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof to such holder.
4. Redemption Rights of Shareholders. Any holder of Class A
Preferred Stock may, at any time after three years from the date of
issuance, by written request mailed to the Corporation at its registered
office, cause the Corporation, to the extent it may lawfully do so, to
redeem all shares of Class A Preferred Stock owned by the holder at the
time and to pay the holder therefor the Liquidation Preference fixed in
Paragraph 2, Part A, of this Article IV. The written request shall state
the name and address of the holder and the number of shares owned by him
and shall be accompanied by the certificate representing all such shares
of Class A Preferred Stock, duly endorsed in blank or accompanied by
appropriate
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<PAGE>
stock powers. Such redemption shall be consummated within 90 days after
the date of the written request.
5. Terms of Redemption or Purchase. The Corporation shall have the
option of either paying cash or giving a promissory note (or a combination
thereof) in payment for any redeemed or purchased shares of Class A
Preferred Stock. Any such promissory note shall be for a term as
determined by the Board of Directors but in no event for a term of not
less than three nor more than five years, unsecured, and shall bear
interest at issuance date at the then current rate of interest at which
the Corporation can borrow money from local banks.
6. Reacquired Shares. No share of Class A Preferred Stock that is
purchased, redeemed or otherwise acquired by the Corporation shall be
reissued. The Corporation shall file all statements required by law in
connection with the purchase, redemption or other acquisition of shares of
Class A Preferred Stock.
7. Voting Rights. Except as required by law, the holders of Class A
Preferred Stock shall
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not be entitled to vote on any matter to be voted upon by the shareholders
of the Corporation.
B. SERIAL PREFERRED STOCK
1. Issuance in Series. The Serial Preferred Stock may be divided
into and issued in one or more series. The Board of Directors is hereby
vested with authority from time to time to establish and designate such
series, and within the limitations prescribed by law or set forth herein,
to fix and determine the relative rights and preferences of the shares of
any series so established and to increase or decrease the number of shares
within each such series; provided that the Board of Directors may not
decrease the number of shares within a series below the number of shares
within such series that is then issued.
2. Relative Rights and Preferences of Each Series. The relative
rights and preferences of the shares of Serial Preferred Stock may vary
between series in any and all respects, and the shares of Serial
Preference Stock as a class need not be identical in any respect so long
as all shares of the same series of Serial Preference Stock are identical
in all respects.
-11-
<PAGE>
3. Reference to External Facts. Any of the designations,
preferences, limitations or relative rights, including voting rights, of
any series of Serial Preference Stock may be dependent upon facts
ascertainable outside these Articles of Incorporation, as amended from
time to time, provided that the manner in which such facts operate upon
the designations, preferences, limitations and relative rights, including
voting rights, of any series of Serial Preference Stock is clearly and
expressly set forth in the resolution adopted by the Board of Directors
setting forth the designation of such series and fixing and determining
the relative rights and preferences thereof.
C. COMMON STOCK
1. Dividends. After the requirements with respect to preferential
dividends from the Class A Preferred Stock and the Serial Preferred Stock
have been met, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the Board
of Directors.
-12-
<PAGE>
2. Voting Rights. Each holder of Common Stock shall be entitled to
one vote for each share held.
D. PROVISIONS APPLICABLE TO ALL CLASSES
1. Denial of Preemptive Rights. No shareholder of the Corporation
shall have any preemptive right to acquire additional, unissued or
treasury shares of the Corporation, or securities of the Corporation
convertible into or carrying a right to subscribe to or acquire any such
shares.
2. Voting Rights. Subject to the voting rights, if any, expressly
conferred upon the holders of Serial Preferred Stock pursuant to Part B of
this Article IV, and except as otherwise required by law, the holders of
the Common Stock shall exclusively possess full voting power for the
election of directors and for all other purposes.
3. Cumulative Voting. No shareholder of the Corporation shall have
the right of cumulative voting at any election of directors or upon any
other matter.
4. Authority to Purchase Shares. Except as otherwise noted herein
and without the necessity
-13-
<PAGE>
for action by its shareholders, the Corporation shall have the authority
to purchase, directly or indirectly, its own shares to the extent of the
aggregate of unrestricted capital surplus available therefor and
unrestricted reduction surplus available therefor.
ARTICLE V.
If, with respect to any action taken by the shareholders of the
Corporation, any provision of the Texas Business Corporation Act would, but for
this Article V, require the vote or concurrence of the holders of shares having
more than a majority of the votes entitled to be cast thereon, or of any class
or series thereof, the vote or concurrence of the holders of shares having only
a majority of the votes entitled to be cast thereon, or of any class or series
thereof, shall be required with respect to any such action.
ARTICLE VI.
1. Indemnification. As permitted by Section G of Article 2.02-1 of the
Texas Business Corporation Act as in effect on the date of the filing of these
Articles of
-14-
<PAGE>
Amendment with the Secretary of State of the State of Texas ("Indemnification
Article"), the Corporation:
(a) makes mandatory the indemnification permitted under Section B of
the Indemnification Article as contemplated by Section G thereof;
(b) agrees to advance the reasonable expenses of a director upon
such director's compliance with the requirements of Sections K and L of
the Indemnification Article; and
(c) extends the mandatory indemnification and the obligation to
advance reasonable expenses to all officers of the Corporation and to all
persons who are or were serving at the request of the Corporation as a
director, officer, partner or trustee of another foreign or domestic
corporation, partnership, joint venture, trust or employee benefit plan to
the same extent that the Corporation has agreed to indemnify and advance
expenses to directors under the Indemnification Article.
2. Non-Exclusivity. The provisions of Section 1 of this Article VI shall
not be deemed exclusive of any other rights to which any such director, officer
or other person may be entitled under any other agreement, pursuant to a vote of
directors or any committee thereof or a vote of
-15-
<PAGE>
shareholders, as a matter of law or otherwise, either as to action in his
official capacity or as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person. No person shall be entitled to indemnification pursuant to this Article
VI in relation to any matter as to which indemnification shall not be permitted
by law.
3. Defined Terms. Terms used herein that are defined in the
Indemnification Article shall have the respective meanings set forth in the
Indemnification Article.
ARTICLE VII.
1. Interested Transactions. No contract or other transaction between the
Corporation and one or more of its directors, officers or securityholders or
between the Corporation and another corporation, partnership, joint venture,
trust or other enterprise of which one or more of the Corporation's directors,
officers or securityholders are members, officers, securityholders, directors or
employees or in which they are otherwise interested, directly or indirectly,
shall be invalid solely because of such relationship, or solely because such a
director, officer or
-16-
<PAGE>
securityholder is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or other
transaction, or solely because his or their votes are counted for such purpose,
if (A) the material facts as to his relationship or interest and as to the
contract or other transaction are known or disclosed to the Board of Directors
or committee thereof, and such board or committee in good faith authorizes the
contract or other transaction by the affirmative vote of a majority of the
disinterested directors even though the disinterested directors be less than a
quorum, or (B) the material facts as to his relationship or interest and as to
the contract or other transaction are known or disclosed to the shareholders
entitled to vote thereon, and the contract or other transaction is approved in
good faith by vote of the shareholders, or (C) the contract or other transaction
is fair as to the Corporation as of the time it is entered into.
2. Reliance by Directors. In performing his duties, a director of the
Corporation shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, in each
case prepared or presented by (A) one or more officers or employees of the
Corporation whom the director reasonably
-17-
<PAGE>
believes to be reliable and competent in the matters presented, (B) counsel,
public accountants or other persons as to matters which the director reasonably
believes to be within such person's professional or expert competence, or (C) a
committee of the Board of Directors upon which he does not serve, duly
designated in accordance with a provision of the by-laws, as to matters within
its designated authority, which committee the director deems to merit
confidence; provided that a director shall not be considered to be acting in
good faith if he has knowledge concerning the matter in question that would
cause such reliance to be unwarranted. A person who so performs his duties shall
have no liability to the Corporation (whether asserted directly or derivatively)
by reason of being or having been a director of the Corporation.
ARTICLE VIII.
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of not less than $1,000.00,
consisting of money, labor done or property actually received.
-18-
<PAGE>
ARTICLE IX.
The address of the registered office of the Corporation is 16000 Barkers
Point Lane, Suite 200, Houston, Texas 77079, and the name of the registered
agent of the Corporation at that address is Bob L. Gowens.
ARTICLE X.
The current Board of Directors of the Corporation consists of 8 members
who will serve until the next annual meeting of shareholders or until their
successors shall have been elected and qualified, and whose names and addresses
are as follows:
Randall C. Barclay Route 1, Box 9D
Cat Spring, TX 78933
Ronnie W. Barclay 3850 Woodbriar
Houston, TX 77002
Lew W. Harpold One Greeway Plaza East, Ste. 200
Houston, TX 77046
Norman P. Frewin 4503 Acacia
Bellaire, TX 77401
Norman N. Frewin 3703 Crystal Falls
Missouri City, TX 77459
Bob L. Gowens 3711 Panorama
Missouri City, TX 77459
R. Randall Onstead 1102 Swallow Circle
Sugar Land, TX 77478
Robert R. Onstead 8 Piper's Walk
Sugar Land, TX 77479
-19-
<PAGE>
Dated: April 24th , 1986
RANDALL'S MANAGEMENT
CORPORATION, INC.
By: /s/ Bob L. Gowens
----------------------------
Exec Vice President
and
By: /s/ Kenneth A. Branch
----------------------------
Secretary
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, a notary public, on this day personally appeared Bob L. Gowens
and Kenneth A. Branch, known to me to be the persons whose names are subscribed
to the foregoing document and, being by me first duly sworn, declared that the
statements therein contained are true and correct.
Given under my hand and seal of office this 24th day of April, 1986.
/s/ Janice R. Schilmoeller
Name: Janice R. Schilmoeller
Notary Public in and for
The State of T E X A S
My Commission Expires: 3-1-90
-20-
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
NOV 22 1988
Corporations Section
RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Restated Articles of Incorporation.
ARTICLE ONE
The name of the corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
ARTICLE TWO
The following amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the Corporation effective on July 25, 1988, to
reduce the par value of voting common stock.
The amendment alters or changes Article IV, (iii) of the Restated Articles
of Incorporation and the full text of such provision as it is amended reads as
follows:
"(iii) 25,000,000 shares of voting common stock of the par value of $0.25
per share (hereinafter called the "Common Stock")."
ARTICLE THREE
The number of shares of the Common Stock of the Corporation outstanding at
the time of the adoption of such amendment, on July 25, 1988, was 3,950,119;
and, the number of shares entitled to vote on the aforesaid amendment was
3,950,119.
ARTICLE FOUR
The holders of all of the shares of the Common Stock outstanding and
entitled to vote on the amendment have signed a consent in writing adopting the
amendment.
ARTICLE FIVE
By virtue of the aforesaid amendment, each outstanding share of Common
Stock of the Corporation shall be exchanged for four (4) shares of Common Stock.
DATED as of July 25, 1988.
RANDALL'S MANAGEMENT CORPORATION, INC.
By /s/ R. Randall Onstead, Jr.
----------------------------------
R. Randall Onstead, Jr., President
By /s/ Kenneth A. Branch
----------------------------------
Kenneth A. Branch, Secretary
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, a notary public, on this day personally appeared R. Randall
Onstead, Jr., known to me to be the person whose name is subscribed to the
foregoing document and, being by me first duly sworn, declared that the
statements therein contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17th day of November, 1988.
/s/ Joanne M. Dufour
-----------------------------------
-----------------------------------
(Print Name)
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
(S E A L)
Joanne M. Dufour
My Commission Expires: Notary Public, State of Texas
My Commission Expires 3-4-89
________________________
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, a notary public, on this day personally appeared Kenneth A.
Branch, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements therein
contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17th day of November, 1988.
/s/ Joanne M. Dufour
-----------------------------------
-----------------------------------
(Print Name)
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
(S E A L)
Joanne M. Dufour
My Commission Expires: Notary Public, State of Texas
My Commission Expires 3-4-89
________________________
- 2 -
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUL 19 1983
Corporations Section
STATEMENT OF CHANGE OF
REGISTERED OFFICE OF
RANDALL'S MANAGEMENT CORPORATION, INC.
1. The name of the Corporation is RANDALL'S MANAGEMENT CORPORATION, INC.
2. The address, including street and number, of its present registered office as
shown in the records of the Secretary of State of the State of Texas prior to
filing this is 16000 Barker's Point Lane, Suite 200, Houston, Texas 77079-4094.
3. The address, including street and number, to which its registered office is
to be changed is 3663 Briar Park, Houston, Texas 77042.
4. The name of its present registered agent, as shown in the records of the
Secretary of State of the State of Texas, prior to filing this statement is Bob
L. Gowens.
5. The address of its registered office and the address of the business office
of its registered agent, as changed, will be identical.
6. Such change was authorized by the Executive Committee of the Board of
Directors of Randall's Management Corporation, Inc., pursuant to Article 9.10(B)
of the Texas Business Corporation Act giving their unanimous written consent.
/s/ R. Randall Onstead, Jr.
---------------------------------------
R. Randall Onstead, Jr.,
President, Randall's Management
Corporation, Inc.
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, the undersigned authority, on this day personally appeared R.
RANDALL ONSTEAD, JR., President of Randall's Management Corporation, Inc., a
Texas corporation, known to me to be
Return to:
HARPOLD, MCDONALD, FITZGERALD & HALL
One Greenway Plaza East, Suite 820
Houston, Texas 77046-0195
<PAGE>
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that he executed the same as the act and deed of such
corporation, for the purposes therein expressed, in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 6th day of July, 1989.
/s/ Joanne M. Dufour
-----------------------------------
- --------------------------------------
[Seal of Joanne M. Dufour
the State Notary Public -----------------------------------
of Texas] State of Texas (Print Name)
My Commission Expires 3-4-89 NOTARY PUBLIC IN AND FOR
- -------------------------------------- THE STATE OF T E X A S
(S E A L)
My Commission Expires:
_____________________
-2-
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
AUG 21 1992
Corporations Section
RANDALL'S MANAGEMENT CORPORATION, INC.
STATEMENT OF RESOLUTION ESTABLISHING SERIES OF SHARES
designated
8% CONVERTIBLE PREFERRED STOCK
Pursuant to Article 2.13 of the Texas Business Corporation Act
Randall's Management Corporation, Inc., a Texas corporation (the
"Corporation"), hereby certifies:
A. That, pursuant to the authority contained in Article IV of the
Restated Articles of Incorporation, as amended, of the Corporation (the
"Articles of Incorporation") and in accordance with the provisions of Article
2.13 of the Texas Business Corporation Act, the Board of Directors of the
Corporation has duly adopted, at a special meeting duly held on August 21, 1992,
the following resolution creating and providing for the establishment and
issuance of a series of shares of Serial Preferred Stock as hereinafter
described, providing for the designations, preferences, limitations and
relative, voting, conversion and other rights thereof and the qualifications,
limitations or restrictions thereof, in addition to those set forth in the
Articles of Incorporation, all in accordance with the provisions of Article
2.13 of the Texas Business Corporation Act:
RESOLVED, that pursuant to Article IV of the Articles of
Incorporation, which authorizes the issuance of 30,008,250 shares of stock,
consisting of 8,250 shares of Class A preferred stock of the par value of $10.00
per share (the "Class A Preferred Stock"), 5,000,000 shares of serial preferred
stock of the par value of $10.00 per share (the "Serial Preferred Stock"), none
of which is outstanding, and 25,000,000 shares of common stock of the par value
of $.25 per share (the "Common Stock"), the Corporation hereby provides for the
issuance of a series of 292,043 shares of Serial Preferred Stock, designated as
8% Convertible Preferred Stock ("Convertible Preferred Stock"), and hereby
approves the designation, issuance and sale by this Corporation of 292,043
shares of the Convertible Preferred Stock and hereby provides for the following
designations, preferences, limitations and relative, voting, conversion and
other rights thereof and the qualifications, limitations or restrictions
thereof:
1. Designation of the Series. There shall be a series of Serial
Preferred Stock designated as "8% Convertible Preferred Stock", par value $10.00
per share, consisting of 292,043 shares. Each share of Convertible Preferred
Stock shall be referred to herein as a "Convertible Preferred Share" or "Share".
<PAGE>
2. Voting.
(a) Except as provided in this Section 2 or as otherwise required by
law, the Convertible Preferred Stock shall not have any right to vote for the
election of directors or for any other purpose. All equity securities of the
Corporation which rank on a parity with the Convertible Preferred Stock as to
payment of dividends and distributions upon liquidation, dissolution or winding
up of the Corporation are collectively referred to as "Parity Stock" and all
equity securities of the Corporation which rank junior (but in no case senior)
to the Convertible Preferred Stock as to payment of dividends or distributions
upon liquidation, dissolution or winding up of the Corporation are collectively
referred to herein as "Junior Stock". So long as the Convertible Preferred Stock
is outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of a majority of all outstanding Convertible Preferred
Stock, voting or consenting separately as a class, (i) amend, alter or repeal
(whether by amendment, merger or otherwise) any provision of the Articles of
Incorporation or the bylaws of the Corporation, as currently in effect (the
"Bylaws"), so as adversely to affect the rights, preferences, qualifications,
limitations or restrictions of the Convertible Preferred Stock, (ii) authorize
or issue any additional shares of Convertible Preferred Stock, (iii) authorize
or issue, or increase the authorized amount of, any class of stock, or any
security convertible into or exchangeable or exercisable for stock of such
class, ranking prior to the Convertible Preferred Stock as to the payment of
dividends or distributions upon liquidation, dissolution or winding up of the
Corporation or (iv) effect any reclassification, conversion, exchange or
cancellation of the Convertible Preferred Stock.
The affirmative vote or consent of the holders of a majority of all
outstanding Convertible Preferred Stock, voting or consenting separately as a
class, shall be required to (a) authorize any sale, lease or conveyance of all
or substantially all of the assets of the Company, or (b) approve any merger,
consolidation or share exchange involving the Corporation unless (i) the terms
of such merger, consolidation or share exchange (x) do not provide for a change
in the terms of the Convertible Preferred Stock or the reclassification,
conversion or exchange of the Convertible Preferred Stock for any securities,
cash or other property except as contemplated by (y) or (y) provide for the
conversion of the Convertible Preferred Stock into stock having substantially
the same relative rights, preferences, qualifications, limitations and
restrictions as set forth herein and (ii) the Convertible Preferred Stock (or
such other stock) is, after such merger, consolidation or share exchange, on a
parity with or prior to any other series of capital stock authorized by the
surviving corporation as to the payment of dividends and distributions upon
liquidation other than (A) the Class A Preferred Stock and (B) any series of
preferred stock of the Corporation prior to the Convertible Preferred Stock as
may be created with the affirmative vote or consent of the holders of a majority
of the Convertible Preferred Stock (or other than a series the shares of which
the Class A Preferred Stock or such prior preferred stock is converted into or
exchanged for as a result of such merger or consolidation that has substantially
the same terms as the Class A Preferred Stock or such prior preferred stock).
-2-
<PAGE>
Except as otherwise set forth herein, to the extent that the holders
of the Convertible Preferred Stock shall have the right to vote as a class
(alone or together with any other series of stock of the Company) pursuant to
the requirements of applicable law on any matter not set forth herein as
requiring the vote of such holders, the approval of such matter shall require
only the vote or consent of the holders of a majority of the shares entitled so
to vote.
(b) If (i) a Change of Control (as defined in paragraph (c) below)
shall have occurred and (ii) the Corporation shall have failed to satisfy its
obligation to redeem shares of Convertible Preferred Stock pursuant to Section
4, then the number of directors constituting the Board of Directors shall,
without further action, be increased by two and the holders of shares of
Convertible Preferred Stock shall have, in addition to the other voting rights
set forth herein, the exclusive right, voting separately as a single class, to
elect the directors of the Corporation to fill such newly created directorships
(the remaining directors to be elected by other classes of stock entitled to
vote therefor) at each meeting of shareholders held for the purpose of electing
directors. Such additional directors shall continue as directors and such
additional voting right shall continue until such time as any mandatory
redemption obligation provided in Section 4 that has become due shall have been
satisfied or all necessary funds have been set aside for payment, as the case
may be, at which time such additional directors shall cease to be directors and
such additional voting right of the holders of Convertible Preferred Stock shall
terminate.
The foregoing rights of holders of shares of Convertible Preferred
Stock to take any action as provided in this Section 2(b) may be exercised at
any annual meeting of shareholders or at a special meeting of shareholders held
for such purpose as hereinafter provided or at any adjournment thereof, or by
the written consent, delivered to the Secretary of the Corporation, of the
holders of the minimum number of shares required to take such action.
So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), upon the written request of holders of the Convertible
Preferred Stock addressed to the Secretary of the Corporation at the principal
office of the Corporation, the Secretary of the Corporation shall call a special
meeting of the holders of shares entitled to vote as provided herein. Such
meeting shall be held within thirty (30) days after delivery of such request to
the Secretary, at the place and upon the notice provided by law and in the
Bylaws of the Corporation for the holding of meetings of shareholders.
For taking of any action as provided in this Section 2 by the
holders of shares of Convertible Preferred Stock each such holder shall have one
vote for each share of such stock standing in this name on the transfer books of
the Corporation as of any record date fixed for such purpose or, if no such date
be fixed, at the close of business on the business day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
-3-
<PAGE>
Each director elected by the holders of shares of Convertible
Preferred Stock as provided in this Section 2(b) shall, unless his term shall
expire earlier, hold office until the annual meeting of shareholders next
succeeding his election or until his successor, if any, is elected and
qualified.
In case any vacancy shall occur among the directors elected by the
holders of shares of Convertible Preferred Stock as provided in this Section
2(b), such vacancy may be filled for the unexpired portion of the term by vote
of the remaining director theretofore elected by such holders (if there is a
remaining director), or such director's successor in office. If any such vacancy
is not so filled within 20 days after the creation thereof or if both directors
so elected by the holders of Convertible Preferred Stock shall cease to serve as
directors before their terms shall expire, the holders of the Convertible
Preferred Stock then outstanding and entitled to vote for such directors may, by
written consent as herein provided, or at a special meeting of such holders
called as provided herein, elect successors to hold office for the unexpired
term of the directors whose places shall be vacant.
Any director elected by the holders of shares of Convertible
Preferred Stock may be removed from office with or without cause only by the
vote or written consent of the holders of at least a majority of the outstanding
shares of Convertible Preferred Stock. A special meeting of the holders of
shares of Convertible Preferred Stock for such purpose may be called in
accordance with the procedures set forth in this Section 2(b).
(c) For purposes of Section 2(b), a "Change of Control" shall be
deemed to have occurred if any person or "group" (within the meaning of Section
13(d)(3) of the Securities and Exchange Act of 1934, as amended), other than a
member or members of the Control Group, shall acquire beneficial ownership of
more than 50% of the issued and outstanding Common Stock, unless the affirmative
vote or consent of the holders of a majority of all outstanding Convertible
Preferred Stock, voting or consenting separately as a class, is obtained.
"Control Group" shall mean (i) Robert R. Onstead, Norman N. Frewin and Bobby L.
Gowens and the descendants, heirs and legatees of each of them and of Randall C.
Barclay and any of their respective spouses, (ii) any trust with respect to
which any person listed in clause (i) is a beneficiary and any corporation,
partnership or family foundation created by or for the benefit of any of the
persons listed in clause (i), and (iii) any employee stock ownership plan or any
other employee benefit plan or trust related thereto benefitting any employees
of Randall's.
3. Dividends. For the purposes of this Section 3, the fifteenth day
of January, April, July and October on which the Convertible Preferred Stock
shall be outstanding shall be deemed to be a "Dividend Due Date". The holders of
Convertible Preferred Shares shall be entitled to receive, if, when and as
declared by the Board of Directors out of funds legally available therefor,
cumulative dividends at the rate of $8.00 per year in cash on each Convertible
Preferred Share and no more, calculated on the basis of a year of 360 days
consisting of twelve 30-day months, payable quarterly on each Dividend Due Date,
with respect to the quarterly period ending on the Dividend Due Date.
-4-
<PAGE>
Dividends on each Convertible Preferred Share shall accumulate and be cumulative
from and after the date of the issuance of such Convertible Preferred Share (or
in the event of a Share initially issued after the first issuance of any Shares,
from the immediately preceding Dividend Due Date or, if none, from the date of
such first issuance). The record date for the payment of dividends shall, unless
otherwise altered by the Corporation's Board of Directors, be the last day of
March, June, September or December, as the case may be, immediately preceding
the relevant Dividend Due Date. The record date for the payment of dividends on
the Convertible Preferred Shares shall in no event be more than sixty (60) or
less than ten (10) days prior to a Dividend Due Date.
On each Dividend Due Date all dividends which shall be accumulated
on each Convertible Preferred Share outstanding on such Dividend Due Date shall
be deemed to become "due". Any dividend which shall not be paid on the Dividend
Due Date on which it shall become due shall be deemed to be "past due" until
such dividend shall be paid or until the Convertible Preferred Share with
respect to which such dividend became due shall no longer be outstanding,
whichever is the earlier to occur.
When dividends are not paid in full upon all shares of Parity Stock,
all dividends declared upon shares of Parity Stock will be declared pro rata so
that in all cases the amount of dividends declared per share on the Parity Stock
bears to each other the same ratio that the accumulated dividends per share on
the shares of Parity Stock bear to each other. Unless (x) full cumulative
dividends on the Parity Stock (which have become due) have been paid or set
aside for payment and (y) the Corporation shall not be in default of any
obligation to redeem the Convertible Preferred Stock at the time required by
Section 4: (i) no dividends in cash, securities or other property may be paid or
declared and set aside for payment or any other distribution made upon any
Junior Stock (other than dividends or distributions in Junior Stock); (ii)
except for redemptions of Convertible Preferred Stock pursuant to Section 4, no
Parity Stock may be (A) redeemed pursuant to a sinking fund or otherwise (unless
all the Parity Stock is redeemed or a pro rata redemption is made from all
holders of Parity Stock, the amount allocable to each series of such Parity
Stock being determined on the basis of the aggregate liquidation preference of
the outstanding shares of each series and the shares of each series are to be
redeemed only on a pro rata basis) or (B) purchased or otherwise acquired for
any consideration by the Corporation except pursuant to an acquisition or offer
made on the equivalent terms to all holders of Parity Stock; and (iii) no Junior
Stock may be acquired for consideration except by conversion into, exchange for,
or out of the cash proceeds from the substantially concurrent offering of,
Junior Stock.
The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation if the Corporation could not, pursuant to this Section 3,
purchase such shares at such time and in such manner.
-5-
<PAGE>
4. Redemption. The Convertible Preferred Shares (i) may be redeemed
at the option of the Corporation, as a whole at any time or in part from time to
time, and (ii) shall be redeemed by the Corporation, unless converted into
shares of Common Stock pursuant to Section 6 hereof, on October 15, 1999 (the
date of any such redemption being the "Redemption Date"), in either case at a
price per share of $100 plus all dividends (whether or not declared or due)
accumulated and unpaid to the date of redemption (the "Redemption Price").
No sinking fund shall be established for the Convertible Preferred
Stock.
Notice of any redemption of the Convertible Preferred Shares shall
be mailed by means of first class mail, postage paid, addressed to the holders
of record of the Convertible Preferred Shares, at their respective addresses
then appearing on the books of the Corporation, at least twenty (20) but not
more than sixty (60) days prior to the Redemption Date. Each such notice shall
specify (i) the Redemption Date, (ii) the Redemption Price, (iii) the place for
payment and for delivering the stock certificate(s) and transfer instrument(s)
in order to collect the Redemption Price, (iv) the Convertible Preferred Shares
to be redeemed and (v) the then effective Conversion Rate (as hereinafter
defined). Any notice mailed in such manner shall be conclusively deemed to have
been duly given whether or not such notice is in fact received. If fewer than
all the outstanding Convertible Preferred Shares are to be redeemed, the
Corporation will select those to be redeemed as nearly pro rata as practicable.
Failure by the Corporation to give the notice described in this paragraph, or
the formal insufficiency of any such notice, shall not prejudice the rights of
any holders of Convertible Preferred Shares to cause the Corporation to redeem
any such shares held by him.
After the Redemption Date for any Convertible Preferred Shares, the
holder of such shares shall not be entitled to receive payment of the Redemption
Price for such Shares until such holder shall cause to be delivered to the place
specified in the notice given with respect to such redemption the certificate(s)
representing such Convertible Preferred Shares and, if required by the
Corporation, duly endorsed to the Corporation or in blank or accompanied by
proper instruments of transfer to the Corporation or in blank. No interest shall
accrue on the Redemption Price of any Convertible Preferred Share after its
Redemption Date.
At the close of business on the Redemption Date for any Convertible
Preferred Share, such Share shall (provided the Redemption Price of such Share
has been paid or properly provided for) be deemed to cease to be outstanding and
all rights of any person other than the Corporation in such Share shall be
extinguished on the Redemption Date (including all rights to receive future
dividends with respect to such Share) except for the right to receive the
Redemption Price, without interest, for the Shares in accordance with the
provisions of this Section 4, subject to applicable escheat laws.
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In the event any Convertible Preferred Shares are to be redeemed
(whether at the option of the Corporation or upon mandatory redemption), the
Corporation may, at its option, in lieu of such redemption, arrange for one or
more designees of the Corporation to purchase such Convertible Preferred Shares
for a purchase price equal to the Redemption Price thereof, and upon such
purchase, the Corporation's obligation to pay the Redemption Price shall be
discharged.
In the event that any Convertible Preferred Shares shall be
converted into Common Stock pursuant to Section 6, then (i) the Corporation
shall not have the right to redeem such Shares and (ii) any funds which shall
have been deposited for the payment of the Redemption Price for such Shares
shall be returned to the Corporation immediately after such conversion.
Subject to Section 3 hereof, the Corporation shall have the right at
any time to acquire any Convertible Preferred Shares from the owner of such
Shares on such terms as may be agreeable to such owner; provided that if the
Corporation proposes to purchase any Convertible Preferred Shares at a price
equal to or exceeding $100 per share plus accrued and unpaid dividends other
than pursuant to Section 9 of the Registration Rights and Repurchase Agreement
between the Corporation and the initial holders of the Convertible Preferred
Stock as it may be amended from time to time (the "Registration Rights and
Repurchase Agreement"), then (i) the Corporation shall notify each holder of
Convertible Preferred Shares of such proposed purchase, (ii) the Corporation
shall offer, for a period of ten days from the delivery of such notice, to
purchase on a pro rata basis at the same purchase price Convertible Preferred
Shares owned by each holder thereof, and (iii) the Corporation shall purchase
all, less than all (but only on a pro rata basis) or none of the shares
originally proposed to be purchased and the shares tendered during such ten-day
period. Subject to the foregoing, Convertible Preferred Shares may be acquired
by the Corporation from any shareholder pursuant to this paragraph without
offering any other shareholder an equal opportunity to sell his stock to the
Corporation, and no purchase by the Corporation from any shareholder pursuant to
this paragraph shall be deemed to create any right on the part of any other
shareholder to sell any Convertible Preferred Stock (or any other stock) to the
Corporation.
5. Liquidation. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation (for the purposes of
this Section 5, a "Liquidation"), before any distribution of assets shall be
made to the holders of any Junior Stock of the Corporation, the holder of each
Convertible Preferred Share then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its shareholders, an
amount equal to $100 plus all dividends (whether or not declared or due)
accumulated and unpaid on such Share on the date fixed for the distribution of
assets of the Corporation to the holders of Convertible Preferred Stock.
If upon any Liquidation of the Corporation, the assets available for
distribution to the holders of Convertible Preferred Stock and any Parity Stock
issued by the
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Corporation which shall then be outstanding (hereinafter in this paragraph
called the "Total Amount Available") shall be insufficient to pay the holders of
all outstanding Convertible Preferred Stock and all such Parity Stock the full
amounts (including all dividends accumulated and unpaid) to which they shall be
entitled by reason of such Liquidation of the Corporation, then there shall be
paid to the holders of the Convertible Preferred Stock in connection with such
Liquidation of the Corporation, an amount equal to the product derived by
multiplying the Total Amount Available times a fraction, the numerator of which
shall be the full amount to which the holders of the Convertible Preferred Stock
shall be entitled under the terms of the preceding paragraph by reason of such
Liquidation of the Corporation and the denominator of which shall be the total
amount which would have been distributed by reason of such Liquidation of the
Corporation with respect to the Convertible Preferred Stock and all Parity Stock
then outstanding had the Corporation possessed sufficient assets to pay the
maximum amount which the holders of all such stock would be entitled to receive
in connection with such Liquidation of the Corporation.
The voluntary sale, conveyance, lease, exchange or transfer of all
or substantially all the property or assets of the Corporation (unless in
connection therewith the Liquidation of the Corporation is specifically
approved) or the merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into the Corporation,
or any purchase or redemption of some or all of the shares of any class or
series of stock of the Corporation, shall not be deemed to be a Liquidation of
the Corporation for the purpose of this Section 5.
The holder of any Convertible Preferred Shares shall not be entitled
to receive any payment owed for such Shares under this Section 5 until such
holder shall cause to be delivered to the Corporation the certificate(s)
representing such Convertible Preferred Shares and, if required by the
Corporation, duly endorsed to the Corporation or in blank or accompanied by
proper instruments of transfer to the Corporation or in blank. As in the case of
the Redemption Price, no interest shall accrue on any payment upon liquidation
after the due date thereof, provided that the Corporation has duly provided
therefor.
After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of the Convertible Preferred Stock will not
be entitled to any further participation in any distribution of assets by the
Corporation.
6. Conversion Privilege. Each Convertible Preferred Share shall be
convertible at the option of the holder thereof, at any time prior to the
termination of such right as set forth in the following sentence, into fully
paid and nonassessable shares of Common Stock at the rate of 2.3 shares of
Common Stock for each full Convertible Preferred Share (the "Conversion Rate").
A Convertible Preferred Share shall cease to be convertible after the earlier of
(i) the consummation of an IPO and (ii) the date the Redemption Price with
respect to such Convertible Preferred Share is paid or properly provided for.
For purposes hereof, "IPO" means an offering of Common Stock that was registered
under the Securities Act of 1933 pursuant to an effective registration statement
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in which the total gross proceeds to the Corporation and any selling
shareholders (together with the total gross proceeds to the Corporation and any
selling shareholders from any previous offering of Common Stock that was
registered under the Securities Act of 1933 pursuant to an effective
registration statement) were at least $30 million.
Before any holder of a Convertible Preferred Share shall be entitled
to convert it into Common Stock, he shall exercise his right to convert by
surrendering the certificate or certificates for such Convertible Preferred
Share at the office of the Corporation designated for the conversion of
Convertible Preferred Shares, which certificate or certificates, if the
Corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or in
blank, and shall give written notice to the Corporation at such office stating
that he elects so to convert such Convertible Preferred Share and setting forth
the name or names in which he wishes the certificate or certificates for Common
Stock to be issued. Each such notice of election to convert shall constitute a
contract between the holder of such Convertible Preferred Share and the
Corporation, whereby the holder of such Convertible Preferred Share shall be
deemed to subscribe for the amount of Common Stock which he shall be entitled to
receive upon such conversion, and in satisfaction of such subscription, to
deposit the Convertible Preferred Share to be converted, and the Corporation
shall be deemed to agree to issue such shares of Common Stock in exchange for
such Convertible Preferred Share.
Notwithstanding anything else contained herein, the holder of any
Convertible Preferred Shares surrendered for conversion shall be entitled to
receive from the Corporation in cash an amount equal to all accrued and unpaid
dividends to the date of conversion.
The Corporation will, as soon as practicable after such deposit of
certificates for Convertible Preferred Shares accompanied by the written notice
and the payment of any required amount, deliver at such office of such transfer
agent to the person for whose account such Convertible Preferred Shares were so
surrendered, or to his nominee or nominees, (i) certificates for the number of
full shares of Common Stock to which he shall be entitled as aforesaid, together
with a cash adjustment of any fraction of a share as hereinafter provided, if
not evenly convertible, (ii) accrued and unpaid dividends to the date of
conversion on the Convertible Preferred Shares converted and (iii) if less than
the full number of shares of Convertible Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates for the number of shares evidenced by such surrendered certificate
or certificates less the number of shares being converted.
The Conversion Rate shall be subject to adjustment as follows:
(a) In case the Corporation shall (i) pay a dividend or make a
distribution on Common Stock in Common Stock, (ii) subdivide its
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outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv)
otherwise reclassify its outstanding shares of Common Stock into
securities, cash or other property (other than in a transaction
subject to subparagraph (i) below), then, and in each such case, the
Conversion Rate in effect immediately prior thereto or the record
date therefor shall be adjusted retroactively as provided below so
that the holder of any Convertible Preferred Shares thereafter
surrendered for conversion shall be entitled to receive the number
of shares of Common Stock or other securities, cash or other
property which he would have owned or have been entitled to receive
after the happening of any of the events described above had such
Convertible Preferred Shares been converted immediately prior to the
happening of such event or the record date therefor. An adjustment
made pursuant to this subparagraph (a) shall become effective
immediately after the record date in the case of a dividend or other
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them (for a period
expiring within 90 days after the date fixed for determination
mentioned below) to subscribe for or purchase shares of Common Stock
at an effective price per share less than the current market price
per share (determined as provided in paragraph (e)) of the Common
Stock immediately prior to the date fixed for the determination of
shareholders entitled to receive such rights or warrants, the
Conversion Rate in effect immediately prior to the date fixed for
such determination shall be increased by multiplying such Conversion
Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the date
fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase and the denominator
shall be the number of shares of Common Stock outstanding
immediately prior to the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the
effective offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such
current market price, such increase to become effective immediately
after the date fixed for such determination; provided, however, in
the event that all the shares of Common Stock offered for
subscription or purchase are not delivered upon the exercise of such
rights or warrants, upon the expiration of such rights or warrants
the Conversion Rate shall be readjusted to the Conversion Rate which
would have been in effect
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had the numerator and the denominator of the foregoing fraction and
the resulting adjustment been made based upon the number of shares
of Common Stock actually delivered upon the exercise of such rights
or warrants rather than upon the number of shares of Common Stock
offered for subscription or purchase. For the purposes of this
subparagraph (b), the number of shares of Common Stock at any time
outstanding shall not include shares owned or held by or for the
account of the Corporation or any of its subsidiaries.
(c) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of its capital
stock (other than Common Stock), evidences of its indebtedness or
assets (excluding cash dividends not in excess of the Available
Amount) or rights or warrants to subscribe for or purchase any
security (excluding those referred to in subparagraph (b) above),
then in each such case the Conversion Rate shall be adjusted so that
the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the date fixed for
the determination of shareholders entitled to receive such
distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in
subparagraph (e)) of the Common Stock immediately prior to the date
fixed for such determination and the denominator shall be such
current market price per share of the Common Stock less the then
fair market value (as determined in good faith by the Board of
Directors based, with respect to any non-cash consideration, on an
opinion of an independent investment banking firm or any other
qualified independent appraiser, whose determination shall be
conclusive and described in a resolution of the Board of Directors)
of the portion of the capital stock, assets, rights or evidences of
indebtedness so distributed applicable to one share of Common Stock,
such adjustment to become effective immediately following the date
fixed for the determination of shareholders entitled to receive such
distribution. For purposes of this paragraph (c), the Available
Amount at any time shall mean the excess of (i) the sum of (w) 75%
of net income available to common stock for the fiscal year through
the end of the most recent fiscal quarter immediately preceding such
time for which financial statements are available plus (x) 75% of
net income available to common stock for the immediately preceding
fiscal year over (ii) the sum of (y) the fair market value of all
dividends or other distributions paid during such fiscal and such
preceding fiscal year plus (z) all amounts deemed pursuant to
subparagraph (d)(1) to be distributed as cash dividends during such
fiscal year and such preceding fiscal year.
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(d) In case the Corporation shall repurchase shares of Common
Stock at a per share purchase price (as determined in good faith by
the Board of Directors based, with respect to any non-cash purchase
price, on an opinion of an independent investment banking firm or
any other qualified independent appraiser) in excess of the current
market price per share (determined as provided in paragraph (e))
(the number of shares so repurchased multiplied by the excess of the
per share purchase price over such current market price per share
being referred to as an "Excess Amount"), the Conversion Rate shall
be adjusted in accordance with the provisions set forth in
paragraphs (c) and (a) above, as if, in lieu of such repurchases,
the Corporation had during the year in which such repurchases were
made (1) distributed a cash dividend in an aggregate amount equal to
the aggregate of the Excess Amounts with respect to such year, with
such dividend paid to holders of Common Stock (including holders of
Common Stock so repurchased) on the date the first share of Common
Stock is so repurchased in such year, and (2) effected a combination
of the Common Stock in the proportion required to reduce the number
of shares of Common Stock outstanding from (x) the number of such
shares outstanding immediately before such first repurchase to (y)
the number of such shares outstanding immediately before such first
repurchase less the number of shares so repurchased during such
year. For purposes of this paragraph (d), the number of shares of
Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the
Corporation or any of its subsidiaries.
(e) For the purpose of any computation under subparagraphs
(b), (c) or (d), the current market price per share of Common Stock
on any date shall be deemed to be the value thereof as most recently
determined on behalf of the trustee of the employee stock ownership
plan currently maintained by the Corporation for the benefit of its
salaried employees (the "ESOP") or, if the ESOP is no longer in
existence, the value thereof as determined in good faith by the
Board of Directors of the Corporation based on an opinion of an
independent investment banking firm or any other qualified
independent appraiser.
(f) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such rate; provided, however, that the Corporation may
make any such adjustment at its election; and provided, further,
that any adjustments which by reason of this subparagraph (f) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
subparagraphs
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(a) to (i) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in
subparagraphs (a) to (i) notwithstanding, the Corporation may make
such increases in the Conversion Rate, in addition to those required
by subparagraphs (a) to (i), as it considers to be advisable in
order that any event treated for Federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the
holders of Common Stock.
(g) Whenever the Conversion Rate is adjusted as herein
provided:
(i) the Corporation shall compute the adjusted
Conversion Rate in accordance with this Section 6 and shall
prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted Conversion Rate and
showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be
filed at each office or agency maintained for the purpose of
conversion of Shares; and
(ii) a notice stating that the Conversion Rate has been
adjusted and setting forth the adjusted Conversion Rate shall
forthwith be required, and as soon as practicable after it is
required, such notice shall be mailed by the Corporation to
all holders of the Shares at their last addresses as they
shall appear in the stock transfer books of the Corporation.
(h) No fractional interests in Common Stock shall be issued
upon conversion of Convertible Preferred Shares. If more than one
certificate representing Convertible Preferred Shares shall be
surrendered for conversion at one time by the same holder, the
number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of Convertible
Preferred Shares so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of
any Convertible Preferred Shares, the Corporation will pay a cash
adjustment in respect of such fractional interest in an amount equal
to the same fraction of the then current market price per share of
Common Stock, as determined in accordance with subparagraph (e).
(i) In case of any consolidation, merger or share exchange
involving the Corporation (other than any such event which does not
result in any reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Corporation) or any
sale
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or transfer of all or substantially all of the assets of the
Corporation, the person formed by such consolidation, resulting from
such merger, which acquires shares of the Corporation pursuant to
such share exchange or which acquires such assets, as the case may
be, shall make provisions in the applicable articles or certificate
of incorporation that the holder of each Convertible Preferred Share
then outstanding shall have the right thereafter, subject to the
terms hereof, to convert such Share only into the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, share exchange, sale or transfer by a holder
of the number of shares of Common Stock of the Corporation equal to
the Conversion Rate in effect immediately prior to such
consolidation, merger, share exchange, sale or transfer assuming
such holder of Common Stock of the Corporation is not a person with
which the Corporation consolidated or into which the Corporation
merged or which merged into the Corporation, which acquired the
Corporation in such share exchange or to which such sale or transfer
was made, as the case may be ("constituent person"), or an affiliate
of a constituent person, provided that if the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, share exchange, sale or transfer is not the
same for each share of Common Stock of the Corporation held
immediately prior to such consolidation, merger, share exchange,
sale or transfer by others than a constituent person or an affiliate
thereof, then for the purpose of subparagraphs (a) to (i) the kind
and amount of securities, cash and other property receivable upon
such consolidation, merger, share exchange, sale or transfer by each
share shall be deemed to be a proportionate combination of the kind
and amount so receivable per share by all such holders or, at the
election of the Corporation, the alternative, if any, involving all
or substantially all cash. Such articles or certificate of
incorporation shall provide for adjustments which, for events
subsequent to the effective date of such articles or certificate of
incorporation, shall be as nearly equivalent as may be practicable
to the adjustments provided for in subparagraphs (a) to (i). The
above provisions shall similarly apply to successive consolidations,
mergers, share exchange, sales or transfers.
(j) In the event that at any time, as a result of any
adjustment made pursuant to subparagraphs (a) to (i) above, the
holder of any Convertible Preferred Share thereafter surrendered for
conversion shall become entitled to receive any share of the
Corporation other than shares of Common Stock, the number of such
other shares so receivable upon conversion of any share of
Convertible Preferred Shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the
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provisions contained in subparagraphs (a) to (i) above, with respect
to the Common Stock.
The Corporation shall at all times reserve and keep available, out
of its authorized and unissued stock, solely for the purpose of effecting the
conversion of the Convertible Preferred Stock, such number of shares of its
Common Stock free of preemptive rights as shall from time to time be sufficient
to effect the conversion of all shares of Convertible Preferred Stock from time
to time outstanding. The Corporation shall from time to time, in accordance with
the laws of the State of Texas, increase the authorized number of shares of
Common Stock if at any time the number of shares of Common Stock not outstanding
shall not be sufficient to permit the conversion of all the then outstanding
Convertible Preferred Shares.
The Corporation will pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Convertible Preferred Shares. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock in a name other than
that in which the Convertible Preferred Shares so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
Before taking any action which would cause an adjustment reducing
the Conversion Rate such that the effective conversion price (for all purposes
an amount equal to $100 divided by the Conversion Rate applicable to one full
share of Convertible Preferred Stock as in effect at such time) would be below
the then par value of the Common Stock, the Corporation will take any corporate
action which may, in the written opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue in fully paid and
non-assessable shares of Common Stock at the Conversion Rate as so adjusted,
including reducing the par value of the Common Stock.
In case the Corporation shall propose at any time
(i) to declare any dividend or distribution on its Common
Stock (other than cash dividends not in excess of the Available
Amount);
(ii) to offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or series
or other rights;
(iii) to repurchase shares of its Common Stock other than
pursuant to the Registration Rights and Repurchase Agreement or any
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shareholders' agreement between the Corporation and any shareholder
or shareholders;
(iv) to effect any consolidation, merger or share exchange
involving the Corporation or any sale or transfer of all or
substantially all of the assets of the Corporation that would, in
any such case, result in subparagraph (i) above having effect; or
(v) to effect the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders of record of the
Convertible Preferred Stock, at their last address as they appear upon the stock
transfer books of the Corporation, at least twenty (20) days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such action set
forth in clause (i) above or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to participate
therein are to be determined, or (y) the date on which such proposed
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up (but no failure to mail such notice or defect therein
or in the mailing thereof shall affect the validity of the corporate action
required to be specified in such notice).
7. Payments. The Corporation may provide funds for any payment of
the Redemption Price for any Convertible Preferred Shares or any amount
distributable with respect to any Convertible Preferred Shares under Section 5
hereof by depositing such funds with a bank or trust company selected by the
Corporation having a net worth of at least $100,000,000 and having its principal
place of business in Houston, Texas, or New York, New York, in trust for the
benefit of the holder of such Convertible Preferred Shares under arrangements
providing irrevocably for payment upon satisfaction of any conditions to such
payment by the holder of such Convertible Preferred Shares which shall
reasonably be required by the Corporation. The Corporation shall be entitled to
make any deposit of funds contemplated by this Section 7 under prudent
arrangements designed to permit such funds to generate interest or other income
for the Corporation, and the Corporation shall be entitled to receive all
interest and other income earned by any funds while they shall be deposited as
contemplated by this Section 7, provided that the Corporation shall maintain on
deposit funds sufficient to satisfy all payments which the deposit arrangement
shall have been established to satisfy. If the conditions precedent to the
disbursement of any funds deposited by the Corporation pursuant to this Section
7 shall not have been satisfied within two years after establishment of the
trust for such funds, then (i) such funds shall be returned to the Corporation
upon its request; (ii) after such return, such funds shall be free
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of any trust which shall have been impressed upon them; (iii) the person
entitled to the payment for which such funds shall have been originally intended
shall have the right to look only to the Corporation for such payment, subject
to applicable escheat laws; and (iv) the trustee which shall have held such
funds shall be relieved of any responsibility for such funds upon the return of
such funds to the Corporation.
Any payment which may be owed for the payment of the Redemption
Price for any Convertible Preferred Shares pursuant to Section 4 or the payment
of any amount distributed with respect to any Convertible Preferred Shares under
Section 5 shall be deemed to have been "paid or properly provided for" upon the
earlier to occur of: (i) the date upon which the funds sufficient to make such
payment shall be deposited in a manner contemplated by the preceding paragraph
or (ii) the date upon which a check payable to the person entitled to receive
such payment shall be delivered to such person or mailed to such person at
either the address of such person then appearing on the books of the Corporation
or such other address as the Corporation shall deem reasonable, provided such
check shall provide good funds.
8. Status of Reacquired Convertible Preferred Shares. Shares issued
and reacquired by the Corporation (including Convertible Preferred Shares which
have been converted into shares of Common Stock and Convertible Preferred Shares
that have been redeemed) shall have the status of authorized and unissued shares
of Serial Preferred Stock undesignated as to series, subject to later issuance,
provided that they may not be reissued as Convertible Preferred Stock.
9. Preemptive Rights. The Convertible Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
10. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof.
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IN WITNESS WHEREOF, this Statement of Resolution has been executed
by an officer of the Corporation, this 21st day of August, 1992.
RANDALL'S MANAGEMENT CORPORATION, INC.
By: /s/ Bob L. Gowens
-------------------------------
Name: Bob L. Gowens
Title: Executive Vice-President
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FILED
In the Office of the
Secretary of State of Texas
DEC 28 1992
Corporations Section
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
RANDALL'S MANAGEMENT CORPORATION, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Randall's Management
Corporation, Inc. (the "Corporation").
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the Corporation on October 5, 1992. The amendment
to the Articles of Incorporation changes the name of the Corporation from
Randall's Management Corporation, Inc. to Randall's Food Markets, Inc. The
amendment changes ARTICLE I of the amended Articles of Incorporation and the
full text of the changed Article is as follows:
"ARTICLE I
The name of the Corporation is Randall's Food Markets, Inc."
THIRD: The number of shares of the Corporation outstanding at the
time of such adoption, and the number of shares entitled to vote thereon, were
as follows:
Shares Shares Entitled
Class Outstanding to Vote
----- ----------- -------
Common Stock,
par value $0.25 per share 15,927,587 15,927,587
Class A Preferred Stock,
par value $10.00 per share 8,250 Not Entitled
8% Convertible Preferred Stock,
par value $10.00 per share 212,043 Not Entitled
FOURTH: The number of shares of Common Stock voted for such
amendment was 15,927,587; and the number of shares of Common Stock voted against
such amendment was 0.
<PAGE>
Dated December 28, 1992.
RANDALL'S MANAGEMENT CORPORATION, INC.
By /s/ Bob L. Gowens
-------------------------------
Bob L. Gowens
Executive Vice-President
-2-
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
DEC 28 1992
Corporations Section
ARTICLES OF MERGER
merging
RANDALL'S MANAGEMENT CORPORATION OF NEVADA, INC.
(a Nevada corporation)
with and into
RANDALL'S MANAGEMENT CORPORATION, INC.
(a Texas corporation)
Pursuant to the provisions of Article 5.16 of the Texas Business
Corporation Act (the "TBCA"), the undersigned domestic corporation adopts the
following Articles of Merger for the purpose of merging Randall's Management
Corporation of Nevada, Inc., a Nevada corporation ("Randall's-Nevada"), with and
into Randall's Management Corporation, Inc., a Texas corporation
("Randall's-Texas"). All of the outstanding shares of Randall's-Nevada are owned
by Randall's-Texas. Randall's-Texas shall continue in existence as the surviving
corporation.
1. Randall's Management Corporation, Inc., a Texas corporation, is
the parent corporation. Randall's Management Corporation of Nevada, Inc., a
Nevada corporation, is the subsidiary corporation.
2. Randall's-Nevada has 1,000 shares of common stock, par value
$1.00 per share, issued and outstanding, and such common stock is the only
outstanding class of capital stock of Randall's-Nevada. All such shares of
Randall's-Nevada common stock are owned by Randall's-Texas.
3. On December 21, 1992, the Board of Directors of Randall's-Texas
adopted resolutions, a copy of which is attached hereto as Exhibit A, approving
the merger of Randall's-Nevada with and into Randall's-Texas in accordance with
the Plan of Merger set forth therein (the "Plan of Merger").
4. Shareholder approval of Randall's-Nevada and Randall's-Texas is
not required pursuant to Section 78.457 of the Nevada Revised Statutes and
Article 5.16 of the TBCA, respectively.
<PAGE>
5. The Plan of Merger and the performance of its terms were duly
authorized by all action required by the laws of the State of Nevada and by the
constituent documents of Randall's-Nevada.
Dated: December 28, 1992
RANDALL'S MANAGEMENT CORPORATION, INC.
a Texas corporation
By: /s/ Bob L. Gowens
----------------------------------
Bob L. Gowens
Executive Vice President
-2-
<PAGE>
EXHIBIT A
RANDALL'S MANAGEMENT CORPORATION, INC.
Unanimous Written Consent of the Board of Directors
Merger of Subsidiary
WHEREAS, the Company is the beneficial owner of all of the
outstanding shares of capital stock of Randall's Warehouse Corporation, a Texas
corporation ("Randall's Warehouse"), Randall's Properties, Inc., a Texas
corporation ("Randall's Properties"), Randall's Food Markets, Inc., a Texas
corporation ("Randall's Food Markets"), and Tom Thumb Food & Drugs, Inc., a
Texas corporation ("Tom Thumb," collectively with Randall's Properties,
Randall's Warehouse and Randall's Food Markets, the "Subsidiaries"); and
WHEREAS, the Company desires that each of the Subsidiaries
reincorporate in the State of Delaware by merging with and into wholly-owned
subsidiaries of such corporations incorporated in the State of Delaware pursuant
to the General Corporation Law of the State of Delaware;
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby authorizes
and approves of the merger of (a) Randall's Warehouse with and into Randall's
Distribution Centers, Inc., a Delaware corporation and wholly-owned subsidiary
of Randall's Warehouse, (b) Randall's Properties with and into Randall's
Properties, Inc., a Delaware corporation and wholly-owned subsidiary of
Randall's Properties, (c) Randall's Foods Markets with and into Randall's Food &
Drugs, Inc., a Delaware corporation and wholly-owned subsidiary of Randall's
Food Markets, and (d) Tom Thumb with and into Tom Thumb Food & Drugs, Inc., a
Delaware corporation and wholly owned subsidiary of Tom Thumb.
Merger of Randall's-Nevada with and into the Company
WHEREAS, the Company is the legal and beneficial owner of all the
outstanding shares of common stock, par value $1.00 per share (the "Common
Stock), of Randall's Management Corporation of Nevada, Inc., a Nevada
corporation ("Randall's-Nevada"); and
WHEREAS, the Common Stock is the only issued and outstanding class
of stock of Randall's-Nevada; and
WHEREAS, the Company desires to merge Randall's-Nevada with and into
the Company pursuant to the provisions of the Nevada Revised Statutes ("Nevada
Law") and of the Texas Business Corporation Act ("Texas Law");
<PAGE>
NOW, THEREFORE, BE IT RESOLVED, that effective upon the filing of
Articles of Merger embodying these resolutions with the Secretary of State of
the State of Nevada and the Secretary of State of the State of Texas,
respectively, Randall's-Nevada shall merge (the "Merger") with and into the
Company, which will assume all of the obligations of Randall's-Nevada; and
further
RESOLVED, that the following Plan of Merger governing the Merger is
hereby adopted: (a) Randall's-Nevada shall be merged with and into the Company
in accordance with (i) this Plan of Merger, (ii) Article 5.16 of Texas Law and
(iii) Section 78.457 of Nevada Law, whereupon the separate existence of
Randall's-Nevada shall cease and the Company shall be the surviving corporation
(the "Surviving Corporation") of the Merger; (b) the Company (i) shall file
Articles of Merger with the Secretary of State of the State of Texas and with
the Secretary of State of the State of Nevada and (ii) shall make all other
filings or recordings required by Texas Law and Nevada Law in connection with
the Merger; (c) the Merger shall become effective at such time as both the
Secretary of State of the State of Texas and the Secretary of State of the State
of Nevada have issued certificates of merger with respect to such Articles of
Merger (the "Effective Time"); (d) at the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any share of Common
Stock, (i) each share of Common Stock owned immediately prior to the Effective
Time shall be cancelled, and no payment shall be made with respect thereto, and
(ii) each share of stock of the Company outstanding immediately prior to the
Effective Time shall remain outstanding and unchanged; (e) the Articles of
Incorporation of the Company in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with applicable law; (f) the bylaws of the Company in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law; and (g) from and after the Effective Time, until
successors are duly elected or appointed in accordance with applicable law, (i)
the directors of the Company at the Effective Time shall be the directors of the
Surviving Corporation and (ii) the officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation; and further
RESOLVED, that the President or any Vice President and the Secretary
or any Assistant Secretary of the Company be, and each hereby is, authorized to
make and execute, and the Secretary or any Assistant Secretary be, and each
hereby is, authorized to attest, Articles of Merger setting forth, as necessary,
a copy of these resolutions providing for the Merger and the date of adoption
hereof, to cause the same to be filed with the Secretary of State of the State
of Nevada and the Secretary of State of the State of Texas, respectively, and to
do all acts and things, whatsoever, whether within or without the State of
Nevada and the State of Texas which may be in any way necessary or appropriate
to effect the Merger.
Miscellaneous
RESOLVED, that the officers of the Company be, and hereby are,
authorized, empowered and directed, for and on behalf of the Company, to take or
cause to be taken any and all action, to enter into, execute and deliver any and
all certificates, agreements,
-2-
<PAGE>
applications, affidavits, acknowledgements, instruments, contracts, statements
and other documents and to do any and all things that, in the judgment of the
officer taking such action, are necessary or advisable to effectuate and carry
out the purposes and intents of the foregoing resolutions, the taking of any
such action, the execution of any such documents and the doing of any such other
things by any of such officers conclusively to evidence the due authorization
and approval thereof by the Board of Directors; and further
RESOLVED, that all acts and deeds previously performed by any of the
officers of the Company prior to the date of these resolutions that are within
the authority conferred by the foregoing resolutions are hereby ratified,
confirmed and approved as the authorized acts and deeds of the Company.
-3-
<PAGE>
================================================================================
SECRETARY OF STATE
[Seal of the State of Nevada]
CERTIFICATE OF CORPORATE STATUS
I, CHERYL A. LAU, the duly elected, qualified and acting Secretary of State of
the State of Nevada, do hereby certify that I am, by the laws of said State, the
custodian of the records relating to corporations organized under the laws
thereof; the revocation of their corporate charters, and their right to transact
and carry on their corporate business; and am the proper officer to execute this
certificate.
I further certify that, at the date of this certificate, RANDALL'S MANAGEMENT
CORPORATION OF NEVADA, INC. is a corporation duly organized and existing under
and by virtue of the laws of the State of Nevada, having fully complied
therewith; is entitled to exercise therein all the corporate powers and
functions recited in its charter or articles of incorporation, and is in good
standing in this State.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal of
State, at my office, in Carson City, Nevada, this 18th day of December, 1992
/s/ Cheryl A. Lau
---------------------------
Secretary of State
[Seal of the State of Nevada]
By /s/ [ILLEGIBLE]
---------------------------
Deputy
================================================================================
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUN 24 1993
Corporations Section
STATEMENT OF CANCELLATION
OF TREASURY SHARES
PURSUANT to the provisions of Article 4.11 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopts the
following Statement of Cancellation:
ARTICLE ONE
The name of the Corporation is RANDALL'S FOOD MARKETS, INC.
ARTICLE TWO
A resolution authorizing the cancellation of the treasury shares as set
forth in this Statement of Cancellation was duly adopted by all necessary action
on the part of the Corporation on June 22, 1993, for the purpose of cancelling
11,968 shares (the "Treasury Shares") of common stock, $.25 par value per share,
of the Corporation, held as treasury stock of the Corporation, which constitutes
all of the treasury stock of the Corporation on the date hereof. The amount of
stated capital represented by the Treasury Shares to be cancelled is $2,992.00.
ARTICLE THREE
The aggregate number of shares of any class or series of stock of the
Corporation which will be issued shares after the cancellation of the Treasury
Shares becomes effective are as follows:
15,915,619 shares of common stock, $.25 par value per share
8,250 shares of Class A preferred stock, $10.00 par value per share
212,043 shares of 8% convertible preferred stock, $10.00 par value per
share
ARTICLE FOUR
The amount which is to constitute the stated capital of the Corporation
after the cancellation becomes effective is $6,181,834.75.
Dated: June 22, 1993 RANDALL'S FOOD MARKETS, INC.
By: /s/ James E. Stiles
----------------------------------------
Name: James E. Stiles
Title: Senior Vice President
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUN 16 1995
Corporations Section
ARTICLES OF AMENDMENT
to
RESTATED ARTICLES OF INCORPORATION
of
RANDALL'S FOOD MARKETS, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Restated Articles of Incorporation:
FIRST: The name of the corporation is Randall's Food Markets, Inc.
(the "Corporation").
SECOND: The following amendment to the Restated Articles of
Incorporation was adopted by unanimous written consent of the shareholders of
the Corporation on May 31, 1995. The amendment to the Restated Articles of
Incorporation changes certain preferences, limitations and relative and other
rights of the Corporation's 8% Convertible Preferred Stock, a series of the
Corporation's serial preferred stock, par value $10.00 per share, by modifying
the Statement of Resolution Establishing Series of Shares designated 8%
Convertible Preferred Stock (the "Statement") as follows:
1. The first paragraph of Section 3 of the Statement is hereby
amended to read in its entirety as follows:
3. Dividends. For the purposes of this Section 3, the
fifteenth day of March, June, September and December on which the
Convertible Preferred Stock shall be outstanding shall be deemed to
be a "Dividend Due Date"; provided that prior to February 1, 1995,
the Dividend Due Dates were the fifteenth day of January, April,
July and October, and that the first Dividend Due Date following the
January 15, 1995 Dividend Due Date shall be June 15, 1995. The
holders of Convertible Preferred Shares shall be entitled to
receive, if, when and as declared by the Board of Directors out of
funds legally available therefor, cumulative cash dividends at the
rate of the Dividend Amount (as hereinafter defined) per annum on
each Convertible Preferred Share and (except as otherwise provided
herein) no more, calculated on the basis of a year of 360 days
consisting of twelve 30-day months, payable quarterly on each
Dividend Due Date, with respect to the quarterly period ending on
such Dividend Due Date; provided that with respect to the June 15,
1995 Dividend Due Date, the cash dividend shall be payable with
respect to the period from January 15, 1995 to and including
<PAGE>
June 15, 1995. As used herein, the "Dividend Amount" shall be (x) on
or before October 15, 1999, 8% per annum calculated on $100 (an
amount equal to $8.00 per annum) and (y) from and after October 15,
1999, if the Convertible Preferred Shares have not been redeemed in
whole, 10% per annum calculated on the Redemption Price (as defined
in Section 4) as of the immediately preceding Dividend Due Date (or,
in the case of the first Dividend Due Date after October 15, 1999,
as of October 15, 1999). Dividends on each Convertible Preferred
Share shall accumulate and be cumulative from and after the date of
the issuance of such Convertible Preferred Share (or in the event of
a Share initially issued after the first issuance of any Shares,
from the immediately preceding Dividend Due Date to which dividends
have been paid or, if none, from the date of such first issuance).
The record date for the payment of dividends shall, unless otherwise
altered by the Corporation's Board of Directors, be the last day of
February, May, August and November, as the case may be, immediately
preceding the relevant Dividend Due Date. The record date for the
payment of dividends on the Convertible Preferred Shares shall in no
event be more than sixty (60) or less than ten (10) days prior to a
Dividend Due Date.
2. The following new paragraph is added to follow the second
paragraph of Section 3 of the Statement:
With respect to any past due dividend (the "Original
Dividend") that first became due on any Dividend Due Date on or
after June 15, 1995, the holders of the Convertible Preferred Shares
shall also be entitled to receive, if, when and as declared by the
Board of Directors out of funds legally available therefor,
additional cumulative cash dividends on the unpaid amount of such
Original Dividend calculated at the applicable rate per annum used
in the definition of Dividend Amount, compounded semi-annually,
until such Original Dividend, together with such additional
dividends, is paid or, if earlier, until October 15, 1999; provided
that such additional dividends on a past due Original Dividend shall
not accrue, accumulate or be payable with respect to the dividend
period ending on any Dividend Due Date if, on the immediately
preceding Dividend Due Date, the declaration or payment of such
Original Dividend (and any other past due dividends that first
became due prior to such Original Dividend) would have constituted
or caused a breach or default under, or would have caused the
Corporation, Randall's Food & Drugs, Inc., a Delaware corporation
("Food & Drugs"), or any affiliate of either to be in violation or
default under, any term or condition of either the Credit Agreement
or the Note Purchase Agreement (each as defined in Section 4).
3. The following new phrase is added to the second sentence of the
third paragraph of Section 3 of the Statement (which paragraph is, after
giving effect to
-2-
<PAGE>
the amendment made by the preceding paragraph 2, the fourth paragraph of
Section 3 of the Statement) after the phrase "at the time required by
Section 4" and before ": (i) no dividends in cash":
(ignoring for these purposes the limitation on the Corporation's
obligation to redeem Convertible Preferred Shares set forth in the
second paragraph of Section 4)
4. The following new paragraphs are added to follow the first
paragraph of Section 4 of the Statement:
Notwithstanding the foregoing paragraph, the Corporation shall
have no obligation to redeem any Convertible Preferred Shares if,
but only for so long as, such redemption would constitute or cause a
breach of or a default under, or would cause the Corporation, Food &
Drugs or any affiliate of either to be in violation or default
under, any term or condition of either the Credit Agreement or the
Note Purchase Agreement (each as hereinafter defined).
As used herein, "Credit Agreement" shall mean that certain
Credit Agreement dated as of November 1, 1993 among Food & Drugs
(formerly Tom Thumb Food & Drugs, Inc. and successor by merger to
Randall's Food & Drugs, Inc., Tom Thumb Stores, Inc. and Randall's
Properties, Inc.), the Corporation and Randall's Properties, Inc.
(successor by merger to Tom Thumb Properties, Inc. and Tom Thumb
Distribution Centers, Inc.) as the Guarantors, the Banks defined
therein, and Texas Commerce Bank National Association, as Agent, as
amended by that certain Waiver and First Amendment to Credit
Agreement dated as of December 15, 1994; and "Note Purchase
Agreement" shall mean that certain Note Purchase Agreement dated as
of November 1, 1993 among Food & Drugs (formerly Tom Thumb Food &
Drugs, Inc. and successor by merger to Randall's Food & Drugs, Inc.,
Tom Thumb Stores, Inc. and Randall's Distribution Centers, Inc.),
the Corporation, Randall's Properties, Inc. (successor by merger to
Tom Thumb Properties, Inc. and Tom Thumb Distribution Centers, Inc.)
and each of the Noteholders named therein, as amended by that
certain Amendment to Note Purchase Agreement dated as of December
15, 1994.
The holders of the Convertible Preferred Stock, by the
affirmative vote or written consent (which can be given without the
holding of a meeting) of one or more holders holding a majority of
all outstanding Convertible Preferred Shares, which vote or consent
can be given before, on or after the date an obligation to redeem
arises, can waive, defer or eliminate (for a specified period, until
the happening of a specified event or contingency, or permanently)
the obligation of the Corporation to redeem the
-3-
<PAGE>
Convertible Preferred Stock pursuant to this Section 4. In the event
of any such action, notwithstanding any other provisions of this
Section 4, the Corporation shall not be required to redeem the
Convertible Preferred Stock to the extent provided in such action.
THIRD: The number of shares of the Corporation outstanding at the
time of such adoption, and the number of shares entitled to vote thereon, were
as follows:
Shares Shares Entitled
Class Outstanding to Vote
----- ----------- -------
Common Stock,
par value $0.25 per share 16,967,000 Not Entitled
Class A Preferred Stock,
par value $10.00 per share 8,250 Not Entitled
8% Convertible Preferred Stock,
par value $10.00 per share 212,043 212,043
FOURTH: The unanimous written consent of all holders of shares of 8%
Convertible Preferred Stock to the foregoing amendment was given in accordance
with the provisions of Article 9.10A of the Texas Business Corporation Act, and
no notice is required to be given by such article.
Dated: June 13, 1995.
RANDALL'S FOOD MARKETS, INC.
By /s/ Lee E. Straus
------------------------------------
-4-
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
NOV 20 1996
Corporations Section
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
RANDALL'S FOOD MARKETS, INC.
* * * * *
PURSUANT to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopts the
following Articles of Amendment to its Restated Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Randall's Food Markets, Inc.
ARTICLE TWO
The following amendments to the Restated Articles of Incorporation
were adopted by the shareholders of common stock, $.25 par value per share
("Common Stock"), of the Corporation on November 12, 1996 for the purpose of (i)
amending the provision contained in the Restated Articles of Incorporation
concerning indemnification of officers, directors, employees and other
representatives of the Corporation and (ii) adding a provision to the Restated
Articles of Incorporation limiting the liability of directors of the Corporation
for certain acts or omissions.
The first amendment alters Article VI of the Restated Articles of
Incorporation of the Corporation in its entirety so that, as amended, Article VI
shall be and read in it entirety as follows:
1
<PAGE>
ARTICLE VI
1. Indemnification. The Corporation shall indemnify, and
advance reasonable expenses of, every director of the Corporation to
the fullest extent permitted by Texas law, including, without
limitation, Article 2.02-1 of the Texas Business Corporation Act as
it presently exists and as it may be amended from time to time (the
"Indemnification Article"). The Corporation shall indemnify, and
advance reasonable expenses of, every officer of the Corporation and
all persons who are or were serving at the request of the
Corporation as a director, officer, partner, trustee or similar
functionary of another foreign or domestic corporation, partnership,
joint venture, trust or employee benefit plan at least to the same
extent that the Corporation has agreed to indemnify and advance
expenses to directors as set forth in this Article VI, subject to
any limitations imposed by Texas law, including, without limitation,
the Indemnification Article.
2. Non-Exclusivity. The provisions of Section 1 of this
Article VI shall not be deemed exclusive of any other rights to
which any such director, officer or other person may be entitled
under any other agreement, pursuant to a vote of directors or any
committee thereof or a vote of shareholders, as a matter of law or
otherwise, either as to action in his or her official capacity or as
to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and
administrators of such person. No person shall be entitled to
indemnification pursuant to this Article VI in relation to any
matter as to which indemnification shall not be permitted by law.
3. Effect of Amendment. Any repeal or amendment of this
Article VI shall not adversely affect any indemnification right of
any director, officer or other person covered hereunder existing at
the time of such repeal or amendment.
4. Defined Terms. Terms used herein that are defined in the
Indemnification Article shall have the respective meanings set forth
in the Indemnification Article.
The second amendment adds a new Article XI to the Restated Articles
of Incorporation of the Corporation so that, as added, Article XI shall be and
read in its entirety as follows:
ARTICLE XI
A director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for an act or
omission made in the director's capacity as a director; provided
that this Article XI shall not eliminate or limit the liability of a
director of the Corporation for the following:
2
<PAGE>
(A) a breach of the director's duty of loyalty to the
Corporation or its shareholders;
(B) an act or omission not in good faith that constitutes a
breach of duty of the director to the Corporation or an
act or omission that involves intentional misconduct or
a knowing violation of the law;
(C) a transaction from which the director received an
improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's
office; or
(D) an act or omission for which the liability of the
director is expressly provided by an applicable statute.
Any repeal or amendment of this Article XI by the shareholders
of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the liability of a director of
the Corporation existing at the time of such repeal or amendment. In
addition to the circumstances in which a director shall not be
liable pursuant to the provisions of this Article XI, a director
shall not be liable to the fullest extent permitted by any provision
of the statutes of Texas hereafter enacted that further limits the
liability of a director.
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of
such adoption was 17,149,382 shares of Common Stock, 8,250 shares of Class A
Preferred Stock, $10.00 par value per share and 278,201 shares of 8% Convertible
Preferred Stock, $10.00 par value per share, and the number of shares entitled
to vote thereon was 17,149,382 shares of Common Stock.
ARTICLE FOUR
The number of shares of Common Stock voted for such amendment was
11,574,023.19; and the number of shares of Common Stock voted against such
amendment was -0-.
3
<PAGE>
ARTICLE FIVE
This amendment does not provide for an exchange, reclassification or
cancellation of issued shares of the Corporation's capital stock.
ARTICLE SIX
This amendment effects no change in the amount of stated capital of
the Corporation.
DATED: November 12, 1996.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead, Jr.
-------------------------------------
R. Randall Onstead, Jr., President
4
<PAGE>
[Emblem]
The State of Texas
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
RANDALL'S FOOD MARKETS, INC.
CHARTER NO. 539315-0
The undersigned, as Secretary of State of Texas, hereby certifies that the
attached Articles of Amendment for the above named entity have been received in
this office and are found to conform to law.
ACCORDINGLY the undersigned, as Secretary of State, and by virtue of the
authority vested in the Secretary by law, hereby issues this Certificate of
Amendment.
Dated: June 16, 1997
Effective: June 16, 1997
[Seal of the State of Texas]
/s/ Antonio O. Garza, Jr. pac
-----------------------------------
Antonio O. Garza, Jr.
Secretary of State
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUN 13 1997
Corporations Section
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
RANDALL'S FOOD MARKETS, INC.
* * * * * * *
Randall's Food Markets, Inc. (the "Corporation"), pursuant to the
provisions of Article 4.04 of the Texas Business Corporation Act, hereby adopts
the following Articles of Amendments to its Restated Articles of Incorporation.
ARTICLE ONE
The name of the corporation is RANDALL'S FOOD MARKETS, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the Corporation on June 9, 1997:
The first paragraph of Article IV, which sets forth the Corporation's
authorized shares, is hereby amended by deleting the language therein contained
in its entirety and substituting the following paragraph therefor:
"The total number of shares of all classes of stock which the
Corporation shall be authorized to issue is 75,508,250 shares, divided
into the following: (i) 8,250 shares of Class A preferred stock of the par
value of $10.00 per share (hereinafter called "Class A Preferred
Stock");(ii) 5,000,000 shares of serial preferred stock of the par value
of $10.00 per share issuable in series (hereinafter called "Serial
Preferred Stock"); and (iii) 75,000,000 shares of voting common stock of
the par value of $0.25 per share (hereinafter called the "Common Stock")."
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption was 17,091,355.3104 shares of Common Stock, 8,250 shares of Class A
Preferred Stock, $10.00 par value per share and 278,201 shares of 8% Convertible
Preferred Stock, $10.00 par value per share, and the number of shares entitled
to vote thereon was 17,091,355.3104 shares of Common Stock. The Common Stock is
the only class of shares of capital stock entitled to vote on the amendment.
ARTICLE FOUR
15,957,381.851 shares of Common Stock voted for such amendment and
103,161.9985 shares of Common Stock voted against such amendment.
ARTICLE FIVE
This amendment does not provide for an exchange, reclassification or
cancellation of issued shares of the corporation's capital stock.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
11th day of June, 1997.
RANDALL'S FOOD MARKETS, INC.
By: /s/ Tom Arledge
---------------------------------
Senior Vice President -- Operations
Tom Arledge
and
By: /s/ Lee E. Straus
---------------------------------
Lee E. Straus
Senior Vice President, Secretary
and Treasurer
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
RANDALL'S FOOD MARKETS, INC.
A Texas Corporation
Date of Adoption: February 2, 1995
<PAGE>
AMENDED AND RESTATED BYLAWS
Table of Contents
Page
----
ARTICLE I OFFICES AND RECORDS .......................................... 1
Section 1. Registered Office .................................... 1
Section 2. Principal and Other Offices .......................... 1
Section 3. Records .............................................. 1
ARTICLE II SHAREHOLDERS ................................................ 1
Section 1. Meetings of Shareholders ............................. 1
Section 2. Annual Meeting ....................................... 1
Section 3. Special Meetings ..................................... 2
Section 4. Notices of Shareholders' Meetings .................... 2
Section 5. Quorum of Shareholders ............................... 2
Section 6. Adjournments of Annual and Special
Meetings of Shareholders ............................. 2
Section 7. Procedure at Meetings of Shareholders ................ 3
Section 8. Attendance and Proxies ............................... 3
Section 9. Voting of Shares ..................................... 4
Section 10. Voting of Shares Owned by Another
Corporation .......................................... 5
Section 11. Shares Held by Fiduciaries, Receivers,
Pledges .............................................. 5
Section 12. Decisions at Meetings of Shareholders ................ 5
Section 13. List of Shareholders ................................. 6
Section 14. Record Date .......................................... 6
Section 15. Action by Written Consent ............................ 6
Section 16. Meeting by Telephone or Similar
Communications Equipment ............................. 6
ARTICLE III BOARD OF DIRECTORS ......................................... 7
Section 1. Board of Directors ................................... 7
Section 2. Number of Directors .................................. 7
Section 3. Election and Term .................................... 7
Section 4. Resignation .......................................... 7
Section 5. Vacancy and Increase ................................. 7
Section 6. Removal .............................................. 8
Section 7. Meeting of Directors ................................. 8
Section 8. First Meeting ........................................ 8
Section 9. Election of Officers ................................. 8
Section 10. Regular Meetings ..................................... 8
Section 11. Special Meetings ..................................... 8
Section 12. Notice ............................................... 8
Section 13. Business to be Transacted ............................ 9
Section 14. Quorum - Adjournment if Quorum is
Not Present .......................................... 9
Section 15. Order of Business .................................... 9
Section 16. Presumption of Assent ................................ 9
Section 17. Compensation ......................................... 10
Section 18. Action by Unanimous Consent .......................... 10
Section 19. Meeting by Telephone or Similar
Communications Equipment ............................. 10
Section 20. Approval or Ratification of Acts or
Contracts by Shareholders ............................ 10
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ARTICLE IV DIRECTORS' SERVICES AND CONFLICTING INTERESTS
AND INDEMNIFICATION AND INSURANCE OF OFFICERS
AND DIRECTORS ............................................... 10
Section 1. Directors' Services .................................. 10
Section 2. Directors' Interests in Contracts .................... 11
Section 3. Reliance Upon Books. Reports and Records ............. 11
Section 4. Non-Liability of Directors and Officers
in Certain Cases ..................................... 12
Section 5. Indemnification of Directors, Officers,
Employees and Agents ................................. 12
ARTICLE V BOARD COMMITTEES ............................................. 17
ARTICLE VI OFFICERS .................................................... 18
Section 1. Principal Officers ................................... 18
Section 2. Additional Officers .................................. 18
Section 3. Terms of Officers .................................... 18
Section 4. Salaries ............................................. 18
Section 5. Removal .............................................. 19
Section 6. Vacancies ............................................ 19
Section 7. Powers and Duties of Officers ........................ 19
Section 8. Chairman of the Board ................................ 19
Section 9. Vice Chairmen of the Board ........................... 19
Section 10. President ............................................ 19
Section 11. Executive Vice Presidents ............................ 19
Section 12. Senior Vice Presidents ............................... 20
Section 13. Vice Presidents ...................................... 20
Section 14. Treasurer ............................................ 20
Section 15. Assistant Treasurers ................................. 20
Section 16. Secretary ............................................ 20
Section 17. Assistant Secretaries ................................ 21
Section 18. Securities of Other Corporations ..................... 21
ARTICLE VII BOOKS, DOCUMENTS AND ACCOUNTS ............................... 21
ARTICLE VIII CAPITAL STOCK .............................................. 21
Section 1. Issuance ............................................. 21
Section 2. Lost Certificates .................................... 23
Section 3. Transfers ............................................ 23
Section 4. Registered Holders ................................... 23
Section 5. Record Dates and Closing of Share
Transfer Records ..................................... 23
Section 6. Regulations .......................................... 24
Section 7. Share Dividends; Distributions ....................... 24
ARTICLE IX MISCELLANEOUS PROVISIONS .................................... 24
Section 1. Fiscal Year .......................................... 24
Section 2. Seal ................................................. 24
Section 3. Notice and Waiver of Notice .......................... 25
Section 4. Resignations ......................................... 25
Section 5. Depositories ......................................... 25
Section 6. Signing of Checks and Notes .......................... 25
Section 7. Loans ................................................ 25
Section 8. Gender and Number .................................... 25
Section 9. Laws and Statutes .................................... 25
Section 10. Headings ............................................. 26
ARTICLE X AMENDMENTS ................................................... 26
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RANDALL'S FOOD MARKETS, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES AND RECORDS
Section 1. Registered Office. Until the Board of Directors otherwise
determines, the registered office of the Corporation required by the Texas
Business Corporation Act to be maintained in the State of Texas shall be the
registered office named in the original Articles of Incorporation of the
Corporation, but such registered office may be changed from time to time by the
Board of Directors in the manner provided by law. Should the Corporation
maintain a place of business in Texas, such registered office need not be
identical to the principal place of business of the Corporation.
Section 2. Principal and Other Offices. The principal office of the
Corporation in the State of Texas shall be located in the City of Houston,
County of Harris. The Corporation may also have offices at such other places or
locations, within or without the State of Texas, as the Board of Directors may
determine or the business of the Corporation may require.
Section 3. Records. The books and records of the Corporation, except as
otherwise provided by statute or these Bylaws, shall be kept in the offices of
the Corporation or in such other place within or without of the State of Texas
as shall be determined by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 1. Meetings of Shareholders. Any meeting of the shareholders,
annual or special, shall be held at the principal place of business of the
Corporation, or at such other place within or without the State of Texas as may
be determined by the Chairman of the Board of Directors. However, any meeting
may be held at any place within or without the State of Texas designated in a
waiver or waivers of notice signed by, or in the aggregate signed by, all of the
shareholders.
Section 2. Annual Meeting. The annual meeting of the Shareholders shall be
held on the first Tuesday after the third Saturday following the end of the
first "quarterly" fiscal accounting period of the Company in each fiscal year.
The Chairman of the Board or the President may change the designated meeting
place, time or date of a regular meeting for any reason by notifying the
Shareholders of the change at least five days before the date of the Annual
Meeting as established in this Section 2. This meeting is for the purpose of
electing Directors of the Corporation and for the transaction of any other
business as may properly come before the meeting. Any and all business of any
nature or character whatsoever may be transacted, and action may be taken
thereon, at any annual meeting, except as otherwise provided by law or by these
Bylaws. If the election of Directors is not held on the day designated herein
for any annual meeting of the Shareholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a Special Meeting of
the Shareholders as soon thereafter as convenient.
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Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute or by law or by the
Articles of Incorporation of the Corporation, may be called by the Chairman of
the Board, the President, or the Board of Directors, and shall be called by the
Chairman of the Board, the President or the Secretary upon written request
therefor, stating the purpose or purposes of the meeting, delivered to such
officer, signed by the then holder(s) of at least ten percent (10%) of all of
the then issued and outstanding shares of the capital stock of the Corporation
entitled to be voted at such meeting.
Section 4. Notices of Shareholders' Meetings. Written or printed notice
stating the place, day and hour of each meeting of the shareholders, and, in
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) days nor more than sixty (60)
days before the date of the meeting, either personally or by mail, by or at the
direction of the Chairman of the Board, the President, the Secretary, or the
officer or person calling the meeting, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at his
address as it appears on the share transfer records of the Corporation, with
postage thereon prepaid. Any notice required to be given to any shareholder
pursuant to this Section 4 need not be given to the shareholder if (1) notice of
two consecutive annual meetings and all notices of meetings held during the
period between those annual meetings, if any, or (2) all (but in no event less
than two) payments (if sent by first class mail) by the Corporation of
distributions with respect to its stock or interest on securities during a
12-month period have been mailed to that person, addressed to his address as
shown on the share transfer records of the Corporation, and have been returned
as undeliverable. If a shareholder described in the immediately preceding
sentence delivers to the Corporation a written notice setting forth his then
current address, the requirement that notice be given to that person shall be
reinstated.
Section 5. Quorum of Shareholders. With respect to any matter, unless
otherwise required by law or provided in the Articles of Incorporation, the
holders of a majority of the shares entitled to vote on such matter, represented
in person or by proxy, shall constitute a quorum at a meeting of shareholders.
In no event shall a quorum consist of the holders of less than one-third (1/3)
of the shares entitled to vote. Except as provided in Section 12 of this Article
II, the vote of the holders of a majority of the shares entitled to vote and
represented at a meeting at which a quorum is present shall be the act of the
shareholders' meeting, unless the vote of a greater number is required by law,
the Articles of Incorporation or these Bylaws. The shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the subsequent withdrawal of enough shareholders to leave less
than a quorum or the refusal of any shareholder present in person or by proxy to
vote or participate.
Section 6. Adjournments of Annual and Special Meetings of Shareholders. If
the holders of the amount of shares necessary to constitute a quorum shall fail
to attend any meeting of the shareholders in person or by proxy, then the
holders of a majority of the shares entitled to vote which are represented in
person or by proxy at the meeting may adjourn any such meeting from time to time
without notice, other than by announcement at the meeting of the time and place
at which the meeting will reconvene, until holders of the amount of shares
requisite to constitute a quorum shall be present at the particular meeting or
at any adjournment thereof, in person or by proxy. The holders of a majority of
the shares entitled to vote and which are represented in person or by proxy at a
meeting may also adjourn any annual or special meeting of the shareholders from
time to time and without notice, other than by announcement at the meeting of
the time and place at which the meeting will reconvene, until the transaction of
any and all business submitted or
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proposed to be submitted to such meeting or any adjournment thereof shall have
been completed. If the adjournment is for more than 60 days, or if after
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at such meeting. At any such adjourned meeting at which a quorum is
present, in person or by proxy, any business may be transacted which might have
been transacted at the meeting as originally notified or called.
Section 7. Procedure at Meetings of Shareholders. The Chairman of the
Board, or in the event of his absence, failure or refusal to act, the President
of the Corporation shall call each meeting of the shareholders to order and
shall act as Chairman of such meeting. If for any reason whatsoever neither the
Chairman of the Board nor the President of the Corporation acts or will act as
the Chairman of the meeting of shareholders, then the shareholders present, in
person or by proxy, and entitled to vote thereat may by majority vote appoint a
Chairman who shall act as Chairman of the meeting.
The Secretary of the Corporation, or in the event of his absence, failure
or refusal to act, an Assistant Secretary, shall act as Secretary of each
meeting of the shareholders. If for any reason whatsoever neither the Secretary
nor an Assistant Secretary acts or will act as Secretary of the meeting of
shareholders, then the Chairman of the meeting or, if he fails to do so, the
shareholders present, either in person or by proxy, and entitled to vote thereat
may by majority vote appoint any person to act as Secretary of the meeting and
such person shall act as Secretary of the meeting.
The Chairman of any meeting shall determine the order of business and the
procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussion as seem to him in order. Unless the Chairman of the
meeting shall otherwise determine, the order of business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a Chairman and the appointment of a Secretary, if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Waiver of reading of minutes and and acceptance without reading of
the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting called
for that purpose.
(h) Unfinished business and taking of any necessary votes thereon.
(i) New business and taking of any necessary votes thereon.
(j) Adjournment.
Section 8. Attendance and Proxies. Each shareholder entitled to vote at a
shareholders' meeting may attend such meeting and vote in person or may attend
such meeting by proxy, and vote by such proxy. Proxies of a shareholder may only
be appointed by an instrument in writing executed by the shareholder or by such
shareholder's duly
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authorized attorney-in-fact and filed with the Secretary of the Corporation
before or at the time of the particular meeting, and the attendance or the vote
at any such meeting of a proxy of any such shareholder so appointed shall for
all purposes be considered as the attendance or vote in person of such
shareholder. Telegram, telex, cablegram or similar transmission by the
shareholder, or a photographic, photostatic, facsimile, or similar reproduction
of a writing executed by the shareholder, shall be treated as an execution in
writing of the proxy for purposes of the preceding sentence. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the Secretary of the meeting who shall decide all questions touching upon the
qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the Chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise expressly provided in the
proxy. Each proxy shall be revocable unless expressly provided therein to be
irrevocable and unless otherwise made irrevocable by law.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all of the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one or, if any even number attend and a majority do not agree on any particular
issue, each proxy so attending shall be entitled to exercise such powers with
respect to the percentage of the total shares equal to the percentage reached by
dividing the number one by the total number of proxies representing such shares.
Section 9. Voting of Shares. At each meeting of the shareholders, each
outstanding share standing in the shareholder's name on the share transfer
records of the Corporation shall be entitled to one (1) vote on each matter
submitted to vote at such meeting, subject, however, to the provisions of
Section 5 of Article VIII of these Bylaws, and except to the extent that the
Articles of Incorporation provide for more or less than one vote per share or,
if and to the extent permitted by law, limit or deny voting rights to the
holders of the shares of any class or series, or as otherwise provided by law.
Treasury shares, shares of the Corporation's stock owned by another corporation
the majority of the voting stock of which is owned or controlled by the
Corporation, and shares of the Corporation's stock held by a corporation in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
At each election for directors by the shareholders, every shareholder
entitled to vote at such election shall have the right to vote the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or, unless expressly prohibited by
the Articles of Incorporation of the Corporation (in general or with respect to
a specified class or series of shares or group of classes or series of shares)
and subject to the provisions of this paragraph below, to cumulate his votes by
giving one candidate as many votes as the number of such directors multiplied by
his shares shall equal or by distributing such votes on the same principle among
any number of such candidates. If cumulative voting of shares of capital stock
of the Corporation has not been denied in the Articles of Incorporation,
cumulative voting will be allowed as long as any shareholder thereby having
cumulative voting rights who intends to cumulate his votes shall have given
written notice of such intention to the Secretary of the Corporation on or
before the day preceding the election at which such shareholder intends to
cumulate his votes. All shareholders entitled to vote cumulatively may cumulate
their votes if any shareholder gives the written notice provided for herein.
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Section 10. Voting of Shares Owned by Another Corporation. Shares standing
in the name of another corporation, domestic or foreign, on the books and
records of the Corporation and having voting rights may be voted by such
officer, agent or proxy as the bylaws of such other corporation may authorize
or, in the absence of such authorization, as the board of directors of such
other corporation may determine; provided, however, that when any foreign
corporation without a permit to do business in the State of Texas lawfully owns
or may lawfully own or acquire stock in a Texas corporation, it shall not be
unlawful for such foreign corporation to vote such stock and to participate in
the management and control of the business and affairs of such Texas
corporation, as other shareholders, subject to all laws, rules and regulations
governing Texas corporations and especially subject to the provisions of the
antitrust laws of the State of Texas.
Section 11. Shares Held by Fiduciaries, Receivers, Pledges. Shares held by
an administrator, executor, guardian or conservator may be voted by him so long
as such shares forming a part of an estate are in the possession and form a part
of the estate being served by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him unless such shares shall have been
transferred into his name as trustee. Shares standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without such shares being transferred
into his name if authority so to do is contained in an appropriate order of the
court by which such receiver was appointed. A shareholder whose shares are
pledged shall be entitled to vote such shares until such shares have been
transferred on the books and records of the Corporation into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Section 12. Decisions at Meetings of Shareholders. At all meetings of the
shareholders all elections of Directors shall be determined by a plurality of
the votes of the shareholders entitled to vote represented in person or by
proxy, a quorum being present, and all other questions, business and matters,
except those of which the manner of deciding is otherwise expressly governed by
the Texas Business Corporation Act or by the Articles of Incorporation or by
these Bylaws, shall be decided by the vote of the holders of a majority of the
votes of the shareholders entitled to vote, represented in person or by proxy, a
quorum being present. All voting shall be viva voce, except that upon the
determination of the Chairman of the meeting or upon the demand of any qualified
voter or his proxy, voting on any question, matter or business at such meeting
shall be by ballot. In the event any business, question or matter is so voted
upon by ballot, then each ballot shall be signed by the shareholder voting or by
his proxy and shall state the number of shares so voted.
In advance of any meeting of shareholders, the Board of Directors may
appoint an inspector of election. If any inspector so appointed refuses to serve
or is not present at the shareholders meeting for which he has been appointed,
the Chairman of the meeting shall appoint a replacement. Each inspector shall
subscribe an oath or affirmation to execute faithfully the duties of inspector
at such meeting with strict impartiality and according to the best of his
ability. The inspector of election shall determine the number of shares
outstanding, the voting power of each share, the number of shares represented at
the meeting, the existence of a quorum, and the authenticity, validity and
effect of proxies. The inspector of election shall in addition receive the
ballots and consents, hear and determine all challenges and questions in any way
arising in connection with a vote, count the votes and announce the results,
make and sign a certificate of the results thereof and do all other acts as may
be proper to conduct elections or votes in a fair and impartial manner. Any
person may serve as an inspector, except no candidate for the office of director
shall be appointed as an inspector.
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Section 13. List of Shareholders. A complete list of shareholders entitled
to vote at each shareholders' meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
shall be prepared by the Secretary and kept on file at the registered office or
principal place of business of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours for a
period of at least ten (10) days prior to such meeting and shall be produced and
kept open at such meeting and at all times during such meeting shall be subject
to inspection by an shareholder. The original share transfer records shall be
prima facie evidence as to the identity of the shareholders entitled to examine
such list or share transfer records or to vote at any meeting of the
shareholders.
Section 14. Record Date. The Board of Directors shall have the power to
close the share transfer records of the Corporation or, in lieu thereof, to fix
a record date for the determination of the shareholders entitled to notice of or
to vote at any meeting of the shareholders and at any adjournment thereof and to
fix a record date for any other purpose as provided in Section 5 of Article
VIII of these Bylaws.
Section 15. Action by Written Consent. In accordance with Article 9.10 of
the Texas Business Corporation Act, any action required or which may be taken
at any annual or special meeting of the shareholders ("Shareholder Action") may
be taken without a meeting, without prior notice and without a vote if a consent
or consents in writing, setting forth the action so taken, shall be signed by
all shareholders entitled to vote with respect to the subject matter thereof at
a meeting of shareholders, and such consent shall have the same force and effect
as a vote at a meeting and may be stated as such in any articles or document
filed with the Secretary of State of Texas.
If permitted by the Articles of Incorporation of the Corporation, any
Shareholder Action may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the action so
taken, shall be signed by those shareholders holding the number of votes
necessary to approve the taking of such action at a meeting at which all
shareholders entitled to vote with respect to the subject matter thereof were
present and voting, and such consent shall have the same force and effect as a
vote at a meeting and may be stated as such in any articles or document filed
with the Secretary of State of Texas. No such written consent shall be effective
to take the action that is the subject of the consent unless it bears the date
of signature of each shareholder who signs the consent and unless, within sixty
(60) days after the date of the earliest dated consent delivered to the
Corporation, a consent or consents signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
the action that is the subject of the consent are delivered to the Corporation
by delivery to its registered office, its registered agent, its principal place
of business, its transfer agent, its registrar, its exchange agent or to the
Secretary or any Assistant Secretary of the Corporation. Delivery of any written
consent to the Corporation pursuant to this paragraph shall be by hand or
certified or registered mail, return receipt requested. Delivery to the
Corporation's principal place of business shall be addressed to the President or
Chief Executive Officer of the Corporation. A telegram, telex, cablegram, or
similar transmission by a shareholder, or a photographic, photostatic,
facsimile, or similar reproduction of a writing signed by a shareholder, shall
be regarded as signed by the shareholder for purposes of this Section 15. Prompt
notice of the taking of any action by shareholders without a meeting by less
than unanimous written consent shall be given to those shareholders who do not
consent in writing to the action.
Section 16. Meeting by Telephone or Similar Communications Equipment.
Subject to the provisions required or permitted by the Texas Business
Corporation Act for notice of meetings, unless otherwise restricted by these
Bylaws or the Articles of Incorporation, shareholders may participate in and
hold a meeting by means of conference telephone or other similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 16 shall
constitute presence in person at such meeting, except where a person
participates in the
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meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Board of Directors. The powers of the Corporation shall be
exercised by or under the authority of, and the business, property and affairs
of the Corporation shall be managed under the direction of, the Board of
Directors and, subject to such restrictions, if any, as may be imposed by law,
the Articles of Incorporation or by these Bylaws, the Board of Directors may,
and are fully authorized to, do all such lawful acts and things as may be done
by the Corporation. Directors need not be residents of the State of Texas or
shareholders of the Corporation.
Section 2. Number of Directors. The number of directors which shall
constitute the entire Board of Directors shall be determined from time to time
by resolution of the Board of Directors, provided that no decrease shall have
the effect of shortening the term of any incumbent director, and further
provided that the number of directors shall never be less than one (1) nor more
than fifteen (15). If the Board of Directors makes no such determination, the
number of directors shall be the number set forth in the Articles of
Incorporation.
Section 3. Election and Term. Except as otherwise provided in Section 5 of
this Article III, the directors shall be elected each year at the annual meeting
of the shareholders, or at a special meeting of the shareholders held in lieu of
the annual meeting. Each such director shall hold office, unless he is removed
in accordance with the provisions of these Bylaws or he resigns, for the term
for which he is elected and until his successor shall have been elected and
qualified. Each director shall qualify by accepting his election to office
either expressly or by acting as a director.
Section 4. Resignation. Any director or officer of the Corporation may
resign at any time as provided in Section 4 of Article IX of these Bylaws.
Section 5. Vacancy and Increase. Any vacancy occurring in the initial
Board of Directors before the issuance of shares may be filled by the
affirmative vote or written consent of a majority of the incorporators or by
the affirmative vote of a majority of the remaining directors though less
than a quorum of the Board of Directors. Any vacancy occurring in the Board
of Directors after the issuance of shares may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of
the Board of Directors. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office and until his successor
shall have been elected and qualified. A directorship to be filled by reason
of an increase in the number of directors may be filled by the Board of
Directors for a term of office continuing only until the next election of one
or more directors by the shareholders; provided, however, that the Board of
Directors may not fill more than two such directorships during the period
between any two successive annual meetings of shareholders. Any vacancy
occurring in the Board of Directors or any directorship to be filled by
reason of an increase in the number of directors may also be filled by
election at an annual or special meeting of shareholders called for that
purpose. Notwithstanding the foregoing provisions of this Section 5, whenever
the holders of any class or series of shares or group of classes or series of
shares are entitled to elect one or more directors by the provisions of the
Articles of Incorporation of the Corporation, any vacancies in such
directorships and any newly-created directorships of such class or series to
be filled because of an increase in the number of such directors may be
filled by the affirmative vote of a majority of the directors elected by such
class or series, or by such group, then in office, or by a sole remaining
director so elected, or by the vote of the holders of the outstanding shares
of such class or series or of such group, and such
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directorships shall not in any case be filled by the vote of the remaining
directors or the holders of the outstanding shares as a whole unless otherwise
provided in the Articles of Incorporation of the Corporation.
Section 6. Removal. At any meeting of shareholders at which a quorum of
shareholders is present called expressly for that purpose, any director or the
entire Board of Directors may be removed from office, with or without cause, by
a vote of the holders of a majority of the shares then entitled to vote at an
election of directors; provided that, in case the shareholders have the right to
cumulate votes for the election of directors, if less than the entire Board is
to be removed, no director may be removed if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at any election of
the entire Board of Directors, or if there be classes of directors, at an
election of the class of directors of which such director is a part, and any
vacancy or vacancies in the Board resulting therefrom may be filled by the
remaining directors, though less than a quorum, or by the shareholders,
whichever shall first act thereon.
Section 7. Meeting of Directors. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Texas.
Section 8. First Meeting. Each newly elected Board of Directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the shareholders, and no notice of such meeting shall be
necessary.
Section 9. Election of Officers. At the first meeting of the newly-elected
Board of Directors in each year at which a quorum shall be present, the Board of
Directors shall proceed to the election of the officers of the Corporation.
Section 10. Regular Meetings. There shall be four Regular Meetings of the
Board of Directors each calendar year. All Regular Meetings of the Board of
Directors other than the Annual Meeting of the Board of Directors shall be held
in the corporate offices of the Corporation at 9:30 a.m. on the first Thursday
after the third Saturday following the end of each "quarterly" fiscal accounting
period without notice other than this Article III, Section 10 of the By-Laws of
the Corporation. The Regular Meeting after the end of the first quarterly fiscal
accounting period of the Corporation will be designated the Annual Meeting of
the Board of Directors and shall be held immediately following the annual
meeting of shareholders scheduled in accordance with Article II, Section 2 of
the By-Laws of the Corporation. The Chairman of the Board or the President may
change the designated meeting place, time or date of a Regular Meeting for any
reason by notifying the Board of Directors of the change at least five days
before the date of the Regular Meeting as established in this Section 10.
Section 11. Special Meetings. Special Meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, President or
any two Directors. The person authorized to call Special Meetings of the Board
of Directors may fix any place, either within or without the State of Texas, as
the place for holding any special meeting of the Board of Directors. Further,
this authorized person may set any time of day for such Special Meeting.
Section 12. Notice. The Secretary or an Assistant Secretary shall, but in
the event of the absence of the Secretary or an Assistant Secretary or the
failure, inability, refusal or omission on the part of the Secretary or an
Assistant Secretary so to do, any other officer of the Corporation may, give
notice to each director of each special meeting, and of the place, day and hour
of the particular meeting, in person or by mail, or by telephone,
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telegraph or other means of communication, at least two (2) days before the
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 13. Business to be Transacted. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or any waiver of notice of such
meeting. Any and all business of any nature or character whatsoever may be
transacted and action may be taken thereon at any meeting, regular or special,
of the Board of Directors. At any meeting at which every director shall be
present, even though without any notice, any business may be transacted.
Section 14. Quorum-Adjournment if Quorum is Not Present. A majority of the
number of directors fixed by, or in the manner provided in, the Articles of
Incorporation or these Bylaws shall constitute a quorum for the transaction of
any and all business, unless a different number or portion is required by law or
by the Articles of Incorporation or these Bylaws. In no case may the Articles of
Incorporation or these Bylaws provide that less than one-third (1/3) of the
number of directors so fixed constitutes a quorum. At any meeting, regular or
special or any first meeting, of the Board of Directors, if there be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time without notice, other than by announcement at the meeting of the time and
place at which the meeting will reconvene, until a quorum shall be present at
the meeting. A majority of the directors present at any meeting of the Board of
Directors, or if only one director may be present, then such director, may
adjourn any meeting of the Board from time to time without notice, other than by
announcement at such meeting of the time and place at which the meeting will
reconvene, until the transaction of any and all business submitted or proposed
to be submitted to such meeting or any adjournment thereof shall have been
completed. The act of the majority of the directors present at any meeting of
the Board of Directors at which a quorum is present shall constitute the act of
the Board of Directors, unless the act of a greater number is required by law or
the Articles of Incorporation or these Bylaws.
Section 15. Order of Business. At all meetings of the Board of Directors,
business shall be transacted in such order as the Board of Directors may
determine. At all meetings of the Board of Directors, the Chairman of the Board
shall preside, but if the Chairman of the Board should be absent, the President
shall preside, but if none of such officers shall be present or preside at any
meeting of the Board, then a Chairman shall be chosen by the Board from among
the directors present and such Chairman so chosen shall preside at the meeting.
The Secretary of the Corporation, or in his absence, an Assistant
Secretary, shall act as Secretary of the meetings of the Board of Directors, but
in the absence of the Secretary and an Assistant Secretary, or if for any
reason neither acts as Secretary thereof, the presiding officer shall appoint
any person of his choice to act, and such person shall act, as Secretary of the
meeting.
Section 16. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately
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after the adjournment of the meeting. Such right to dissent shall not apply
to a director who voted in favor of such action.
Section 17. Compensation. Unless otherwise restricted by the Articles of
Incorporation, the Board of Directors shall have authority to fix the
compensation of directors. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as a director. Nothing
herein contained shall be construed so as to preclude any director from serving
the Corporation in any other capacity or receiving compensation therefor.
Members of special or standing committees may be allowed a fixed sum and
expenses of attendance, if any, at committee meetings.
Section 18. Action by Unanimous Consent. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee may be taken
without a meeting if a consent in writing, setting forth the action so taken, is
signed by all members of the Board of Directors or committee, as the case may
be. Such consent shall have the same force and effect as a unanimous vote at a
meeting, and may be stated as such in any document or instrument filed with the
Secretary of State of the State of Texas.
Section 19. Meeting by Telephone or Similar Communications Equipment.
Subject to the provisions required or permitted by the Texas Business
Corporation Act for notice of meetings, unless otherwise restricted by these
Bylaws or the Articles of Incorporation, the Board of Directors or any committee
thereof designated by the Board of Directors, may participate in and hold a
meeting of the Board of Directors or any such committee by means of conference
telephone or other similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section 19 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 20. Approval or Ratification of Acts or Contracts by Shareholders.
The Board of Directors in its discretion may submit any act or contract for
approval or ratification at any annual meeting of the shareholders, or at any
special meeting of the shareholders called for the purpose of considering any
such act or contract, and any act or contract that shall be approved or be
ratified by the vote of the shareholders holding a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote and present in
person or by proxy at such meeting, provided that a quorum is present, shall be
as valid and as binding upon the Corporation and upon all of the shareholders as
if it has been approved or ratified by every shareholder of the Corporation.
ARTICLE IV
DIRECTORS' SERVICES AND CONFLICTING INTERESTS AND
INDEMNIFICATION AND INSURANCE OF OFFICERS AND DIRECTORS
Section 1. Directors' Services. No director shall be required to devote
his time or any particular portion of his time or render services or any
particular services exclusively to the Corporation. Every director shall be
entirely free to engage, participate and invest in any and all businesses,
enterprises and activities, either similar or dissimilar to the business,
enterprise and activities of the Corporation, without the breach of any duty to
the Corporation or to its shareholders and without accountability or liability
to the Corporation or to its shareholders.
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Every director shall, respectively, be entirely free to act for, serve and
represent any other corporation, any entity or any person, in any capacity, and
be or become a director or officer, or both, of any other corporation or any
entity, irrespective of whether or not the business, purposes, enterprises and
activities, or any of them, thereof be similar or dissimilar to the business,
purposes, enterprises and activities, or any of them, of the Corporation,
without the breach of any duty to the Corporation or to its shareholders and
without accountability or liability to the Corporation or to its shareholders.
Section 2. Directors' Interests in Contracts. As provided in the Articles
of Incorporation of the Corporation and this Section 2, no contract or
transaction between the Corporation and one or more of its directors, or between
the Corporation and any other corporation, partnership, association, or other
organization or entity in which one or more of the Corporation's directors are
directors or have a financial interest, shall be void or voidable solely for
such reason, solely because the director is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if (i) the material facts of his relationship or interest shall
be disclosed or known to the Board of Directors or the committee, and the Board
of Directors or such committee shall in good faith authorize, approve or ratify
such contract or other transaction by a vote of a majority of the disinterested
directors present, even though the disinterested directors be less than a
quorum, (ii) the material facts of such relationship or interest and of such
contract or transaction shall be disclosed or known to the shareholders entitled
to vote thereon and such shareholders shall in good faith authorize, approve or
ratify such contract or other transaction, or (iii) such contract or other
transaction is fair to the Corporation at the time of its authorization,
approval or ratification by the Board of Directors or any committee thereof or
the shareholders; nor shall any director be responsible to, or liable to account
to, the Corporation for any profits realized by or from or through any such
contract or other transaction of the Corporation so authorized, ratified or
approved, by reason of such interest or his being or having been a director of
the Corporation. Nothing herein contained shall create responsibility or
liability in or in connection with any such event or prevent the authorization,
ratification or approval of such contracts or other transactions in any other
manner permitted by law or by statute. This Section 2 shall not be construed to
invalidate any contract or other transaction which would otherwise be valid
under the common or statutory law applicable thereto. Common or interested
directors may be counted in determining the presence of a quorum at the meeting
of the Board of Directors or committee thereof which authorizes any such
contract or transaction.
Section 3. Reliance Upon Books, Reports and Records. As provided in the
Articles of Incorporation of the Corporation and this Section 3, a director
shall not be liable under Section 2.41(A)(1) of the Texas Business Corporation
Act if, in voting for or assenting to the distribution, the director (i) relied
in good faith and with ordinary care upon (a) financial statements of the
Corporation (including without limitation financial statements that include
subsidiary corporations or other corporations accounted for on a consolidated
basis or on the equity method of accounting) that present the financial
condition of the Corporation in accordance with generally accepted accounting
principles, or (b) financial statements prepared on the basis of accounting used
to file the Corporation's federal income tax return or any other accounting
practices and principles that are reasonable in the circumstances, or (c)
financial information, including without limitation, condensed or summary
financial statements, that is prepared on a basis consistent with the financial
statements described pursuant to subclauses (i)(a) and (i)(b) of this sentence,
(d) projection, forecast, or other forward looking information relating to the
future economic performance, financial condition or liquidity of the Corporation
that is reasonable in the circumstances, (e) a fair valuation or information
from any other method that is reasonable under the circumstances, (f) any
combination of the statements, valuations or information authorized
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by this clause (i), or (g) other information, opinions, reports or statements,
including financial statements and other financial data, concerning the
Corporation or another person, that were prepared or presented by one or more
officers or employees of the Corporation, legal counsel, public accountants,
investment bankers, or other persons as to matters the director reasonably
believes are within the person's professional or expert competence, or a
committee of the Board of Directors of which the director is not a member, (ii)
acting in good faith and with ordinary care considered the worth of the assets
of the Corporation to be at least equal to their book value, or (iii) in
determining whether the Corporation made adequate provision for payment,
satisfaction or discharge of all of its liabilities and obligations as provided
in Article 6.04 of the Texas Business Corporation Act, relied in good faith and
with ordinary care upon financial statements of, or other information
concerning, any person who was or became contractually obligated to pay, satisfy
or discharge some or all of those liabilities or obligations.
In the discharge of any duty imposed or power conferred upon a director,
including as a member of a committee, the director may in good faith and with
ordinary care, rely on information, opinions, reports, or statements, including
financial statements and other financial data, concerning the Corporation or
another person, that were prepared or presented by one or more officers or
employees of the Corporation, legal counsel, public accountants, investment
bankers, or other persons as to matters the director reasonably believes are
within the person's professional or expert competence, or a committee of the
Board of Directors of which the director is not a member. A director is not
relying in good faith if the director has knowledge concerning the matter in
question that makes reliance as otherwise permitted above unwarranted.
In the discharge of any duty imposed or power conferred upon an officer of
the Corporation the officer may in good faith and with ordinary care rely on
information, opinions, reports, or statements, including financial statements
and other financial data, concerning the Corporation or another person, that
were prepared or presented by one or more other officers or employees of the
Corporation, including members of the Board of Directors, or legal counsel,
public accountants, investment bankers, or other persons as to matters the
officer reasonably believes are within the person's professional or expert
competence. An officer is not relying in good faith if the officer has knowledge
concerning the matter in question that makes reliance as otherwise permitted
above unwarranted.
Section 4. Non-Liability of Directors and Officers in Certain Cases. No
director, officer, or member of a committee shall be liable for his acts as such
if he is excused from liability under any present or future provision of the
Texas Business Corporation Act.
Section 5. Indemnification of Directors, Officers, Employees and Agents.
(a) As used in this section:
(1) "Corporation" includes any domestic or foreign predecessor
entity of the Corporation in a merger, consolidation or other transaction
in which the liabilities of the predecessor are transferred to the
Corporation by operation of law and in any other transaction in which the
Corporation assumes the liabilities of the predecessor but does not
specifically exclude liabilities that are the subject matter of this
Section 5.
(2) "Director" means an person who is or was a director of the
Corporation and any person who, while a director of the Corporation, is or
was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another
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foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official Capacity" means
(A) when used with respect to a Director, the office of
director in the Corporation, and
(B) when used with respect to a person other than a Director,
the elective or appointive office in the Corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent on behalf of the Corporation,
but neither A nor B above includes service for any other foreign or
domestic corporation or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(5) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or
proceeding.
(b) As provided in the Articles of Incorporation of the Corporation, the
Corporation shall indemnify any person who was, is or is threatened to be made a
named defendant or respondent in any Proceeding because the person is or was a
Director only if it is determined in accordance with paragraph (f) of this
Section 5 that the person:
(1) conducted himself in good faith;
(2) reasonably believed:
(A) in the case of conduct in his Official Capacity as a
Director of the Corporation, that his conduct was in the
Corporation's best interests, and
(B) in all other cases, that his conduct was at least not
opposed to the Corporation's best interests; and
(3) in the case of any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
(c) A Director may not be indemnified under subsection 5(b) for
obligations resulting from a Proceeding:
(1) in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's Official Capacity; or
(2) in which the person is found liable to the Corporation.
(d) The termination of any Proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the person did not meet the requirements set forth in
subsection 5(b). A person shall be
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deemed to have been found liable in respect of any claim, issue or matter only
after the person shall have been so adjudged by a court of competent
jurisdiction after exhaustion of all appeals therefrom.
(e) A person shall be indemnified under subsection 5(b) against judgments,
penalties (including excise and similar taxes), fines, settlements and
reasonable Expenses actually incurred by the person in connection with the
Proceeding; but if the Proceeding was brought by or on behalf of the
Corporation, the indemnification is limited to reasonable Expenses actually
incurred by the person in connection with the Proceeding.
(f) No indemnification under subsection 5(b) shall be made by the
Corporation unless authorized in the specific case after a determination has
been made that the Director has met the standard of conduct set forth in
subsection 5(b). Such determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who at the time of the vote are not named
defendants or respondents in the Proceeding;
(2) if such quorum cannot be obtained, then by a majority vote of a
committee of the Board of Directors, designated to act in the matter by a
majority vote of the full Board of Directors (in which vote directors who
are named defendants or respondents may participate), which committee
shall consist solely of two or more directors who at the time of the vote
are not named defendants or respondents in the Proceeding;
(3) by special legal counsel, selected by the Board of Directors or
a committee thereof by vote as set forth in clauses (1) or (2) of this
subsection 5(f), or, if the requisite quorum of the full Board of
Directors cannot be obtained therefor and such a committee cannot be
established, by a majority vote of the full Board of Directors (in which
vote directors who are named defendants or respondents may participate);
or
(4) by the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the Proceeding.
(g) Authorization of indemnification and determination as to
reasonableness of Expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of Expenses shall be
made in the manner specified in clause (3) in subsection 5(f) for the selection
of such counsel. A provision contained in the Articles of Incorporation, these
Bylaws, a resolution of shareholders or directors, or an agreement that makes
mandatory the indemnification permitted under subsection 5(b) shall be deemed to
constitute authorization of indemnification in the manner required by this
section even though such provision may not have been adopted or authorized in
the same manner as the determination that indemnification is permissible.
(h) Unless limited by the Articles of Incorporation of the Corporation, a
Director who has been wholly successful, on the merits or otherwise, in the
defense of any Proceeding in which he is a party because he is or was a Director
shall be indemnified by the Corporation against reasonable Expenses incurred by
him in connection with the Proceeding.
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(i) If, in a suit for the indemnification required by Section 5(h), a
court of competent jurisdiction determines that the Director is entitled to
indemnification under that section, the court shall order indemnification and
shall award to the Director the expenses incurred in securing the
indemnification. Unless limited by the Articles of Incorporation of the
Corporation, if, upon application of a Director, a court of competent
jurisdiction determines, after giving any notice the court considers necessary,
that the Director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he has met the standard of
conduct set forth in subsection 5(b) or has been found liable in the
circumstances described in subsection 5(c), the court may order such
indemnification as the court determines is proper and equitable. The court by
law is required to limit indemnification to reasonable Expenses if the
Proceeding is brought by or on behalf of the Corporation or if the Director is
found liable to the Corporation or is found liable on the basis of circumstances
described in subsection 5(c)(1).
(j) As provided in the Articles of Incorporation of the Corporation,
reasonable Expenses incurred by a Director who was, is, or is threatened to be
made a named defendant or respondent to a Proceeding shall be paid or reimbursed
by the Corporation in advance of the final disposition of such Proceeding after
(i) receipt by the Corporation of a written affirmation by the Director of his
good faith belief that he has met the standard of conduct necessary for
indemnification by the Corporation as authorized in this Section 5, and a
written undertaking by or on behalf of the Director to repay the amount paid or
reimbursed if it shall ultimately be determined that he has not met that
standard and (ii) a determination that the facts then known to those making the
determination would not preclude indemnification under this Section 5. The
written undertaking required above must be an unlimited general obligation of
the Director but need not be secured. It may be accepted without reference to
financial ability to make repayment. Determinations and authorizations of
payments under this Section 5 (j) must be made in the manner specified by
Section 5(f) for determining that indemnification is permissible.
(k) The indemnification provided by this Section 5 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any statute, including, but not limited to, Article 2.02-1 of the Texas Business
Corporation Act, Bylaw, agreement, insurance policy, vote of shareholders or
disinterested directors or otherwise, both as to action in their Official
Capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a Director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person; provided, however, no provision for the
Corporation to indemnify or to advance Expenses to a Director who was, is or is
threatened to be made a named defendant or respondent to a Proceeding, whether
contained in the Articles of Incorporation, these Bylaws, a resolution of
shareholders or directors, an agreement or otherwise (except as contemplated by
subsection (p)), shall be valid unless consistent with the provisions of the
Texas Business Corporation Act and this Section 5 or, to the extent that
indemnity hereunder is limited by the Articles of Incorporation, consistent
therewith.
(1) Nothing contained in this Section 5 shall limit the Corporation's
power to pay or reimburse Expenses incurred by a Director in connection with his
appearance as a witness in a Proceeding at a time when he is not a named
defendant or respondent in the Proceeding.
(m) As currently required by the Articles of Incorporation of the
Corporation (and unless otherwise limited thereby),
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(1) an officer of the Corporation shall be indemnified as and to the
same extent provided in this Section 5 for a Director and shall be
entitled to the same extent as a Director to seek indemnification pursuant
to the provisions of such Section 5; and
(2) the Corporation shall indemnify and advance Expenses to an
officer, and may indemnify and advance Expenses to an employee or agent of
the Corporation, to the same extent that it is required to indemnify and
advance Expenses to Directors pursuant to this Section 5.
(n) As currently required by the Articles of Incorporation of the
Corporation (and unless otherwise limited thereby), the Corporation shall
indemnify and advance Expenses to persons who are or were serving at the request
of the Corporation as a director, officer, partner, or trustee of another
foreign or domestic corporation, partnership, joint venture, trust or employee
benefit plan to the same extent that the Corporation has agreed to indemnify and
advance expenses to Directors under this Section 5.
(o) Unless limited by the Articles of Incorporation of the Corporation,
the Corporation may indemnify and advance Expenses to an officer, employee,
agent or person described pursuant to Section 5(n) and who is not a Director to
such further extent, consistent with law, as may be provided by the Articles of
Incorporation of the Corporation, these Bylaws, general or specific action of
the Board of Directors, or contract or as permitted or required by common law.
(p) The Corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, other
enterprise or employee benefit plan, against any liability asserted against him
and incurred by him in any such a capacity or arising out of his status as such
a person, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of the Texas Business Corporation
Act or this Section 5. If the insurance or other arrangement is with a person or
entity that is not regularly engaged in the business of providing insurance
coverage, the insurance or arrangement may provide for a payment of a liability
with respect to which the Corporation would not have the power to indemnify the
person only if including coverage for the additional liability has been approved
by the shareholders of the Corporation. Without limiting the power of the
Corporation to procure or maintain any kind of insurance or other arrangement, a
Corporation may, for the benefit of persons indemnified by the Corporation, (1)
create a trust fund, (2) establish any form of self-insurance, (3) secure its
indemnity obligation by grant of a security interest or other lien on the assets
of the Corporation, or (4) establish a letter of credit, guaranty, or surety
arrangement. The insurance or other arrangement may be procured, maintained, or
established within the Corporation or with any insurer or other person deemed
appropriate by the Board of Directors regardless of whether all or part of the
stock or other securities of the insurer or other person are owned in whole or
in part by the Corporation. In the absence of fraud, the judgment of the Board
of Directors as to the terms and conditions of the insurance or other
arrangement and the identity of the insurer or other person participating in an
arrangement shall be conclusive and the insurance or arrangement shall not be
voidable and shall not subject the directors approving the insurance or
arrangement to liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance or arrangement.
(q) Any indemnification of, or advance of Expenses to a Director in
accordance with this Section 5 shall be reported in writing to the shareholders
with or before the notice or
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waiver of notice of the next shareholders' meeting or with or before the next
submission to shareholders of a consent to action without a meeting pursuant to
Section A, Article 9.10 of the Texas Business Corporation Act, and in any case,
within the 12-month period immediately following the date of the indemnification
or advance.
(r) For purposes of this Section 5, the Corporation shall be deemed to
have requested a Director to serve an employee benefit plan whenever the
performance by him of his duties to the Corporation also imposes duties on, or
otherwise involves services by, him to the plan or participants or beneficiaries
of the plan. Excise taxes assessed on a Director with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines". Action taken or
omitted by him with respect to an employee benefit plan in the performance of
his duties for a purpose reasonably believed by him to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Corporation.
ARTICLE V
BOARD COMMITTEES
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an Executive Committee
and one or more other committees, each of which, to the extent provided in such
resolution or in the Articles of Incorporation or in these Bylaws, shall have
and may exercise all of the authority of the Board of Directors, except that no
such committee shall have the authority of the Board of Directors in reference
to any of the following:
(1) amending the Articles of Incorporation, except that a committee may,
to the extent provided in the resolution designating the committee
or in the Articles of Incorporation or these Bylaws, exercise the
authority of the Board of Directors vested in it in accordance with
Article 2.13 of the Texas Business Corporation Act,
(2) proposing a reduction in the stated capital of the Corporation in
the manner permitted by Article 4.12 of the Texas Business
Corporation Act,
(3) approving a plan of merger or share exchange of the Corporation,
(4) recommending to the shareholders the sale, lease or exchange of all
or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business,
(5) recommending to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof,
(6) amending, altering or repealing these Bylaws or adopting new Bylaws
for the Corporation,
(7) filling vacancies in the Board of Directors or any such committee or
designating alternative members thereof,
(8) filing any directorship to be filled by reason of an increase in the
number of directors,
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(9) electing or removing officers or members or alternative members of
any such committee,
(10) fixing the compensation of any member or alternative members of such
committee, or
(11) altering or repealing any resolution of the Board of Directors that
by its terms provides that it shall not be so amendable or
repealable;
and, unless the resolution establishing the committee or the Articles of
Incorporation expressly so provide, no such committee shall have the power and
authority to authorize any distribution by the Corporation to any of the
shareholders or issuance of shares of the Corporation.
A majority of all of the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of Directors
shall otherwise provide. At every meeting of any such committee, the presence of
a majority of all of the members thereof shall constitute a quorum and the
affirmative vote of a majority of the members present shall be necessary for the
adoption by it of any resolution. The Board of Directors shall have power at any
time to change the number and members of any such committee, to fill vacancies
and to discharge any such committee. The Board of Directors may designate one or
more directors as alternate members of any committee, who may, subject to any
limitation imposed by the Board of Directors, replace any absent or disqualified
member of the committee at any meeting of such committee. Each such committee
shall serve at the pleasure of the Board of Directors and may establish its own
administrative and operational rules and procedures, so long as they are
consistent with those set forth in this paragraph above. Each committee shall
keep accurate and complete records of the actions taken by it. The designation
of such committee and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed by law.
ARTICLE VI
OFFICERS
Section 1. Principal Officers. The officers of the Corporation shall be
chosen by the Board of Directors. The officers shall be a Chairman of the Board
of Directors, a President, one or more Executive Vice Presidents, one or more
Vice Presidents, a Secretary and a Treasurer and such number of Vice Chairmen,
Senior Vice Presidents, Assistant Secretaries and Assistant Treasurers as the
Board may from time to time determine or elect. Any person may hold two or more
offices at the same time.
Section 2. Additional Officers. The Board may appoint such other officers
and agents as it shall deem necessary, which officers and agents shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board or as otherwise
provided in these Bylaws.
Section 3. Terms of Officers. Each officer shall hold his office until his
successor shall have been duly elected and qualified or until his death or until
he shall resign or shall have been removed in the manner hereinafter provided.
Section 4. Salaries. The salaries or other compensation of the officers
and agents of the Corporation shall be fixed from time to time by the Board of
Directors.
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Section 5. Removal. Any officer or agent or member of any committee
elected or appointed by the Board of Directors may be removed by the affirmative
vote of a majority of the Board of Directors.
Section 6. Vacancies. A vacancy in the office of any officer may be filled
by the vote of a majority of the directors then in office.
Section 7. Powers and Duties of Officers. The officers so chosen shall
perform the duties and exercise the powers expressly conferred or provided for
in these Bylaws, as well as the usual duties and powers incident to such office,
respectively, and such other duties and powers as may be assigned to them by the
Board of Directors or by the Chairman of the Board.
Section 8. Chairman of the Board. The Chairman of the Board of Directors
shall be the chief executive officer of the business affairs of the Corporation
and shall preside at all meetings of the Board of Directors and the shareholders
and approve the minutes of all proceedings thereat, and the Chairman of the
Board shall be available to consult with and advise the officers of the
Corporation with respect to the conduct of the business and affairs of the
Corporation and shall have such other powers and duties as designated in
accordance with these Bylaws and as from time to time may be assigned to him by
the Board of Directors. Except where by law the signature of the President is
required, the Chairman of the Board shall possess the same power as the
President to sign all certificates, contracts and others instruments of the
Corporation which may be authorized by the Bylaws and the Board of Directors.
During the absence or disability of the President, the Chairman of the Board
shall exercise all of the powers and discharge all of the duties of the
President.
Section 9. Vice Chairmen of the Board. Each Vice Chairman of the Board, in
the capacities determined by the Board of Directors, shall perform such duties
and exercise such powers as may be assigned to him from time to time by the
Board of Directors.
Section 10. President. The President shall be the chief operating officer
of the Corporation and, in the absence of the Chairman of the Board, shall
preside at all meetings of the shareholders and the Board of Directors. The
President shall have general and active management of the business operations of
the Corporation and shall see that all orders of the Chairman of the Board and
the resolutions of the Board of Directors are carried into effect. In the
absence of the Chairman of the Board and except where required or permitted by
law to be otherwise signed and except where the signing thereof shall be
expressly delegated by the Board of Directors to another officer or agent of the
Corporation, the President may make, execute, acknowledge and deliver any and
all contracts, leases, deeds, conveyances, assignments, bills of sale,
transfers, releases and receipts, and any and all mortgages, deeds of trust,
indentures, pledges, chattel mortgages, liens and hypothecations, and any and
all bonds, debentures, notes, other evidences of indebtedness and any and all
other obligations and encumbrances and any and all other instruments, documents
and papers of any kind or character for and on behalf of and in the name of the
Corporation. Together with the Secretary or an Assistant Secretary, the
President may sign all certificates for shares of the capital stock of the
Corporation. The President shall further perform such other duties and have such
additional authority and powers as from time to time may be assigned to or
conferred upon him by the Board of Directors.
Section 11. Executive Vice Presidents. In the absence of the President and
the Chairman of the Board or in the event of the disability or refusal to act of
both, each Executive Vice President (if more than one, in the order prescribed
by the Board of Directors) shall perform the duties of the President, and when
so acting, shall have such
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power and discharge such duties as may be assigned to him from time to time by
the Board of Directors.
Section 12. Senior Vice Presidents. Each Senior Vice President, in the
capacities determined by the Board of Directors, shall perform such duties and
exercise such powers as may be assigned to him from time to time by the Board of
Directors.
Section 13. Vice Presidents. Each Vice President, in the capacities
determined by the Board of Directors, shall perform such duties and exercise
such powers as may be assigned to him from time to time by the Board of
Directors.
Section 14. Treasurer. The Treasurer shall have custody of all funds and
securities of the Corporation which come into his hands. When necessary or
proper, he may endorse or cause to be endorsed on behalf of the Corporation, for
collection, checks, notes and other obligations and shall deposit or cause to be
deposited the same to the credit of the Corporation in such banks or
depositories as shall be selected or designated by or in the manner prescribed
by the Board of Directors. He may sign all receipts and vouchers for payments
made to the Corporation, either alone or jointly with such officer as may be
designated by the Board of Directors. Whenever required by the Board of
Directors he shall render or cause to be rendered a statement of his cash
account. He shall enter or cause to be entered, punctually and regularly, on the
books of the Corporation to be kept by him or under his supervision or direction
for that purpose, full and accurate accounts of moneys received and paid out by,
for or on account of the Corporation. He shall at all reasonable times exhibit
his books and accounts and other financial records to any director of the
Corporation during business hours. He shall have such other powers and duties as
may be conferred upon or assigned to him by the Board of Directors. The
Treasurer shall perform all acts incident to the position of Treasurer subject
always to the control of the Chief Executive Officer and the Board of Directors.
He shall, if required by the Board of Directors, give such bond for the faithful
discharge of his duties in such form and amount as the Board of Directors may
require.
Section 15. Assistant Treasurers. Each Assistant Treasurer (if more than
one, in the order determined by the Board of Directors or Chairman of the Board)
shall perform the duties and exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act and shall perform such other
duties and have such other powers as the Board of Directors, Chairman of the
Board, President or any Executive Vice President may from time to time confer
upon or assign to him.
Section 16. Secretary. The Secretary, or in his absence an Assistant
Secretary, as designated by the Chairman of the Board of Directors, (1) shall
attend all meetings of the Board of Directors and shareholders and keep the
minutes of all such meetings, in books provided for that purpose, and perform
like duties for the standing committees of each when required, (2) shall attend
to the giving and serving of all notices of meetings, as required by law or
these Bylaws, (3) may sign with the Chairman of the Board, the President or any
Executive Vice President or Vice President in the name of the Corporation and/or
attest the signature of any to all contracts, conveyances, transfers,
assignments, encumbrances, authorizations and all other instruments, documents
and papers, of any and every description whatsoever, of or executed for or on
behalf of the Corporation and affix the seal of the Corporation thereto, (4) may
sign with the Chairman of the Board or President all certificates for shares of
the capital stock of the Corporation and affix the corporate seal of the
Corporation thereto, (5) shall have charge of and maintain and keep or supervise
and control the maintenance and keeping of the corporate seal, stock certificate
books, share transfer records and such other books and papers as the Board of
Directors may authorize, direct or provide for, all of which shall at all
reasonable times be open to the inspection of
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any director, upon request, at the office of the Corporation during business
hours, (6) shall in general perform all of the duties incident to the office of
Secretary, subject to the control of the Board of Directors, the Chairman of the
Board and the President, under whose supervision he shall be, and (7) shall have
such other powers and duties as may be conferred upon or assigned to him by the
Board of Directors. The Board of Directors may give general authority to any
other officer of the corporation to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 17. Assistant Secretaries. Each Assistant Secretary, in the order
determined by the Board of Directors if more than one, shall perform the duties
and exercise the powers of the Secretary during that officer's absence or
inability or refusal to act and shall perform such other duties and have such
other powers as may be conferred upon or assigned to him by the Board of
Directors from time to time.
Section 18. Securities of Other Corporations. The Chairman of the Board,
President or any Executive Vice President of the Corporation shall have power
and authority to transfer, enforce for transfer, vote, consent or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute and deliver any waiver, proxy or
consent with respect to any such securities and otherwise to exercise any and
all rights and powers which the Corporation may possess by reason of its
ownership of securities in such other corporation, including the exercise of any
voting rights.
ARTICLE VII
BOOKS, DOCUMENTS AND ACCOUNTS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders. The Board
of Directors shall have power to keep the books, documents and accounts of the
Corporation outside of the State of Texas, except that a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shall be kept at its registered office or
principal place of business, or at the office of its transfer agent or registrar
and the original or a duplicate of the share transfer records shall at all times
be kept within the State of Texas. A director may examine the Corporation's
books and records of account, share transfer records, corporate minutes and any
other corporate books and records for any purpose reasonably related to the
director's service as a director.
ARTICLE VIII
CAPITAL STOCK
Section 1. Issuance. No shares of the Corporation shall be issued until
consideration for such shares, fixed as provided by law, has been fully paid.
The shares of the Corporation shall be represented by certificates, provided
that the Board of Directors may provide by resolution that some or all classes
or series of the Corporation's stock may be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered. Notwithstanding the adoption of such a resolution by
the Board of Directors, every holder of stock represented by certificates and,
upon request, every holder of uncertificated shares shall be entitled to a
certificate or certificates showing on its face the following information and
any other information required by the Texas Business Corporation Act: (i) a
statement that the Corporation is organized under the laws of the State of
Texas, (ii) the name of the holder, (iii) the number of shares
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of stock registered in his name on the books of the Corporation, along with
class and designation of series, if any, and (iv) par value per share of stock
or a statement that the shares are without par value. Certificates representing
stock shall otherwise be in such form as may be determined by the Board of
Directors, shall be issued in numerical order, shall be signed by the Chairman
of the Board, the President or any Executive Vice President and by the Secretary
or an Assistant Secretary and shall be entered on the books of the Corporation
as they are issued. Any or all of the signatures on the certificate may be
facsimiles. The stock record books and the blank stock certificate books shall
be kept by the Secretary, or at the office of such transfer agent or transfer
agents as the Board of Directors may from time to time by resolution determine.
In case any officer, transfer agent or registrar who shall have signed or whose
facsimile signature or signatures shall have been placed upon any such
certificate or certificates shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued by the Corporation, such
certificate may nevertheless be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class or if the Corporation shall limit or
deny preemptive rights of any class, a full statement of the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights and any limitation
or denial of preemptive rights shall be conspicuously set forth on the face or
back of the certificate which the Corporation shall issue to represent such
class of stock; provided that, except as otherwise provided by statute, in lieu
of the foregoing requirements there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that a statement of the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights is set forth in the Articles of Incorporation of
the Corporation on file with the Secretary of State of Texas and that the
Corporation will furnish to each shareholder who so requests in writing, without
charge, a copy of such statement.
If any restriction on transfer, or registration of transfer, of shares is
imposed or agreed to by the Corporation, each certificate representing
restricted shares shall conspicuously set forth a full or summary statement of
the restriction on the face or back of the certificate (and shall include a
statement on the front of the certificate referencing the restriction described,
if described on the back of the certificate) or shall conspicuously state on the
front or back of the certificate that a restriction exists pursuant to a
specified document and that the Corporation will furnish to the record holder of
the certificate without charge, upon written request, a copy of the specified
document or that, if the document has been filed under the Texas Business
Corporation Act, that such document is on file with the Secretary of State of
Texas and contains a full statement of the restriction.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to this Section 1 or otherwise required by law. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of uncertificated stock and the rights of holders of certificates representing
stock of the same class and series shall be identical.
All certificates surrendered to the Corporation for transfer shall be
cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in the case of a lost, stolen, destroyed or mutilated certificate a new one
may be issued therefor upon such terms and with such
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indemnity, if any, to the Corporation as the Board of Directors may prescribe in
accordance with Section 2 of this Article VIII. Certificates representing
fractional shares of stock may be issued.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate of stock or uncertificated shares to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his
legal representative, to advertise the same in such manner as it shall require
or to give the Corporation a bond in such sum as it may deem sufficient to
indemnify it against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares, or both.
Section 3. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and register the
transaction upon its books. Upon presentation to the Corporation or the transfer
agent of the Corporation of an instruction with a request to transfer, pledge or
release an uncertificated share or shares, it shall be the duty of the
Corporation to register the transfer, pledge or release upon its books, and to
provide the registered owner with such notices as may be required by law.
Transfers of shares shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney and filed with the Secretary of the Corporation or the transfer agent.
Section 4. Registered Holders. The Corporation shall be entitled to treat
the registered owner of any share or shares of stock, whether certificated or
uncertificated, as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Texas.
Section 5. Record Dates and Closing of Share Transfer Records. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of shareholders for any other proper purpose
(other than determining shareholders entitled to consent to action by
shareholders proposed to be taken without a meeting of shareholders), the Board
of Directors may provide that the share transfer records shall be closed for a
stated period not to exceed, in any case, sixty (60) days. If the share transfer
records shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten (10) days immediately preceding such meeting. In lieu of
closing the share transfer records, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than sixty (60) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the share transfer records are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a
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distribution, the date on which the notice of the meeting is mailed or the date
on which the resolution of the Board of Directors declaring such distribution is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided herein, such determination
shall apply to any adjournment thereof except where the determination has been
made through the closing of share transfer records and the stated period of
closing has expired.
Unless a record date shall have previously been fixed or determined
pursuant to this Section 5, whenever action by shareholders is proposed to be
taken by consent in writing without a meeting of shareholders, the Board of
Directors may fix a record date for the purpose of determining shareholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors and the prior action of the Board of
Directors is not required by the Texas Business Corporation Act, the record date
for determining shareholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation in the
manner provided in Section 15 of Article II of these Bylaws. If no record date
shall have been fixed by the Board of Directors and prior action of the Board of
Directors is required by the Texas Business Corporation Act, the record date for
determining shareholders entitled to consent to action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts a resolution taking such prior action.
Section 6. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of the capital stock of the Corporation.
Section 7. Share Dividends; Distributions. The Board of Directors may
declare share dividends and distributions of the assets of the Corporation to
its shareholders as the Board deems expedient and as permitted by law under the
provisions of the Texas Business Corporation Act. Before declaring any share
dividends or distributions there may be reserved out of the surplus such sums as
the Board of Directors deems proper for working capital or as a reserve fund to
meet contingencies or for equalizing distributions, or for such other purposes
as the Board may deem conducive to the interests of the Corporation, and the
Board may abolish any such reserve in the manner in which it was created.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be such
as the Board of Directors shall, by resolution, provide or establish.
Section 2. Seal. The seal of the Corporation shall be in such form as the
Board of Directors shall prescribe, and may be used by causing it or a facsimile
thereof to be impressed, or printed, or reproduced or in any other manner
affixed. The Secretary shall have charge of the seal. If and when so directed by
the Board of Directors, duplicates of the seal may be kept and used by the
Treasurer or by any Assistant Secretary or Assistant Treasurer.
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Section 3. Notice and Waiver of Notice. Whenever any notice is required to
be given under the provisions of the Texas Business Corporation Act or under the
provisions of these Bylaws or the Articles of Incorporation of the Corporation,
said notice shall be deemed to be sufficient if given by depositing the same in
a post office box in a sealed post-paid wrapper addressed to the person entitled
thereto at his post office address as the same appears on the books or other
records of the Corporation, and such notice shall be deemed to have been given
on the day of such mailing, but such notice shall also be deemed to be
sufficient and to have been given and received if given in any other manner or
by any other means authorized or provided for elsewhere in these Bylaws. A
written waiver of notice, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice.
Section 4. Resignations. Any director or officer may resign at any time.
Each such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
any of the Board of Directors, the Chairman of the Board, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
Section 5. Depositories. Funds of the Corporation not otherwise
employed shall be deposited to the credit of the Corporation in such banks or
other depositories as the Board of Directors may approve.
Section 6. Signing of Contracts, Checks and Notes. In addition to and
cumulative of, but in no way limiting or restricting, any other provision of
these Bylaws which confer any authority relative thereto, all contracts,
agreements and instruments, all checks, drafts and other orders for the payment
of money out of funds of the Corporation and all notes and other evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation, in
such manner, and by such officer or person as shall be determined or designated
by the Board of Directors. Such authority may be general or confined to specific
instances. If, when, after and as authorized or provided for by the Board of
Directors, the signature of any such officer or person signing checks, drafts
and other orders for the payment of money and notes and other evidences of
indebtedness may be a facsimile or engraved or printed, and shall have the same
force and effect and bind the Corporation as though such officer or person had
signed the same personally, and, in the event of the death, disability, removal
or resignation of any such officer or person, if the Board of Directors shall so
determine or provide, as though and with the same effect as if such death,
disability, removal or resignation had not occurred.
Section 7. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 8. Gender and Number. Wherever used or appearing in these Bylaws,
pronouns of the masculine gender shall include the persons of the female sex as
well as the neuter gender and the singular shall include the plural wherever
appropriate.
Section 9. Laws and Statutes. Wherever used or appearing in these Bylaws,
the words "law" or "laws" or "statute" or "statutes," respectively, shall mean
and refer to laws and statutes, or a law or statute, of the State of Texas, to
the extent only that such is or are expressly applicable, except where otherwise
expressly stated or the context requires that such words not be so limited.
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Section 10. Headings. The headings of the Articles and Sections of these
Bylaws are inserted for convenience of reference only and shall not be deemed to
be a part thereof or used in the construction or interpretation thereof.
ARTICLE X
AMENDMENTS
These Bylaws may, from time to time, be added to, changed, altered,
amended or repealed or new Bylaws may be made or adopted by the Board of
Directors at any meeting of the Board of Directors, subject to repeal or change
by action of the shareholders, unless the power to alter, amend or repeal these
Bylaws is reserved to the shareholders in the Articles of Incorporation
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FIRST AMENDMENT TO
AMENDED AND RESTATED BYLAWS OF
RANDALL'S FOOD MARKETS, INC.
Adopted by the Board of Directors on October 17, 1996
Became Effective on November 20, 1996
Section 5. Indemnification of Directors, Officers, Employees and
Agents.
(a) As used in this section:
(1) "Corporation" includes any domestic or foreign predecessor
entity of the Corporation in a merger, consolidation or other
transaction in which the liabilities of the predecessor are
transferred to the Corporation by operation of law and in any other
transaction in which the Corporation assumes the liabilities of the
predecessor but does not specifically exclude liabilities that are
the subject matter of this Section 5.
(2) "Director" means any person who is or was a director of
the Corporation and any person who, while a director of the
Corporation, is or was serving at the request of the Corporation as
a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official Capacity" means
(A) when used with respect to a Director, the office of
director in the Corporation, and
(B) when used with respect to a person other than a
Director, the elective or appointive office in the Corporation
held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the
Corporation,
but neither A nor B above includes service for any other foreign or
domestic corporation or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(5) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or
proceeding, and any inquiry or investigation that could lead to such
an action, suit or proceeding.
(b) As provided in the Articles of Incorporation of the Corporation,
the Corporation shall indemnify any person who was, is or is threatened to be
made a named defendant or respondent in any Proceeding because the person is or
was a Director only if it is determined in accordance with paragraph (f) of this
Section 5 that the person:
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(1) conducted himself in good faith;
(2) reasonably believed:
(A) in the case of conduct in his Official Capacity as
a Director of the Corporation, that his conduct was in the
Corporation's best interests, and
(B) in all other cases, that his conduct was at least
not opposed to the Corporation's best interests; and
(3) in the case of any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.
(c) Except to the extent permitted by paragraph (e) of this Section
5, a Director may not be indemnified under subsection 5(b) in respect of a
Proceeding:
(1) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's Official
Capacity; or
(2) in which the person is found liable to the Corporation.
(d) The termination of any Proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the person did not meet the requirements set forth in
subsection 5(b). A person shall be deemed to have been found liable in respect
of any claim, issue or matter only after the person shall have been so adjudged
by a court of competent jurisdiction after exhaustion of all appeals therefrom.
(e) A person shall be indemnified under subsection 5(b) against
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable Expenses actually incurred by the person in connection with the
Proceeding; but if the person is found liable to the Corporation or is found
liable on the basis that personal benefit was improperly received by the person,
the indemnification (i) is limited to reasonable Expenses actually incurred by
the person in connection with the Proceeding, and (2) shall not be made in
respect of any proceeding in which the person shall have been found liable for
willful or intentional misconduct in the performance of his duty to the
Corporation.
(f) A determination of indemnification under subsection 5(b) must be
made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who at the time of the vote are not named
defendants or respondents in the Proceeding;
(2) if such quorum cannot be obtained, then by a majority vote
of a committee of the Board of Directors, designated to act in the
matter by a majority vote of the full Board of Directors (in which
vote directors who are named defendants or respondents may
participate), which committee shall consist solely of two or more
directors who at the time of the vote are not named defendants or
respondents in the Proceeding;
2
<PAGE>
(3) by special legal counsel, selected by the Board of
Directors or a committee thereof by vote as set forth in clauses (1)
or (2) of this subsection 5(f), or, if the requisite quorum of the
full Board of Directors cannot be obtained therefor and such a
committee cannot be established, by a majority vote of the full
Board of Directors (in which vote directors who are named defendants
or respondents may participate); or
(4) by the shareholders in a vote that excludes the shares
held by directors who are named defendants or respondents in the
Proceeding.
(g) Authorization of indemnification and determination as to
reasonableness of Expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of Expenses must be
made in the manner specified in clause (3) in subsection 5(f) for the selection
of such counsel. A provision contained in the Articles of Incorporation, these
Bylaws, a resolution of shareholders or directors, or an agreement that makes
mandatory the indemnification permitted under subsection 5(b) shall be deemed to
constitute authorization of indemnification in the manner required by this
section even though such provision may not have been adopted or authorized in
the same manner as the determination that indemnification is permissible.
(h) Unless limited by the Articles of Incorporation of the
Corporation, a Director who has been wholly successful, on the merits or
otherwise, in the defense of any Proceeding in which he is a party because he is
or was a Director shall be indemnified by the Corporation against reasonable
Expenses incurred by him in connection with the Proceeding.
(i) Unless limited by the Articles of Incorporation of the
Corporation, if, in a suit for the indemnification required by Section 5(h), a
court of competent jurisdiction determines that the Director is entitled to
indemnification under that section, the court shall order indemnification and
shall award to the Director the expenses incurred in securing the
indemnification.
(j) Unless limited by the Articles of Incorporation of the
Corporation, if, upon application of a Director, a court of competent
jurisdiction determines, after giving any notice the court considers necessary,
that the Director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he has met the requirements
set forth in subsection 5(b) or has been found liable in the circumstances
described in subsection 5(c), the court may order such indemnification as the
court determines is proper and equitable. The court by law is required to limit
indemnification to reasonable Expenses actually incurred by the Director in
connection with the Proceeding if the Director is found liable to the
Corporation or is found liable on the basis of circumstances described in
subsection 5(c)(1).
(k) As provided in the Articles of Incorporation of the Corporation,
reasonable Expenses incurred by a Director who was, is, or is threatened to be
made a named defendant or respondent in a Proceeding shall be paid or reimbursed
by the Corporation in advance of the final disposition of such Proceeding and
without the determination specified in subsection 5(f) or the authorization or
determination specified in subsection 5(g) after receipt by the Corporation of
(i) a written affirmation by the
3
<PAGE>
Director of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Corporation as authorized in this Section
5, and (ii) a written undertaking by or on behalf of the Director to repay the
amount paid or reimbursed if it is ultimately determined that he has not met
that standard or if it is ultimately determined that indemnification of the
Director against expenses incurred by him in connection with such Proceeding is
prohibited by subsection 5(e). A provision contained in the Articles of
Incorporation, these Bylaws, a resolution of shareholders or directors, or an
agreement that makes mandatory the payment or reimbursement permitted hereunder
shall be deemed to constitute authorization of that payment or reimbursement.
(1) The written undertaking required by subsection 5(k) must be an
unlimited general obligation of the Director but need not be secured. It may be
accepted without reference to financial ability to make repayment.
(m) The indemnification provided by this Section 5 shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any statute, including, but not limited to, Article 2.02-1 of the Texas
Business Corporation Act, Bylaw, agreement, insurance policy, vote of
shareholders or disinterested directors or otherwise, both as to action in their
Official Capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person; provided, however, no provision
for the Corporation to indemnify or to advance Expenses to a Director who was,
is or is threatened to be made a name defendant or respondent to a Proceeding,
whether contained in the Articles of Incorporation, these Bylaws, a resolution
of shareholders or directors, an agreement or otherwise (except as contemplated
by subsection (r)), shall be valid only to the extent it is consistent with the
provisions of the Texas Business Corporation Act and this Section 5 or, to the
extent that indemnity hereunder is limited by the Articles of Incorporation,
consistent therewith.
(n) Nothing contained in this Section 5 shall limit the
Corporation's power to pay or reimburse Expenses incurred by a Director in
connection with his appearance as a witness or other participation in a
Proceeding at a time when he is not a named defendant or respondent in the
Proceeding.
(o) As currently required by the Articles of Incorporation of the
Corporation (and unless otherwise limited thereby),
(1) an officer of the Corporation shall be indemnified as and
to the same extent provided in this Section 5 for a Director and
shall be entitled to the same extent as a Director to seek
indemnification pursuant to the provisions of such Section 5; and
(2) the Corporation shall indemnify and advance Expenses to an
officer, and may indemnify and advance Expenses to an employee or
agent of the Corporation, to the same extent that it is required to
indemnify and advance Expenses to Directors pursuant to this Section
5.
(p) As currently required by the Articles of Incorporation of the
Corporation (and unless otherwise limited thereby), the Corporation shall
indemnify and advance Expenses to persons who are or were serving at the request
of the Corporation as a director, officer, partner, trustee or similar
functionary of another foreign or domestic corporation,
4
<PAGE>
partnership, joint venture, trust, or employee benefit plan to the same extent
that the Corporation has agreed to indemnify and advance expenses to Directors
under this Section 5.
(q) Unless limited by the Articles of Incorporation of the
Corporation, the Corporation may indemnify and advance Expenses to an officer,
employee, agent or person described pursuant to Section 5(p) and who is not a
Director to such further extent, consistent with law, as may be provided by the
Articles of Incorporation of the Corporation, these Bylaws, general or specific
action of the Board of Directors, or contract or as permitted or required by
common law.
(r) The Corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, other
enterprise or employee benefit plan, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of the Texas Business Corporation
Act or this Section 5. If the insurance or other arrangement is with a person or
entity that is not regularly engaged in the business of providing insurance
coverage, the insurance or arrangement may provide for payment of a liability
with respect to which the Corporation would not have the power to indemnify the
person only if including coverage for the additional liability has been approved
by the shareholders of the Corporation. Without limiting the power of the
Corporation to procure or maintain any kind of insurance or other arrangement, a
Corporation may, for the benefit of persons indemnified by the Corporation, (1)
create a trust fund, (2) establish any form of self-insurance, (3) secure its
indemnity obligation by grant of a security interest or other lien on the assets
of the Corporation, or (4) establish a letter of credit, guaranty, or surety
arrangement. The insurance or other arrangement may be procured, maintained, or
established within the Corporation or with any insurer or other person deemed
appropriate by the Board of Directors regardless of whether all or part of the
stock or other securities of the insurer or other person are owned in whole or
in part by the Corporation. In the absence of fraud, the judgment of the Board
of Directors as to the terms and conditions of the insurance or other
arrangement and the identity of the insurer or other person participating in an
arrangement shall be conclusive and the insurance or arrangement shall not be
voidable and shall not subject the directors approving the insurance or
arrangement to liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance or arrangement.
(s) Any indemnification of, or advance of Expenses to a Director in
accordance with this Section 5 shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next shareholders' meeting
or with or before the next submission to shareholders of a consent to action
without a meeting pursuant to Section A, Article 9.10 of the Texas Business
Corporation Act, and in any case, within the 12-month period immediately
following the date of the indemnification or advance.
(t) For purposes of this Section 5, the Corporation is deemed to
have requested a Director to serve an employee benefit plan whenever the
performance by him of his duties to the Corporation also imposes duties on, or
otherwise involves services by, him to the plan or participants or beneficiaries
of the plan. Excise taxes assessed on a
5
<PAGE>
Director with respect to an employee benefit plan pursuant to applicable law
shall be deemed "fines." Action taken or omitted by him with respect to an
employee benefit plan in the performance of his duties for a purpose reasonably
believed by him to be in the interest of the participants and beneficiaries of
the plan is deemed to be for a purpose which is not opposed to the best
interests of the Corporation.
6
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
NOV 20 1996
Corporations Section
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
RANDALL'S FOOD MARKETS, INC.
*****
PURSUANT to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopts the
following Articles of Amendment to its Restated Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Randall's Food Markets, Inc.
ARTICLE TWO
The following amendments to the Restated Articles of Incorporation
were adopted by the shareholders of common stock, $.25 par value per share
("Common Stock"), of the Corporation on November 12, 1996 for the purpose of (i)
amending the provision contained in the Restated Articles of Incorporation
concerning indemnification of officers, directors, employees and other
representatives of the Corporation and (ii) adding a provision to the Restated
Articles of Incorporation limiting the liability of directors of the Corporation
for certain acts or omissions.
The first amendment alters Article VI of the Restated Articles of
Incorporation of the Corporation in its entirety so that, as amended, Article VI
shall be and read in its entirety as follows:
1
<PAGE>
ARTICLE VI
1. Indemnification. The Corporation shall indemnify, and
advance reasonable expenses of, every director of the Corporation
to the fullest extent permitted by Texas law, including, without
limitation, Article 2.02-1 of the Texas Business Corporation Act as
it presently exists and as it may be amended from time to time (the
"Indemnification Article"). The Corporation shall indemnify, and
advance reasonable expenses of, every officer of the Corporation and
all persons who are or were serving at the request of the
Corporation as a director, officer, partner, trustee or similar
functionary of another foreign or domestic corporation, partnership,
joint venture, trust or employee benefit plan at least to the same
extent that the Corporation has agreed to indemnify and advance
expenses to directors as set forth in this Article VI, subject to
any limitations imposed by Texas law, including, without limitation,
the Indemnification Article.
2. Non-Exclusivity. The provisions of Section 1 of this
Article VI shall not be deemed exclusive of any other rights to
which any such director, officer or other person may be entitled
under any other agreement, pursuant to a vote of directors or any
committee thereof or a vote of shareholders, as a matter of law or
otherwise, either as to action in his or her official capacity or as
to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and
administrators of such person. No person shall be entitled to
indemnification pursuant to this Article VI in relation to any
matter as to which indemnification shall not be permitted by law.
3. Effect of Amendment. Any repeal or amendment of this
Article VI shall not adversely affect any indemnification right of
any director, officer or other person covered hereunder existing at
the time of such repeal or amendment.
4. Defined Terms. Terms used herein that are defined in the
Indemnification Article shall have the respective meanings set forth
in the Indemnification Article.
The second amendment adds a new Article XI to the Restated Articles
of Incorporation of the Corporation so that, as added, Article XI shall be and
read in its entirety as follows:
ARTICLE XI
A director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for an act or
omission made in the director's capacity as a director; provided
that this Article XI shall not eliminate or limit the liability of a
director of the Corporation for the following:
2
<PAGE>
(A) a breach of the director's duty of loyalty to the
Corporation or its shareholders;
(B) an act or omission not in good faith that constitutes a
breach of duty of the director to the Corporation or an
act or omission that involves intentional misconduct or
a knowing violation of the law;
(C) a transaction from which the director received an
improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's
office; or
(D) an act or omission for which the liability of the
director is expressly provided by an applicable statute.
Any repeal or amendment of this Article XI by the shareholders
of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the liability of a director of
the Corporation existing at the time of such repeal or amendment. In
addition to the circumstances in which a director shall not be
liable pursuant to the provisions of this Article XI, a director
shall not be liable to the fullest extent permitted by any provision
of the statutes of Texas hereafter enacted that further limits the
liability of a director.
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of
such adoption was 17,149,382 shares of Common Stock, 8,250 shares of Class A
Preferred Stock, $10.00 par value per share and 278,201 shares of 8% Convertible
Preferred Stock, $10.00 par value per share, and the number of shares entitled
to vote thereon was 17,149,382 shares of Common Stock.
ARTICLE FOUR
The number of shares of Common Stock voted for such amendment was
11,574,023.19; and the number of shares of Common Stock voted against such
amendment was -0-.
3
<PAGE>
ARTICLE FIVE
This amendment does not provide for an exchange, reclassification or
cancellation of issued shares of the Corporation's capital stock.
ARTICLE SIX
This amendment effects no change in the amount of stated capital of
the Corporation.
DATED: November 12, 1996.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead
-------------------------------------
R. Randall Onstead, Jr., President
4
<PAGE>
EXHIBIT 4.1
RANDALL'S FOOD MARKETS, INC.,
as Issuer
and
MARINE MIDLAND BANK,
as Trustee
--------------------
Indenture
Dated as of June 27, 1997
---------------------
$150,000,000
93/8% Senior Subordinated Notes due 2007
93/8% Series B Senior Subordinated Notes due 2007
<PAGE>
RANDALL'S FOOD MARKETS, INC.(1)
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of June 27, 1997
Trust Indenture
Act Section Indenture Section
ss. 310(a)(1) .......................................... 608
(a)(2) .......................................... 608
(b) .......................................... 609
ss. 312(a) .......................................... 701
(c) .......................................... 702
ss. 313(a) .......................................... 703
(c) .......................................... 703
ss. 314(a)(4) .......................................... 1010(a)
(c)(1) .......................................... 102
(c)(2) .......................................... 102
(e) .......................................... 102
ss.315(a) .......................................... 601(a)
(b) .......................................... 602
(c) .......................................... 601(b)
(d) .......................................... 601(c), 603
316(a)(last
sentence) .......................................... 101 ("Outstanding")
(a)(1)(A) ........................................... 502, 512
(a)(1)(B) ........................................... 513
(b) .......................................... 508
(c) .......................................... 104(d)
ss. 317(a)(1) .......................................... 503
(a)(2) .......................................... 504
(b) .......................................... 1003
ss. 318(a) .......................................... 111
- ----------
(1.) Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS(1)
Page
PARTIES......................................................................1
RECITALS OF THE COMPANY......................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................... 1
Acquired Indebtedness.............................................. 2
Act ......................................................... 2
Affiliate ......................................................... 2
Agent ......................................................... 2
Applicable Premium................................................. 2
Asset Sale......................................................... 3
Authenticating Agent............................................... 4
Bank Agent......................................................... 4
Bankruptcy Law..................................................... 4
Board of Directors................................................. 4
Board Resolution................................................... 4
Business Day....................................................... 4
Capital Stock...................................................... 4
Capitalized Lease Obligation....................................... 4
Cash Equivalents................................................... 4
Change of Control.................................................. 5
Commission......................................................... 5
Common Stock....................................................... 5
Company ......................................................... 5
Company Request or Company Order................................... 6
Consolidated Additional Paid-In Capital............................ 6
Consolidated Depreciation and Amortization Expense................. 6
Consolidated Interest Expense...................................... 6
Consolidated Net Income............................................ 6
Contingent Obligations............................................. 7
Corporate Trust Office............................................. 7
Credit Facilities.................................................. 7
Custodian ......................................................... 7
Default ......................................................... 7
Defaulted Interest................................................. 7
- ----------
(1.) Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
Page
----
Depositary......................................................... 7
Designated Noncash Consideration................................... 7
Designated Preferred Stock......................................... 8
Designated Senior Indebtedness..................................... 8
Disqualified Stock................................................. 8
EBITDA ......................................................... 8
Equity Interests................................................... 9
Equity Offering.................................................... 9
Event of Default................................................... 9
Exchange Act....................................................... 9
Exchange Notes..................................................... 9
Exchange Offer..................................................... 9
Exchange Offer Registration Statement.............................. 9
Excluded Contribution.............................................. 9
Existing Indebtedness.............................................. 9
Financings......................................................... 10
Fixed Charge Coverage Ratio........................................ 10
Fixed Charges...................................................... 11
GAAP ......................................................... 11
Government Securities.............................................. 11
guarantee ......................................................... 11
Guarantee ......................................................... 11
Guarantor ......................................................... 11
Hedging Obligations................................................ 12
Holder ......................................................... 12
Indebtedness....................................................... 12
Indenture ......................................................... 12
Independent Financial Advisor...................................... 12
Initial Notes...................................................... 12
Initial Purchasers................................................. 12
Interest Payment Date.............................................. 12
Investment Grade Securities........................................ 12
Investments........................................................ 13
Issuance Date...................................................... 13
KKR ......................................................... 13
Lien ......................................................... 13
Management Group................................................... 13
Maturity ......................................................... 14
Moody's ......................................................... 14
Mortgage Financing................................................. 14
Mortgage Refinancing............................................... 14
Net Income......................................................... 14
Net Proceeds....................................................... 14
Note Register and Note Registrar................................... 14
Notes ......................................................... 14
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Page
----
Obligations........................................................ 14
Offer Period....................................................... 15
Offering Memorandum................................................ 15
Officer ......................................................... 15
Officers' Certificate.............................................. 15
Opinion of Counsel................................................. 15
Outstanding........................................................ 15
Pari Passu Indebtedness............................................ 16
Paying Agent....................................................... 16
Permitted Holders.................................................. 16
Permitted Investments.............................................. 16
Person ......................................................... 18
Predecessor Note................................................... 18
preferred stock.................................................... 18
QIB ......................................................... 18
Recapitalization................................................... 18
Redemption Date.................................................... 18
Redemption Price................................................... 18
Registration Default............................................... 18
Registration Rights Agreement...................................... 18
Regular Record Date................................................ 18
Regulation S....................................................... 18
Related Parties.................................................... 18
Representative..................................................... 18
Repurchase Offer................................................... 19
Responsible Officer................................................ 19
Restricted Investment.............................................. 19
Restricted Subsidiary.............................................. 19
Rule 144A ......................................................... 19
S&P ......................................................... 19
Securities Act..................................................... 19
Senior Credit Facilities........................................... 19
Senior Indebtedness................................................ 19
Shelf Registration Statement....................................... 20
Significant Subsidiary............................................. 20
Similar Business................................................... 20
Special Record Date................................................ 20
Stated Maturity.................................................... 20
Subordinated Indebtedness.......................................... 20
Subordinated Note Obligations...................................... 20
Subsidiary......................................................... 21
Total Assets....................................................... 21
Treasury Rate...................................................... 21
Trust Indenture Act or TIA......................................... 21
Trustee ......................................................... 21
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Page
----
Unrestricted Subsidiary............................................ 21
Vice President..................................................... 22
Voting Stock....................................................... 22
Weighted Average Life to Maturity.................................. 22
Wholly Owned Restricted Subsidiary................................. 22
Wholly Owned Subsidiary............................................ 22
SECTION 102. Compliance Certificates and Opinions..................... 23
SECTION 103. Form of Documents Delivered to Trustee................... 23
SECTION 104. Acts of Holders.......................................... 24
SECTION 105. Notices, Etc., to Trustee, the Company and any Guarantor. 25
SECTION 106. Notice to Holders; Waiver................................ 25
SECTION 107. Effect of Headings and Table of Contents................. 26
SECTION 108. Successors and Assigns................................... 26
SECTION 109. Separability Clause...................................... 26
SECTION 110. Benefits of Indenture.................................... 26
SECTION 111. Governing Law............................................ 26
SECTION 112. Legal Holidays........................................... 27
SECTION 113. No Personal Liability of Directors, Officers,
Employees, Stockholders or Incorporators................. 27
SECTION 114. Counterparts............................................. 27
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.......................................... 27
SECTION 202. Restrictive Legends...................................... 29
SECTION 203. Form of Certificate to Be Delivered upon Termination of
Restricted Period........................................ 31
SECTION 204. Form of Face of Note..................................... 32
SECTION 205. Form of Reverse of Note.................................. 35
SECTION 206. Form of Trustee's Certificate of Authentication.......... 42
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.......................................... 42
SECTION 302. Denominations............................................ 43
SECTION 303. Execution, Authentication, Delivery and Dating........... 43
SECTION 304. Temporary Notes.......................................... 45
SECTION 305. Registration, Registration of Transfer and Exchange...... 45
SECTION 306. Book-Entry Provisions for U.S. Global Note............... 46
SECTION 307. Special Transfer Provisions.............................. 48
iv
<PAGE>
Page
----
SECTION 308. Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors.. 52
SECTION 309. Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S....................... 54
SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes.............. 55
SECTION 311. Payment of Interest; Interest Rights Preserved........... 56
SECTION 312. Persons Deemed Owners.................................... 57
SECTION 313. Cancellation............................................. 57
SECTION 314. Computation of Interest.................................. 58
SECTION 315. CUSIP Numbers............................................ 58
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.................. 58
SECTION 402. Application of Trust Money............................... 60
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default........................................ 60
SECTION 502. Acceleration of Maturity; Rescission and Annulment....... 62
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee................................... 63
SECTION 504. Trustee May File Proofs of Claim......................... 64
SECTION 505. Trustee May Enforce Claims Without Possession of Notes... 64
SECTION 506. Application of Money Collected........................... 65
SECTION 507. Limitation on Suits...................................... 65
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest..................................... 66
SECTION 509. Restoration of Rights and Remedies....................... 66
SECTION 510. Rights and Remedies Cumulative........................... 66
SECTION 511. Delay or Omission Not Waiver............................. 66
SECTION 512. Control by Holders....................................... 67
SECTION 513. Waiver of Past Defaults.................................. 67
SECTION 514. Waiver of Stay or Extension Laws......................... 68
SECTION 515. Undertaking for Costs.................................... 68
v
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Page
----
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities...................... 68
SECTION 602. Notice of Defaults....................................... 69
SECTION 603. Certain Rights of Trustee................................ 70
SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes 71
SECTION 605. May Hold Notes........................................... 71
SECTION 606. Money Held in Trust...................................... 72
SECTION 607. Compensation and Reimbursement........................... 72
SECTION 608. Corporate Trustee Required; Eligibility.................. 73
SECTION 609. Resignation and Removal; Appointment of Successor........ 73
SECTION 610. Acceptance of Appointment by Successor................... 74
SECTION 611. Merger, Conversion, Consolidation or
Succession to Business................................... 75
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses........... 75
SECTION 702. Disclosure of Names and Addresses of Holders............. 75
SECTION 703. Reports by Trustee....................................... 76
ARTICLE EIGHT
MERGER, CONSOLIDATION, OR SALE OF ASSETS
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms..... 76
SECTION 802. Successor Substituted.................................... 77
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
SECTION 901. Supplemental Indentures Without Consent of Holders....... 78
SECTION 902. Supplemental Indentures with Consent of Holders.......... 79
SECTION 903. Execution of Supplemental Indentures..................... 80
SECTION 904. Effect of Supplemental Indentures........................ 80
SECTION 905. Conformity with Trust Indenture Act...................... 80
SECTION 906. Reference in Notes to Supplemental Indentures............ 80
SECTION 907. Notice of Supplemental Indentures........................ 80
SECTION 908. Effect on Senior Indebtedness............................ 81
vi
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Page
----
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest...... 81
SECTION 1002. Maintenance of Office or Agency.......................... 81
SECTION 1003. Money for Note Payments to Be Held in Trust.............. 81
SECTION 1004. Corporate Existence...................................... 83
SECTION 1005. Payment of Taxes and Other Claims........................ 83
SECTION 1006. Maintenance of Properties................................ 83
SECTION 1007. Insurance................................................ 84
SECTION 1008. Compliance with Laws..................................... 84
SECTION 1009. Limitation on Restricted Payments........................ 84
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock.................................... 89
SECTION 1011. Limitation on Liens...................................... 92
SECTION 1012. Limitation on Transactions with Affiliates............... 92
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................... 94
SECTION 1014. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries............................................. 95
SECTION 1015. Limitation on Other Senior Subordinated Indebtedness..... 96
SECTION 1016. Purchase of Notes upon a Change of Control............... 97
SECTION 1017. Limitation on Sales of Assets............................ 98
SECTION 1018. Statement by Officers as to Default..................... 101
SECTION 1019. Commission Reports and Reports to Holders............... 101
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Redemption.............................................. 102
SECTION 1102. Applicability of Article................................ 102
SECTION 1103. Election to Redeem; Notice to Trustee................... 102
SECTION 1104. Selection by Trustee of Notes to Be Redeemed............ 103
SECTION 1105. Notice of Redemption.................................... 103
SECTION 1106. Deposit of Redemption Price............................. 104
SECTION 1107. Notes Payable on Redemption Date........................ 104
SECTION 1108. Notes Redeemed in Part.................................. 105
vii
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ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Legal Defeasance
or Covenant Defeasance.................................. 105
SECTION 1202. Legal Defeasance and Discharge.......................... 105
SECTION 1203. Covenant Defeasance..................................... 106
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance... 106
SECTION 1205. Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions........... 108
SECTION 1206. Reinstatement........................................... 108
ARTICLE THIRTEEN
SUBORDINATION OF NOTES
SECTION 1301. Notes Subordinate to Senior Indebtedness................ 109
SECTION 1302. Payment over of Proceeds upon Dissolution, Etc.......... 109
SECTION 1303. Suspension of Payment When Senior Indebtedness in
Default ................................................ 109
SECTION 1304. Acceleration of Notes................................... 111
SECTION 1305. When Distribution Must Be Paid Over..................... 111
SECTION 1306. Notice by Company....................................... 111
SECTION 1307. Payment Permitted If No Default......................... 111
SECTION 1308. Subrogation to Rights of Holders of Senior Indebtedness. 112
SECTION 1309. Provisions Solely to Define Relative Rights............. 112
SECTION 1310. Trustee to Effectuate Subordination..................... 112
SECTION 1311. Subordination May Not Be Impaired by Company............ 113
SECTION 1312. Distribution or Notice to Representative................ 113
SECTION 1313. Notice to Trustee....................................... 113
SECTION 1314. Reliance on Judicial Order or Certificate of
Liquidating Agent....................................... 114
SECTION 1315. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustees' Rights........................ 114
SECTION 1316. Article Applicable to Paying Agents..................... 114
SECTION 1317. No Suspension of Remedies............................... 115
SECTION 1318. Modification of Terms of Senior Indebtedness............ 115
SECTION 1319. Certain Terms........................................... 115
SECTION 1320. Trust Moneys Not Subordinated........................... 115
SIGNATURES................................................................ 132
viii
<PAGE>
INDENTURE, dated as of June 27, 1997, between RANDALL'S FOOD
MARKETS, INC., a corporation duly organized and existing under the laws of the
State of Texas (the "Company"), having its principal office at 3663 Briarpark,
Houston, Texas 77042, and MARINE MIDLAND BANK, a New York banking corporation
and trust company, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of its
93/8% Senior Subordinated Notes due 2007 (the "Initial Notes"), and 93/8% Series
B Senior Subordinated Notes due 2007 (the "Exchange Notes," and together with
the Initial Notes, the "Notes"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to, and shall be governed by, the provisions of the
Trust Indenture Act of 1939, as amended, that are required or deemed to be part
of and to govern indentures qualified thereunder.
All things necessary have been done to make the Notes, when executed
and duly issued by the Company and authenticated and delivered hereunder by the
Trustee or the Authenticating Agent, the valid obligations of the Company and to
make this Indenture a valid agreement of the Company in accordance with their
and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and words in the singular include the plural as well
as the singular, and words in the plural include the singular as well as
the plural;
<PAGE>
2
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or defined by
Commission rule and not otherwise defined herein have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper," as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) the word "or" is not exclusive; and
(f) provisions of the Indenture apply to successive events and
transactions.
Certain terms, used principally in Articles Two, Ten, Twelve and
Thirteen, are defined in those Articles.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Act," when used with respect to any Holder, has the meaning set
forth in Section 104.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means any Paying Agent, Authenticating Agent and Note
Registrar under this Indenture.
"Applicable Premium" means, with respect to a Note at any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the
excess of (A) the present value at such time of (1) the Redemption Price of such
Note at July 1, 2002 (such redemption
<PAGE>
3
price as described in the Notes) plus (2) all required interest payments due on
such Note through July 1, 2002, computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (B) the principal amount of such Note.
"Asset Sale" means:
(i) the sale, conveyance, transfer or other disposition (whether in
a single transaction or a series of related transactions) of property or
assets (including by way of a sale and leaseback) of the Company or any
Restricted Subsidiary (each referred to in this definition as a
"disposition") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary (whether in a single transaction or a series of related
transactions);
in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade Securities
or obsolete equipment in the ordinary course of business or inventory or
goods held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described in
Section 801 herein or any disposition that constitutes a Change of Control
pursuant to this Indenture;
(c) any Restricted Payment that is permitted to be made, and is
made, under paragraph (a) of Section 1009;
(d) any disposition of assets with an aggregate fair market value of
less than $1.0 million;
(e) any disposition of property or assets by a Restricted Subsidiary
to the Company or by the Company or a Restricted Subsidiary to a Wholly
Owned Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a Similar Business;
(g) the lease, assignment or a lease or sub-lease of any real or
personal property in the ordinary course of business;
(h) any financing transaction with respect to property built or
acquired by the Company or any Restricted Subsidiary including, without
limitation, sale-leasebacks and asset securitizations;
(i) up to $10.0 million in the aggregate from (A) any disposition of
undeveloped land owned by the Company or its Restricted Subsidiaries on
the Issuance
<PAGE>
4
Date which the Company in good faith determines it will not use in its
consolidated operations and (B) the sale of interests in joint ventures to
which the Company or one of its Restricted Subsidiaries is a party on the
Issuance Date;
(j) foreclosures on assets; and
(k) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary.
"Authenticating Agent" means the Person appointed, if any, by the
Trustee as an authenticating agent pursuant to the last paragraph of Section
303.
"Bank Agent" means The Chase Manhattan Bank, in its capacity as
administrative agent under the Senior Credit Facilities, and any successor
administrative agent thereunder.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal or state or foreign law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"Board of Directors" means, with respect to any Person, either the
board of directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Capitalized Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized and reflected as a
liability on a balance sheet (excluding the footnotes thereto) in accordance
with GAAP.
"Cash Equivalents" means (a) United States dollars, (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality
<PAGE>
5
thereof, (c) certificates of deposit, time deposits and eurodollar time deposits
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500.0 million, (d) repurchase obligations for underlying securities of the
types described in clauses (b) and (c) entered into with any financial
institution meeting the qualifications specified in clause (c) above, (e)
commercial paper rated A-1 or the equivalent thereof by Moody's or S&P and in
each case maturing within one year after the date of acquisition, (f) investment
funds investing 95% of their assets in securities of the types described in
clauses (a)-(e) above, (g) readily marketable direct obligations issued by any
state of the United States of America or any political subdivision thereof
having one of the two highest rating categories obtainable from either Moody's
or S&P and (h) Indebtedness or preferred stock issued by Persons with a rating
of "A" or higher from S&P or "A2" or higher from Moody's.
"Change of Control" means the occurrence of any of the following:
(a) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole; or
(b) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or
any successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or
more of the total Voting Stock of the Company.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issuance Date or issued after Issuance Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company (a) by its Chairman, a Vice-Chairman,
its President or any Vice
<PAGE>
6
President and (b) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary and delivered to the Trustee; provided, however, that such
written request or order may be signed by any two of the officers or directors
listed in clause (a) above in lieu of being signed by one of such officers or
directors listed in such clause (a) and one of the officers listed in clause (b)
above.
"Consolidated Depreciation and Amortization Expense" means with
respect to any Person for any period, the total amount of depreciation and
amortization expense and other noncash charges (excluding any noncash item that
represents an accrual, reserve or amortization of a cash expenditure for a
future period) of such Person and its Restricted Subsidiaries for such period on
a consolidated basis and otherwise determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period,
the sum, without duplication, of: (a) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period (including amortization
of original issue discount, noncash interest payments, the interest component of
Capitalized Lease Obligations, and net payments (if any) pursuant to Hedging
Obligations, excluding amortization of deferred financing fees) and (b)
consolidated capitalized interest of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, and otherwise determined
in accordance with GAAP; provided, however, that (i) any net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto)
shall be excluded, (ii) the Net Income for such period shall not include the
cumulative effect of a change in accounting principles during such period, (iii)
any net after-tax income (loss) from discontinued operations and any net
after-tax gains or losses on disposal of discontinued operations shall be
excluded, (iv) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions other than in the ordinary
course of business (as determined in good faith by the Board of Directors of the
Company) shall be excluded, (v) the Net Income for such period of any Person
that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted
for by the equity method of accounting, shall be included only to the extent of
the amount of dividends or distributions or other payments paid in cash (or to
the extent converted into cash) to the referent Person or a Wholly Owned
Restricted Subsidiary thereof in respect of such period, (vi) the Net Income of
any Person acquired in a pooling of interests transaction shall not be included
for any period prior to the date of such acquisition, (vii) the Net Income for
such period of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of its Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, unless
such restriction with respect to the payment of dividends or in similar
distributions has been legally waived and (viii) non-recurring expenses which
are not capitalized and which are incurred in connection with the expansion of
the Company's self-distribution capabilities shall be excluded.
<PAGE>
7
"Contingent Obligations" means, with respect to any Person, any
obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, or (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation against loss in respect
thereof.
"Corporate Trust Office" means the principal corporate trust office
of the Trustee, at which at any particular time its corporate trust business
shall be administered, which office at the date of execution of this Indenture
is located at 140 Broadway, 12th Floor, New York, NY 10005, except that with
respect to presentation of Notes for payment or for registration of transfer or
exchange, such term shall mean any office or agency of the Trustee at which, at
any particular time, its corporate agency business shall be conducted.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Senior Credit Facilities) or
commercial paper facilities with banks or other institutional lenders or
indentures providing for revolving credit loans, term loans, letters of credit
or other long-term indebtedness, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 311.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, executed by the principal executive officer
and the principal financial officer of the Company, less the amount of cash or
Cash Equivalents received in connection with a sale of such Designated Noncash
Consideration.
"Designated Preferred Stock" means preferred stock of the Company
(other than Disqualified Stock) that is issued for cash (other than to a
Restricted Subsidiary) and is so designated as Designated Preferred Stock,
pursuant to an Officers' Certificate executed by the principal executive officer
and the principal financial officer of the Company, on the issuance
<PAGE>
8
date thereof, the cash proceeds of which are excluded from the calculation set
forth in clause (iv)(3) of paragraph (a) of Section 1009.
"Designated Senior Indebtedness" means (a) Senior Indebtedness under
the Senior Credit Facilities and (b) any other Senior Indebtedness permitted
under this Indenture the principal amount of which is $25.0 million or more and
that has been designated by the Company as Designated Senior Indebtedness.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which, by its terms (or by the terms of any security into
which it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a Change of Control or Asset Sale), pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof
(other than as a result of a Change of Control or Asset Sale), in whole or in
part, in each case prior to the date 91 days after the maturity date of the
Notes; provided, however, that if such Capital Stock is issued to any plan for
the benefit of employees of the Company or its Subsidiaries or by any such plan
to such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (a) provision for
taxes based on income or profits of such Person for such period deducted in
computing Consolidated Net Income, plus (b) Consolidated Interest Expense of
such Person for such period to the extent the same was deducted in calculating
such Consolidated Net Income, plus (c) Consolidated Depreciation and
Amortization Expense of such Person for such period to the extent such
depreciation and amortization were deducted in computing Consolidated Net
Income, plus (d) any expenses or charges related to any Equity Offering,
Permitted Investment or Indebtedness permitted to be incurred by this Indenture
(including such expenses or charges related to the Recapitalization and the
Financings) and deducted in such period in computing Consolidated Net Income,
plus (e) the amount of restructuring charge (including, without limitation,
charges incurred in connection with the closing or exchange of stores, which are
accrued prior to June 27, 1998) deducted in such period in computing
Consolidated Net Income, plus (f) without duplication, any other noncash charges
reducing Consolidated Net Income for such period (excluding any such charge
which requires an accrual of a cash reserve for anticipated cash charges for any
future period), plus (g) the amount of any minority interest expense deducted in
calculating Consolidated Net Income, less, without duplication (h) noncash items
increasing Consolidated Net Income of such Person for such period (excluding any
items which represent the reversal of any accrual of, or cash reserve for,
anticipated cash charges in any prior period).
"Employee Stock Ownership Plan" has the meaning specified in the
Offering Memorandum and shall include all successors and assigns.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
<PAGE>
9
"Equity Offering" means any public or private sale of Common Stock
or preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"Event of Default" has the meaning set forth in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Notes containing terms substantially
identical to the Initial Notes (except that (i) such Exchange Notes shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act, and (ii) certain provisions relating to an increase in
the stated rate of interest thereon shall be eliminated) that are issued and
exchanged for the Initial Notes in accordance with the Exchange Offer, as
provided for in the Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders of
the Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Excluded Contribution" means the net cash proceeds received by the
Company from (a) contributions to its common equity capital and (b) the sale
(other than to a Subsidiary or to any Company or Subsidiary management equity
plan or stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock) of the Company, in
each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by the principal executive officer and the principal
financial officer of the Company on the date such capital contributions are made
or the date such Equity Interests are sold, as the case may be, the cash
proceeds of which are excluded from the calculation set forth in paragraph (c)
of Section 1009.
"Existing Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries in existence on the Issuance Date, plus interest
accruing thereon, after application of the net proceeds of the sale of the Notes
as described in the Offering Memorandum.
"Financings" means (i) an aggregate of approximately $125.5 million
of bank borrowings by the Company, including $125.0 million of borrowings under
a senior secured term loan facility and $0.5 million of borrowings under a
$225.0 million senior secured revolving credit facility, as may be adjusted as a
consequence of the passage of time between April 5, 1997 and the Issuance Date,
(ii) $150.0 million aggregate principal amount of Notes and (iii) $225.0 million
from RFM Acquisition LLC, pursuant to the Subscription Agreement dated April 1,
1997, between RFM Acquisition LLC, the Company and Robert R. Onstead, as
consideration for the issuance
<PAGE>
10
of 18,579,686 shares of Common Stock and a 25-year option to purchase 3,606,881
shares of Common Stock at $12.11 per share.
"Fixed Charge Coverage Ratio" means, with respect to any Person for
any period, the ratio of EBITDA of such Person for such period to the Fixed
Charges of such Person for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than in the case of revolving credit borrowings, in which
case interest expense shall be computed based upon the average daily balance of
such Indebtedness during the applicable period) or issues or redeems
Disqualified Stock or preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of Disqualified Stock
or preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter period. For purposes of making the computation referred
to above, Investments, acquisitions, dispositions, mergers, consolidations and
discontinued operations (as determined in accordance with GAAP) that have been
made by the Company or any of its Restricted Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to or simultaneously with the Calculation Date shall be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (and the reduction of any
associated fixed charge obligations and the change in EBITDA resulting
therefrom) had occurred on the first day of the four-quarter reference period.
If since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, merger, consolidation or discontinued operation that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto for
such period as if such Investment, acquisition, disposition, merger,
consolidation or discontinued operation had occurred at the beginning of the
applicable four-quarter period. For purposes of this definition, whenever pro
forma effect is to be given to a transaction, the pro forma calculations shall
be made in good faith by a responsible financial or accounting officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the Calculation Date had been the applicable rate for
the entire period (taking into account any Hedging Obligations applicable to
such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by a responsible financial
or accounting officer of the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP. For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate.
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11
"Fixed Charges" means, with respect to any Person for any period,
the sum of (a) Consolidated Interest Expense of such Person for such period and
(b) all cash dividend payments (excluding items eliminated in consolidation) on
any series of preferred stock of such Person.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Issuance Date. For the
purposes of this Indenture, the term "consolidated" with respect to any Person
shall mean such Person consolidated with its Restricted Subsidiaries, and shall
not include any Unrestricted Subsidiary.
"Government Securities" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such Government
Securities or a specific payment of principal of or interest on any such
Government Securities held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such depository receipt.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness or other obligations.
"Guarantee" means any guarantee of the obligations of the Company
under the Indenture and the Notes by any Person in accordance with the
provisions of this Indenture. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Person that incurs a Guarantee; provided that
upon the release and discharge of such Person from its Guarantee in accordance
with this Indenture, such Person shall cease to be a Guarantor.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates.
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12
"Holder" means a holder of the Notes.
"Indebtedness" means, with respect to any Person, (a) any
indebtedness of such Person, whether or not contingent (i) in respect of
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit or bankers' acceptances (or, without double
counting, reimbursement agreements in respect thereof), (iii) representing the
balance deferred and unpaid of the purchase price of any property (including
Capitalized Lease Obligations), except any such balance that constitutes a trade
payable or similar obligation to a trade creditor, in each case accrued in the
ordinary course of business or (iv) representing any Hedging Obligations, if and
to the extent of any of the foregoing Indebtedness (other than letters of credit
and Hedging Obligations) that would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP, (b) to the extent not otherwise included, any obligation by such Person to
be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); provided, however, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking firm or consultant to Persons engaged in Similar Businesses
of nationally recognized standing that is, in the judgment of the Company's
Board of Directors, qualified to perform the task for which it has been engaged.
"Initial Notes" has the meaning specified in the recitals to this
Indenture.
"Initial Purchasers" means, collectively, BT Securities Corporation,
Chase Securities Inc., Goldman, Sachs & Co. and PaineWebber Incorporated, as
purchasers of the Initial Notes.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Notes.
"Investment Grade Securities" means (a) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (other than Cash Equivalents), (b) debt
securities or debt instruments with a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such rating by such rating organization,
or, if no rating of S&P or Moody's then exists, the equivalent of such rating by
any other nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (c) investments in any fund that invests exclusively in
investments of the type described in clauses
<PAGE>
13
(a) and (b) which fund may also hold immaterial amounts of cash pending
investment and/or distribution.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans
(including guarantees), advances or capital contributions (excluding advances to
customers, commission, travel and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities issued by
any other Person and investments that are required by GAAP to be classified on
the balance sheet of the Company in the same manner as the other investments
included in this definition to the extent such transactions involve the transfer
of cash or other property. For purposes of the definition of "Unrestricted
Subsidiary" and Section 1009, (a) "Investments" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of a Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Company shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the
Company's "Investment" in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at the
time of such redesignation; and (b) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors.
"Issuance Date" means the closing date for the sale and original
issuance of the Notes hereunder.
"Key Employee Stock Ownership Plan" has the meaning specified in the
Offering Memorandum and shall include all successors and assigns.
"KKR" means Kohlberg Kravis Roberts & Co., L.P.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
provided that in no event shall an operating lease be deemed to constitute a
Lien.
"Management Group" means the group consisting of all or certain
Officers of the Company on the Issuance Date whether or not such person remains
in that capacity.
"Maturity" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity by declaration of acceleration, call for
redemption or purchase or otherwise.
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14
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Mortgage Financing" means the incurrence by the Company or a
Subsidiary of the Company of any Indebtedness secured by a mortgage or other
Lien on real property acquired or improved by the Company or any Subsidiary of
the Company after the date of the Indenture.
"Mortgage Refinancing" means the incurrence by the Company or a
Subsidiary of the Company of any Indebtedness secured by a mortgage or other
Lien on real property subject to a mortgage or other Lien existing on the date
of the Indenture or created or incurred subsequent to the date of the Indenture
as permitted by the terms of the Indenture and owned by the Company or any
Subsidiary of the Company.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and brokerage and
sales commissions), any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by clause (i) of the second paragraph
of Section 1017) to be paid as a result of such transaction and any deduction of
appropriate amounts to be provided by the Company as a reserve in accordance
with GAAP against any liabilities associated with the asset disposed of in such
transaction and retained by the Company after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with such transaction.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 305.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness.
"Offer Period" means the period from the date of a Change of Control
until and including the Change of Control Payment Date.
<PAGE>
15
"Offering Memorandum" means the Offering Memorandum dated June 24,
1997 with respect to the offering of the Notes.
"Officer" means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Section 102.
"Opinion of Counsel" means a written opinion of counsel, which and
who are reasonably acceptable to, and addressed to, the Trustee complying with
the requirements of Section 102. Unless otherwise required by the TIA, such
legal counsel may be an employee of or counsel to the Company or the Trustee.
"Outstanding," when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered under
this Indenture, except:
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Notes; provided that, if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(c) Notes, except to the extent provided in Sections 1202 and 1203,
with respect to which the Company has effected defeasance and/or covenant
defeasance as provided in Article Eleven; and
(d) Notes in exchange for or in lieu of which other Notes (including
pursuant to Section 310) have been authenticated and delivered pursuant to
this Indenture, other than any such Notes in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such
Notes are held by a bona fide purchaser in whose hands the Notes are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding
(provided, that in connection with any offer by the Company or any obligor to
purchase the Notes, Notes
<PAGE>
16
tendered for purchase will be deemed to be Outstanding and held by the tendering
Holder until the date of purchase), except that, in determining whether the
Trustee shall be protected in making such calculation or in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes which the Trustee actually knows to be so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor.
"Pari Passu Indebtedness" means (a) with respect to the Notes,
Indebtedness which ranks pari passu in right of payment to the Notes and (b)
with respect to any Guarantee, Indebtedness which ranks pari passu in right of
payment to such Guarantee.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Notes on behalf of the Company.
"Permitted Holders" means KKR and any of its Affiliates and the
Management Group.
"Permitted Investments" means:
(a) any Investment in the Company or any Restricted Subsidiary;
(b) any Investment in cash and Cash Equivalents or Investment Grade
Securities;
(c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person that is engaged in a Similar Business if as a
result of such Investment (i) such Person becomes a Restricted Subsidiary
or (ii) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Restricted Subsidiary;
(d) any Investment in securities or other assets not constituting
cash or Cash Equivalents and received in connection with an Asset Sale
made pursuant to Section 1017 or any other disposition of assets not
constituting an Asset Sale;
(e) any Investment existing on the Issuance Date;
(f) advances to employees not in excess of $10.0 million outstanding
at any one time, in the aggregate;
(g) any Investment acquired by the Company or any of its Restricted
Subsidiaries (i) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a
<PAGE>
17
bankruptcy, workout, reorganization or recapitalization of the issuer of
such other Investment or accounts receivable or (ii) as a result of a
foreclosure by the Company or any of its Restricted Subsidiaries with
respect to any secured Investment or other transfer of title with respect
to any secured Investment in default;
(h) Hedging Obligations permitted under clause (x) of paragraph (b)
of Section 1010;
(i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
expenses, in each case incurred in the ordinary course of business;
(j) any Investment in a Similar Business (other than an Investment
in an Unrestricted Subsidiary) having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (j)
that are at that time outstanding, not to exceed the greater of (x) $75.0
million or (y) 15% of Total Assets at the time of such Investment (with
the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value);
(k) Investments the payment for which consists of Equity Interests
of the Company (exclusive of Disqualified Stock); provided, however, that
such Equity Interests will not increase the amount available for
Restricted Payments under clause (3) of paragraph (a) of Section 1009;
(l) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (l)
that are at that time outstanding, not to exceed the greater of (x) $30.0
million or (y) 5% of Total Assets at the time of such Investment (with the
fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value);
(m) any Investment by Restricted Subsidiaries in Wholly Owned
Restricted Subsidiaries and Investments by Subsidiaries that are not
Restricted Subsidiaries in other Subsidiaries that are not Restricted
Subsidiaries;
(n) guarantees (including Guarantees) of Indebtedness permitted
under Section 1010; and
(o) any transaction to the extent it constitutes an investment that
is permitted and made in accordance with the provisions of the paragraph
(b) of Section 1012, except transactions described in clauses (ii), (vi),
(vii) and (xi) of paragraph (b) thereunder.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
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18
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 310 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"preferred stock" means any Equity Interest with preferential right
of payment of dividends or upon liquidation, dissolution, or winding up.
"Putable Shares Reserve Fund" means approximately $6.6 million to be
set aside for the repurchase of shares of the Company's Common Stock pursuant to
pre-existing contractual obligations with certain shareholders.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Recapitalization" means the consummation of the series of
transactions contemplated by the Subscription Agreement dated as of April 1,
1997 between the Company, RFM Acquisition LLC and Robert R. Onstead.
"Redemption Date," when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Default," has the meaning specified in the second
paragraph of Section 204.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 27, 1997, among the Company and the holders of
Initial Notes.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 15 or December 15 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Related Parties" means any Person controlled by a Permitted Holder,
including any partnership or limited liability company of which a Permitted
Holder or its Affiliates is the general partner or managing member, as the case
may be.
"Representative" means (a) with respect to the Senior Credit
Facilities, the Bank Agent and (b) with respect to any other Senior
Indebtedness, the indenture trustee or other trustee, agent or representative
for the holders of such Senior Indebtedness.
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19
"Repurchase Offer" means an offer made by the Company to purchase
all or any portion of a Holder's Notes pursuant to Sections 1016 and 1017
herein.
"Responsible Officer," when used with respect to the Trustee, means
the chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Senior Credit Facilities" means that certain term loan credit
facility and revolving credit facility described in the Offering Memorandum
among the Company and the lenders from time to time party thereto, including any
collateral documents, instruments and agreements executed in connection
therewith, and any amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any indentures or credit facilities or
commercial paper facilities with banks or other institutional lenders that
replace, refund or refinance any part of the loans, notes, other credit
facilities or commitments thereunder, including any such replacement, refunding
or refinancing facility or indenture that increases the amount borrowable
thereunder or alters the maturity thereof, provided, however, that in connection
with any facilities which refund, replace or refinance the original term loan
and revolving credit facilities there shall not be more than one facility at any
one time that is identified as the Senior Credit Facilities and, if at any time
there is more than one facility which would constitute the Senior Credit
Facilities, the Company will designate in writing to the Trustee which one of
such facilities will be the Senior Credit Facilities for purposes of this
Indenture.
"Senior Indebtedness" means (a) the Obligations under the Senior
Credit Facilities and (b) any other Indebtedness permitted to be incurred by the
Company hereunder, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with
<PAGE>
20
or subordinated in right of payment to the Notes, including, with respect to
clauses (a) and (b), interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy, whether or
not such interest is an allowable claim in such bankruptcy proceeding.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (i) any liability for federal, state, local or other taxes owed
or owing by the Company, (ii) any obligation of the Company to any of its
Subsidiaries, (iii) any accounts payable or trade liabilities arising in the
ordinary course of business (including instruments evidencing such liabilities)
other than obligations in respect of letters of credit under the Senior Credit
Facilities, (iv) any Indebtedness that is incurred in violation hereof, (v)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company, (vi) any Indebtedness, guarantee or obligation of the Company which is
subordinate or junior to any other Indebtedness, guarantee or obligation of the
Company, (vii) Indebtedness evidenced by the Notes and (viii) Capital Stock of
the Company.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issuance Date.
"Similar Business" means the supermarket and retail food sale
business and any activity or business incidental, directly related or similar
thereto, or any line of business engaged in by the Company or its Subsidiaries
on the Issuance Date or any business activity that is a reasonable extension,
development or expansion thereof or ancillary thereto.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 311.
"Stated Maturity" when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means (a) with respect to the Notes, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantee, any Indebtedness of
the applicable Guarantor which is by its terms subordinated in right of payment
to such Guarantee.
"Subordinated Note Obligations" means any principal of, premium, if
any, and interest on the Notes payable pursuant to the terms of the Notes or
upon acceleration, together with and including any amounts received upon the
exercise of rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the Notes
or amounts corresponding to such principal, premium, if any, or interest on the
Notes.
<PAGE>
21
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture
or limited liability company) of which more than 50% of the total voting power
of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time of determination owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person or a
combination thereof and (ii) any partnership, joint venture, limited liability
company or similar entity of which (x) more than 50% of the capital accounts,
distribution rights, total equity and voting interests or general or limited
partnership interests, as applicable, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any Wholly
Owned Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"Total Assets" means the total consolidated assets of the Company
and its Restricted Subsidiaries, as shown on the most recent balance sheet of
the Company.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
period from the Redemption Date to July 1, 2002; provided, however, that if the
period from the Redemption Date to July 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to July 1, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force on the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
which at the time of determination is an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any existing Subsidiary
and any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests of, or owns, or holds any Lien on, any property of, the Company or any
Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be so
designated), provided that (a) any Unrestricted Subsidiary must be an entity of
which shares of the capital stock or other equity interests
<PAGE>
22
(including partnership interests) entitled to cast at least a majority of the
votes that may be cast by all shares or equity interests having ordinary voting
power for the election of directors or other governing body are owned, directly
or indirectly, by the Company, (b) the Company certifies that such designation
complies with the requirements of Section 1009 and (c) each of (I) the
Subsidiary to be so designated and (II) its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
pursuant to which the lender has recourse to any of the assets of the Company or
any of its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that,
immediately after giving effect to such designation, (i) the Company could incur
at least $1.00 of additional Indebtedness under paragraph (a) of Section 1010,
or (ii) the Fixed Charge Coverage Ratio for the Company and its Restricted
Subsidiaries would be greater than such ratio for the Company and its Restricted
Subsidiaries immediately prior to such designation, in each case on a pro forma
basis taking into account such designation. Any such designation by the Board of
Directors shall be notified by the Company to the Trustee by promptly filing
with the Trustee a copy of the board resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (a) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such payment, by
(b) the sum of all such payments.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary
that is a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person 100% of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company and any
Guarantor (if applicable) and any other obligor on the Notes (if applicable)
shall furnish to the Trustee an Officers' Certificate in form and substance
reasonably acceptable to the Trustee stating that all conditions precedent, if
<PAGE>
23
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
provided pursuant to Section 1018(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual or such
firm, he or it has made such examination or investigation as is necessary
to enable him or it to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any
Guarantor or other obligor on the Notes may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company, any Guarantor or other obligor on the Notes stating
that the information with respect to such factual matters is in the possession
of the Company, any Guarantor or other obligor on the Notes unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
<PAGE>
24
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section 104.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Note Register.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in advance
a record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding TIA Section 316(c),
such record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be
<PAGE>
25
deemed effective unless it shall become effective pursuant to the provisions of
this Indenture not later than six months after the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof (including in
accordance with Section 310) in respect of anything done, omitted or suffered to
be done by the Trustee, any Paying Agent or the Company or any Guarantor in
reliance thereon, whether or not notation of such action is made upon such Note.
SECTION 105. Notices, Etc., to Trustee, the Company and any
Guarantor.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Guarantor or
any other obligor on the Notes shall be sufficient for every purpose
hereunder if made, given, furnished or delivered in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier,
to or with the Trustee and received at its Corporate Trust Office,
Attention: Corporate Trust Services -- Randall's, or
(2) the Company or any Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or delivered, in writing, or
mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to the Company or such Guarantor addressed to it at the address
of its principal office specified in the first paragraph of this
Indenture, or at any other address previously furnished in writing to the
Trustee by the Company or such Guarantor.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
<PAGE>
26
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, (other than the parties hereto, any Agent and their
successors hereunder and each of the Holders and, with respect to any provisions
hereof relating to the subordination of the Notes or the rights of holders of
Senior Indebtedness, the holders of Senior Indebtedness) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW YORK EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE
OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK. UPON THE ISSUANCE OF THE EXCHANGE NOTES OR THE
EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, THIS INDENTURE SHALL BE
SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT THAT ARE REQUIRED TO BE
PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH
PROVISIONS.
<PAGE>
27
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, any date established
for payment of Defaulted Interest pursuant to Section 311 or Redemption Date or
Stated Maturity or Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of principal (or premium, if any) or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date or date established for payment of
Defaulted Interest pursuant to Section 311, Redemption Date, or at the Stated
Maturity or Maturity; provided that no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date or date established for
payment of Defaulted Interest pursuant to Section 311, Stated Maturity or
Maturity, as the case may be, to the next succeeding Business Day.
SECTION 113. No Personal Liability of Directors, Officers,
Employees, Stockholders or Incorporators.
No director, officer, employee, incorporator or stockholders, as
such, of the Company or any Guarantor shall have any liability for any
obligations of the Company or such Guarantor under the Notes, this Indenture or
any Guarantee or for any claim based on, in respect of, or by reason of, such
obligations or their creations. Each Holder by accepting a Note waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Notes.
SECTION 114. Counterparts.
This Indenture may be executed in any number of counterparts, each
of which shall be original; but such counterparts shall together constitute but
one and the same instrument.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "93/8% Senior Subordinated
Notes due 2007" and the Exchange Notes shall be known as the "93/8% Series B
Senior Subordinated Notes due 2007," in each case, of the Company. The Notes and
the Trustee's certificate of authentication shall be in substantially the forms
set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their execution
of the Notes. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication.
<PAGE>
28
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Notes, as evidenced by their
execution of such Notes.
Initial Notes offered and resold in reliance on Rule 144A to QIBs
will be issued on the Issuance Date in the form of a single, permanent global
Note substantially in the form set forth in Sections 204 and 205 (the "U.S.
Global Note") deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The U.S. Global Note (which may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate) will represent
Initial Notes sold to QIB's. The aggregate principal amount of the U.S. Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Initial Notes resold in reliance on Regulation S, if any, shall be
reissued in the form of temporary certificated Notes in registered form
substantially in the form set forth in Sections 204 and 205 (the "Temporary
Offshore Physical Notes"). The Temporary Offshore Physical Notes will be
registered in the name of, and held by, a temporary certificate holder
designated by BT Securities Corporation until the later of the completion of the
distribution of the Initial Notes and the termination of the "restricted period"
(as defined in Regulation S) with respect to the offer and sale of such Initial
Notes (the "Offshore Notes Exchange Date"). The Company shall promptly notify
the Trustee in writing of the occurrence of the Offshore Notes Exchange Date
and, at any time following the Offshore Notes Exchange Date, upon receipt by the
Trustee and the Company of a certificate substantially in the form set forth in
Section 203, the Company shall execute, and the Trustee shall authenticate and
deliver, one or more permanent certificated Notes in registered form
substantially in the form set forth in Sections 204 and 205 (the "Permanent
Offshore Physical Notes") in exchange for the Temporary Offshore Physical Notes
of like tenor and amount.
Initial Notes resold other than as described in the preceding
paragraph, if any, shall be issued in the form of permanent certificated Notes
in registered form in substantially the form set forth in Sections 204 and 205
(the "U.S. Physical Notes"). U.S. Physical Notes in certain circumstances shall
be transferred to all beneficial owners in exchange for their beneficial
interests in the U.S. Global Note as set forth in Section 306.
The Temporary Offshore Physical Notes, Permanent Offshore Physical
Notes and U.S. Physical Notes are sometimes collectively herein referred to as
the "Physical Notes."
<PAGE>
29
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement or (ii) an Initial Note is exchanged for an Exchange Note
in connection with an effective Registration Statement, in each case pursuant to
the Registration Rights Agreement, each such U.S. Global Note, Temporary
Offshore Physical Note, Permanent Offshore Physical Note and U.S. Physical Note
shall bear the following legend (the "Private Placement Legend") on the face
thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT (AND IF ACQUIRING THE SECURITIES FROM SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," IS ACQUIRING SECURITIES HAVING AN AGGREGATE
PRINCIPAL AMOUNT OF NOT LESS THAN $250,000), OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT; PROVIDED THAT THE COMPANY AND THE TRUSTEE SHALL HAVE THE
<PAGE>
30
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
Each U.S. Global Note, whether or not an Initial Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
<PAGE>
31
SECTION 203. Form of Certificate to Be Delivered upon Termination of
Restricted Period.
On or after August 6, 1997
MARINE MIDLAND BANK
140 Broadway, 12th Floor
New York, NY 10005
Attention: Corporate Trust Services - Randall's
Re: RANDALL'S FOOD MARKETS, INC.
(the "Company")
93/8% Senior Subordinated Notes due 2007 (the "Notes")
Ladies and Gentlemen:
This letter relates to Notes represented by temporary certificated
notes (the "Temporary Offshore Physical Notes"). Pursuant to Section 201 of the
Indenture dated as of June 27, 1997 relating to the Notes (the "Indenture"), we
hereby certify that (1) we are the beneficial owner of $[ ] principal amount of
Notes represented by the Temporary Offshore Physical Notes and (2) we are a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the Securities Act of
1933, as amended. Accordingly, you are hereby requested to issue a Permanent
Offshore Physical Note representing the undersigned's interest in the principal
amount of Notes represented by the Temporary Offshore Physical Notes, all in the
manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
---------------------------------
Authorized Signature
<PAGE>
32
SECTION 204. Form of Face of Note.
RANDALL'S FOOD MARKETS, INC.
93/8% [Series B]1 Senior Subordinated Note due 2007
CUSIP No. _____
No. __________ $________
RANDALL'S FOOD MARKETS, INC., a Texas corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of
____________________ Dollars on July 1, 2007, at the office or agency of the
Company referred to below, and to pay interest thereon on January 1, 1998 and
semi-annually thereafter, on January 1 and July 1 in each year, from June 27,
1997, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 93/8% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the date on
which such overdue interest becomes payable to the date payment of such interest
has been made or duly provided for. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be the June 15 or December 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
such defaulted interest, and (to the extent lawful) interest on such defaulted
interest at the rate borne by the Notes, may be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of June 27, 1997 (the "Registration
Rights Agreement"), between the Company and the Initial Purchasers named
therein. In the event that either (a) an Exchange Offer Registration Statement
(as such term is defined in the Registration Rights Agreement) is not filed with
the Commission on or prior to the 100th calendar day following the date of
original issue of the Notes, (b) such Exchange Offer Registration Statement has
not been declared effective on or prior to the 200th day following the date of
original issue of the Notes or (c) the Exchange Offer (as such term is defined
in the Registration Rights Agreement) is not consummated on or prior to the
230th calendar day following the date of original issue of the Notes or a Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) with respect
- ----------
1. Include only for Exchange Notes.
<PAGE>
33
to the Notes is not declared effective on or prior to the 230th day following
the date of original issue of the Notes (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or applicable
interpretations of the Staff of the Commission, if later, within 45 days after
publication of the change in law or interpretations but in no event before 100
calendar days after the Issuance Date) (each such event an "Exchange
Registration Default"), the interest rate borne by this Note shall be increased
by one-quarter of one percent per annum following such 100-day period in the
case of clause (a) above, following such 200-day period in the case of clause
(b) above, or such 230-day period in the case of clause (c) above (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Staff of the Commission, if
later, following such 45-day period after publication of the change in law or
interpretation but in no event before 100 calendar days after the Issuance
Date), which rate will be increased by an additional one-quarter of one percent
per annum for each 90-day period that any such additional interest continues to
accrue; provided that the aggregate increase in such annual interest rate will
in no event exceed one percent. Upon (x) the filing of the Exchange Offer
Registration Statement after the 100-day period described in clause (a) above,
(y) the effectiveness of the Exchange Offer Registration Statement after the
200-day period described in clause (b) above, or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 230-day period described in clause (c) above (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Staff of the Commission, if
later, following such 45-day period after publication of the change in law or
interpretation but in no event before 100 calendar days after the Issuance
Date), the interest rate borne by the Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate set forth above if the Company is otherwise in compliance
with this paragraph; provided, however, that, if after such reduction in
interest rate, a different event specified in clause (a), (b) or (c) above
occurs, the interest rate may again be increased and thereafter decreased
pursuant to the foregoing provisions. If the Company issues a notice that the
Shelf Registration Statement is unusable pending the announcement of a material
corporate transaction or otherwise pursuant to Section 2(f) of the Registration
Rights Agreement, or such a notice is required under applicable securities laws
to be issued by the Company, and the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective or
required to be issued exceeds 30 days in the aggregate (a "Shelf Registration
Default," and together with an Exchange Registration Default, a "Registration
Default"), then the interest rate borne by the Notes will be increased by
one-quarter of one percent per annum following the date that such Shelf
Registration Statement ceases to be usable beyond the period permitted above,
which rate shall be increased by an additional one-quarter of one percent per
annum for each 90-day period that such additional interest continues to accrue;
provided that the aggregate increase in such annual interest rate may in no
event exceed one percent. Upon the Company declaring that the Shelf Registration
Statement is usable after the interest rate has been increased pursuant to the
preceding sentence, the interest rate borne by the Notes will be reduced to the
original interest rate if the Company is otherwise in compliance with this
paragraph; provided, however, that if after any such reduction in interest rate
the Shelf
<PAGE>
34
Registration Statement again ceases to be usable beyond the period permitted
above, the interest rate will again be increased and thereafter reduced pursuant
to the foregoing provisions.]2
Payment of the principal of (and premium, if any, on) and interest
on this Note will be made at the office or agency of the Company maintained for
that purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company (i) by check mailed to the address of the
Person entitled thereto as such address shall appear on the Note Register or
(ii) by wire transfer to an account maintained by the payee located in the
United States.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee or the Authenticating Agent referred to on the reverse
hereof by manual signature, this Note shall not be entitled to any benefit under
the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
RANDALL'S FOOD MARKETS, INC.
By
-------------------------------------
Name:
Title:
Attest: [SEAL]
- -----------------
Authorized Officer
- ----------
2. Include only for Initial Notes.
<PAGE>
35
SECTION 205. Form of Reverse of Note.
This Note is one of a duly authorized issue of securities of the
Company designated as its 93/8% [Series B]3 Senior Subordinated Notes due 2007
(the "Notes"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $150,000,000, which may be issued
under the indenture (the "Indenture") dated as of June 27, 1997 between the
Company and Marine Midland Bank, as trustee (the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders, and of the terms upon
which the Notes are, and are to be, authenticated and delivered. Capitalized
terms used herein without definition shall have the meanings set forth in the
Indenture.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose.
On or before each payment date, the Company shall deliver or cause
to be delivered to the Trustee or the Paying Agent an amount in dollars
sufficient to pay the amount due on such payment date.
The Notes are subject to redemption upon not less than 30 nor more
than 60 days' notice, at any time on and after July 1, 2002, as a whole or in
part, at the election of the Company, at a Redemption Price equal to the
percentage of the principal amount set forth below, plus, in each case, accrued
and unpaid interest, if any, to the applicable Redemption Date, if redeemed
during the twelve month period beginning July 1 of the years indicated below:
Redemption
Year Price
---- -----
2002 .............................................. 104.688%
2003............................................... 103.125
2004 .............................................. 101.563
2005 and thereafter ............................... 100.000%
In addition, at any time or from time to time, on or prior to July
1, 2000, the Company may, at its option, redeem up to 40% of the aggregate
principal amount of Notes originally issued under the Indenture on the Issuance
Date at a Redemption Price equal to
- ----------
3. Include only for the Exchange Notes.
<PAGE>
36
109.375% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Redemption Date, with the net proceeds of one
or more Equity Offerings; provided that at least 60% of the aggregate principal
amount of Notes originally issued under the Indenture on the Issuance Date
remains outstanding immediately after the occurrence of each such redemption;
and provided further that each such redemption shall occur within 60 days of the
date of the closing of any such Equity Offering.
If less than all the Notes are to be redeemed pursuant to the
preceding two paragraphs, the Trustee shall select the Notes or portions thereof
to be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes being redeemed are listed, or if
the Notes are not so listed, on a pro rata basis, by lot or by such other method
the Trustee shall deem fair and appropriate; provided that no such partial
redemption shall reduce the portion of the principal amount of a Note not
redeemed to less than $1,000.
At any time on or prior to July 1, 2002, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control or upon the acquisition, in one or a series of related transactions,
of 50% or more of the total Voting Stock of the Company by an Affiliate of KKR
or the sale, lease or transfer, in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, to an Affiliate of KKR upon not less than 30 nor more than 60
days prior notice (but in no event more than 90 days after the occurrence of
such Change of Control or transfer event) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
In the case of any redemption or repurchase of Notes, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Notes, or one or more Predecessor Notes, of
record at the close of business on the relevant Regular Record Date or Special
Record Date, as the case may be, referred to on the face hereof. Notes (or
portions thereof) for whose redemption and payment provision is made in
accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
In the event of redemption or repurchase of this Note in part only,
a new Note or Notes for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, unless the Company has
elected to redeem the Notes in connection with such Change of Control, the
Company will be required to make an offer to purchase on the Change of Control
Payment Date all outstanding Notes at a purchase price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of purchase, in accordance with the Indenture.
Holders that are subject to an offer to purchase will receive a Change of
Control Offer from the Company prior to any related Change of Control Payment
Date.
<PAGE>
37
Under certain circumstances, in the event of certain Asset Sales,
the Company will be required to make an offer to all Holders to purchase the
maximum principal amount of Notes, in an integral multiple of $1,000, that may
be purchased out of Excess Proceeds at a purchase price in cash equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the Indenture. Holders that are subject to
any offer to purchase will receive an Asset Sale Offer from the Company prior to
any related Asset Sale Purchase Date.
If an Event of Default shall occur and be continuing, the principal
of all the Notes may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Notes and the
Guarantees, if any, at any time by the Company and the Trustee with the consent
of the Holders of a specified percentage in aggregate principal amount of the
Notes at the time Outstanding. Additionally, the Indenture permits that, without
notice to or consent of any Holder, the Company, any Guarantor and the Trustee
together may amend or supplement the Indenture, any Guarantee or this Note (i)
to cure any ambiguity, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, (iii) to
comply with the covenant relating to mergers, consolidations and sales of
assets, (iv) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders, (v) to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect the legal
rights under the Indenture of any such Holder, (vi) to add covenants for the
benefit of the Holders or to surrender any right or power conferred upon the
Company, (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, (viii) to evidence and provide for the acceptance of appointment under the
Indenture by a successor Trustee pursuant to the requirements of Section 610
thereof, (ix) to make any change that does not adversely affect the legal rights
of any Holder or (x) to add a Guarantor under the Indenture. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Notes at the time Outstanding, on behalf of the Holders
of all the Notes, to waive compliance by the Company with certain provisions of
the Indenture, the Notes and the Guarantees, if any, and certain past Defaults
under the Indenture and the Notes and the Guarantees, if any, and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Notes (in the event such Guarantor or
other obligor is obligated to make payments in
<PAGE>
38
respect of the Notes), which is absolute and unconditional, to pay the principal
of (and premium, if any) and interest on this Note at the times, place, and
rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registerable on the Note
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Note Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to pay all documentary, stamp or similar issue or transfer taxes or
other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Company, the Trustee nor any agent shall be affected by notice to the contrary.
THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW YORK EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE
OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a 360-day
year of twelve 30-day months.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
<PAGE>
39
please print or typewrite name and address including zip code of assignee
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
<PAGE>
40
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
NOTES]
In connection with any transfer of this Note occurring prior to the
date that is the earlier of the date of an effective Registration Statement, as
defined in the Registration Rights Agreement dated as of June 27, 1997, or June
27, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[_](a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
[_](b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished that comply with the
conditions of transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date: ____________________ ________________________________________________
NOTICE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
<PAGE>
41
Dated:____________________________ NOTICE: To be executed by an executive
officer.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Sections 1016 and 1017 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Sections 1016 and 1017 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
SECTION 206. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
MARINE MIDLAND BANK,
as Trustee
By
------------------------
Authorized Signatory
Dated: ____________________
<PAGE>
42
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is limited to $150,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 304, 305, 306, 307, 310,
906, 1015, 1017 or 1108 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the "93/8% Senior
Subordinated Notes due 2007" and the Exchange Notes shall be known and
designated as the "93/8% Series B Senior Subordinated Notes due 2007," in each
case, of the Company. The Stated Maturity of the Notes shall be July 1, 2007,
and they shall bear interest at the rate of 93/8% per annum, which rate may be
increased in the event of a Registration Default pursuant to Section 2(f) of the
Registration Rights Agreement dated June 27, 1997 by and among the Company and
the parties named on the signature pages thereof, from June 27, 1997, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, payable on January 1, 1998 and semi-annually thereafter on January
1 and July 1 in each year, until the principal thereof is paid in full and to
the Person in whose name the Note (or any predecessor Note) is registered at the
close of business on the June 15 or December 15 next preceding such interest
payment date. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months, until the principal thereof is paid or duly provided
for. Interest on any overdue principal, interest (to the extent lawful) or
premium, if any, shall be payable on demand.
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that, at the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Note Register;
provided that all payments of principal, premium, if any, and interest with
respect to Notes represented by one or more permanent global Notes registered in
the name of or held by the Depositary or its nominee will be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
Holders shall have the right to require the Company to purchase
their Notes, in whole or in part, in the event of a Change of Control pursuant
to Section 1016.
The Notes shall be subject to repurchase by the Company pursuant to
an Asset Sale Offer as provided in Section 1017.
The Notes shall be redeemable as provided in Article Twelve and in
the Notes.
<PAGE>
43
The Indebtedness evidenced by the Notes shall be subordinated in
right of payment to Senior Indebtedness as provided in Article Thirteen.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its Chief
Executive Officer or a Vice President, under its corporate seal reproduced
thereon and attested by its Corporate Secretary or an Assistant Secretary. The
signature of any of these officers on the Notes may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Initial Notes executed by the Company
to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes, and the Trustee in accordance with
such Company Order shall authenticate and deliver such Initial Notes directing
the Trustee to authenticate the Notes and certifying that all conditions
precedent to the issuance of Notes contained herein have been fully complied
with, and the Trustee in accordance with such Company Order shall authenticate
and deliver such Initial Notes. On Company Order, the Trustee shall authenticate
for original issue Exchange Notes in an aggregate principal amount not to exceed
$150,000,000; provided that such Exchange Notes shall be issuable only upon the
valid surrender for cancellation of Initial Notes of a like aggregate principal
amount in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement. In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Notes. Such order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Initial Notes or Exchange Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture.
<PAGE>
44
In case the Company or any Guarantor, pursuant to Article Eight,
shall be consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company or such
Guarantor shall have been merged, or the Person which shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to Article
Eight, any of the Notes authenticated or delivered prior to such consolidation,
merger, conveyance, transfer, lease or other disposition may, from time to time,
at the request of the successor Person, be exchanged for other Notes executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Notes as specified in such request for the purpose of such exchange. If Notes
shall at any time be authenticated and delivered in any new name of a successor
Person pursuant to this Section 303 in exchange or substitution for or upon
registration of transfer of any Notes, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
Notes at the time Outstanding for Notes authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes on behalf of the Trustee. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Note Registrar or Paying Agent
to deal with the Company and its Affiliates.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
<PAGE>
45
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Note Register shall be in written form
or any other form capable of being converted into written form within a
reasonable time. At all reasonable times, the Note Register shall be open to
inspection by the Trustee. The Trustee is hereby initially appointed as security
registrar (the Trustee in such capacity, together with any successor of the
Trustee in such capacity, the "Note Registrar") for the purpose of registering
Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of a U.S. Global Note shall, by acceptance
of such U.S. Global Note, agree that transfers of beneficial interest in such
U.S. Global Note may be effected only through a book-entry system maintained by
the Holder of such U.S. Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry.
At the option of the Holder, Notes may be exchanged for other Notes
of any authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange (including an exchange of Initial Notes
for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive; provided that no exchange of Initial Notes for Exchange
Notes shall occur until an Exchange Offer Registration Statement shall have been
declared effective by the Commission, the Trustee shall have received an
Officers' Certificate confirming that the Exchange Offer Registration Statement
has been declared effective by the Commission and the Initial Notes to be
exchanged for the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax
<PAGE>
46
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than exchanges pursuant to
Section 304, 906, 1016, 1017 or 1108, not involving any transfer.
SECTION 306. Book-Entry Provisions for U.S. Global Note.
(a) Each U.S. Global Note initially shall (i) be registered in the
name of the Depositary for such U.S. Global Note or the nominee of the
Depositary, (ii) be delivered to the Trustee as custodian for the Depositary and
(iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any U.S. Global Note
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the U.S. Global Note, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such U.S. Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or shall impair, as
between the Depositary and its Agent Members, the operation of customary
practices governing the exercise of the rights of a Holder of any Note.
(b) Transfers of a U.S. Global Note shall be limited to transfers of
such U.S. Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
U.S. Global Note may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 307. If required to do so
pursuant to any applicable law or regulation, beneficial owners may obtain U.S.
Physical Notes in exchange for their beneficial interests in a U.S. Global Note
upon written request in accordance with the Depositary's and the Registrar's
procedures. In addition, U.S. Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in a U.S. Global
Note if (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such U.S. Global Note or the Depositary ceases to
be a clearing agency registered under the Exchange Act, at a time when the
Depositary is required to be so registered in order to act as Depositary, and in
each case a successor depositary is not appointed by the Company within 90 days
of such notice or, (ii) the Company executes and delivers to the Trustee and
Note Registrar an Officers' Certificate stating that such U.S. Global Note shall
be so exchangeable or (iii) an Event of Default has occurred and is continuing
and the Note Registrar has received a request from the Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in a U.S. Global Note pursuant to subsection (b) of this Section to
beneficial owners who are required to hold U.S. Physical Notes, the Note
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in the U.S. Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Notes of like tenor and amount.
<PAGE>
47
(d) In connection with the transfer of an entire U.S. Global Note to
beneficial owners pursuant to subsection (b) of this Section, such U.S. Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Note, an equal aggregate principal amount of U.S.
Physical Notes of authorized denominations.
(e) Any U.S. Physical Note delivered in exchange for an interest in
a U.S. Global Note pursuant to subsection (c) or subsection (d) of this Section
shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph (f) of
Section 307, bear the applicable legend regarding transfer restrictions
applicable to the U.S. Physical Note set forth in Section 202.
(f) The registered holder of a U.S. Global Note may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement, or (ii) an Initial Note is exchanged for an Exchange
Note in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any institutional "Accredited Investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act) ("IAI")
which is not a QIB (excluding Non-U.S. Persons):
(i) The Note Registrar shall register the transfer of any Initial
Note, whether or not such Initial Note bears the Private Placement Legend,
if (x) the requested transfer is at least two years after the original
issue date of the Initial Note or (y) the proposed transferee has
delivered to the Note Registrar a certificate substantially in the form
set forth in Section 308.
(ii) Unless the proposed transferee is entitled to receive a U.S.
Physical Note as provided in Section 306, the proposed transferee shall
obtain a beneficial interest in the U.S. Global Note, in which case, upon
receipt by the Note Registrar of the documents, if any, required by
paragraph (i), such transfer will be made in accordance with the rules and
procedures of the Depositary; provided, however, that the Note Registrar
shall incur no liability hereunder as a result of the failure of any IAI
to deliver to the Note Registrar a certificate substantially in the form
set forth in Section 308.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Note to a QIB
(excluding Non-U.S. Persons):
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48
(i) If the Note to be transferred consists of U.S. Physical Notes,
Temporary Offshore Physical Notes or Permanent Offshore Physical Notes,
the Registrar shall register the transfer if such transfer is being made
by a proposed transferor who has checked the box provided for on the form
of Initial Note stating, or has otherwise advised the Company and the Note
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Initial Note stating, or has otherwise advised
the Company and the Note Registrar in writing, that it is purchasing the
Initial Note for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the person on whose
behalf it is acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Initial
Note to be transferred consists of U.S. Physical Notes, Temporary Offshore
Physical Notes or Permanent Offshore Physical Notes upon receipt by the
Note Registrar of instructions given in accordance with the Depositary's
and the Note Registrar's procedures therefor, the Note Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Note in an amount equal to the principal amount
of the U.S. Physical Notes, Temporary Offshore Physical Notes or Permanent
Offshore Physical Notes, as the case may be, to be transferred, and the
Trustee shall cancel the Physical Note so transferred.
(c) Transfers by Non-U.S. Persons Prior to August 6, 1997. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Note by a Non-U.S. Person prior to August 6, 1997:
(i) The Note Registrar shall register the transfer of any Initial
Note (x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Note Registrar a certificate substantially
in the form set forth in Section 309 or (y) if the proposed transferee is
a QIB and the proposed transferor has checked the box provided for on the
form of Initial Note stating, or has otherwise advised the Company and the
Note Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Note stating, or has
otherwise advised the Company and the Note Registrar in writing, that it
is purchasing the Initial Note for its own account or an account with
respect to which it exercises sole investment discretion and that it, or
the person on whose behalf it is acting with respect to any such account,
is a QIB within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A. Unless clause (ii) below is applicable, the
<PAGE>
49
Company shall execute, and the Trustee shall authenticate and deliver, one
or more Temporary Offshore Physical Notes of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Note in an amount equal to the
principal amount of the Temporary Offshore Physical Note to be
transferred, and the Note Registrar shall cancel the Temporary Offshore
Physical Notes so transferred; provided that if the proposed transferee is
an IAI, the proposed transferee delivers to the Note Registrar a
certificate substantially in the form set forth in Section 308 and if the
Company so requests, an opinion of counsel setting forth the basis of the
exemption from the Securities Act for such transfer.
(d) Transfers by Non-U.S. Persons on or After August 6, 1997. The
following provisions shall apply with respect to any transfer of an Initial Note
by a Non-U.S. Person on or after August 6, 1997:
(i) (x) If the Initial Note to be transferred is a Permanent
Offshore Physical Note, the Note Registrar shall register such transfer,
(y) if the Initial Note to be transferred is a Temporary Offshore Physical
Note, upon receipt of a certificate substantially in the form set forth in
Section 309 from the proposed transferor, the Note Registrar shall
register such transfer and (z) in the case of either clause (x) or (y),
unless clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore
Physical Notes of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Note in an amount equal to the
principal amount of the Temporary Offshore Physical Note or of the
Permanent Offshore Physical Note to be transferred, and the Trustee shall
cancel the Physical Note so transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Note to a
Non-U.S. Person:
(i) Prior to August 6, 1997, the Note Registrar shall register any
proposed transfer of an Initial Note to a Non-U.S. Person upon receipt of
a certificate substantially in the form set forth in Section 309 from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and make available for delivery, one or more Temporary
Offshore Physical Notes.
(ii) On and after August 6, 1997, the Note Registrar shall register
any proposed transfer to any Non-U.S. Person (w) if the Initial Note to be
transferred is a Permanent Offshore Physical Note, (x) if the Initial Note
to be transferred is a Temporary Offshore
<PAGE>
50
Physical Note, upon receipt of a certificate substantially in the form set
forth in Section 309 from the proposed transferor, (y) if the Initial Note
to be transferred is a U.S. Physical Note or an interest in a U.S. Global
Note, upon receipt of a certificate substantially in the form set forth in
Section 309 from the proposed transferor and (z) in the case of either
clause (w), (x) or (y), the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical Notes of
like tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Note, upon receipt by the Note
Registrar of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Note Registrar's
procedures therefor, the Note Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S. Global
Note in an amount equal to the principal amount of the beneficial interest
in the U.S. Global Note to be transferred and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Permanent
Offshore Physical Notes of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless either (i) the circumstances contemplated by the
fourth paragraph of Section 201 (with respect to Permanent Offshore Physical
Notes) or paragraph (a)(i)(x), (d)(i) or (e)(ii) of this Section 307 exist or
(ii) there is delivered to the Note Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this Section
307. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar.
<PAGE>
51
SECTION 308. Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors.
[date]
RANDALL'S FOOD MARKETS, INC.
c/o MARINE MIDLAND BANK, as Trustee
140 Broadway, 12th Floor
New York, NY 10005
Attention: Corporate Trust Services - Randall's
Dear Sirs:
In connection with our proposed purchase of $_______ of the 93/8%
Senior Subordinated Notes due 2007 (the "Notes") of Randall's Food Markets,
Inc., a Texas corporation (the "Company"), we confirm that:
(1) We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
of 1933, as amended (the "Securities Act")) purchasing for our own account
or for the account of such an institutional "accredited investor," and we
are acquiring the Notes for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution in violation of the
Securities Act or other applicable securities law and we have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
(2) We understand and acknowledge that the Notes have not been
registered under the Securities Act, or any other applicable securities
law and may not be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act or any
other applicable securities law, or pursuant to an exemption therefrom,
and in each case in compliance with the conditions for transfer set forth
below. We agree on our own behalf and on behalf of any investor account
for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date which is two years after the later of the
date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonably believe is a "Qualified Institutional Buyer" within
the meaning of Rule l44A (a "QIB") that purchases for its own account or
for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales to
non-U.S. persons that occur outside the United States within the meaning
of Regulation S under the Securities Act,
<PAGE>
52
(e) to an institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
that is acquiring the Notes for its own account or for the account of such
an institutional "accredited investor" for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution
in violation of the Securities Act or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance
with any applicable state securities laws. The foregoing restrictions on
resale will not apply subsequent to the Resale Restriction Termination
Date. If any resale or other transfer of the Notes is proposed to be made
pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver to the trustee (the "Trustee") under
the Indenture pursuant to which the Notes are issued a letter from the
transferee substantially in the form of this letter, which shall provide,
among other things, that the transferee is a person or entity as defined
in paragraph 1 of this letter and that it is acquiring such Notes for
investment purposes and not for distribution in violation of the
Securities Act. We acknowledge that the Company and the Trustee reserve
the right prior to any offer, sale or other transfer of the Notes pursuant
to clauses (d), (e) and (f) above prior to the Resale Restriction
Termination Date to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and
the Trustee.
(3) We are acquiring the Notes purchased by us for our own account
or for one or more accounts as to each of which we exercise sole
investment discretion.
(4) You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
By: (Name of Purchaser)
Date:
<PAGE>
53
Upon transfer the Notes would be registered in the name of the new beneficial
owner as follows:
Taxpayer ID
Name Address Number:
- ---- ------- -------
SECTION 309. Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S.
[date]
MARINE MIDLAND BANK, as Trustee
140 Broadway, 12th Floor
New York, NY 10005
Attention: Corporate Trust Services - Randall's
Re: RANDALL'S FOOD MARKETS, INC.
(the "Company") 93/8% Senior Subordinated
Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
<PAGE>
54
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------
Authorized Signature
SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee, or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company,
any Guarantor and the Trustee such security or indemnity, in each case, as may
be required by them to save each of them harmless, then, in the absence of
notice to the Company any Guarantor or the Trustee that such Note has been
acquired by a bona fide purchaser, the Company shall execute and upon Company
Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note
of like tenor and principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, any Guarantor and any other
obligor upon the Notes, whether or not the mutilated, destroyed, lost
<PAGE>
55
or stolen Note shall be at any time enforceable by anyone, and shall be entitled
to all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 311. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 1002;
provided, however, that each installment of interest may at the Company's option
be paid by (i) mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 312, to the address of
such Person as it appears in the Note Register, provided that all payments of
principal, premium, if any, and interest with respect to Notes represented by
one or more permanent global Notes registered in the name of or held by the
Depositary or its nominee will be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Notes (such defaulted interest
and interest thereon herein collectively called "Defaulted Interest") shall be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
(not less than 30 days after such notice) of the proposed payment (the
"Special Record Date"), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the Special Record
Date and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be given in the manner
provided for in Section 106, not less than 10 days prior to such
<PAGE>
56
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 312. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the Person in whose name such Note is registered as the owner
of such Note for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 311) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and none of the
Company, any Guarantor, the Trustee nor any agent of the Company, any Guarantor
or the Trustee shall be affected by notice to the contrary.
SECTION 313. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. If the
Company shall acquire any of the Notes other than as set forth in the preceding
sentence, the acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 313. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this Indenture.
All cancelled Notes held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures unless by Company Order the Company
shall direct that cancelled Notes be returned to it.
<PAGE>
57
SECTION 314. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 315. CUSIP Numbers.
The Company in issuing Notes may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; if so, the Trustee shall use
such "CUSIP" numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such CUSIP numbers
either as printed on the Notes or as contained in any notice of a redemption or
repurchase and that reliance may be placed only on the serial or other
identification numbers printed on the Notes, and any such redemption or
repurchase shall not be affected by any defect in or omission of such CUSIP
numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Notes expressly provided for herein or pursuant hereto) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all such Notes theretofore authenticated and delivered
(other than (i) Notes which have been lost, stolen or destroyed and
which have been replaced or paid as provided in Section 310 and (ii)
Notes for whose payment money has theretofore been deposited in
trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation;
or
(b) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable by reason of the making
of a notice of redemption or otherwise; or
(ii) will become due and payable at their Stated
Maturity within one year; or
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58
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company or any Guarantor, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose solely for the
benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as
will be sufficient without consideration of any reinvestment of
interest to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation, for
principal of (and premium, if any) and interest to the date of such
deposit (in the case of Notes which have become due and payable) or
to the Stated Maturity or Redemption Date, as the case may be;
(2) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument or agreement to which the Company or any Guarantor is a
party or by which it is bound;
(3) the Company or any Guarantor has paid or caused to be paid all
sums payable hereunder by the Company or any Guarantor;
(4) the Company has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of such Notes at
maturity or the Redemption Date, as the case may be; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606 and, if money
shall have been deposited with the Trustee pursuant to subclause (b) of clause
(1) of this Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 401 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 401; provided that if the Company has made any payment of principal of,
premium, if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal or premium, if any, on the Notes
whether or not such payment shall be prohibited by Article Thirteen;
(ii) default for 30 days or more in the payment when due of interest
with respect to the Notes whether or not such payment shall be prohibited
by Article Thirteen;
(iii) default in the performance, or breach, of any covenant,
warranty or other agreement of the Company or any Guarantor contained in
this Indenture or any Guarantee under this Indenture (other than a default
in the performance, or breach, of a covenant, warranty or agreement which
is specifically dealt with in clauses (i) or (ii) of this Section 501) and
continuance of such default or breach for a period of 30 days after
written notice shall have been given to the Company or such Guarantor by
the Trustee or to the Company or such Guarantor and the Trustee by the
Holders of at least 30% in aggregate principal amount of the Notes then
Outstanding;
(iv) default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the Issuance Date, if both (A) such default either (1)
results from the failure to pay any such Indebtedness at its stated final
maturity (after giving
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effect to any applicable grace periods) or (2) relates to an obligation
other than the obligation to pay principal of any such Indebtedness at its
stated final maturity and results in the holder or holders of such
Indebtedness causing such Indebtedness to become due prior to its stated
maturity and (B) the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness in default for failure
to pay principal at stated final maturity (after giving effect to any
applicable grace periods), or the maturity of which has been so
accelerated, aggregate $20.0 million or more at any one time outstanding;
(v) failure by the Company or any of its Significant Subsidiaries to
pay final judgments aggregating in excess of $20.0 million, which final
judgments remain unpaid, undischarged and unstayed for a period of more
than 60 days after such judgment becomes final, and in the event such
judgment is covered by insurance, an enforcement proceeding has been
commenced by any creditor upon such judgment or decree which is not
promptly stayed;
(vi) the Company or any of its Significant Subsidiaries pursuant to
or within the meaning of Federal Bankruptcy Code: (A) commences a
voluntary case; (B) consents to the entry of an order for relief against
it in an involuntary case; (C) consents to the appointment of a Custodian
of it or for all or substantially all of its property; (D) makes a general
assignment for the benefit of its creditors, or (E) admits in writing that
it is generally not paying its debts (other than debts which are the
subject of a bona fide dispute) as they become due;
(vii) a court of competent jurisdiction enters an order or decree
under any Federal Bankruptcy Code that remains unstayed and in effect for
60 days and: (A) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case; (B) appoints a Custodian
of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property of the Company or any of its Significant
Subsidiaries; or (C) orders the liquidation of the Company or any of its
Significant Subsidiaries; provided that clauses (A), (B) and (C) shall not
apply to an Unrestricted Subsidiary, unless such action or proceeding has
a material adverse effect on the interests of the Company or any
Restricted Subsidiary; or
(viii) the Guarantee of any Significant Subsidiary shall for any
reason cease to be in full force and effect or is declared null and void
or any Responsible Officer of the Company or any Guarantor that is a
Significant Subsidiary denies that it has any further liability under its
Guarantee or gives notice to such effect (other than by reason of the
termination of this Indenture or the release of any such Guarantee in
accordance with this Indenture).
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SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than by reason of an Event of Default
specified in Section 501(vi) or 501(vii)) occurs and is continuing, the Trustee
or the Holders of at least 30% in principal amount of the Notes Outstanding may
declare the principal (and premium, if any), interest and any other monetary
obligations on all the then outstanding Notes to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by Holders);
provided, however, that, so long as any Indebtedness permitted to be incurred
pursuant to the Senior Credit Facilities shall be outstanding, such acceleration
shall not be effective until the earlier of (i) acceleration of any such
Indebtedness under the Senior Credit Facilities or (ii) five Business Days after
the giving of written notice to the Company and the Bank Agent of such
acceleration. Upon the effectiveness of such declaration, such principal and
interest will be due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default specified in Section 501(vi) or 501(vii) occurs
and is continuing, then the principal amount of all the Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in aggregate principal amount of the Notes Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal
and premium at the rate borne by the Notes (for purposes of this
clause (B) without duplication to amounts to be paid or deposited
under clause (A) above),
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Notes which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513;
(3) if the rescission would not conflict with any judgment or
decree; and
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(4) in the event of the cure or waiver of an Event of Default
specified in clause (iv) of Section 501, the Trustee shall have received
an Officers' Certificate and, if appropriate, an Opinion of Counsel that
such Event of Default has been cured or waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon a determination by the Company that the Senior Credit
Facilities are no longer in effect, the Company shall promptly give to the
Trustee written notice thereof, which notice shall be countersigned by the Bank
Agent. Unless and until the Trustee shall have received such written notice with
respect to the Senior Credit Facilities, the Trustee, subject to the TIA
Sections 315(a) through 315(d), shall be entitled in all respects to assume that
the Senior Credit Facilities are in effect (unless a Responsible Officer of the
Trustee shall have knowledge to the contrary).
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
If an Event of Default specified in Section 501(i) or 501(ii) occurs
and is continuing, the Trustee, in its own name as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any Guarantor (in accordance with the
applicable Guarantee) or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company, any Guarantor or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or any Guarantee by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, including, seeking recourse against any Guarantor pursuant to the
terms of any Guarantee, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy including, without limitation,
seeking recourse against any Guarantor pursuant to the terms of a Guarantee, or
to enforce any other proper remedy, subject however to Section 513. No recovery
of any such judgment upon any property of the Company or any Guarantor shall
affect or impair any rights, powers or remedies of the Trustee or the Holders.
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SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor,
including any Guarantor, upon the Notes or the property of the Company or of
such other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal, premium, if any,
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes, to
take such other actions (including participating as a member, voting or
otherwise, of any official committee of creditors appointed in such
matter) and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding; provided, however, that the
Trustee may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or other similar official.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture, the Notes or
the Guarantees may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders in respect of which such judgment has
been recovered.
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SECTION 506. Application of Money Collected.
Subject to Article Thirteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Notes for principal (and premium, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto, including the Company or any other obligor on the Notes, as their
interests may appear or as a court of competent jurisdiction may direct,
provided that all sums due and owing to the Holders and the Trustee have
been paid in full as required by this Indenture.
SECTION 507. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 30% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a
majority or more in principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, any Note or any
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Guarantee to affect, disturb or prejudice the rights of any other Holders, or to
obtain or to seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, any Note or any Guarantee, except in the
manner herein provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Eleven) and in
such Note of the principal of (and premium, if any) and (subject to Section 311)
interest on such Note on the respective Stated Maturities expressed in such Note
(or, in the case of redemption or repurchase, on the Redemption Date or
repurchase) and to institute suit for the enforcement of any such payment, and
such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Guarantee and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, any
Guarantor, any other obligor on the Notes, the Trustee and the Holders shall be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 310, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
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SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or any Guarantee,
(2) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting; and
(3) subject to the provisions of Section 315 of the Trust Indenture
Act, the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Sections 508 and 902, the Holders of a majority in
aggregate principal amount of the Outstanding Notes (including consents obtained
in connection with a purchase of or tender offer or exchange offer for the
Notes) may on behalf of the Holders of all the Notes waive any existing Default
or Event of Default and its consequences under the Indenture or any Guarantee
except a continuing Default or Event of Default in the payment of interest on,
premium, if any, or the principal of, any such Note held by a non-consenting
Holder, or in respect of a covenant or a provision which cannot be amended or
modified without the consent of all Holders.
In the event that any Event of Default specified in Section 501(iv)
shall have occurred and be continuing, such Event of Default and all
consequences thereof (including without limitation any acceleration or resulting
payment default) shall be annulled, waived and rescinded, automatically and
without any action by the Trustee or the Holders, if within 20 days after such
Event of Default arose (x) the Indebtedness or guarantee that is the basis for
such Event of Default has been discharged, or (y) the holders thereof have
rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default, or (z) if the default that is the basis
for such Event of Default has been cured.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
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SECTION 514. Waiver of Stay or Extension Laws.
The Company, the Guarantors and any other obligors upon the Notes,
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which would prohibit or forgive the Company, any
Guarantor or any such obligor from paying all or any portion of the principal
of, premium, if any, or interest on the Notes contemplated herein or in the
Notes or which may affect the covenants or the performance of this Indenture;
and each of the Company, any Guarantor and any such obligor (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 515. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of a Default or an Event of
Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith or willful misconduct on its part,
the Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming
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to the requirements of this Indenture; but in the case of any such
certificates or opinions, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Indenture, but not to verify the contents thereof.
(b) In case a Default or an Event of Default has occurred and is
continuing of which a Responsible Officer of the Trustee has actual knowledge or
of which written notice of such Default or Event of Default shall have been
given to the Trustee by the Company, any other obligor of the Notes or by any
Holder, the Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in aggregate principal amount of
the Outstanding Notes relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. Notice of Defaults.
Within 60 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or
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Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders; and provided further that in
the case of any Default of the character specified in Section 501(iii) no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof.
SECTION 603. Certain Rights of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel of its selection and any
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall
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determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture.
(c) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 604. Trustee Not Responsible for Recitals or Issuance of
Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Notes and
perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of Notes or the
proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar, any
Authenticating Agent or any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent, Note
Registrar, Authenticating Agent or such other agent.
SECTION 606. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust hereunder for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.
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SECTION 607. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as
shall be agreed to in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel and costs and expenses of
collection), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee (and
their respective directors, officers, employees and agents) for, and to
hold it harmless against, any and all loss, damage, claim, liability or
expense, including taxes (other than taxes based on the income of the
Trustee) incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Holders upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(vi) or (vii), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1), and which shall have an
office in The City of New York and shall have a combined capital and surplus of
at least $50,000,000. If the Trustee does not have an office in The City of New
York, the Trustee may appoint an agent in The City of New
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York reasonably acceptable to the Company to conduct any activities which the
Trustee may be required under this Indenture to conduct in The City of New York.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section 608, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 608, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 609. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of this Section.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument executed by
authority of the Board of Directors, a copy of which shall be delivered to the
resigning Trustee and a copy to the successor trustee. If an instrument of
acceptance required by this Section shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Notes, delivered
to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a Custodian of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder for at least six
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months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided for in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 610. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 611. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In
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case any Notes shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes. In case at that time any of the Notes shall not have
been authenticated, any successor Trustee may authenticate such Notes either in
the name of any predecessor hereunder or in the name of the successor Trustee.
In all such cases such certificates shall have the full force and effect which
this Indenture provides for the certificate of authentication of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a list
of similar form and content to that in Subsection (a) hereof as of a date not
more than 15 days prior to the time such list is furnished;
provided, however that if and so long as the Trustee shall be the Note
Registrar, no such list need be furnished.
SECTION 702. Disclosure of Names and Addresses of Holders.
Every Holder, by receiving and holding the same, agrees with the
Company and the Trustee that none of the Company or the Trustee or any agent of
either of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 312, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 703. Reports by Trustee.
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Within 60 days after June 30 of each year commencing with June 30,
1998, the Trustee shall transmit to the Holders, in the manner and to the extent
provided in TIA Section 313(c), a brief report dated as of such June 30 if
required by TIA Section 313(a).
ARTICLE EIGHT
MERGER, CONSOLIDATION, OR SALE OF ASSETS
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
(a) The Company will not consolidate or merge with or into or wind
up into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to any Person
unless:
(i) the Company is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation organized or existing
under the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof (the Company or such Person, as the
case may be, being herein called the "Successor Company");
(ii) the Successor Company (if other than the Company) expressly
assumes all the obligations of the Company under this Indenture and the
Notes pursuant to a supplemental indenture or other documents or
instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) immediately after giving pro forma effect to such transaction,
as if such transaction had occurred at the beginning of the applicable
four-quarter period, (A) the Successor Company would be permitted to incur
at least $1.00 of additional Indebtedness under paragraph (a) of Section
1010, or (B) the Fixed Charge Coverage Ratio for the Successor Company and
its Restricted Subsidiaries would be greater than such Ratio for the
Company and its Restricted Subsidiaries immediately prior to such
transaction;
(v) each Guarantor, if any, unless it is the other party to the
transactions described above, in which case clause (ii) shall apply, shall
have by supplemental indenture confirmed that its Guarantee shall apply to
such Person's obligations under this Indenture and the Notes; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the requirements of this Indenture.
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Notwithstanding the foregoing clause (iv), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (b) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another State of the United States so long as the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby.
(b) Each Guarantor, if any, shall not, and the Company will not
permit a Guarantor to, consolidate or merge with or into or wind up into
(whether or not such Guarantor is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions to, any Person, unless
at the time and after giving effect:
(i) such Guarantor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than such
Guarantor) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made is a corporation organized or
existing under the laws of the United States, any State thereof, the
District of Columbia, or any territory thereof (such Guarantor or such
Person, as the case may be, being herein called the "Successor
Guarantor");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor hereunder and
under such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form reasonably satisfactory to the
Trustee;
(iii) immediately after such transaction, no Default or Event of
Default exists; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the Company
with or into or wind up into any other corporation or any sale, assignment,
conveyance, transfer, lease or other disposition of the properties and assets of
the Company substantially as an entirety to any Person in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or wound up or to which such sale, assignment, conveyance,
transfer, lease or other disposition is made will succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
therein, and thereafter (except in the case of a sale, assignment, transfer,
lease, conveyance or other disposition) the predecessor corporation will be
relieved of all further obligations and covenants under this Indenture and the
Notes; provided that, solely with respect to calculating amounts described in
clauses (A), (B) and (C) of paragraph (a) of Section 1009, any such surviving
entity to the Company shall only be
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deemed have succeeded to and be substituted for the Company with respect to
periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, the Guarantors, if
any (with respect to a Guarantee to which it is a party), when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(3) to comply with Article Eight hereof;
(4) to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of such Notes;
(5) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
hereunder of any such Holder;
(6) to add covenants for the benefit of the Holders or to surrender
any right or power conferred upon the Company;
(7) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act;
(8) to evidence and provide for the acceptance and appointment
hereunder of a successor Trustee pursuant to the requirements of Section
610;
(9) to make any other change that does not adversely affect the
legal rights of any Holder; or
(10) to add a Guarantor hereunder.
SECTION 902. Supplemental Indentures with Consent of Holders.
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With the consent of the Holders of at least a majority in principal
amount of the Outstanding Notes (including, without limitation, consents
obtained in connection with a purchase of, tender offer or exchange offer, for
Notes), by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby
(with respect to any Notes held by a nonconsenting Holder):
(1) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver; or
(2) reduce the principal of or change or have the effect of changing
the Stated Maturity of any Note or alter or waive the provisions with
respect to the redemption of the Notes (other than Sections 1016 and 1017
and the defined terms used therein); or
(3) reduce the rate of or change or have the effect of changing the
time for payment of interest on any Note; or
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes Outstanding and a waiver of the
payment default that resulted from the acceleration), or in respect of a
covenant or provision contained in the Indenture or any Guarantee which
cannot be amended or modified without the consent of all Holders; or
(5) make any Note payable in money other than that stated in the
Notes; or
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of the Holders to receive payments
of principal of or premium, if any, or interest on the Notes; or
(7) make any change in the foregoing amendment and waiver
provisions; or
(8) impair the right of any Holder to receive payment of principal
of, or interest on such Holder's Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Holder's Notes; or
(9) make any change in the subordination provisions of this
Indenture that would adversely affect the Holders.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustees own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby (except as provided in Section 902).
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Note affected, in
the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture.
SECTION 908. Effect on Senior Indebtedness.
No supplemental indenture shall adversely affect the rights of any
holders of Senior Indebtedness under Article Thirteen unless the requisite
holders of each issue of Senior Indebtedness affected thereby shall have
consented to such supplemental indenture.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Notes in accordance with the terms of the Notes and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or
agency where Notes may be presented or surrendered for payment, where Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Corporate Trust Office of the Trustee shall be such office or agency
of the Company, unless the Company shall designate and maintain some other
office or agency for one or more of such purposes. The Company will give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all such purposes and may from time to
time rescind any such designation; provided, however, that no such designation
or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in The City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and any change in the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of (or premium,
if any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure to so act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal of (or premium, if
any) or interest on any Notes, deposit with a Paying Agent a sum in same day
funds (or New York Clearing House funds if such deposit is made prior to the
date on which such deposit is required to be made) sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for
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the benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of such action or any failure to so act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (or premium,
if any) or interest on any Note and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment to the Company, may at the expense of the Company
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence and that of each
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Restricted Subsidiary and the corporate rights (charter and statutory) licenses
and franchises of the Company and each Restricted Subsidiary; provided, however,
that the Company shall not be required to preserve any such existence (except
the Company) right, license or franchise if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and each of its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not, and will not
be, disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a material liability or lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate reserves, if necessary (in
the good faith judgment of management of the Company) are being maintained in
accordance with GAAP.
SECTION 1006. Maintenance of Properties.
The Company will cause all material properties owned by the Company
or any Restricted Subsidiary or used or held for use in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in normal condition, repair and working order and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly conducted at all times;
provided, however, that nothing in this Section shall prevent the Company or any
of its Restricted Subsidiaries from discontinuing the maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Restricted Subsidiary and
not adverse in any material respect to the Holders.
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SECTION 1007. Insurance.
To the extent available at commercially reasonable rates, the
Company will maintain, and will cause its Subsidiaries to maintain, insurance
with responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses, of similar size, including
professional and general liability, property and casualty loss, workers'
compensation and interruption of business insurance.
SECTION 1008. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental regulatory authority, in respect of the conduct
of their respective businesses and the ownership of their respective properties,
except for such noncompliances as would not in the aggregate have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
SECTION 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiaries, directly or indirectly, to take any of the following actions:
(i) declare or pay any dividend or make any distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests,
including any dividend or distribution payable in connection with any
merger or consolidation (other than (A) dividends or distributions by the
Company payable in Equity Interests (other than Disqualified Stock) of the
Company or (B) dividends or distributions by a Restricted Subsidiary so
long as, in the case of any dividend or distribution payable on or in
respect of any class or series of securities issued by a Subsidiary other
than a Wholly Owned Subsidiary, the Company or a Restricted Subsidiary
receives at least its pro rata share of such dividend or distribution in
accordance with its Equity Interests in such class or series of
securities);
(ii) purchase, redeem, defease or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or indirect parent
of the Company;
(iii) make any principal payment on, or redeem, repurchase, defease
or otherwise acquire or retire for value in each case, prior to any
scheduled repayment, or maturity, any Subordinated Indebtedness (other
than Indebtedness permitted under the covenants described in clauses (vii)
and (viii) paragraph (b) the under Section 1010); or
(iv) make any Restricted Investment
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(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness under paragraph (a) of Section 1010; and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issuance Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends
on Refunding Capital Stock pursuant to clause (b) thereof), (iv) (only to
the extent that amounts paid pursuant to such clause are greater than
amounts that would have been paid pursuant to such clause if $5.0 million
and $10.0 million were substituted in such clause for $10.0 million and
$20.0 million, respectively), (v), (viii), (ix) and (xiii) of the
paragraph (b) of this Section 1009, but excluding all other Restricted
Payments permitted by paragraph (b) of this Section 1009), is less than
the sum of:
(A) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the fiscal quarter that first
begins after the Issuance Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, in the case such Consolidated
Net Income for such period is a deficit, minus 100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds and the fair market
value, as determined in good faith by the Board of Directors, of
marketable securities received by the Company since immediately after the
closing of the Recapitalization and the Financings from the issue or sale
of Equity Interests of the Company (including Retired Capital Stock (as
defined below), but excluding cash proceeds and marketable securities
received from the sale of (a) Equity Interests to members of management,
directors or consultants of the Company and its Subsidiaries after the
Issuance Date to the extent such amounts have been applied to Restricted
Payments in accordance with clause (iv) of the next succeeding paragraph,
and (b) Designated Preferred Stock) or debt securities of the Company that
have been converted into such Equity Interests of the Company (other than
Refunding Capital Stock (as defined below) or Equity Interests or
convertible debt securities of the Company sold to a Restricted Subsidiary
of the Company and other than Disqualified Stock or debt securities that
have been converted into Disqualified Stock), plus
(C) 100% of the aggregate amount of cash and marketable securities
contributed to the capital of the Company following the Issuance Date,
plus
(D) 100% of the aggregate amount received in cash and the fair
market value of marketable securities (other than Restricted Investments)
received from (A) the sale or other disposition (other than to the Company
or a Restricted Subsidiary) of Restricted
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Investments made by the Company and its Restricted Subsidiaries and
repurchases and redemptions of such Restricted Investments from the
Company and its Restricted Subsidiaries by such Person and repayments of
loans or advances which constitute Restricted Investments to the Company
and its Restricted Subsidiaries or (B) a dividend from, or the sale (other
than to the Company or a Restricted Subsidiary) of the stock of, an
Unrestricted Subsidiary (other than an Unrestricted Subsidiary the
Investment in which was made by the Company or a Restricted Subsidiary
pursuant to clauses (vi), (x) and (xi) of paragraph (b) of this Section
1009.
(b) The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) (A) the redemption, repurchase, retirement or other acquisition
of any Equity Interests (the "Retired Capital Stock") or Subordinated
Indebtedness of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
Equity Interests of the Company (other than any Disqualified Stock) (the
"Refunding Capital Stock"), and (B) the declaration and payment of
dividends on the Refunding Capital Stock in an aggregate amount per year
no greater than the aggregate amount of dividends per annum that was
declarable and payable on such Retired Capital Stock immediately prior to
such retirement; provided, however, that at the time of the declaration of
any such dividends, no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(iii) the redemption, repurchase or other acquisition or retirement
of Subordinated Indebtedness of the Company made by exchange for, or out
of the proceeds of the substantially concurrent sale of, new Indebtedness
of the Company so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired for value
(plus the amount of any premium required to be paid under the terms of the
instrument governing the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired), (B) such Indebtedness is subordinated
to the Senior Indebtedness and the Notes at least to the same extent as
such Subordinated Indebtedness so purchased, exchanged, redeemed,
repurchased, acquired or retired for value, (C) such Indebtedness has a
final scheduled maturity date equal to or later than the final scheduled
maturity date of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired and (D) such Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted
Average Life to Maturity of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired;
(iv) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of
the Company held by any future, present or former employee, director or
consultant of the Company or any Subsidiary pursuant to any management
equity plan or stock option plan or any other
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management or employee benefit plan or agreement; provided, however, that
the aggregate Restricted Payments made under this clause (iv) does not
exceed in any calendar year $10.0 million (with unused amounts in any
calendar year being carried over to succeeding calendar years subject to a
maximum (without giving effect to the following proviso) of $20.0 million
in any calendar year); provided further that such amount in any calendar
year may be increased by an amount not to exceed (A) the cash proceeds
from the sale of Equity Interests of the Company to members of management,
directors or consultants of the Company and its Subsidiaries that occurs
after the Issuance Date (to the extent the cash proceeds from the sale of
such Equity Interest have not otherwise been applied to the payment of
Restricted Payments by virtue of the preceding subclause (a)(3)) plus (B)
the cash proceeds of key man life insurance policies received by the
Company and its Restricted Subsidiaries after the Issuance Date less (C)
the amount of any Restricted Payments previously made pursuant to clauses
(A) and (B) of this subparagraph (iv); and provided further that
cancellation of Indebtedness owing to the Company from members of
management of the Company or any of its Restricted Subsidiaries in
connection with a repurchase of Equity Interests of the Company will not
be deemed to constitute a Restricted Payment for purposes of this Section
1009 or any other provision hereof;
(v) (A) the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified
Stock) issued after the Issuance Date or (B) the declaration and payment
of dividends on Refunding Capital Stock in excess of the dividends
declarable and payable thereon pursuant to clause (ii); provided, however,
in either case, that for the most recently ended four full fiscal quarters
for which internal financial statements are available immediately
preceding the date of issuance of such Designated Preferred Stock or the
declaration of such dividends on Refunding Capital Stock, after giving
effect to such issuance or declaration on a pro forma basis, the Company
and its Restricted Subsidiaries would have had a Fixed Charge Coverage
Ratio of at least 1.75 to 1.00;
(vi) Investments in Unrestricted Subsidiaries having an aggregate
fair market value, taken together with all other Investments made pursuant
to this clause (vi) that are at that time outstanding, not to exceed $25.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
(vii) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options;
(viii) the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after
the Issuance Date, of up to 6% per annum of the net proceeds received by
the Company in such public offering, other than public offerings with
respect to the Company's Common Stock registered on Form S-8;
(ix) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of Equity Interests of the
Company in existence on the
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Issuance Date and which are not held by KKR or any of its Affiliates on
the Issuance Date (including any Equity Interests issued in respect of
such Equity Interests as a result of a stock split, recapitalization,
merger, combination, consolidation or otherwise), provided that the
aggregate Restricted Payments made under this clause (ix) shall not exceed
$105.0 million, provided further that the aggregate amount expended under
this clause (ix) shall not exceed $35 million in the fiscal year ending
June 27, 1998); or $70 million in the two fiscal years ending June 26,
1999; provided further that notwithstanding the foregoing provisos, the
Company shall be permitted to make Restricted Payments under this clause
(ix) only if after giving effect thereto, the Company would be permitted
to incur at least $1.00 of additional Indebtedness under paragraph (a) of
Section 1010;
(x) Investments in Unrestricted Subsidiaries that are made with
Excluded Contributions;
(xi) other Restricted Payments in an aggregate amount not to exceed
$20.0 million;
(xii) the payment of any amount in connection with the
Recapitalization and the Financings and the documents executed in
connection therewith, including, without limitation, payments in respect
of the Putable Shares Reserve Fund; and
(xiii) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of Equity Interests owned by the
Employee Stock Ownership Plan or the Key Employee Stock Ownership Plan;
provided however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (iii) through (ix) and clauses (xi)
and (xiii), no Default or Event or Default shall have occurred and be continuing
or would occur as a consequence thereof.
(c) Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 1009 were computed, which calculations may
be based upon the Company's latest available financial statements. The Trustee
shall have no duty to recompute or recalculate or verify the accuracy of the
information set forth in such Officers' Certificate.
(d) As of the Issuance Date, all of the Company's Subsidiaries will
be Restricted Subsidiaries. The Company will not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the second to
last sentence of the definition of "Unrestricted Subsidiary." For purposes of
designating any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid) in the Subsidiary so designated will be deemed to be
Restricted Payments in an amount determined as set forth in the last sentence of
the definition of "Investments." Such designation will be permitted only if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to clause (a) of this Section 1009 or under clauses (vi), (x) and (xi)
of paragraph (b) of this Section 1009) and if such Subsidiary otherwise meets
the definition of an
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Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of
the restrictive covenants set forth in this Indenture.
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur" and collectively, an "incurrence") any
Indebtedness (including Acquired Indebtedness) and the Company will not issue
any shares of Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Indebtedness) or issue shares
of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's and
the Restricted Subsidiaries' most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 1.75 to 1.00, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, and the application of proceeds therefrom had
occurred at the beginning of such four-quarter period.
(b) The foregoing limitations will not apply to:
(i) the incurrence by the Company of Indebtedness under Credit
Facilities and the issuance and creation of letters of credit and bankers'
acceptances thereunder (with letters of credit and bankers' acceptances
being deemed to have a principal amount equal to the face amount thereof)
up to an aggregate principal amount of $450 million outstanding at any one
time;
(ii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iii) the Existing Indebtedness (other than Indebtedness described
in clauses (i) and (ii));
(iv) Indebtedness (including Capitalized Lease Obligations) incurred
by the Company or any of its Restricted Subsidiaries to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) in an aggregate principal amount which, when
aggregated with the principal amount of all other Indebtedness then
outstanding and incurred pursuant to this clause (iv) and including all
Refinancing Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (iv), does not exceed
20% of Total Assets;
(v) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the
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ordinary course of business, including without limitation letters of
credit in respect of workers' compensation claims or self-insurance, or
other Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims; provided, however, that upon the
drawing of such letters of credit or the incurrence of such Indebtedness,
such obligations are reimbursed within 30 days following such drawing or
incurrence;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition; provided, however, that (A)
such Indebtedness is not reflected on the balance sheet of the Company or
any Restricted Subsidiary (contingent obligations referred to in a
footnote to financial statements and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (A)) and (B) the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross
proceeds including noncash proceeds (the fair market value of such noncash
proceeds being measured at the time received and without giving effect to
any subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(vii) Indebtedness of the Company to a Restricted Subsidiary;
provided that any such Indebtedness is made pursuant to an intercompany
note and is subordinated in right of payment to the Notes; provided
further that any subsequent issuance or transfer of any Capital Stock or
any other event which results in any such Restricted Subsidiary ceasing to
be a Restricted Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary)
shall be deemed, in each case to be an incurrence of such Indebtedness;
(viii) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary; provided that (A) any such Indebtedness is
made pursuant to an intercompany note and (B) if a Guarantor incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; provided further that any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary)
shall be deemed, in each case to be an incurrence of such Indebtedness;
(ix) Hedging Obligations that are incurred in the ordinary course of
business for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of the
Indenture to be outstanding;
(x) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
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(xi) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(xii) Indebtedness of the Company and any of its Restricted
Subsidiaries not otherwise permitted hereunder in an aggregate principal
amount, which when aggregated with the principal amount of all other
Indebtedness then outstanding and incurred pursuant to this clause (xii),
does not exceed $150.0 million at any one time outstanding; provided,
however, that the aggregate principal amount of such Indebtedness which
may be incurred by Restricted Subsidiaries does not exceed $100.0 million
at any one time outstanding; (it being understood that any Indebtedness
incurred under this clause (xii) shall cease to be deemed incurred or
outstanding for purposes of this clause (xii) but shall be deemed to be
incurred for purposes of paragraph (a) of this Section 1010 from and after
the first date on which the Company could have incurred such Indebtedness
under paragraph (a) of this Section 1010 without reliance upon this clause
(xii));
(xiii) (A) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the
incurrence of such Indebtedness incurred by such Restricted Subsidiary is
permitted under the terms of this Indenture and (B) any Excluded Guarantee
(as defined in paragraph (a) of Section 1014) of a Restricted Subsidiary;
(xiv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund, refinance or
restructure any Indebtedness incurred as permitted under paragraph (a) and
clauses (ii) and (iii) above, or any Indebtedness issued to so refund,
refinance or restructure such Indebtedness including additional
Indebtedness incurred to pay premiums and fees in connection therewith
(the "Refinancing Indebtedness") prior to its respective maturity;
provided, however, that such Refinancing Indebtedness (A) has a Weighted
Average Life to Maturity at the time such Refinancing Indebtedness is
incurred which is not less than the remaining Weighted Average Life to
Maturity of Indebtedness being refunded or refinanced, (B) to the extent
such Refinancing Indebtedness refinances Indebtedness subordinated or pari
passu to the Notes, such Refinancing Indebtedness is subordinated or pari
passu to the Notes at least to the same extent as the Indebtedness being
refinanced or refunded and (C) shall not include (x) Indebtedness of a
Subsidiary that refinances Indebtedness of the Company or (y) Indebtedness
of the Company or a Restricted Subsidiary that refinances Indebtedness of
an Unrestricted Subsidiary; and provided further that subclauses (A) and
(B) of this clause (xiv) will not apply to any refunding or refinancing of
any Senior Indebtedness;
(xv) Indebtedness or Disqualified Stock of Persons that are acquired
by the Company or any of its Restricted Subsidiaries or merged into a
Restricted Subsidiary in accordance with the terms of this Indenture;
provided that such Indebtedness or Disqualified Stock is not incurred in
contemplation of such acquisition or merger; and provided further that
after giving effect to such acquisition, either (A) the Company would be
permitted to incur at least $1.00 of additional Indebtedness under
paragraph (a) or (B) the Fixed Charge Coverage Ratio is greater than
immediately prior to such acquisition; and
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(xvi) Contingent Obligations in the form of guarantees, whether by
operation of law or otherwise, of Indebtedness of joint ventures in
existence on the Issuance Date to which the Company or its Restricted
Subsidiaries is a party.
For purposes of determining compliance with this Section, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (i) through (xvi)
above or is entitled to be incurred pursuant to paragraph (a) of this Section
1010, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this Section and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to paragraph (a) of this Section 1010 except as
otherwise set forth in clause (xii). Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section.
SECTION 1011. Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien that secures obligations under any Pari Passu Indebtedness or
Subordinated Indebtedness on any asset or property of the Company or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, unless the Notes are equally and ratably
secured with the obligations so secured or until such time as such obligations
are no longer secured by a Lien.
No Guarantor will directly or indirectly create, incur, assume or
suffer to exist any Lien that secures obligations under any Pari Passu
Indebtedness or Subordinated Indebtedness of such Guarantor on any asset or
property of such Guarantor or any income or profits therefrom, or assign or
convey any right to receive income therefrom, unless the Guarantee of such
Guarantor is equally and ratably secured with the obligations so secured or
until such time as such obligations are no longer secured by a Lien.
SECTION 1012. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction") involving
aggregate payments or consideration in excess of $5.0 million, unless:
(i) such Affiliate Transaction is on terms that are not materially
less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee with respect to any
Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration
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in excess of $10.0 million, a resolution adopted by the majority of the
Board of Directors of the Company approving such Affiliate Transaction and
set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above.
(b) The foregoing provisions will not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments permitted by Section 1009; (iii) the
payment of customary annual management, consulting and advisory fees and related
expenses to KKR and its Affiliates; (iv) the payment of reasonable and customary
fees paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Restricted Subsidiary; (v)
payments by the Company or any of its Restricted Subsidiaries to KKR and its
Affiliates made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including,
without limitation, in connection with acquisitions or divestitures which
payments are approved by a majority of the Board of Directors of the Company in
good faith; (vi) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of clause (i) of paragraph (a); (vii) payments or loans to
employees or consultants which are approved by a majority of the Board of
Directors of the Company in good faith; (viii) any agreement as in effect as of
the Issuance Date or any amendment thereto (so long as any such amendment is not
disadvantageous to the Holders in any material respect) or any transaction
contemplated thereby; (ix) the existence of, or the performance by the Company
or any of its Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Issuance Date and
any similar agreements which it may enter into thereafter; provided, however,
that the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of obligations under any future amendment to any such
existing agreement or under any similar agreement entered into after the
Issuance Date shall only be permitted by this clause (ix) to the extent that the
terms of any such amendment or new agreement are not otherwise disadvantageous
to the Holders in any material respect; (x) the Recapitalization and the
Financings and the payment of all fees and expenses related to the
Recapitalization and the Financings; and (xi) transactions with customers,
clients, suppliers, or purchasers or sellers of goods or services, in each case
in the ordinary course of business and otherwise in compliance with the terms of
the Indenture which are fair to the Company or its Restricted Subsidiaries, in
the reasonable determination of the Board of Directors of the Company or the
senior management thereof, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party.
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any such Restricted Subsidiary to:
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(a) (i) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease, or transfer any of its properties or assets to the
Company, or any of its Restricted Subsidiaries;
except (in each case) for such encumbrances or restrictions existing under or by
reason of:
(1) contractual encumbrances or restrictions in effect on the
Issuance Date, including, without limitation, pursuant to Existing
Indebtedness or the Senior Credit Facilities and their related
documentation;
(2) this Indenture and the Notes;
(3) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature discussed in
clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired;
(6) contracts for the sale of assets, including, without limitation
customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred pursuant
to Sections 1010 and 1011 that limit the right of the debtor to dispose of
the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(9) other Indebtedness of Restricted Subsidiaries permitted to be
incurred subsequent to the Issuance Date pursuant to Section 1010;
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(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(11) any Mortgage Financing or Mortgage Refinancing that imposes
restrictions on the real property securing such Indebtedness;
(12) customary provisions contained in leases and other agreements
entered into in the ordinary course of business; or
(13) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements
or refinancings of the contracts, instruments or obligations referred to
in clauses (1) through (12) above, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the
Company's Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
SECTION 1014. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries.
(a) The Company will not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company or any Indebtedness of
any other Restricted Subsidiary unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of payment of the Notes by such Restricted Subsidiary
except that with respect to a guarantee of Indebtedness of the Company (A) if
the Notes are subordinated in right of payment to such Indebtedness, the
Guarantee under the supplemental indenture shall be subordinated to such
Restricted Subsidiary's guarantee with respect to such Indebtedness
substantially to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture and (B) if such Indebtedness is by its express
terms subordinated in right of payment to the Notes, any such guarantee of such
Restricted Subsidiary with respect to such Indebtedness shall be subordinated in
right of payment to such Restricted Subsidiary's Guarantee with respect to the
Notes substantially to the same extent as such Indebtedness is subordinated to
the Notes; (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Guarantee; and (iii) such Restricted Subsidiary shall
deliver to the Trustee an Opinion of Counsel to the effect that (A) such
Guarantee of the Notes has been duly executed and authorized and (B) such
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; provided that
this paragraph (a) shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time such
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Person became a Restricted Subsidiary of the Company and (B) was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary of the Company or (y) that guarantees the payment of Obligations of
the Company or any Restricted Subsidiary under the Senior Credit Facilities or
any other Senior Indebtedness and any refunding, refinancing or replacement
thereof, in whole or in part, provided that such refunding, refinancing or
replacement thereof constitutes Senior Indebtedness and is not incurred pursuant
to a registered offering of securities under the Securities Act or a private
placement of securities (including under Rule 144A) pursuant to an exemption
from the registration requirements of the Securities Act, which private
placement provides for registration rights under the Securities Act (any
guarantee excluded by operations of this clause (y) being an "Excluded
Guarantee").
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited hereunder) or (ii) the release or
discharge of the guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 1015. Limitation on Other Senior Subordinated Indebtedness.
The Company will not, and will not permit any Guarantor to, directly
or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Company or any
Indebtedness of any Guarantor, as the case may be, unless such Indebtedness is
either (a) pari passu in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be or (b) subordinate in right of payment to the
Notes, or such Guarantor's Guarantee, as the case may be, in the same manner and
at least to the same extent as the Notes are subordinate to Senior Indebtedness
or such Guarantor's Guarantee is subordinate to such Guarantor's Senior
Indebtedness, as the case may be.
SECTION 1016. Purchase of Notes upon a Change of Control.
(a) Upon the occurrence of a Change of Control, unless the Company
has elected to redeem the Notes in connection with such Change of Control, the
Company will make an offer to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of the Notes pursuant to the offer described below
(the "Change of Control Offer") at a price in cash (the "Change of Control
Payment") equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest thereon, if any, to the date of purchase.
(b) Within 30 days following any Change of Control, the Company
shall give to each Holder, with a copy to the Trustee, in the manner provided in
Section 106 a notice stating:
(1) a Change of Control Offer is being made pursuant to this Section
entitled "Purchase of Notes upon Change of Control," and that all Notes
properly tendered pursuant to such Change of Control Offer will be
accepted for payment;
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(2) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, except as may be otherwise required by applicable law (the "Change
of Control Payment Date");
(3) any Note not properly tendered will remain outstanding and
continue to accrue interest;
(4) unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control
Payment Date;
(5) Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent specified in the notice at the
address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date;
(6) Holders will be entitled to withdraw their tendered Notes and
their election to require the Company to purchase such Notes, provided
that the Paying Agent receives, not later than the close of business on
the last day of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes tendered for purchase, and a statement that such Holder is
withdrawing such Holder's tendered Notes and his election to have such
Notes purchased;
(7) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof; and
(8) any additional instructions a Holder must follow in order to
have its Notes repurchased in accordance with this Section 1016.
(c) Prior to complying with the provisions of this Section 1016, but
in any event within 30 days following a Change of Control, the Company will
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under any outstanding Senior Indebtedness in each case
necessary to permit the repurchase of the Notes required by this Section 1016.
The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws or regulations are applicable in connection with the repurchase of the
Notes pursuant to a Change of Control Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions hereunder,
the Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described hereunder by
virtue thereof.
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(d) On the Change of Control Payment Date, the Company shall, to the
extent permitted by law,
(i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent an amount equal to the aggregate
Change of Control Payment in respect of all Notes or portions thereof so
tendered and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation the Notes so accepted together with an Officers' Certificate
stating that such Notes or portions thereof have been tendered to and
purchased by the Company.
(e) The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(f) The Paying Agent shall promptly mail to each Holder the Change
of Control Payment for such Notes, and the Trustee will promptly authenticate
and mail to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any, provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof.
SECTION 1017. Limitation on Sales of Assets.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless (x) the
Company, or its Restricted Subsidiaries, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Company) of the assets sold or
otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company, or such Restricted Subsidiary, as the case may be, is
in the form of cash or Cash Equivalents; provided that the amount of (a) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes), that are assumed by the transferee of any such assets, (b) any
securities received by the Company or such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received within 180 days following the closing
of such Asset Sale) and (c) any Designated Noncash Consideration received by the
Company or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (c) that is at that time
outstanding, not to exceed the greater of (x) $100 million or (y) 15% of Total
Assets at the time of the receipt of such Designated Noncash Consideration (with
the fair market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent changes in
value), shall be deemed to be cash for the purposes of this provision and for no
other purpose.
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Within 365 days after the Company's or any Restricted Subsidiary's
receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted
Subsidiary, at its option, may (i) apply the Net Proceeds from such Asset Sale
to permanently reduce (x) Obligations under the Senior Credit Facilities (and to
correspondingly reduce commitments with respect thereto), (y) other Senior
Indebtedness or Pari Passu Indebtedness (provided that if the Company shall so
reduce Obligations under Pari Passu Indebtedness, it will equally and ratably
reduce Obligations under the Notes if the Notes are then prepayable or, if the
Notes may not be then prepaid, the Company shall make an offer (in accordance
with the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at 100% of the principal amount thereof, plus the amount of accrued but
unpaid interest, if any, on the amount of Notes that would otherwise be prepaid)
or (z) Indebtedness of a Wholly Owned Restricted Subsidiary, (ii) apply the Net
Proceeds from such Asset Sale to an investment in any one or more businesses,
capital expenditures or acquisitions of other assets in each case, used or
useful in a Similar Business (including investments or purchases of non-capital
assets in connection with the construction or expansion of distribution
facilities), (iii) in the case of a sale of a store or stores, deem such Net
Proceeds to have been applied to the extent of any capital expenditures made to
construct or acquire a replacement store in the general vicinity of the store
sold within 365 days preceding the date of the Asset Sale; provided that Net
Proceeds were not previously excluded from the definition of Excess Proceeds as
a result of the same capital expenditures made to acquire or construct such
replacement store and/or (iv) apply the Net Proceeds from such Asset Sale to an
investment in properties or assets that replace the properties and assets that
are the subject of such Asset Sale. Pending the final application of any such
Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce
Indebtedness under a revolving credit facility, if any, or otherwise invest such
Net Proceeds in Cash Equivalents or Investment Grade Securities. The Indenture
will provide that any Net Proceeds from the Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15.0 million,
the Company shall make an offer to all Holders (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date fixed for the closing of such offer
(the "Offered Price"). Within 10 Business Days after the date on which the
aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall
give to each Holder, with a copy to the Trustee, in the manner provided in
Section 106 a notice stating:
(i) that the Holder has the right to require the Company to
repurchase such Holder's Notes at the Offered Price, subject to proration
in the event the Excess Proceeds are less than the aggregate Offered Price
of all Notes tendered;
(ii) the date of purchase of Notes pursuant to the Asset Sale Offer
(the "Asset Sale Purchase Date"), which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed;
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(iii) that the Offered Price will be paid to Holders electing to
have Notes purchased on the Asset Sale Purchase Date, provided that a
Holder must surrender its Note to the Paying Agent at the address
specified in the notice prior to the close of business at least five
Business Days prior to the Asset Sale Purchase Date;
(iv) any Note not tendered will continue to accrue interest pursuant
to its terms;
(v) that unless the Company defaults in the payment of the Offered
Price, any Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest on and after the Asset Sale Purchase Date;
(vi) that Holders will be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such Notes, provided
that the Company receives, not later than the close of business on the
third Business Day preceding the Asset Sale Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Notes tendered for purchase, and a
statement that such Holder is withdrawing its election to have such Notes
purchased;
(vii) that the Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof; and
(viii) the instructions a Holder must follow in order to have his
Notes purchased in accordance with this Section 1017.
To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased in the
manner described in Section 1104. Upon completion of any such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 1017, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Indenture.
SECTION 1018. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing officers with a view to
determining whether it has kept, observed, performed and fulfilled,
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and has caused each of its Subsidiaries to keep, observe, perform and fulfill
its obligations under this Indenture and further stating, as to each such
officer signing such certificate, that, to the best of his or her knowledge, the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and
fulfill each and every such covenant contained in this Indenture and no Default
or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default which has occurred and is
continuing or, if such signers do know of such Default or Event of Default, the
certificate shall describe its status, with particularity and that, to the best
of his or her knowledge, no event has occurred and remains by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action each is taking or proposes to take with respect thereto. The Officers'
Certificate shall also notify the Trustee should the Company elect to change the
manner in which it fixes its fiscal year end. For purposes of this Section
1018(a), such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $10 million), the Company
shall deliver to the Trustee by registered or certified mail or facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1019. Commission Reports and Reports to Holders.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on
an annual and quarterly basis on forms provided for such annual and quarterly
reporting pursuant to rules and regulations promulgated by the Commission, the
Company will file with the Commission (and provide the Trustee and Holders with
copies thereof, without cost to each Holder, within 15 days after it files them
with the Commission), (a) within 90 days after the end of each fiscal year,
annual reports on Form 10-K (or any successor or comparable form) containing the
information required to be contained therein (or required in such successor or
comparable form); (b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, reports on Form 10-Q (or any successor or
comparable form); (c) promptly from time to time after the occurrence of an
event required to be therein reported, such other reports on Form 8-K (or any
successor or comparable form); and (d) any other information, documents and
other reports which the Company would be required to file with the Commission if
it were subject to Section 13 or 15(d) of the Exchange Act; provided, however,
the Company shall not be so obligated to file such reports with the Commission
if the Commission does not permit such filing, in which event the Company will
make available such information to prospective purchasers of Notes, in addition
to providing such information to the Trustee and the Holders, in each case
within 15 days after the time the Company would be required to file such
information with the Commission, if it were subject to Sections 13 or 15(d) of
the Exchange Act.
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ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Redemption.
The Notes may or shall, as the case may be, be redeemed, as a whole
or from time to time in part, subject to the conditions and at the Redemption
Prices specified in the form of Note, together with accrued interest to the
Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104.
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SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular Notes
to be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Notes not previously called for
redemption, in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed, or, if such Notes
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements) and which may provide for the selection for
redemption of portions of the principal of Notes; provided, however, that no
such partial redemption shall reduce the portion of the principal amount of a
Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder to be redeemed. The Trustee shall give notice of redemption in
the Company's name and at the Company's expense; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the Redemption
Date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
following items.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption,
(4) in case any Note is to be redeemed in part only, the notice
which relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the holder will receive, without
charge, a new Note or Notes of authorized denominations for the principal
amount thereof remaining unredeemed,
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(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Note, or the portion
thereof, to be redeemed, and, unless the Company defaults in making the
redemption payment, that interest on Notes called for redemption (or the
portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made as to the
accuracy or correctness of the CUSIP number, if any, listed in such notice
or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes are to
be redeemed.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Regular Record Date or Special Record Date, as the case
may be, according to their terms and the provisions of Section 311.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
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SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 1002 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holders attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Note so surrendered, provided, that each such new Note will be in a
principal amount of $1,000 or integral multiple thereof.
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Legal Defeasance or
Covenant Defeasance.
The Company and the Guarantors may, at their option by Board
Resolution, at any time, with respect to the Notes, elect to have either Section
1202 or Section 1203 be applied to all Outstanding Notes upon compliance with
the conditions set forth below in this Article Twelve.
SECTION 1202. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and any Guarantor shall be deemed
to have been discharged from its obligations with respect to all Outstanding
Notes on the date the conditions set forth in Section 1204 are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company and any such Guarantor shall be deemed to have paid and
discharged the entire Indebtedness represented by the Outstanding Notes, which
shall thereafter be deemed to be "Outstanding" only for the purposes of Section
1205 and the other Sections of this Indenture referred to in (A) and (B) below,
and to have satisfied all its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Notes to receive, solely
from the trust fund described in Section 1204 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any, on)
and interest on such Notes when such payments are due, (B) the Company's
obligations with respect to such Notes under Sections 304, 305, 310, 1002 and
1003, (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, and the Company's obligations in connection therewith and (D) this
Article Twelve.
<PAGE>
105
Subject to compliance with this Article Twelve, the Company may
exercise its option under this Section 1202 notwithstanding the prior exercise
of its option under Section 1203 with respect to the Notes.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company shall be released from its
obligations under any covenant contained in Section 801 and in Sections 1006
through 1019 with respect to the Outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder (it being
understood that such Notes will not be outstanding for accounting purposes). For
this purpose, such Covenant Defeasance means that, with respect to the
Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
501(iii), but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby.
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Notes:
(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of the Indenture who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Notes, cash in
U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by
the Company, to pay the principal of, premium, if any, and interest due on
the Outstanding Notes on the Stated Maturity or on the applicable
Redemption Date as the case may be, of such principal, premium, if any, or
interest on the Outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee (which opinion may be subject to
customary assumptions and exclusions) confirming that (A) the Company has
received from, or there has been published by, the United States Internal
Revenue Service a ruling or (B) since the Issuance Date, there has been a
change in the applicable U.S. federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel in the United
States (which opinion may be subject to customary assumptions and
exclusions) shall confirm that the Holders will not recognize
<PAGE>
106
income, gain or loss for U.S. federal income tax purposes as a result of
such Legal Defeasance and will be subject to U.S. federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or with respect to certain
bankruptcy or insolvency Events of Default on the 91st day after the date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company
or any Guarantor is a party or by which the Company or any Guarantor is
bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of
the Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which Opinion
of Counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 1205. Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and Government Securities (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to
<PAGE>
107
Section 1204 in respect of the Outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law. Money and Government Securities so held in trust are not subject to Article
Thirteen.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Securities
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Notes.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Securities held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money or
Government Securities in accordance with Section 1205 by reason of any legal
proceeding or by any reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1202 or 1203, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1205; provided, however, that if the Company makes any payment of principal of
(or premium, if any) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money and Government Securities held
by the Trustee or Paying Agent.
ARTICLE THIRTEEN
SUBORDINATION OF NOTES
SECTION 1301. Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder, by his acceptance
thereof, likewise covenants and agrees, for the benefit of the holders, from
time to time, of Senior Indebtedness that, to the extent and in the manner
hereinafter set forth in this Article, the Indebtedness represented by the Notes
and the payment of the principal of (and premium, if any)
<PAGE>
108
and interest on each and all of the Notes and all other Subordinated Note
Obligations are hereby expressly made subordinate and subject in right of
payment as provided in this Article to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness, whether outstanding on the Issuance Date
or thereafter incurred, created, assumed or, except as limited by Section 1014,
guaranteed.
SECTION 1302. Payment over of Proceeds upon Dissolution, Etc.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or cash equivalents of all Obligations due in
respect of such Senior Indebtedness before the Holders are entitled to
receive any payment with respect to the Subordinated Note Obligations
(except that Holders may receive (i) shares of stock and any debt
securities that are subordinated at least to the same extent as the Notes
to (a) Senior Indebtedness and (b) any securities issued in exchange for
Senior Indebtedness and (ii) payments and other distributions made from
the trusts described in Article Twelve); and
(2) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (1) above) are paid in full in cash or cash
equivalents, any distribution to which Holders would be entitled but for
this Article shall be made to holders of Senior Indebtedness (except that
Holders may receive (i) shares of stock and any debt securities that are
subordinated at least to the same extent as the Notes to (a) Senior
Indebtedness and (b) any securities issued in exchange for Senior
Indebtedness and (ii) payments and other distributions made from the
trusts described in Article Twelve) as their interests may appear.
SECTION 1303. Suspension of Payment When Senior Indebtedness in
Default.
The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Subordinated Note Obligations and may not acquire
from the Trustee or any Holder any Notes for cash or property (other than (i)
securities that are subordinated to at least the same extent as the Notes to (a)
Senior Indebtedness and (b) any securities issued in exchange for Senior
Indebtedness and (ii) payments and other distributions made from the trusts
described in Article Twelve) until all Senior Indebtedness has been paid in full
in cash or cash equivalents if:
(i) a default in the payment of any principal of, premium, if any,
or interest on, or of unreimbursed amounts under drawn letters of credit
or in respect of bankers' acceptances or fees relating to letters of
credit or bankers' acceptances constituting, Designated Senior
Indebtedness occurs and is continuing beyond any applicable grace
<PAGE>
109
period in the agreement, indenture or other document governing such
Designated Senior Indebtedness (a "payment default"); or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity (a "non-payment
default") and the Trustee receives a notice of the default (a "Payment
Blockage Notice") from a Person who may give it pursuant to Section 1313
hereof. No new period of payment blockage may be commenced unless and
until 365 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice. However, if any Payment Blockage Notice
within such 365-day period is given by or on behalf of any holders of
Designated Senior Indebtedness (other than the Bank Agent under the Senior
Credit Facilities), the Bank Agent may give another Payment Blockage
Notice within such period. In no event, however, may the total number of
days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 365 consecutive day period. No
nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) in the case of a payment default, upon the date on which such
default is cured or waived or shall have ceased to exist or such
Designated Senior Indebtedness shall have been discharged or paid in full
in cash or cash equivalents, and
(2) in case of a nonpayment default, the earlier of (x) the date on
which such nonpayment default is cured or waived, (y) 179 days after the
date on which the applicable Payment Blockage Notice is received (the
"Payment Blockage Period") or (z) the date such Payment Blockage Period
shall be terminated by written notice to the Trustee from the requisite
holders of such Designated Senior Indebtedness necessary to terminate such
period or from their Representative,
after which the Company shall resume making any and all required payments in
respect of the Notes, including any missed payments, if this Article otherwise
permits the payment, distribution or acquisition at the time of such payment or
acquisition.
SECTION 1304. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 1305. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Subordinated Note Obligations at a time when such payment is prohibited by
Sections 1302 or
<PAGE>
110
1303, such payment shall be held by the Trustee or such Holder, for the benefit
of, and shall be paid forthwith over and delivered, upon written request, to,
the holders of Senior Indebtedness as their interests may appear or to their
Representative under the indenture or other agreement (if any) pursuant to which
such Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay such Senior Indebtedness in full in cash
or cash equivalents in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the benefit of holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article Thirteen, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into the Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
Thirteen, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
SECTION 1306. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes that violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article Thirteen.
SECTION 1307. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or
in any of the Notes shall prevent the Company, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1302 or under the conditions
described in Section 1303, from making payments at any time of principal of (and
premium, if any, on) or interest on the Notes.
<PAGE>
111
SECTION 1308. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all Senior Indebtedness in cash or
cash equivalents, the Holders shall be subrogated (equally and ratably with the
holders of all Pari Passu Indebtedness of the Company) to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
Subordinated Note Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the Holders or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders or on their behalf or by the Trustee, shall, as among the Company,
its creditors other than holders of Senior Indebtedness, and the Holders, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness; it being understood that the provisions of this Article are
intended solely for the purpose of determining the relative rights of the
Holders, on the one hand, and the holders of Senior Indebtedness, on the other
hand.
SECTION 1309. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders and creditors of the
Company other than their rights in relation to holders of Senior Indebtedness;
or (c) prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness. If the
Company fails because of this Article to pay principal (or premium, if any) or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 1310. Trustee to Effectuate Subordination.
Each Holder by his acceptance thereof authorizes and directs the
Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes. If the
Trustee does not file a proper proof of claim or proof of debt in the form
required in any proceeding referred to in Section 504 hereof at least 30 days
before the expiration of the time to file such claim, the Bank Agent (if the
Senior Credit Facilities are still outstanding) is hereby authorized to file an
appropriate claim for and on behalf of the Holders.
<PAGE>
112
SECTION 1311. Subordination May Not Be Impaired by Company.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1312. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders
of Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article Thirteen, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other acts pertinent thereto or to this Article
Thirteen.
SECTION 1313. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company,
the Bank Agent or a holder of Senior Indebtedness or from any trustee, fiduciary
or agent therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to TIA Sections 315(a) through 315(d), shall be entitled in all
respects to assume that no such facts exist; provided, however, that, if the
Trustee shall not have received the notice provided for in this Section at least
three Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
of the principal of (and premium, if any) or interest on any Note), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has
<PAGE>
113
been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1314. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d),
and the Holders shall be entitled to rely upon any order or decree entered by
any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article; provided that such court, trustee,
receiver, custodian, assignee, agent or other Person has been apprised of, or
the order, decree or certificate makes reference to, the provisions of this
Article.
SECTION 1315. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustees' Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1316. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1315 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
<PAGE>
114
SECTION 1317. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Notes pursuant to Article Five or to pursue any rights or remedies hereunder or
under applicable law, except as provided in Article Five.
SECTION 1318. Modification of Terms of Senior Indebtedness.
Any renewal or extension of the time of payment of any Senior
Indebtedness or the exercise by the holders of Senior Indebtedness of any of
their rights under any instrument creating or evidencing Senior Indebtedness,
including, without limitation, the waiver of default thereunder, may be made or
done all without notice to or assent from the Holders or the Trustee.
No compromise, alteration, amendment, modification, extension,
renewal or other change of, or waiver, consent or other action in respect of,
any liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument under which any
Senior Indebtedness is outstanding or of such Senior Indebtedness, whether or
not such release is in accordance with the provisions of any applicable
document, shall in any way alter or affect any of the provisions of this Article
Thirteen or of the Notes relating to the subordination thereof.
SECTION 1319. Certain Terms.
For purposes of this Article Thirteen, (i) "cash equivalents" means
Government Securities with maturities of nine months or less and (ii) unless the
context clearly indicates otherwise, any payment or distribution to the Trustee
or any Holder in respect of any Subordinated Note Obligation shall include any
payment or distribution of any kind or character from any source, whether in
cash, property or securities, by set-off or otherwise, including any repurchase,
redemption or acquisition of the Notes and any direct or indirect payment
payable by reason of any other Indebtedness or Obligation being subordinated to
the Notes.
SECTION 1320. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments
from cash or the proceeds of Government Securities held in trust under Article
Twelve hereof by the Trustee (or other qualifying trustee) and which were
deposited in accordance with the terms of Article Twelve hereof and not in
violation of Section 1303 hereof for the payment of principal of (and premium,
if any) and interest on the Notes shall not be subordinated to the prior payment
of any Senior Indebtedness or subject to the restrictions set forth in this
Article Thirteen, and none of the Holders shall be obligated to pay over any
such amount to the Company or any holder of Senior Indebtedness or any other
creditor of the Company.
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
<PAGE>
115
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
RANDALL'S FOOD MARKETS, INC.,
a Texas corporation
By /s/ LEE E. STRAUS
----------------------------------------
Name: Lee E. Straus
Title: Senior Vice President, Finance,
Secretary and Treasurer
MARINE MIDLAND BANK,
as Trustee
By /s/ EILEEN M. HUGHES
----------------------------------------
Name: Eileen M. Hughes
Title: Assistant Vice President
<PAGE>
EXHIBIT 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of June 27, 1997
by and among
RANDALL'S FOOD MARKETS, INC.
as Issuer,
and
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
AND
PAINEWEBBER INCORPORATED,
as Initial Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made and
entered into as of June 27, 1997, by and among Randall's Food Markets, Inc., a
Texas corporation (the "Issuer"), as issuer, and BT Securities Corporation,
Chase Securities Inc., Goldman, Sachs & Co. and PaineWebber Incorporated
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated June
24, 1997, among the Issuer and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Issuer to the Initial Purchasers
of $150,000,000 aggregate principal amount of the Issuer's 93/8% Senior
Subordinated Notes due 2007 (the "Notes"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuer has agreed to
provide to the Initial Purchasers and their direct and indirect transferees and
assigns the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the SEC promulgated thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"Broker-Dealer" shall mean any broker or dealer registered under the
1934 Act.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Issuer, provided, however, that any such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Exchange Notes" shall mean 93/8% Series B Senior Subordinated Notes
due 2007 to be issued by the Issuer under the Indenture containing terms
identical to the Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such interest has
been paid, from the date of original issuance of the Notes, (ii) the transfer
restrictions thereon shall be eliminated and (iii) certain provisions relating
to an increase in the stated rate of interest thereon shall be eliminated) to be
offered to Holders of Notes in exchange for Notes pursuant to the Exchange
Offer.
"Exchange Offer" shall mean the exchange offer by the Issuer of
Registrable Notes for Exchange Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
<PAGE>
"Holders" shall mean the Initial Purchasers, for so long as they own
any Registrable Notes, and each of their successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes under the
Indenture.
"Indenture" shall mean the Indenture relating to the Notes dated as
of June 27, 1997, between the Issuer and Marine Midland Bank, as trustee, as the
same may be amended from time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble of this Agreement.
"Issuer" shall have the meaning set forth in the preamble of this
Agreement and also includes the Issuer's successors.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Issuer or
any of its affiliates (as such term is defined in Rule 405 under the 1933 Act)
(other than the Initial Purchasers or subsequent holders of Registrable Notes if
such subsequent holders are deemed to be such affiliates solely by reason of
their holding of such Registrable Notes) shall be disregarded in determining
whether such consent or approval was given by the Holders of such required
percentage or amount.
"Person" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Participating Broker-Dealer" means any Broker-Dealer which holds
Participating Broker- Dealer Notes.
"Participating Broker-Dealer Notes" shall mean Notes acquired by a
Broker-Dealer in the Exchange Offer that such broker or dealer acquired for its
own account as a result of market making activities or other trading activities
(other than Registrable Notes acquired directly from the Issuer or any of its
affiliates).
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean each Note, until the earliest to
occur of (a) the date on which such Note is exchanged for Exchange Notes upon
consummation of the Exchange Offer and entitled to be resold to the public by
the Holder thereof without complying with the prospectus delivery requirements
of the 1933 Act, (b) the date on which such Note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such Note
is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein) or (d) the date on which such Note is
distributed to the public pursuant to Rule 144 under the 1933 Act.
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"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Issuer with this Agreement, including
without limitation: (i) all SEC and National Association of Securities Dealers,
Inc. ("NASD") registration and filing fees, if any (including, without
limitation, the fees and expenses of any "qualified independent underwriter"),
(ii) all fees and expenses incurred in connection with compliance with state
securities, blue sky or other securities laws (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection with
state securities, blue sky or other securities qualification or of any of the
Exchange Notes or Registrable Notes), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, certificates representing the Exchange Notes and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) the reasonable fees and disbursements of counsel
for the Issuer and, in the case of a Shelf Registration Statement, the
reasonable fees and disbursements (including the expenses of preparing and
distributing any underwriting or securities sales agreement) of one counsel (in
addition to appropriate local counsel) for the Holders (which counsel shall be
selected in writing by the Majority Holders), (vi) all application and filing
fees in connection with listing the Exchange Notes on a national securities
exchange or an automated quotation system, if any, (vii) the reasonable fees and
expenses of the independent public accountants of the Issuer, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, and (viii) the reasonable fees and expenses
of the trustee, including its counsel, and any exchange agent, escrow agent or
custodian, including their counsels, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of
the Issuer which covers any of the Exchange Notes or Registrable Notes pursuant
to the provisions of this Agreement, and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Issuer pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the then Registrable Notes on an appropriate form
under Rule 415 under the 1933 Act, or any successor rule that may be adopted by
the SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" shall mean the trustee with respect to the Notes under the
Indenture.
2. Registration Under the 1933 Act.
(a) Exchange Offer Registration. To the extent not prohibited
by any applicable law or applicable interpretation of the Staff of the SEC, the
Issuer shall (A) file an Exchange Offer Registration Statement covering the
offer by the Issuer to the Holders to exchange all of their
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Registrable Notes for Exchange Notes within 100 calendar days after the date
hereof, (B) use its best efforts to cause such Exchange Offer Registration
Statement to be declared effective by the SEC within 200 calendar days after the
date hereof, (C) use its best efforts to cause such Exchange Offer Registration
Statement to remain effective until the closing of the Exchange Offer or, in
accordance with the procedures set forth in Section 3(f), to the extent any
Participating Broker-Dealer participates in the Exchange Offer, use its best
efforts to maintain the effectiveness of the Exchange Offer Registration
Statement for a period ending on the earlier to occur of (i) the date when all
Exchange Notes held by Participating Broker-Dealers have been sold and (ii) 90
days after the consummation of the Exchange Offer and (D) use its best efforts
to consummate the Exchange Offer on or prior to 230 calendar days following the
date hereof. No securities other than the Exchange Notes shall be included in
the Exchange Offer Registration Statement. The Exchange Notes will be issued
under the Indenture (or a trust indenture which is identical in all material
respects to the Indenture, other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA, and which
has been qualified under the TIA). Upon the effectiveness of the Exchange Offer
Registration Statement, the Issuer shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder (other than
Participating Broker-Dealers exchanging Participating Broker-Dealer Notes for
Exchange Notes, assuming that such Holder is not an affiliate of the Issuer
within the meaning of Rule 405 under the 1933 Act, acquires the Exchange Notes
in the ordinary course of such Holder's business and has no arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes) to trade such Exchange Notes from
and after their receipt without any limitations or restrictions under the 1933
Act and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
In connection with the Exchange Offer, the Issuer shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 business days
after the date notice thereof is mailed to the Holders (or such different
period as required by applicable law);
(iii) use the services of the Depositary for the Exchange Offer with
respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at any
time prior to the close of business, New York City time, on the last
business day on which the Exchange Offer shall remain open, by sending to
the institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Notes
exchanged;
(v) prior to effectiveness of the Exchange Offer Registration
Statement, if the SEC so requests, provide a supplemental letter to the
SEC (A) stating that the Issuer is registering the Exchange Offer in
reliance on the position of the SEC enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the SEC's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters and (B)
including a representation that the Issuer has not entered into any
arrangement or
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<PAGE>
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange Offer and that, to the best of the Issuer's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer; and
(vi) otherwise comply in all material respects with all applicable
laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Issuer shall:
(i) accept for exchange Registrable Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the Issuer;
and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in amount to the
Registrable Notes of such Holder so accepted for exchange.
The Exchange Offer shall not be subject to any conditions, other
than (i) that the Exchange Offer, or the making of any exchange by a Holder,
does not, in the good faith determination of the Issuer, (a) violate applicable
law, statute, rule or regulation, or (b) violate any applicable interpretation
of the Staff of the SEC and (ii) that there has been no action or proceeding
instituted in any court or before any governmental agency or regulatory
authority or any injunction, order or decree issued with respect to the Exchange
Offer, which would prohibit the Issuer from proceeding with the Exchange Offer.
Each Holder of Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in the Exchange
Offer shall have represented that (w) it is not an affiliate (as defined in Rule
405 under the 1933 Act) of the Issuer, (x) any Exchange Notes to be received by
it were acquired in the ordinary course of business, (y) at the time of the
commencement of the Exchange Offer it has no arrangement with any person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes and (z) it is not acting on behalf of any person who could not
make the representations in clauses (w) through (y). The Issuer shall inform the
Initial Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right to
contact such Holders and otherwise facilitate the tender of Registrable Notes in
the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the Staff of the SEC, the Issuer is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer cannot be consummated within
230 calendar days following the date hereof, or (iii) if any Holder (other than
an Initial Purchaser) is not eligible to participate in the Exchange Offer or
(iv) upon the written request of any Initial Purchaser (with respect to any
Registrable Notes which it acquired directly from the Issuer), then the Issuer
shall upon receipt of notice of such event, or in the case of clause (iv) above,
within 90 days following the consummation of the Exchange Offer if any such
Initial Purchaser shall hold Registrable Notes which it acquired directly from
the Issuer, the Issuer shall, at its cost:
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<PAGE>
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the then
outstanding Registrable Notes by the Holders from time to time in
accordance with the methods of distribution elected by the Majority
Holders of such Registrable Notes and set forth in such Shelf Registration
Statement, and use its best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC by the 230th calendar day
after the date hereof (or within 90 calendar days following consummation
of the Exchange Offer) (or within 45 calendar days in the event of any
changes in law or applicable interpretations of the Staff of the SEC
pursuant to clause (b)(i) above but in no event before 100 calendar days
after the date hereof). In the event that the Issuer is required to file a
Shelf Registration Statement upon the request of any Holder (other than an
Initial Purchaser) not eligible to participate in the Exchange Offer
pursuant to clause (iii) above or upon the request of any Initial
Purchaser pursuant to clause (iv) above, the Issuer shall file and have
declared effective within 230 days of the date hereof by the SEC both an
Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf Registration Statement (which
may be a combined Registration Statement with the Exchange Offer
Registration Statement) with respect to offers and sales of Registrable
Notes held by such Holder or such Initial Purchaser after completion of
the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the
Issuance Date (or one year from the date the Shelf Registration Statement
is declared effective if such Shelf Registration Statement is filed upon
the request of any Initial Purchaser pursuant to clause (iv) above) or
such shorter period which will terminate when all of the Registrable Notes
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or all of the Registrable Notes become
eligible for resale pursuant to Rule 144 under the 1933 Act without volume
restrictions; and
(C) notwithstanding any other provisions hereof use its best efforts
to ensure that (i) any Shelf Registration Statement and any amendment
thereto and any Prospectus forming a part thereof and any supplement
thereto complies in all material respects with the 1933 Act and the rules
and regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and (iii) any Prospectus forming part of any Shelf Registration
Statement and any supplement to such Prospectus (as amended or
supplemented from time to time), does not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading.
The Issuer further agrees, if necessary, to supplement or amend any
such Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use all reasonable efforts to cause any such
amendment to become effective and such Shelf Registration Statement to become
usable as soon as reasonably practicable thereafter and to furnish to the
Holders of Registrable Notes copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
(c) Expenses. The Issuer shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) and 2(b). Each Holder
shall pay all expenses of its counsel other than as set forth in the preceding
sentence, underwriting discounts and commissions (prior to the reduction
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<PAGE>
thereof with respect to selling concessions, if any) and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC, provided, however, that if,
after it has been declared effective, the offering of Registrable Notes pursuant
to a Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or court,
such Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) Remedies for Breach. In the event that (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the 100th
day following the date of original issue of the Notes, (b) such Exchange Offer
Registration Statement has not been declared effective on or prior to the 200th
day following the date of original issue of the Notes or (c) the Exchange Offer
is not consummated or a Shelf Registration Statement is not declared effective
on or prior to the 230th day following the date of original issue of the Notes
the interest rate borne by the Notes shall be increased by one-quarter of one
percent per annum following such 100-day period in the case of clause (a) above,
such 200-day period in the case of clause (b) above, or such 230-day period in
the case of clause (c) above (or, in the case of a Shelf Registration Statement
required to be filed in response to a change in law or applicable
interpretations of the Staff of the Securities and Exchange Commission, if
later, within 45 days after publication of the change in law or interpretation
but in no event before 100 calendar days after the date of original issue of the
Notes), which rate will be increased by an additional one-quarter of one percent
per annum for each 90-day period that any such additional interest continues to
accrue; provided that the aggregate increase in such annual interest rate will
in no event exceed one percent. Upon (x) the filing of the Exchange Offer
Registration Statement after the 100-day period described in clause (a) above,
(y) the effectiveness of the Exchange Offer Registration Statement after the
200-day period described in clause (b) above, or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 230-day period described in clause (c) above (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Staff of the Securities and
Exchange Commission, if later, within 45 days after publication of the change in
law or interpretation but in no event before 100 calendar days after the
Issuance Date), the interest rate borne by the Notes from the date of such
filing, effectiveness, consummation, or that the applicable registration
statement again becomes effective and usable, as the case may be, will be
reduced to the original interest rate set forth above if the Issuer is otherwise
in compliance with this paragraph; provided, however, that, if after such
reduction in interest rate, a different event specified in clause (a), (b) or
(c) above occurs, the interest rate may again be increased and thereafter
reduced pursuant to the foregoing provisions. Not withstanding the foregoing,
the Issuer may issue a notice that the Shelf Registration Statement is unusable
pending the announcement of a material corporate transaction and may issue any
notice suspending use of the Shelf Registration Statement required under
applicable securities laws to be issued, and in the event that the aggregate
number of days in any consecutive twelve-month period for which all such notices
are issued and effective exceeds 30 days in the aggregate, then the interest
rate borne by the Notes will be increased by one quarter of one percent per
annum following the date that such Shelf Registration Statement ceases to be
usable beyond the 30- day period permitted above, which rate shall be increased
by an additional one-quarter of one percent per annum for each subsequent 90-day
period that such additional interest continues to accrue; provided that the
aggregate increase in such annual interest rate may in no event exceed one
percent. Upon the Issuer declaring that the Shelf Registration Statement is
usable after the interest rate has been increased pursuant
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to the preceding sentence, the interest rate borne by the Notes will be reduced
to the original interest rate if the Issuer is otherwise in compliance with this
paragraph; provided, however, that if after any such reduction in interest rate
the Shelf Registration Statement again ceases to be usable beyond the period
permitted above, the interest rate will again be increased and thereafter
reduced pursuant to the foregoing provisions.
3. Registration Procedures. In connection with the obligations of
the Issuer with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Issuer shall:
(a) prepare and file with the SEC a Registration Statement, within
the time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Issuer, (ii) shall, in
the case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof, (iii) shall, in the case
of the Exchange Offer Registration Statement, be available for the sale of
Participating Broker-Dealer Notes by the Holders thereof for the time
period described in Section 2(a) and (iv) shall comply as to form in all
material respects with the requirements of the applicable form and include
or incorporate by reference all financial statements required by the SEC
to be filed therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to (i) the Exchange Offer Registration Statement as may be
necessary under applicable law to keep such Exchange Offer Registration
Statement effective for the period required to comply with Section 2(a)
(except to the extent the Issuer is unable to consummate the Exchange
Offer and the Issuer complies with Section 2(b)), and (ii) the Shelf
Registration Statement as may be necessary under applicable law to keep
such Shelf Registration Statement effective for the period required
pursuant to Section 2(b) hereof; cause each Prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the 1933 Act, and comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the selling Holders
thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes, at least ten days prior to filing, that the Shelf
Registration Statement with respect to the Registrable Notes is being
filed and advising such Holders that the distribution of Registrable Notes
will be made in accordance with the method elected by the Majority
Holders; and (ii) furnish to each Holder of Registrable Notes, to counsel
for the Initial Purchasers, to counsel for the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request,
including financial statements and schedules and, if the Holder
specifically so requests in writing, all exhibits (including those
incorporated by reference) in order to facilitate the public sale or other
disposition of the Registrable Notes; and (iii) subject to the last
paragraph of Section 3, hereby consent to the use of the Prospectus,
including each preliminary Prospectus, or any amendment or supplement
thereto by each of the selling Holders of Registrable Notes in connection
with the offering and sale of the Registrable Notes covered by the
Prospectus or any amendment or supplement thereto;
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(d) use its best efforts to register or qualify the Registrable
Notes under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable
Notes shall reasonably request by the time the applicable Registration
Statement is declared effective by the SEC, cooperate with the Holders in
connection with any filings required to be made with the NASD, keep each
such registration or qualification effective during the period such
Registration Statement is required to be effective and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction
of such Registrable Notes owned by such Holder, provided, however, that
the Issuer shall not be required to (i) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) or (ii) take
any action which would subject it to general service of process or
taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, notify each Holder of Registrable Notes and counsel for such
Holders promptly and, if requested by such Holder or counsel, confirm such
advice in writing promptly (i) when a Registration Statement has become
effective and when any post-effective amendments and supplements thereto
become effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes
covered thereby, the representations and warranties of the Issuer
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to such offering cease to be
true and correct in all material respects, (v) of the receipt by the
Issuer of any notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi) of the
happening of any event or the discovery of any facts during the period
such Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading and (vii) of any determination by the Issuer that a
post-effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by a Participating Broker-Dealer who holds
Participating Broker-Dealer Notes; provided that such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount
of Notes held by any such Broker-Dealer, except to the extent required by
the SEC as a result of a change in policy after the date of this
Agreement, (ii) furnish to each Participating Broker-Dealer, without
charge, as many copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such Participating Broker-Dealer may
reasonably request, (iii) include in the Exchange Offer Registration
Statement a statement that any Participating Broker-Dealer who receives
Exchange Notes for Registrable Notes pursuant to the Exchange Offer, may
be a statutory underwriter and must deliver a prospectus meeting the
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requirements of the 1933 Act in connection with any resale of such
Exchange Notes, (iv) subject to the last paragraph of Section 3, hereby
consent to the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any
Participating Broker-Dealer in connection with the sale or transfer of the
Participating Broker-Dealer Notes covered by the Prospectus or any
amendment or supplement thereto, and (v) include in the transmittal letter
or similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account
in exchange for Registrable Notes, it represents that the
Registrable Notes to be exchanged for Exchange Notes were acquired
by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Notes acquired pursuant to the Exchange
Offer; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act;
and (y) a statement to the effect that by a Participating Broker-Dealer
making the acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the sale of Participating Broker-Dealer
Notes received in exchange for Registrable Notes, the Participating
Broker-Dealer will not be deemed to admit that it is an underwriter within
the meaning of the 1933 Act;
(B) the Issuer shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement as
would otherwise be contemplated by Section 3(b), or take any other action
as a result of this Section 3(f), for a period exceeding the time
specified in Section 2(a)(C) (as such period may be extended by the
Issuer) and Participating Broker-Dealers shall not be authorized by the
Issuer to, and shall not, deliver such Prospectus after such period has
lapsed in connection with resales contemplated by this Section 3.
(g) in the case of an Exchange Offer, furnish counsel for
Participating Broker-Dealers, if any, and in the case of a Shelf
Registration, furnish counsel for the Holders of Registrable Notes, copies
of any request by the SEC or any state securities authority for amendments
or supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, furnish to each Holder of Registrable Notes, without charge, at
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least one conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents incorporated therein
by reference or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, cooperate with the selling Holders of Registrable Notes to
facilitate the timely preparation and delivery of certificates
representing Registrable Notes to be sold and not bearing any restrictive
legends; and cause such Registrable Notes to be in such denominations
(consistent with the provisions of the Indenture) and registered in such
names as the selling Holders or the underwriters, if any, may reasonably
request at least one business day prior to the closing of any sale of
Registrable Notes;
(k) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, upon the occurrence of any event or the discovery of any facts,
each as contemplated by Section 3(e)(vi) hereof, use its best efforts to
prepare a supplement or post-effective amendment to a Registration
Statement or the related Prospectus or any document incorporated therein
by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes, such Prospectus will
not contain at the time of such delivery any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The Issuer agrees to notify each Holder to
suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and each Holder hereby agrees to suspend use
of the Prospectus until the Issuer has amended or supplemented the
Prospectus to correct such misstatement or omission. At such time as such
public disclosure is otherwise made or the Issuer determines that such
disclosure is not necessary, in each case to correct any misstatement of a
material fact or to include any omitted material fact, the Issuer agrees
promptly to notify each Holder of such determination and to furnish each
Holder such numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, not later than the
effective date of a Registration Statement, and provide the Trustee with
printed certificates for the Exchange Notes in a form eligible for deposit
with the Depositary;
(m) (i) cause the Indenture to be qualified under the TIA, no later
than the effective date of the first Registration Statement required by
this Agreement, (ii) cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to be
so qualified in accordance with the terms of the TIA and (iii) execute,
and use its best efforts to cause the Trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(n) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, enter into agreements (including underwriting agreements) and take
all other customary and appropriate actions (including those reasonably
requested by the Majority Holders) in order to expedite or facilitate the
disposition of such Registrable Notes and in such event, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration,
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(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Issuer and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if
any, and the holders of a majority in principal amount of the
Registrable Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten
offerings;
(iii) obtain "cold comfort" letters and updates thereof from
the Issuer's independent certified public accountants addressed to
the underwriters, if any, and use best efforts to have such letters
addressed to the selling Holders of Registrable Notes, such letters
to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be
in form, substance and scope customary for similar offerings; and
(v) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto) and
(ii) each closing under any underwriting or similar agreement as and to
the extent required thereunder. In the case of any underwritten offering,
the Issuer shall provide written notice to the Holders of all Registrable
Notes of such underwritten offering at least 30 days prior to the filing
of a prospectus supplement for such underwritten offering. Such notice
shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than
ten days following the date of such notice, by which such Holder must
inform the Issuer of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must follow in order
to participate in such underwritten offering;
(o) in the case of a Shelf Registration and, to the extent that the
Issuer is required to maintain an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a)
above, make available for inspection by representatives of the Holders of
the Registrable Notes and any underwriters participating in any
disposition pursuant to such Registration Statement and any counsel or
accountant retained by such Holders or underwriters, at reasonable times
and in a reasonable manner, all financial and other records, pertinent
corporate documents and properties of the Issuer reasonably requested by
any such persons, and cause the respective officers, directors, employees,
and any other agents of the Issuer to supply all information reasonably
requested by any such representative, underwriter, special counsel or
accountant in connection with such Registration Statement, provided,
however, that such Persons shall first agree in writing with the Issuer
that any information that is reasonably and in good faith designated by
the Issuer in writing as confidential at the time of delivery of such
information shall
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<PAGE>
be kept confidential by such Persons, unless (i) disclosure of such
information is required by court or administrative order or is necessary
to respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of such
Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
Person or (iv) such information becomes available to such Person from a
source other than the Issuer and its subsidiaries and such source is not
known, after due inquiry, by the relevant Holder to be bound by a
confidentiality agreement; provided further, that the foregoing
investigation shall be coordinated on behalf of the Holders by one
representative designated by and on behalf of such Holders and any such
confidential information shall be available from such representative to
such Holders so long as any Holder agrees to be bound by such
confidentiality agreement;
(p) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchasers and each other Broker-Dealer that has notified the Issuer that
it may or has exchanged Registrable Notes for Participating Broker-Dealer
Notes, and make such changes in any such document prior to the filing
thereof as any of the Initial Purchasers or such Broker-Dealers or their
counsel may reasonably request; (ii) in the case of a Shelf Registration,
a reasonable time prior to filing any Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to such Shelf
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Holders of Registrable Notes, to
the Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Notes, if any, and make such changes in any such document prior to the
filing thereof as the Majority Holders of Registrable Notes, the Initial
Purchasers on behalf of such Holders, their counsel and any underwriter
may reasonably request; and (iii) cause the representatives of the Issuer
to be available for discussion of such document as shall be reasonably
requested by the Holders of Registrable Notes, the Initial Purchasers on
behalf of such Holders or any underwriter and shall not at any time make
any filing of any such document of which such Holders, the Initial
Purchasers on behalf of such Holders, their counsel or any underwriter
shall not have previously been advised and furnished a copy or to which
such Holders, the Initial Purchasers on behalf of such Holders, their
counsel or any underwriter shall reasonably object, each of which actions
in this clause (iii) by the Holders shall be coordinated by one
representative for all the Holders at reasonable times and in a reasonable
manner;
(q) in the case of a Shelf Registration, use their best efforts to
cause all Registrable Notes to be listed on any securities exchange, if
any, on which similar debt securities issued by the Issuer are then listed
if requested by the Majority Holders or by the underwriter or underwriters
of an underwritten offering of Registrable Notes, if any;
(r) in the case of a Shelf Registration, unless the rating in effect
for the Notes applies to the Exchange Notes and the Notes to be sold
pursuant to a Shelf Registration, use its best efforts to cause the
Registrable Notes to be rated with the appropriate rating agencies, if so
requested by the Majority Holders or by the underwriter or underwriters of
an underwritten offering of Registrable Notes, if any, unless the
Registrable Notes are already so rated; and
(s) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an
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<PAGE>
earning statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.
No Holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such Holder furnishes to the Issuer in writing, within 20 days after
receipt of a request therefor, such information as the Issuer may reasonably
request, including, without limitation, the information specified in item 507 of
Regulation S-K under the 1933 Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Registrable Notes shall be entitled to additional interest as
provided in such Holder's Registrable Notes unless and until such Holder shall
have used its best efforts to provide all such information. Each Holder as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Issuer all information required to be disclosed in order to make
the information previously furnished to the Issuer by such Holder not materially
misleading.
In the case of a Shelf Registration Statement and, to the extent
that the Issuer is maintaining an effective Exchange Offer Registration
Statement for any Participating Broker-Dealer pursuant to Section 2(a) above,
each Holder agrees that, upon receipt of any notice from the Issuer of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Notes pursuant to such Registration Statement until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(k) hereof, and, if so directed by the Issuer, such
Holder will deliver to the Issuer (at its expense) all copies in its possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Notes current at the time of receipt of
such notice. The Issuer will be deemed not to have used its best efforts to
cause a Registration Statement to become or remain effective during the
requisite period if the Issuer has voluntarily taken any action that resulted in
any Registration Statement not being declared effective and in Holders of
Registrable Notes covered thereby not being able to exchange or offer and sell
such Registrable Notes during that period or the delivery of a notice described
in Section 3(e)(vi) hereof unless (A) such action was required by applicable law
or (B) such action was taken by the Issuer in good faith and for valid business
reasons (but not including avoidance of the Issuer's obligations hereunder),
including a material corporate transaction; provided that, in any event, the
aggregate number of days in any consecutive twelve-month period for which a
Registration Statement is not effective or usable does not exceed 30 days. In
any event, any suspension pursuant to this paragraph shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders
shall have received copies of the supplemented or amended Prospectus necessary
to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuer.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
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5. Indemnification and Contribution.
(a) The Issuer agrees to indemnify and hold harmless (i) each Holder and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "controlling person")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Issuer by any of the
Holders expressly for use therein and provided further, that the Issuer will not
be liable to the Holders or any person controlling any Holder with respect to
any such untrue statement or omission made in any preliminary prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased the Notes
from any Holder in reliance upon a preliminary prospectus but was not sent or
given a copy of the Prospectus (as amended or supplemented) at or prior to the
written confirmation of the sale of such Notes to such person, unless such
failure to deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Issuer with Section 3 of this Agreement. The Issuer also
agrees to reimburse each Indemnified Holder for any and all fees and expenses
(including, without limitation, the fees and expenses of counsel) as they are
incurred in connection with enforcing such Indemnified Holder's rights under
this Agreement (including, without limitation, its rights under this Section 5).
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Holders with respect to which indemnity may be sought against
the Issuer, such Indemnified Holder (or the Indemnified Holder controlled by
such controlling person) shall promptly notify the Issuer in writing (provided,
that the failure to give such notice shall not relieve the Issuer of its
obligations pursuant to this Agreement unless such failure materially prejudices
the Issuer). Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid, as incurred, by the Issuer (regardless of whether it is ultimately
determined that an Indemnified Holder is not entitled to indemnification
hereunder). The Issuer shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for such Indemnified Holders, which firm shall be designated by the Holders. The
Issuer shall be liable for any settlement of any such action or proceeding
effected with the Issuer's prior written consent, which consent shall not be
withheld unreasonably, and the Issuer agrees to indemnify and hold harmless each
Indemnified Holder from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the written
consent of the Issuer.
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(b) Each Holder of Registrable Notes agrees, severally and not
jointly, to indemnify and hold harmless the Issuer and its directors, officers,
and any person controlling (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Issuer, and its officers, directors,
partners, employees, representatives and agents of each such person, to the same
extent as the foregoing indemnity from the Issuer to each of the Indemnified
Holders, but only with respect to claims and actions based on information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement. In case any action or proceeding shall be brought
against the Issuer or its directors or officers or any such controlling person
in respect of which indemnity may be sought against a Holder of Registrable
Notes, such Holder shall have the rights and duties given the Issuer, and the
Issuer, such directors or officers or such controlling person shall have the
rights and duties given to each Holder by the preceding paragraph. In no event
shall any Holder be liable or responsible for any amount in excess of the amount
by which the total received by such Holder with respect to its sale of
Registrable Notes pursuant to a Registration Statement exceeds (i) the amount
paid by such Holder for such Registrable Notes and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 5 is
unavailable to an indemnified party under Section 5(a) or Section 5(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Issuer, on the one hand, and the Holders, on the other hand, from their sale of
Registrable Notes or if such allocation is not permitted by applicable law, the
relative fault of the Issuer, on the one hand, and of the Indemnified Holder, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the Issuer, on the one
hand, and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuer or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 5(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Issuer and each Holder of Registrable Notes agree that it would
not be just and equitable if contribution pursuant to this Section 5(c) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Registrable Notes pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Registrable Notes plus (B) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or
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omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 5(c) are several in proportion to the respective principal amount of
Notes held by each of the Holders hereunder and not joint.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer represents and agrees
that (i) it has not entered into nor will the Issuer on or after the date of
this Agreement enter into any agreement which is inconsistent with the rights
granted to the Holders of Registrable Notes in this Agreement or otherwise
conflicts with the provisions hereof and (ii) the rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Issuer's other issued and outstanding
securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuer has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided, however, that no amendment, modification, supplement or
waiver or consent to any departure from the provisions of Section 5 hereof and
this Section 6(b) shall be effective as against any Holder of Registrable Notes
unless consented to in writing by such Holder. Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relate
exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that do not affect directly or indirectly the
rights of Holders whose securities are not being tendered pursuant to such
Exchange Offer shall be given by the Holders of a majority of the outstanding
principal amount of Registrable Securities subject to the Exchange Offer.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than an Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to an
Initial Purchaser, at the most current address given by such Initial Purchaser
to the Issuer by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is the address set forth in the
Purchase Agreement; and (iii) if to the Issuer, initially at the Issuer's
address set forth in the Purchase Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall
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be deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuer on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each 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.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
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If the foregoing is in accordance with your understanding of this
Agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Issuer and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
RANDALL'S FOOD MARKETS, INC.
By: /s/ LEE E. STRAUS
--------------------------------------
Name: Lee E. Straus
Title: Senior Vice President, Finance,
Secretary and Treasurer
Accepted and agreed to as of
the date first written above:
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
Acting severally on behalf of
themselves and the several
Initial Purchasers named
in Schedule I hereto
BY: BT SECURITIES CORPORATION
By: /s/ CHRISTINE BARBELLA-FOGGIA
- --------------------------------------
Name: Christine Barbella Foggia
Title: Vice President
<PAGE>
Schedule I
(Registration Rights Agreement)
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
PAINEWEBBER INCORPORATED
<PAGE>
Exhibit 4.5
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of September 8, 1997 (this
"Supplemental Indenture"), between RANDALL'S FOOD MARKETS, INC., a corporation
duly organized and existing under the laws of the State of Texas (the
"Company"), having its principal office at 3663 Briarpark, Houston, Texas 77042,
and MARINE MIDLAND BANK, a New York banking corporation and trust company, as
trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company and the Trustee are parties to the Indenture
dated as of June 27, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Indenture");
WHEREAS, the Company has requested and the Trustee has agreed to join
in the execution of this Supplemental Indenture in accordance with the terms of
Section 901 of the Indenture and subject to the conditions set forth herein;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
In consideration of the promises and mutual agreements herein
contained, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders, as follows:
SECTION 101. AMENDMENTS TO THE INDENTURE. The Indenture is hereby
amended as follows:
(a) By deleting Section 201 therefrom in its entirety and substituting
in lieu thereof the following new Section 201:
"SECTION 201. FORMS GENERALLY.
The Initial Notes shall be known as the "93/8% Senior Subordinated
Notes due 2007" and the Exchange Notes shall be known as the "93/8% Series
B Senior Subordinated Notes due 2007," in each case, of the Company. The
Notes and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required
or permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note. Each Note shall be
dated the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any
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2
other manner, all as determined by the officers of the Company executing
such Notes, as evidenced by their execution of such Notes.
Initial Notes offered and resold in reliance on Rule 144A to QIBs or
on another exemption under the Securities Act to institutional "Accredited
Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities
Act) ("IAIs") will be issued on the Issuance Date or thereafter in the form
of two permanent global Notes (with separate CUSIP numbers) substantially
in the form set forth in Sections 204 and 205 (each a "U.S. Global Note")
deposited with the Trustee, as custodian for the Depositary, duly executed
by the Company and authenticated by the Trustee as hereinafter provided.
One U.S. Global Note (which may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate) will represent
Initial Notes sold to QIB's, and the other will represent Initial Notes
sold to IAI's. The aggregate principal amount of each U.S. Global Note may
from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided. Transfers of Initial Notes from QIBs to IAIs, and
from IAIs to QIBs, will be represented by appropriate increases and
decreases to the respective amounts of the appropriate U.S. Global Notes,
as more fully provided in Section 307.
Initial Notes resold in reliance on Regulation S, if any, shall be
reissued in the form of temporary certificated Notes in registered form
substantially in the form set forth in Sections 204 and 205 (the "Temporary
Offshore Physical Notes"). The Temporary Offshore Physical Notes will be
registered in the name of, and held by, a temporary certificate holder
designated by BT Securities Corporation until the later of the completion
of the distribution of the Initial Notes and the termination of the
"restricted period" (as defined in Regulation S) with respect to the offer
and sale of such Initial Notes (the "Offshore Notes Exchange Date"). The
Company shall promptly notify the Trustee in writing of the occurrence of
the Offshore Notes Exchange Date and, at any time following the Offshore
Notes Exchange Date, upon receipt by the Trustee and the Company of a
certificate substantially in the form set forth in Section 203, the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
permanent certificated Notes in registered form substantially in the form
set forth in Sections 204 and 205 (the "Permanent Offshore Physical Notes")
in exchange for the Temporary Offshore Physical Notes of like tenor and
amount.
Initial Notes resold other than as described in the preceding
paragraphs, if any, shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Sections
204 and 205 (the "U.S. Physical Notes"). U.S. Physical Notes in certain
circumstances shall be transferred to all beneficial owners
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3
in exchange for their beneficial interests in the U.S. Global Notes as set
forth in Section 306.
The Temporary Offshore Physical Notes, Permanent Offshore Physical
Notes and U.S. Physical Notes are sometimes collectively herein referred to
as the "Physical Notes.""
(b) By deleting Section 307 therefrom in its entirety and substituting
in lieu thereof the following new Section 307:
"SECTION 307. SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement, or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Note to any IAI which is not a QIB
(excluding Non-U.S. Persons):
(i) The Note Registrar shall register the transfer of any
Initial Note, whether or not such Initial Note bears the Private
Placement Legend, if (x) the requested transfer is at least two years
after the original issue date of the Initial Note or (y) the proposed
transferee has delivered to the Note Registrar a certificate
substantially in the form set forth in Section 308.
(ii) Unless the proposed transferee is entitled to receive a U.S.
Physical Note as provided in Section 306, the proposed transferee
shall obtain a beneficial interest in the U.S. Global Note
representing Initial Notes held by IAIs, in which case, upon receipt
by the Note Registrar of the documents, if any, required by paragraph
(i), such transfer will be made in accordance with the rules and
procedures of the Depositary; PROVIDED, HOWEVER, that the Note
Registrar shall incur no liability hereunder as a result of the
failure of any IAI to deliver to the Note Registrar a certificate
substantially in the form set forth in Section 308.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Note to
a QIB (excluding Non-U.S. Persons):
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4
(i) If the Note to be transferred consists of U.S. Physical
Notes, Temporary Offshore Physical Notes or Permanent Offshore
Physical Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Initial Note stating, or has otherwise
advised the Company and the Note Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Initial Note stating, or has otherwise advised the Company and the
Note Registrar in writing, that it is purchasing the Initial Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it, or the person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning
of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial Note to be transferred consists of U.S. Physical Notes,
Temporary Offshore Physical Notes or Permanent Offshore Physical
Notes, or an interest in the U.S. Global Note representing Initial
Notes held by IAIs, upon receipt by the Note Registrar of instructions
given in accordance with the Depositary's and the Note Registrar's
procedures therefor, the Note Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S.
Global Note representing Initial Notes held by QIBs in an amount equal
to (x) the principal amount of the U.S. Physical Notes, Temporary
Offshore Physical Notes or Permanent Offshore Physical Notes, as the
case may be, to be transferred, and the Trustee shall cancel the
Physical Note so transferred or (y) the amount of interest in the U.S.
Global Note representing Initial Notes held by IAIs to be so
transferred (in which case the Note Registrar shall reflect on its
books and records the date and an appropriate decrease in the
principal amount of such U.S. Global Note).
(c) TRANSFERS BY NON-U.S. PERSONS PRIOR TO AUGUST 6, 1997. The
following provisions shall apply with respect to registration of any
proposed transfer of an Initial Note by a Non-U.S. Person prior to August
6, 1997:
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5
(i) The Note Registrar shall register the transfer of any
Initial Note (x) if the proposed transferee is a Non-U.S. Person and
the proposed transferor has delivered to the Note Registrar a
certificate substantially in the form set forth in Section 309 or (y)
if the proposed transferee is a QIB and the proposed transferor has
checked the box provided for on the form of Initial Note stating, or
has otherwise advised the Company and the Note Registrar in writing,
that the sale has been made in compliance with the provisions of Rule
144A to a transferee who has signed the certification provided for on
the form of Initial Note stating, or has otherwise advised the Company
and the Note Registrar in writing, that it is purchasing the Initial
Note for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the person on
whose behalf it is acting with respect to any such account, is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A. Unless clause (ii) below is
applicable, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Notes of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the appropriate U.S. Global Note
in an amount equal to the principal amount of the Temporary Offshore
Physical Note to be transferred, and the Note Registrar shall cancel
the Temporary Offshore Physical Notes so transferred; provided that if
the proposed transferee is an IAI, the proposed transferee delivers to
the Note Registrar a certificate substantially in the form set forth
in Section 308 and if the Company so requests, an opinion of counsel
setting forth the basis of the exemption from the Securities Act for
such transfer.
(d) TRANSFERS BY NON-U.S. PERSONS ON OR AFTER AUGUST 6, 1997. The
following provisions shall apply with respect to any transfer of an Initial
Note by a Non-U.S. Person on or after August 6, 1997:
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6
(i) (x) If the Initial Note to be transferred is a Permanent
Offshore Physical Note, the Note Registrar shall register such
transfer, (y) if the Initial Note to be transferred is a Temporary
Offshore Physical Note, upon receipt of a certificate substantially in
the form set forth in Section 309 from the proposed transferor, the
Note Registrar shall register such transfer and (z) in the case of
either clause (x) or (y), unless clause (ii) below is applicable, the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more Permanent Offshore Physical Notes of like tenor and
amount.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Note Registrar of instructions given in accordance with the
Depositary's and the Note Registrar's procedures therefor, the Note
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the appropriate U.S. Global Note
in an amount equal to the principal amount of the Temporary Offshore
Physical Note or of the Permanent Offshore Physical Note to be
transferred, and the Trustee shall cancel the Physical Note so
transferred.
(e) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to any transfer of an Initial Note to a
Non-U.S. Person:
(i) Prior to August 6, 1997, the Note Registrar shall register
any proposed transfer of an Initial Note to a Non-U.S. Person upon
receipt of a certificate substantially in the form set forth in
Section 309 from the proposed transferor and the Company shall
execute, and the Trustee shall authenticate and make available for
delivery, one or more Temporary Offshore Physical Notes.
(ii) On and after August 6, 1997, the Note Registrar shall
register any proposed transfer to any Non-U.S. Person (w) if the
Initial Note to be transferred is a Permanent Offshore Physical Note,
(x) if the Initial Note to be transferred is a Temporary Offshore
Physical Note, upon receipt of a certificate substantially in the form
set forth in Section 309 from the proposed transferor, (y) if the
Initial Note to be transferred is a U.S. Physical Note or an interest
in a U.S. Global Note, upon receipt of a certificate substantially in
the form set forth in Section 309 from the proposed transferor and (z)
in the case of either clause (w), (x) or (y), the Company shall
execute, and the Trustee shall authenticate and deliver, one or more
Permanent Offshore Physical Notes of like tenor and amount.
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7
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Note, upon receipt by the Note
Registrar of (x) the document, if any, required by paragraph (i), and
(y) instructions in accordance with the Depositary's and the Note
Registrar's procedures therefor, the Note Registrar shall reflect on
its books and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal amount of
the beneficial interest in the U.S. Global Note to be transferred and
the Company shall execute, and the Trustee shall authenticate and
deliver, one or more Permanent Offshore Physical Notes of like tenor
and amount.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Note Registrar shall deliver only Notes that
bear the Private Placement Legend unless either (i) the circumstances
contemplated by the fourth paragraph of Section 201 (with respect to
Permanent Offshore Physical Notes) or paragraph (a)(i)(x), (d)(i) or
(e)(ii) of this Section 307 exist or (ii) there is delivered to the Note
Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with
the provisions of the Securities Act.
(g) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions
on transfer of such Note set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this
Section 307. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Note
Registrar."
SECTION 201. MISCELLANEOUS.
(a) THE TRUSTEE. The recitals contained herein shall be taken as the
statements of the Company and the Trustee shall not assume responsibility for,
or be liable in respect of, the correctness thereof. The Trustee makes no
representation as to,
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8
and shall not be liable or responsible for, the validity or sufficiency of this
Supplemental Indenture.
(b) LIMITED EFFECT. Except as expressly amended hereby, all of the
provisions, covenants, terms and conditions of the Indenture are ratified and
confirmed, and shall remain in full force.
(c) COUNTERPARTS. This Supplemental Indenture may be executed by one
or more parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(D) GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE DEEMED TO BE
A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
RANDALL'S FOOD MARKETS, INC.,
a Texas corporation
By /s/ Lee E. Straus
-----------------------
Name: Lee E. Straus
Title: Senior Vice President,
Secretary & Treasurer
MARINE MIDLAND BANK,
as Trustee
By /s/ Frank J. Godino
-----------------------
Name: Frank J. Godino
Title: Assistant Vice President
<PAGE>
EXHIBIT 5
[LETTERHEAD OF SIMPSON THACHER & BARTLETT]
September 10, 1997
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Ladies and Gentlemen:
We have acted as special counsel for Randall's Food Markets, Inc., a Texas
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the issuance by the Company of
$150,000,000 aggregate principal amount of its 9 3/8% Series B Senior
Subordinated Notes due 2007 (the "Exchange Notes"). The Exchange Notes are to be
offered by the Company in exchange (the "Exchange") for $150,000,000 aggregate
principal amount of its outstanding 9 3/8% Senior Subordinated Notes due 2007
(the "Notes"). The Notes have been, and the Exchange Notes will be, issued under
an Indenture dated as of June 27, 1997 between the Company and Marine Midland
Bank, as Trustee (the "Trustee"), as amended by the First Supplemental Indenture
dated as of September 8, 1997 (the "Indenture").
We have examined the Registration Statement and the Indenture which has been
filed with the Commission as Exhibits to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals and the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, assuming the Indenture has been duly authorized and validly
executed and delivered by the parties thereto, when (i) the Indenture has been
duly qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), (ii) the Board of Directors of the Company, a duly constituted
and acting committee thereof or duly authorized officers thereof have taken all
necessary corporate action to approve the issuance and terms of the Exchange
Notes, the terms of the Exchange and related matters, and (iii) the Exchange
Notes have been duly executed, authenticated, issued and delivered in accordance
with the provisions of the Indenture upon the Exchange, we are of the opinion
that the Exchange Notes will constitute valid and legally binding obligations of
the Company, enforceable against the Company in accordance with their terms.
Our opinion set forth in the preceding sentence is subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not express any
opinion herein concerning any law other than the law of the State of New York.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
<PAGE>
Exhibit 8
[Letterhead of Simpson Thacher & Bartlett]
September 10, 1997
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Ladies and Gentlemen:
We have acted as special counsel for Randall's Food Markets, Inc., a
Texas corporation (the "Company"), in connection with the Registration Statement
on Form S-4 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the issuance by the
Company of $150,000,000 aggregate principal amount of its 9-3/8% Series B Senior
Subordinated Notes due 2007 (the "Exchange Notes"). The Exchange Notes are to
be offered by the Company in exchange (the "Exchange") for $150,000,000
aggregate principal amount of its outstanding 9-3/8% Senior Subordinated Notes
due 2007 (the "Notes"). The Notes have been, and the Exchange Notes will be,
issued under an Indenture dated as of June 27, 1997 (the "Indenture") between
the Company and Marine Midland Bank, as Trustee (the "Trustee").
<PAGE>
2
We have examined the Registration Statement and the Indenture which
has been filed with the Commission as an Exhibit to the Registration Statement.
In addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we hereby advise you that the statements made in the
Registration Statement under the caption "Certain U.S. Federal Income Tax
Consequences," insofar as they purport to constitute summaries of matters of
United States federal income tax law and regulations or legal conclusions with
respect thereto, constitute accurate summaries of the matters described therein
in all material respects.
<PAGE>
3
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the federal law of the
United States.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included therein.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BRIAN G. POPP and RONALD D. MOORE, ) Clerk, U.S. District Court
on behalf of Randalls Food Markets, ) Southern District of Texas
Inc. Employee Stock Ownership Plan, ) ENTERED
Randalls Food Markets, Inc. Hourly ) JUN 13 1997
Paid Employee Stock Ownership Plan )
and Randalls Food Markets, Inc. ) Michael N. Milby
Salaried Employee Stock Ownership ) Clerk of Court
Plan and on behalf of themselves and )
all others similarly situated, )
)
Plaintiffs, )
)
V. ) CIVIL ACTION NO. H-95-5400
)
RANDALLS FOOD MARKETS, INC., )
f/k/a RANDALLS' MANAGEMENT )
CORPORATION, ROBERT R. ONSTEAD, )
NANCY N. FRYE, RONNIE W. )
BARCLAY, JANICE R. SCHILMOELLER, )
BOBBY L. GOWENS, LEE STRAUS, )
FIRST INTERSTATE BANK OF TEXAS, )
N.A., BANK ONE, TEXAS, N.A., R. )
RANDALL ONSTEAD, JR., ARTHUR )
ANDERSEN AND CO., S.C. and )
ARTHUR ANDERSEN, L.L.P. a/k/a )
ANDERSEN WORLDWIDE and f/k/a )
ARTHUR ANDERSEN AND CO., TEXAS )
COMMERCE BANK f/k/a AMERITRUST )
TEXAS, N.A., TOWERS, PERRIN, )
FORSTER & CROSBY, INC. and )
MELTON & MELTON, L.L.P., )
) CLASS ACTION
Defendants. ) RICO
FINAL ORDER AND JUDGMENT:
FINAL APPROVAL OF SETTLEMENT
ESTABLISHMENT OF SETTLEMENT FUND,
APPOINTMENT OF SETTLEMENT ADMINISTRATOR,
AND APPROVAL OF PRELIMINARY PLAN OF DISTRIBUTION
<PAGE>
The parties have filed a Joint Motion for Final Approval of the
Settlement entered into by Plaintiffs Brian G. Popp and Ronald D. Moore, on
behalf of Randalls Food Markets, Inc. Employee Stock Ownership Plan, Randalls
Food Markets, Inc. Hourly Paid Employee Stock Ownership Plan and Randalls
Food Markets, Inc. Salaried Employee Stock Ownership Plan (collectively
"Randalls Employee ESOP" or the "ESOP" or the "Plan," which term includes,
following the conversion of the ESOP into a 401(K) plan, such 401(K) plan)
and on behalf of themselves and all others similarly situated (the "Plaintiff
Class") (collectively the "Plaintiffs") and Defendants Randalls Food Markets,
Inc. f/k/a Randalls' Management Corporation ("Randalls"), Robert R. Onstead,
Nancy N. Frye, Ronnie W. Barclay, Janice R. Schilmoeller, Bobby L. Gowens,
Lee Straus, and Randall Onstead, Jr. (collectively the "Individual
Defendants" and, together with Randalls, the "Randalls Defendants"), Bank
One, Texas, N.A. ("Bank One"), Arthur Andersen LLP and Andersen Worldwide,
S.C., (incorrectly identified in this Action as Arthur Andersen and Co., S.C.
and Arthur Andersen L.L.P. a/k/a Andersen Worldwide and f/k/a Arthur
Andersen and Co., ("Arthur Andersen") and Texas Commerce Bank f/k/a
Ameritrust Texas, N.A. ("Texas Commerce Bank"), Wells Fargo Bank (Texas),
National Association f/k/a First Interstate Bank of Texas, N.A. ("First
Interstate"), Melton & Melton, L.L.P. ("Melton & Melton") and Towers, Perrin,
Forster & Crosby, Inc. ("Towers Perrin"). (Docket Entry Nos. 155 and 157).
2
<PAGE>
Plaintiffs and Clements, O'Neill, Pierce & Nickens, L.L.P., and
Dennis H. Taylor, J.D. and P.C. ("Class Counsel") have applied for an award
of attorneys' fees and expenses incurred in prosecuting this action. (Docket
Entry No. 150) This court will address the application in a separate order.
Collectively, First Interstate, Melton & Melton and Towers Perrin
constitute the "Original Settling Defendants" and their settlement with
Plaintiffs constitutes the "Original Settlement." The remaining Defendants
together constitute the "Second Settlement Group" and their settlement with
Plaintiffs constitutes the "Second Settlement." Collectively the Original
Settling Defendants and the Second Settlement Group constitute the
"Defendants" and the Defendants and the Plaintiffs collectively constitute
the "Parties." Collectively, the Original Settlement and the Second
Settlement constitute the "Final Settlement."
In its verified original complaint, first amended original
complaint, and second amended original complaint, Plaintiffs asserted
violations by Defendants of the Employee Retirement Security Act ("ERISA");
the Racketeer-Influenced and Corrupt Practices Act ("RICO"); the Securities
Exchange Act of 1934; the Texas Securities Act; section 27.01 of the Texas
Business and Commerce Code; and various common law duties and
responsibilities. Plaintiffs alleged that Defendants fraudulently induced
Randalls employees to join the Plan; manipulated the price of stock purchased
from and sold to the Plan by Randalls insiders to the benefit of
3
<PAGE>
Randalls insiders and to the detriment of the Plan and its participants;
failed to register Randalls stock and the ESOP under the securities laws;
failed to disclose facts material to the Plan participants' decisions to
invest; deprived the participants of voting rights; engaged in illegal
transactions with the Plan; negligently performed professional services;
failed to disclose their actions; and conspired to commit the unlawful
actions. In addition to damages, fees and costs, Plaintiffs sought an
accounting; a declaration of rights; removal of the ESOP trustee, auditors,
and appraisers; termination of the ESOP; distribution of the ESOP assets; and
replacement of the ESOP with an appropriate retirement vehicle with
diversified investments.
On November 14, 1996, Plaintiffs and Defendant Melton & Melton executed
a settlement agreement after the first court-ordered mediation in this case.
On December 6, 1996, after another mediation, Plaintiffs and Defendants First
Interstate and Towers Perrin executed settlement agreements. In 1997,
Plaintiffs and the remaining Defendants, the Randalls Defendants, Bank One,
Arthur Andersen, and Texas Commerce Bank, executed a settlement agreement.
On April 1, 1997, this court certified a Class under Rule 23(a) and (b)(3) of
the Federal Rules of Civil Procedure; approved the action as a derivative
action on behalf of the ESOP; and preliminarily approved the Original
Settlement, the Second Settlement, and the Final Settlement. (Docket Entry
Nos. 136 and 137). Notice of the derivative and class action and the
settlements was provided to the members of the Class, as approved by this
court, and
4
<PAGE>
as provided in the notices, the form of which was filed on April 8, 1997.
(Docket Entry Nos. 140, 147, 148). The Class members were notified of their
right to appear and be heard at a final fairness hearing by filing and
serving a notice of appearance, and of their right to opt out of the Class and
to hire counsel of their own choosing to represent their interests at their
own expense. No member of the Class objected or opted out. This court held a
formal fairness hearing on June 2, 1997. (Docket Entry No. 161).
The parties' joint motion requests final approval of the Final
Settlement or alternatively, final approval of the Original Settlement. The
court has considered all papers filed and proceedings had herein. The court
has held an evidentiary hearing and heard arguments of counsel. Based on the
pleadings, the motions, the record, and the applicable law, this court enters
the following order approving the Settlement, establishing a Settlement Fund,
appointing a Settlement Administrator, and approving a Preliminary Plan of
Distribution.
For purposes of this Order, this court adopts and incorporates the
definitions in this Order and the terms of the Second Settlement. The court
confirms and makes final certification of this Action as a class action under
FED. R. CIV. P. 23 with the Class as defined in this court's Order Approving
Derivative Action and Certifying Class, dated April 1, 1997. (Docket Entry
No. 136).
5
<PAGE>
This court has jurisdiction over the subject matter of this litigation,
over all actions within this litigation and over all parties to this
litigation, including all Class members. Generally, all persons and entities
who validly request exclusion from a class are not members of the class. In
this case, no persons or entities has objected to or opted out of the Class.
Based on a review of the record, the settlement agreements, all other
papers filed in the case and the proceedings therein, and the arguments heard
at the Final Approval Hearing, and having specifically considered, in
accordance with PARKER V. ANDERSON, 667 F.2d 1204, 1209 (5th Cir.), CERT.
DENIED, 103 S. Ct. 63 (1982), whether the settlement was a product of fraud
or collusion; the complexity; expense and likely duration of the litigation;
the stage of the proceedings and the amount of discovery completed; the
factual and legal obstacles to prevailing on the merits; the possible range
of recovery and the certainty of damages; and the respective opinions of the
participants, including all counsel, the Representative Plaintiffs, and the
absent Class members, the court finds the Original Settlement, the Second
Settlement, the Final Settlement, and each of the settlements constituting
the foregoing settlements to be fair, adequate, and reasonable, and finds
that they should be approved.
The court specifically finds that none of the foregoing settlements is
the product of fraud or collusion. All of the settlements have been singularly
6
<PAGE>
characterized by vigorous representation by all counsel of their respective
clients and hard-fought arm's length negotiations by all counsel.
The court finds that this Action is complex and expensive to pursue and
defend and was likely to have endured for a substantial period of time but
for the settlements. This Action involved derivative and class allegations
under ERISA and class allegations under federal and state securities
statutes, including Section 10(b) and Rule 10b-5 of the Securities Exchange
Act of 1934 and Article 581-33 of the Texas Securities Act, section 27.01 of
the Texas Business and Commerce Code, and state common law allegations
against a variety of corporate and individual Defendants bearing different
relationships to the Plaintiffs under the different theories of law asserted
on behalf of both the ESOP and the Class. The court further finds that
settlement was achieved at a time of maximum uncertainty for all parties in
that motions to dismiss some or all of the claims against them were pending
on behalf of all Defendants. The court also finds that, before settlement,
extensive written discovery requests had been propounded by Plaintiffs and
responded to by Defendants, including extensive document production, and oral
depositions had been begun. This court finds that a much greater expense of
funds and attorney time would have been required by the parties to prepare
the case for trial, but for the settlements. The court finds that, at the
time of settlement, there were substantial factual and legal obstacles to
either Plaintiffs or Defendants prevailing on the merits on the different
7
<PAGE>
claims made against the different Defendants. The court has reviewed the
settlement terms for all settlements and finds that the all settlements
individually and together are well within the possible range of ultimate
recovery as it can be ascertained at this stage of the proceedings. By
executing the settlement documents, including the settlement agreements
attached as Exhibits "A," "B," "C," and "D" hereto, and other documents filed
with the court in connection with the settlement, all parties' counsel have
affirmed their belief that the settlements are in the best interests of their
clients.
In accordance with the Conditional Settlement Agreement, Bank One resigned
from its position as trustee of the Randalls' ESOP effective May 17, 1997. At
that time, Randalls appointed the U.S. Trust Company of California to serve
as trustee, and it accepted the appointment. The court finds that the
resignation and replacement of Bank One as trustee of the Randalls ESOP has
been performed in a manner satisfying the relevant provisions of ERISA and
with the documents and instruments governing the ESOP.
This court, therefore, approves the Final Settlement, Second Settlement,
and Original Settlement, and each settlement constituting part of each of the
foregoing settlements and finds that they are in all respects fair,
reasonable, and adequate in accordance with Rule 23 of the Federal Rules of
Civil Procedure, and directs implementation of the terms and provisions of
the Final Settlement and each of the constituent settlements.
8
<PAGE>
This court decrees that neither the Final Settlement, nor this Order, nor
the fact of settlement, is an admission or concession by Defendants of any
liability or wrongdoing whatsoever. This Order is not a finding of the
validity or invalidity of any claims in the action or of any wrongdoing by
Defendants. Neither the Final Settlement, nor this Order, nor the fact of
settlement, nor the settlement proceedings, nor the settlement negotiations,
nor any related documents, shall be used or construed as an admission of any
fault, liability or wrongdoing by any person or entity or be offered or
received in evidence as an admission, concession, presumption or inference
against any party in any proceeding. Nothing in this paragraph shall be
interpreted to preclude any proceeding to enforce the Final Settlement,
should such be necessary.
Each Releasor, as defined below, is hereby deemed conclusively to have
fully, finally, and forever compromised, settled, discharged, dismissed and
released the Released Claims, as defined below, known or unknown, against the
Released Persons, as defined below.
"Releasors" and "Released Persons" shall each mean and include each
plaintiff, including the representative Plaintiffs and the Class members, and
each Defendant and the Releasors' and Released Persons' respective agents,
employees, predecessors, affiliates, successors, assigns, directors and
attorneys. "Released Claims" means and includes any and all claims which have
been or could have been asserted by, on behalf of, and/or for the benefit of,
any Releasor against any Released
9
<PAGE>
Person, including, without limitation, any and all claims, actions,
allegations, causes of action, demands, debts, rights or liabilities, known
or unknown, asserted or unasserted, liquidated or unliquidated, fixed or
contingent, accrued or unaccrued, of any nature whatsoever, and in any
capacity whatsoever, as of the date of this Order, arising from or related to
the facts, transactions, events, occurrences, disclosures, statements, acts,
or omissions or failures to act that are the subject matter of the action or
arising out of or related to the subject matter of the action that were or
could have been asserted in the action or that occurred before the entry of
this order, including all claims for contribution, indemnity and set-off that
could have been asserted between or among the Released Persons.
Notwithstanding the generality of the foregoing, Released Claims specifically
include without limitation any and all claims and causes of action, at law or
in equity, in any capacity, arising from or related to acts, omissions, or
consequences relating to: (i) the creation, operation, administration,
treatment or disposition of the ESOP occurring prior to entry of this Order,
including, without limitation, all transactions involving Randalls' common
stock and all valuations of such stock; (ii) any loans, loan applications,
extensions of credit, and/or other bank services provided to the ESOP; (iii)
any appraisals or other valuation of any stock or other asset of the ESOP;
(iv) all transactions involving Randalls' common stock, including any
purchase, sale or trade of stock and/or the acquisition or disposition of any
other asset of the ESOP; (v) any and all investment decisions
10
<PAGE>
relating to or affecting the ESOP; (vi) participation by any Released Person
in any credit facility, loan or other extension of credit (including, without
limitation, syndicated loans, personal loans, guaranties, letters of credit,
debt restructuring, and other financing of any type or description) to the
sponsor or other parties related to or affiliated with the ESOP; (vii) all
events and occurrences in connection with the proposed transactions between
Randalls, certain shareholders of Randalls and RFM Acquisition LLC, an
affiliate of Kohlberg Kravis Roberts & Co., contemplated by the subscription
agreement and the voting, repurchase and shareholders agreement, each dated
as of April 1, 1997, and each among Randalls, RFM Acquisition LLC and the
other parties thereto, including the exhibits thereto, including, without
limitation, the signing of such agreements and all terms and transactions
contemplated thereby relating to the ESOP (the "KKR Transaction"); (viii)
the resignation and replacement of Bank One as trustee; or (ix) the
resignation and replacement of Arthur Andersen as appraiser, but in each case
described in this sentence only those claims that were or could have been
asserted in the Action or the factual basis for which occurred prior to entry
of this order.
Nothing in this definition of "Released Claims" shall be construed to
include the release, forgiveness or compromise of any indebtedness, security,
guaranty, or other obligation owing by any of the Class members or Randalls
Defendants to First Interstate, Bank One and/or Texas Commerce, such
obligations
11
<PAGE>
being expressly excepted and preserved from any such release and not intended
to be released, waived or otherwise compromised in any way, except for
contribution, indemnification, and set-off, which are separately dealt with
in this Order.
"Unknown claims" means any Released Claims that any Releasor does not
know or suspect to exist in his, her or its favor at the time of the release
of the Released Persons which, if known by him, her, or it, might have
affected his, her, or its settlement with and release of the Released
Persons, or might have affected his, her, or its decision not to object to
this settlement. Solely with respect to any and all Released Claims, the
parties stipulate and agree that, upon the date of entry of this order, each
party shall expressly waive and relinquish and the other Releasors shall be
deemed to and by operation of this order shall waive and relinquish, to the
fullest extent permitted by law, any and all provisions, rights, and benefits
conferred by any law of the United States or any state or territory of the
United States, or principle of common law, which provides that a general
release does not extend to claims which the Releasor does not know or suspect
to exist in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the Released Person.
Each of the parties and other Releasors may hereafter discover facts in
addition to or different from those which he or she now knows or believes to
be true with respect to the subject matter of the Released Claims, but each
stipulates and
12
<PAGE>
agrees that each party does and each other Releasor shall be deemed to, upon
the date of entry of this order, fully, finally, and forever compromise,
settle and release any and all Released Claims, known or unknown, suspected
or unsuspected, contingent or non-contingent, whether or not concealed or
hidden, which now exist, or heretofore have existed upon any theory of law or
equity, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or
additional facts. Releasors acknowledge that the foregoing Release was
separately bargained for and a key element of the Final Settlement of which
this Release is a part.
All Released Persons and all other persons who are, have been or could
have been named as Defendants in this Action, are enjoined from instituting,
prosecuting or continuing to prosecute, either directly, representatively, or
in any other capacity, against any Released Person, any action, claim,
demand, right, or cause of action, including, without limitation, claims for
contribution, reimbursement or indemnification, or any theory, whether by way
of third or subsequent-party complaint, cross-claim, separate action, or
otherwise, and whether under state or federal law, for recovery in whole or
in party of any liability or damages such persons may incur in connection
with the Released Claims. If the Second Settlement does not become final and
effective in accordance with its terms and conditions and this order is
vacated, in whole or in part, with respect to the Second Settlement Group, the
13
<PAGE>
Second Settlement Group shall nevertheless continue to be enjoined from
instituting, prosecuting or continuing to prosecute any action, claim,
demand, right or cause of action, including, without limitation, claims for
contribution, reimbursement or indemnification (or any other theory) and from
filing or pursuing any claim, complaint, cross-claim, separate action or
other proceeding against the Original Settling Defendants in connection with
the Released Claims, and the Original Settling Defendants shall continue to
be enjoined from instituting, prosecuting or continuing to prosecute any
action, claim, demand, right or cause of action, including, without
limitation, claims for contribution, reimbursement or indemnification (or any
other theory) and from filing or pursuing any claim, complaint, cross-claim,
separate action or other proceeding against the Second Settlement Group in
connection with the Released Claims. Furthermore, notwithstanding whether the
Second Settlement becomes final and effective, all claims and causes of
action asserted by any or all members of the Second Settlement Group against
any or all of the Original Settling Defendants and all claims and causes of
action asserted by any or all members of the Original Settlement group
against any or all of the Second Settlement Group for contribution, indemnity
and/or set-off shall be deemed released in their entirety. All claims for
contribution, reimbursement or indemnification (or any other theory) are
released as between or among members of the Second Settlement Group, unless
the
14
<PAGE>
Second Settlement does not become final and effective in accordance with its
terms and conditions and this order is vacated with respect to the Second
Settlement Group.
Clements, O'Neill, Pierce & Nickens, L.L.P. and Dennis H. Taylor, J.D.
P.C. ("Class Counsel") and Randalls shall mutually select a bank and Class
counsel shall set up the necessary bank account and attend to other matters
necessary to establish a qualified Settlement Fund under Treasury Regulation
Section 1.468B-1 (the "Settlement Fund") to hold the proceeds of the
settlement. The settlement payment by the Original Settling Defendants shall
be made upon entry of this order and establishment of the bank account.
Although the Second Settlement shall become final upon entry of this Order,
it is contemplated, but not required, that the settlement payment by the
Second Settlement Group will be made upon Randalls obtaining financing in an
amount sufficient to establish the Settlement Fund as a result of the
proposed equity investment contemplated by a transaction between Randalls and
an affiliate of Kohlberg Kravis Roberts & Co. The bank account for the
Settlement Fund shall be interest-bearing, with all interest paid to the
Settlement Fund, subject to the terms of the last sentence of this paragraph,
for the benefit of the Plaintiffs. The Settlement Fund shall be held intact
until the expiration of the time for all appeals from this order. If the
Second Settlement is not ultimately approved or the conditions precedent
thereto are not met, the funds paid into the Settlement Fund by or on behalf
15
<PAGE>
of the Second Settlement Group, plus all interest earned thereon, shall be
returned to the payor of such amount.
The court finds this to be a complicated case requiring expert knowledge
and professional capabilities in matters of administration of pension funds
subject to regulation by the Internal Revenue Service ("IRS") and the
Department of Labor ("DOL") under ERISA, as well as requiring actuarial and
accounting skill and skill in matters of account and of difficult computation
of damages. Therefore, in accordance with Federal Rule of Civil Procedure 53
and the agreement of the parties, the court finds this case to be appropriate
for the appointment of a master (hereinafter the "Settlement
Administrator") to administer the Settlement Fund, including INTER
ALIA, to make disbursements therefrom, to prepare and file tax returns,
and to pay administrative expenses of the Settlement, including reasonable
and necessary attorneys' fees and expenses incurred in connection with
administration of the Settlement; to prepare and propose for court approval,
in cooperation with Class Counsel, a Final Plan of Distribution of the cash
balance of the Settlement Fund after payment of court-approved costs and
expenses and a portion of the attorneys' fees (the "Net Settlement Fund");
to seek approval of the allocation methodology of the Final Plan of
Distribution by the IRS, subject to ERISA and Internal Revenue Code
restrictions; to distribute the cash balance of the Net Settlement Fund to
present and former Plan participants in accordance with the court-approved
Final Plan of
16
<PAGE>
Distribution; and to perform such other services and pay such other amounts
as are reasonable and necessary in connection with the administration of the
Settlement Fund.
The Settlement Administrator shall be reasonably compensated for its
services in accordance with community standards for professional actuaries
and fund administrators.
Class Counsel is authorized and empowered to enter into a representation
agreement with the Settlement Administrator on such reasonable and customary
terms as are consistent with the other provisions hereof, including
specifically, but not by way of limitation, indemnification of the Settlement
Administrator for any and all claims, demands and causes of action other than
for gross negligence or fraud.
The Settlement Administrator shall perform the functions described above
and shall make its reports to the court on a quarterly basis in connection
with the administration of the Settlement Fund, including accountings of all
costs and expenses of the Settlement Fund and its administration, all tax
returns, the allocation and distribution of funds, and the Settlement
Administrator's requests for compensation. The Settlement Administrator
shall file its reports with the clerk of the court and serve them upon Class
counsel and counsel for Randalls Food Markets, Inc. Additional reports shall
be filed and served as necessary.
17
<PAGE>
Randalls shall pay all costs of notice to the Class, costs of court, and
administrative costs of distribution of the settlement, including the costs
of the court-appointed Settlement Administrator and the costs of allocating
and distributing cash settlement proceeds. Except for the costs of mailing
notice (which shall be paid by Randalls), Randalls' obligation in this
paragraph shall not exceed $200,000. Any costs in excess of $200,000 shall
be paid from the Settlement Fund and approved by the court on a quarterly
basis. To the extent possible, notice to the Class shall be made in
conjunction with the mailing of periodic reports of the Randalls Employee
ESOP.
The court finds that Bass Consultants, Inc. is the appropriate entity to
administer the Settlement Fund and perform the functions described above and
to make its reports to the court. Therefore, Bass Consultants, Inc. is
appointed Settlement Administrator in this Action.
After satisfaction of court-approved expenses and a portion of the
attorneys' fees, any other court-approved expenses, and court approval of the
Final Plan of Distribution, the funds remaining in the Settlement Fund not
allocated as attorneys' fees, including interest, (the Net Settlement Fund)
shall be deposited in the ESOP for distribution to Class members.
The proper allocation of the Settlement Fund among the members of the
Plaintiff Class shall be the sole responsibility of the Class and the
Settlement
18
<PAGE>
Administrator, provided that the allocation may not contradict any provision
of the Randalls Employee ESOP or ERISA, and shall be approved by the court.
Allocation of settlement proceeds to Class members from the Net
Settlement Fund shall not be made until after approval by the IRS of the
allocation methodology subject to ERISA and Internal Revenue Code restrictions.
Before any distribution of settlement proceeds from the Net Settlement
Fund to Class members be made, the Settlement Administrator and Class Counsel
shall apply to the court for approval of a Final Plan of Distribution meeting
the criteria set out herein.
Class members shall be given notice of the terms of the proposed Final
Plan of Distribution and of the Hearing to Approve the Final Plan of
Distribution and shall have an opportunity to appear at the hearing and to
object to the Final Plan of Distribution without affecting the finality of
this Final Order and Judgment. Randalls Food Markets, Inc. shall bear all
costs of notice to the Class.
After approval by this court of the Final Plan of Distribution, the Net
Settlement Fund shall be distributed to the ESOP in respect of Class members
in the manner set out in the Final Plan of Distribution. It is anticipated
that closed accounts for former participants of the ESOP will be reactivated
and that the cash balance of these reactivated accounts will then be
distributed from the ESOP to the former Plan participants.
19
<PAGE>
This court dismisses this Action on the merits, with prejudice, except
as herein provided.
Without affecting the finality of this order, this court retains
continuing jurisdiction: (a) over administration and implementation of the
Final Settlement and/or the Original Settlement; (b) over disposition of the
Settlement Fund and all distributions to the ESOP and Class members, pursuant
to further orders of this court; (c) over the Action until the Final
Settlement has been consummated and each and every act agreed to be performed
by the parties shall have been performed pursuant to the Final Settlement;
(d) over all parties to the Action and all Class members for the purpose of
enforcing and administering the final settlement and/or Original Settlement
and this order; and (e) for the purpose of deciding the pending and any
supplemental applications for fees and expenses as set forth herein or in the
settlement agreements.
If the Second Settlement does not become final and effective in
accordance with its terms and conditions, then this Order shall be vacated
with respect to the Second Settlement Group and the Second Settlement and all
orders entered in connection therewith shall be rendered null and void,
PROVIDED THAT (1) as to expenses already paid or incurred, the provisions of
the Second Settlement as to who shall bear the costs of identification and
notice to the Plaintiff Class shall still apply; and (2) the Action shall be
reinstated as to the Second Settlement Group; and (3) this Order approving
the Original Settlement shall not be vacated and shall have full effect with
20
<PAGE>
respect to the Original Settling Defendants, and the Action shall be, and it
is, dismissed with prejudice as to the Original Settling Defendants, who are
hereby deemed Released Persons and as to whom the Released Claims are hereby
deemed released; and (4) all claims and causes of action asserted or which
could have been asserted by any Defendant against any other Defendant for
contribution, indemnity and/or set off shall be deemed released in their
entirety and all Defendants shall be barred and enjoined from asserting any
and all such claims and causes of action, except as between members of the
Second Settlement Group.
In the event that the Second Settlement does not become final, the terms
of the Final Order and Judgment establishing the Settlement Fund, approving
the Preliminary Plan of Distribution, and appointing the Settlement
Administrator will be adjusted solely insofar as necessary to vacate terms
referring exclusively to the Second Settlement or dependent upon its
finalization. The recovery from the Original Settlement shall be placed in a
Settlement Fund established in accordance with the Final Order and Judgment.
21
<PAGE>
While the court intends this Judgment to be a Final Judgment upon which
an appeal lies as contemplated by FED. R. CIV. P. 54(a), if, for any reason,
this Judgment is determined not to be a final judgment under FED. R. CIV. P.
54(a), then this court directs the entry of a Final Judgment under FED. R.
CIV. P. 54(b) and finds that there is no just reason for delay.
SIGNED on June 13, 1997, at Houston, Texas.
-------------
/s/ Lee H. Rosenthal
---------------------------------------
Lee H. Rosenthal
United States District Judge
22
<PAGE>
A
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BRIAN G. POPP, ET AL., )
)
Plaintiffs, )
) C.V. H-95-5400
VS. ) JURY DEMANDED
)
RANDALLS FOOD MARKETS, INC., ET )
AL., )
) CLASS ACTION
) -----------
Defendants. ) RICO
) ----
SETTLEMENT AGREEMENT
--------------------
On the 14th day of November, 1996, the parties (and their respective
counsel) assembled at the Houston Mediation Center for the purpose of
mediation. Upon completion of the mediation process, the parties have
agreed to settle their dispute upon the following terms and conditions:
1. The parties to this settlement are:
a. Brian G. Popp, et al. individually, derivatively, and on
behalf of the Plaintiff classes ("Plaintiffs")
b. Melton & Melton, L.L.P. ("Melton & Melton").
2. The parties have settled all claims and controversies between
them, asserted or assertable in this case.
3. The consideration to be given for this settlement is as follows:
a. $175,000.00 cash to be paid by Melton & Melton to or for
the benefit of Plaintiffs, such payment to be made
conditioned on the following:
1. The Court will certify an appropriately defined
class of all current and former Randalls' employees
broad enough to cover the auditing, accounting, and
other services performed by, or contracted from,
Melton & Melton for either the Randalls Defendants
(as that term is commonly used in this litigation)
or the Randalls ESOPs:
2. Subject to the Court granting leave to do so, the
plaintiffs will file an amended complaint
eliminating all causes of action against Melton &
Melton for violations of RICO, federal and state
securities laws, and statutory and common law fraud:
<PAGE>
3. The Court approves the settlement.
b. Plaintiffs' counsel shall be responsible for initiating
and obtaining class certification and Court approval of
this settlement, with the cooperation of Melton & Melton's
counsel.
4. The parties agree to release and discharge each other and their
agents, employees, and attorneys from any and all claims, demands, or suits,
known or unknown, fixed or contingent, liquidated or unliquidated, whether or
not asserted in the above case, as of this date, arising from or related to
the events and transactions which are the subject matter of this case.
5. Each of the undersigned parties warrants and represents to the
other (i) that such party has the authority to enter into this settlement and
(ii) that the claims, suits, rights, and/or interests which are the subject
matter hereto are owned by the party asserting same.
6. Attorneys for the Plaintiffs shall deliver drafts of further
documentation to effectuate the settlement as soon as practicable. The
parties agree to cooperate with each other in the drafting and execution of
such additional documents as are reasonably requested or required to
implement the terms and spirit of this Agreement. If any dispute arises with
regard to the interpretation and/or performance of this Agreement, or any of
its provisions, the parties agree to attempt to resolve same by phone
conference with the Mediator who facilitated this settlement. If the parties
cannot resolve their differences by phone conference, then each agrees to
schedule one day of arbitration with the Mediator serving as Arbitrator
within thirty (30) days to resolve the disputes and to share the costs of
same equally. If a party refuses to arbitrate, then that party may not
recover attorneys' fees or costs in any litigation brought to construe or
enforce this Agreement.
7. This Agreement is made and performable in Harris County, Texas
and shall be construed in accordance with the laws of the State of Texas.
8. Any party to this Agreement may file this Agreement with the
Court. IT IS AGREED, HOWEVER, THAT THIS AGREEMENT SHALL BE ENFORCEABLE AS A
CONTRACT EVEN IF A PARTY DISPUTES OR REJECTS THIS AGREEMENT BEFORE THIS
AGREEMENT IS FILED WITH THE COURT.
9. Each of the parties hereby acknowledge as follows:
a. The mediator is not the attorney of any party.
b. Each party has been advised by their respective attorney
with regard to this Agreement.
c. Each party has read this Agreement and has entered into
this Agreement freely and without duress.
d. Although the mediator has provided a basic outline of this
Agreement to the parties' counsel as a courtesy to
facilitate the final resolution of this dispute,
<PAGE>
each party and counsel has completed the Agreement to
conform to their respective agreement and the mediator has
no responsibility relating to the drafting of this
Agreement.
10. The amount of the settlement shall be kept confidential until the
application for Court approval of this settlement is filed with the Court.
Signed this 14th day of November, 1996.
---- --------
PLAINTIFFS DEFENDANT
BRIAN POPP AND RONALD MOORE, ET MELTON & MELTON, L.L.P.
AL.
By: /s/ Lucas T. Elliot
By:/s/ J. Eugene Clements --------------------------------
------------------------------- Thomas C. Godbold
J. Eugene Clements Lucas T. Elliot
Clements O'Neill Pierce & Nickens LLP Fulbright & Jaworski LLP
1000 Louisiana, Suite 1800 1301 McKinney, Suite 5100
Houston, Texas 77002 Houston, Texas 77010-3095
ATTORNEY FOR PLAINTIFFS ATTORNEYS FOR MELTON & MELTON,
L.L.P.
<PAGE>
B
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BRIAN G. POPP, ET AL., )
)
PLAINTIFFS, )
)
VS. ) CASE NO. 95-CV-5400
)
RANDALLS FOOD MARKET, ET AL., )
)
DEFENDANTS. )
SETTLEMENT AGREEMENT
--------------------
On the 6th day of December, 1996, the parties (and their respective
counsel) assembled at the Houston Mediation Center for the purpose of
mediation. Upon completion of the mediation process, the parties below have
agreed to settle their dispute upon the following terms and conditions:
1. The parties to this settlement are:
a. Brian G. Popp, et al., individually, and on behalf of
the Plaintiff classes.
b. Wells Fargo Bank (Texas) National Association, F/K/A
First Interstate Bank of Texas, N.A.
2. The parties have settled all claims and controversies between them,
asserted or assertable in this case.
3. The consideration to be given for this settlement is as follows:
a. $955,000 cash to be paid by Wells Fargo to or for the benefit of
Plaintiffs, such payment to be made only after certification of the
Plaintiff classes and approval by the court of this settlement.
b. Plaintiffs' counsel shall be responsible for initiating and
obtaining class certification and Court approval of this settlement,
with the cooperation of Wells Fargo's counsel.
4. In the event any non-settling Defendant recovers on a claim for
contribution or indemnity against Wells Fargo, Plaintiffs
<PAGE>
hereby indemnity Wells Fargo to the full extent of any amount awarded under
such contribution and indemnity claim.
5. The parties agree to release and discharge each other and their
agents, employees, and attorneys from any and all claims, demands, or suits,
known or unknown, fixed or contingent, liquidated or unliquidated, whether or
not asserted in the above case, as of this date, arising from or related to
the events and transactions which are the subject matter of this case.
6. Each of the undersigned parties warrants and represents to the
other (i) that such party has the authority to enter into this settlement and
(ii) that the claims, suits, rights, and/or interests which are the subject
matter hereto are owned by the party asserting same.
7. Attorneys for the Plaintiffs shall deliver drafts of further
documentation to effectuate the settlement as soon as practicable. The
parties agree to cooperate with each other in the drafting and execution of
such additional documents as are reasonably requested or required to
implement the terms and spirit of this Agreement. If any dispute arises with
regard to the interpretation and/or performance of this Agreement, of any of
its provisions, the parties agree to attempt to resolve same by phone
conference with the Mediator who facilitated this settlement. If the parties
cannot resolve their differences by phone conference, then each agrees to
schedule one day of arbitration with the Mediator serving as Arbitrator
within thirty (30) days to resolve the disputes and to share the costs of
same equally. If a party refuses to arbitrate, then that party may not
recover attorneys' fees or costs in any litigation brought to construe or
enforce this Agreement.
8. This Agreement is made and performable in Harris County, Texas, and
shall be construed in accordance with the laws of the State of Texas.
9. Any party to this Agreement may file this Agreement with the Court.
IT IS AGREED, HOWEVER, THAT THIS AGREEMENT SHALL BE ENFORCEABLE AS A CONTRACT
EVEN IF A PARTY DISPUTES OR REJECTS THIS AGREEMENT BEFORE THIS AGREEMENT IS
FILED WITH THE COURT.
10. Each of the parties hereby acknowledge as follows:
a. The mediator is not the attorney of any party.
b. Each party has been advised by their respective attorney with
regard to this Agreement.
2
<PAGE>
c. Each party has read this Agreement and has entered into this
Agreement freely and without duress.
d. Although the mediator has provided a basic outline of this
Agreement to the parties' counsel as a courtesy to facilitate
the final resolution of this dispute, each party and counsel
has completed the Agreement to conform to their respective
agreement and the mediator has no responsibility relating to
the drafting of this Agreement.
11. The amount of the settlement shall be kept confidential until the
application for Court approval of this settlement is filed with the Court.
Signed this 6th day of December, 1996.
PLAINTIFFS DEFENDANT
BRIAN POPP AND RONALD MOORE, WELLS FARGO BANK (TEXAS), N.A.
ET AL.
By:/s/ J. Eugene Clements By: /s/ Ted Minick
------------------------ ----------------------------
Name: J. EUGENE CLEMENTS Name: TED MINICK
Title: ATTORNEY FOR BRIAN G. Title: ATTORNEY FOR WELLS FARGO
POPP AND RONALD D. BANK (TEXAS), N.A.
MOORE, ET AL. F/K/A FIRST INTERSTATE
BANK OF TEXAS, N.A.
3
<PAGE>
C
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BRIAN G. POPP, ET AL., )
)
PLAINTIFFS, )
)
VS. ) CASE NO. 95-CV-5400
)
RANDALLS FOOD MARKET, ET AL., )
)
DEFENDANTS. )
SETTLEMENT AGREEMENT
--------------------
On the 6th day of December, 1996, the parties (and their respective
counsel) assembled at the Houston Mediation Center for the purpose of
mediation. Upon completion of the mediation process, the parties below have
agreed to settle their dispute upon the following terms and conditions:
1. The parties to this settlement are:
a. Brian G. Popp, et al, individually, and on behalf of the
Plaintiff classes.
b. Towers, Perrin, Forster & Crosby, Inc. ("Towers Perrin").
2. The parties have settled all claims and controversies between them,
asserted or assertable in this case.
3. The consideration to be given for this settlement is as follows:
a. $350,000 cash to be paid by Towers Perrin to or for the benefit
of Plaintiffs, such payment to be made after certification of
the Plaintiff classes and approval by the Court of this
settlement as a full and complete settlement of all claims,
including all class actions and derivative claims.
b. Plaintiffs counsel shall be responsible for initiating and
obtaining class certification and Court approval of this
settlement, with the cooperation of Towers Perrin's counsel.
4. In the event any non-settling Defendant recovers on a claim for
contribution or indemnity against Towers Perrin. Plaintiffs hereby indemnify
Towers Perrin to the full extent of any amount awarded under such
contribution and indemnity claim.
<PAGE>
5. The parties agree to release and discharge each other and their
agents, employees, and attorneys from any and all claims, demands, or suits,
known or unknown, fixed or contingent, liquidated or unliquidated, whether or
not asserted in the above case, as of this date, arising from or related to
the events and transactions which are the subject matter of this case,
including all class actions and derivative claims.
6. Each of the undersigned parties warrants and represents to the other
(i) that such party has the authority to enter into this settlement and (ii)
that the claims, suits, rights, and/or interests which are the subject matter
hereto are owned by the party asserting same.
7. Attorneys for the Plaintiffs shall deliver drafts of further
documentation to effectuate the settlement as soon as practicable. The
parties agree to cooperate with each other in the drafting and execution of
such additional documents as are reasonably requested or required to
implement the terms and spirit of this Agreement. If any dispute arises with
regard to the interpretation and/or performance of this Agreement, of any of
its provisions, the parties agree to attempt to resolve same by phone
conference with the Mediator who facilitated this settlement. If the parties
cannot resolve their differences by phone conference, then each agrees to
schedule one day of arbitration with the Mediator serving as Arbitrator
within thirty (30) days to resolve the disputes and to share the costs of
same equally. If a party refuses to arbitrate, then that party may not
recover attorneys' fees or costs in any litigation brought to construe or
enforce this Agreement.
8. This Agreement is made and performable in Harris County, Texas, and
shall be construed in accordance with the laws of the State of Texas.
9. Any party to this Agreement may file this Agreement with the Court.
IT IS AGREED, HOWEVER, THAT THIS AGREEMENT SHALL BE ENFORCEABLE AS A CONTRACT
EVEN IF A PARTY DISPUTES OR REJECTS THIS AGREEMENT BEFORE THIS AGREEMENT IS
FILED WITH THE COURT.
10. Each of the parties hereby acknowledge as follows:
a. The mediator is not the attorney of any party.
b. Each party has been advised by their respective attorney with
regard to this Agreement.
c. Each party has read this Agreement and has entered into this
Agreement freely and without duress.
2
<PAGE>
d. Although the mediator has provided a basic outline of this
Agreement to the parties' counsel as a courtesy to facilitate the
final resolution of this dispute, each party and counsel has
completed the Agreement to conform to their respective agreement
and the mediator has no responsibility relating to the drafting
of this Agreement.
11. The amount of the settlement shall be kept confidential until the
application for Court approval of this settlement is filed with the Court.
Signed this 6th day of December, 1996.
PLAINTIFFS DEFENDANT
BRIAN POPP AND RONALD MOORE, ET AL. TOWERS, PERRIN, FORSTER & CROSBY, INC.
By: /s/ J. Eugene Clements By: /s/ Donald L. Harvey
------------------------------ ------------------------------
Name: J. EUGENE CLEMENTS Name: DONALD L. HARVEY
Title: ATTORNEY FOR BRIAN G. POPP Title: ATTORNEY FOR TOWERS PERRIN,
AND RONALD D. MOORE, ET AL. FORSTER & CROSBY, INC.
3
<PAGE>
D
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BRIAN G. POPP and RONALD D. MOORE, )
on behalf of Randalls Food Markets, )
Inc. Employee Stock Ownership Plan, )
Randalls Food Markets, Inc. Hourly )
Paid Employee Stock Ownership Plan )
and Randalls Food Markets, Inc. )
Salaried Employee Stock Ownership )
Plan and on behalf of themselves and )
all others similarly situated, )
)
Plaintiffs, )
)
V. )
)
RANDALLS FOOD MARKETS, INC., )
f/k/a RANDALLS' MANAGEMENT ) C.V.H-95-5400
CORPORATION, ROBERT R. ONSTEAD, ) JURY DEMANDED
NANCY N. FRYE, RONNIE W. )
BARCLAY, JANICE R. SCHILMOELLER, )
BOBBY L. GOWENS, LEE STRAUS, )
FIRST INTERSTATE BANK OF TEXAS, )
N.A., BANK ONE, TEXAS, N.A., R. )
RANDALL ONSTEAD, JR., ARTHUR )
ANDERSEN AND CO., S.C. and )
ARTHUR ANDERSEN, L.L.P. a/k/a )
ANDERSEN WORLDWIDE and f/k/a )
ARTHUR ANDERSEN AND CO., TEXAS )
COMMERCE BANK f/k/a AMERITRUST )
TEXAS, N.A., TOWERS, PERRIN, )
FORSTER & CROSBY, INC. and )
MELTON & MELTON, L.L.P. )
) CLASS ACTION
Defendants. ) RICO
CONDITIONAL SETTLEMENT AGREEMENT
The parties to this Conditional Settlement Agreement hereby settle
the above-referenced matter (the "Proposed Settlement"), subject to the
execution of and the filing of appropriate documents with the Court and
subject to Court approval.
1. The parties to this Conditional Settlement Agreement are:
<PAGE>
a. Brian G. Popp and Ronald D. Moore, individually,
derivatively, and on behalf of Randalls Food Markets, Inc.
Employee Stock Ownership Plan, Randalls Food Markets, Inc.
Hourly Paid Employee Stock Ownership Plan and Randalls Food
Markets, Inc. Salaried Employee Stock Ownership Plan
(collectively "Randalls Employee ESOP") and of themselves
and all others similarly situated (the "Plaintiff Class")
b. Randalls Food Markets, Inc. f/k/a Randalls' Management
Corporation ("Randalls")
Robert R. Onstead
Nancy N. Frye
Ronnie W. Barclay
Janice R. Schilmoeller
Bobby L. Gowens
Lee Straus
Bank One, Texas, N.A.
R. Randall Onstead, Jr.
Arthur Andersen LLP and Andersen Worldwide S.C.,
(incorrectly identified in this Action as Arthur Andersen and
Co., S.C. and Arthur Andersen, L.L.P. a/k/a Andersen
Worldwide and f/k/a Arthur Andersen and Co.)
Texas Commerce Bank f/k/a Ameritrust Texas, N.A.
Any unnamed fiduciary of the Randalls Employee ESOP
("Settling Defendants")
2. The Proposed Settlement will cover and will settle all known
and unknown claims and controversies among the parties that were or could
have been asserted in this case that arise or could have arisen before the
entry of a final judgment in this matter, including all state and federal
claims that were or could have been asserted personally or individually and
all state and federal claims that were or could have been asserted
derivatively ("Covered Claims").
3. The consideration to be given for the Covered Claims is as
follows:
a. $15,000,000.00 cash shall be paid by or on behalf of the
Settling Defendants to a qualified settlement fund under Treasury Regulation
Section 1.468B-1 ("Settlement Fund"). Plaintiffs' counsel shall set up the
necessary bank account (the bank is to be mutually selected by Randalls and
plaintiffs' counsel) and other matters necessary to hold the Settlement Fund.
The settlement payment shall be made upon Randalls' obtaining financing in an
amount sufficient to establish the Settlement Fund as a result of the
proposed equity investment contemplated by a transaction between Randalls and
an affiliate of Kohlberg Kravia Roberts & Co. The Settlement Fund shall be
held intact until the expiration of the time for all appeals from final
approval by the Court approving the Proposed Settlement. If the Proposed
Settlement is not ultimately approved, the Settlement Fund plus all interest
earned shall be returned to the payor of such amount.
b. Randalls shall pay all costs of notice to the class, costs
of court, and administrative costs of distribution of the settlement,,
including the costs of a court-appointed settlement administrator and the
costs of allocating and distributing cash settlement proceeds.
2
<PAGE>
Except for the cost of mailing the notices (which shall be paid by Randalls),
Randalls' obligation in this section shall not exceed $200,000. Any costs in
excess of $200,000 shall be paid from the Settlement Fund. To the extent
possible, notice to the class shall be made in conjunction with the mailing
of periodic reports of the Randalls Employee ESOP.
c. The Board of Directors of Randalls shall appoint an
independent corporate Trustee to be the Trustee of the Randalls Employee ESOP
Trust, or of the portion of any continuing trust succeeding thereto.
Randalls shall use its best efforts to appoint as independent trustee one of
the following: U.S. Trust Company of California, Marine Midland Bank, or
LaSalle National Bank. The independent Trustee shall be paid by Randalls.
The independent Trustee shall be indemnified by Randalls as provided in the
Randalls Food Markets, Inc. Employee Stock Ownership Plan, to the full extent
permitted by Section 410 of the Employee Retirement Income Security Act of
1974, as amended. ("ERISA"), 29 U.S.C SECTION 1110. Within thirty (30) days
of the Court's preliminary approval of the proposed settlement, Bank One and
Randalls will take such steps as are necessary to effect the resignation and
replacement of Bank One as Trustee of the Randalls Employee ESOP Trust (or
of the portion of any continuing trust succeeding to that Trust) on a basis
consistent with the provisions of ERISA and the Randalls Food Markets, Inc.
Employee Stock Ownership Plan Trust Agreement, with such resignation and
replacement to be effective no later than 60 days after such preliminary
approval. In the event that Randalls has not appointed a successor trustee
who has accepted such appointment within 60 days after the Court's
preliminary approval of the proposed settlement, Bank One may apply to the
Court for the appointment of a successor Trustee or for instructions. The
Final Order and Judgment shall include the Court's finding that the
resignation of Bank One has been performed in a manner satisfying the
provisions of ERISA and with the documents and instruments governing the ESOP.
d. Each participant and beneficiary in the Randalls Employee
ESOP shall be entitled to direct the independent Trustee as to the manner in
which the employer securities, which each such participant or beneficiary is
entitled to vote, and which are allocated to the account of each such
participant or beneficiary, are to be voted in accordance with ERISA and the
Internal Revenue Code.
e. Prior to any transaction in which the employer securities
held by the Randalls Employee ESOP are to be voted by the participants and
beneficiaries, Randalls or the independent Trustee shall disseminate printed
materials to each participant and beneficiary, which by a fair and factual
presentation disclose pertinent information, including material facts
necessary in order that the statements made, in light of the circumstances
under which they are made, are not misleading, and any other material
required to be distributed by the Securities Act of 1933, the Securities
Exchange Act of 1934, the Texas Securities Act and the Texas Business
Corporations Act, if applicable.
f. An independent appraiser shall be employed to value
Randalls common stock at fair market value unless such stock is registered as
a publicly traded security and shall be paid by Randalls to make quarterly
appraisals of the fair market value of such stock. A new independent
appraiser shall be appointed in accordance with ERISA within 60 days of final
approval of the Proposed Settlement. The new independent appraiser shall
have no material business relationship with Randalls.
3
<PAGE>
g. The Randalls Employee ESOP shall be audited annually according to
generally accepted accounting principles by an independent auditor. A new
independent auditor shall be appointed in accordance with ERISA within 60
days of final approval of this Proposed Settlement.
h. With respect to the Plan, Randalls shall timely file the filings
required by ERISA, including all ERISA annual reports and audited financial
statements, shall timely file and/or distribute all Summary Annual Reports,
Summary Plan Descriptions, individual account statements, and other documents
required to be filed and/or distributed by ERISA, and shall use its best
efforts to make all termination distributions within ninety (90) days after
receipt of instructions from the participant or beneficiary.
4. All Plaintiff Class attorneys' fees and expenses shall be paid from
the Settlement Fund. The proper allocation of the Settlement Fund among the
members of the Plaintiff Class shall be the sole responsibility of the
Plaintiff Class and the court appointed settlement administrator; provided
that such allocation may not contradict any provision of the Randalls
Employee ESOP or ERISA and shall be approved by the Court.
5. After satisfaction of court-approved attorney's fees and expenses,
any other court-approved litigation expenses, and court approval of a final
plan of distribution, the funds remaining in the Settlement Fund shall be
deposited to the ESOP. The proper allocation of the Settlement Fund among
the members of the Plaintiff Class shall be the sole responsibility of the
Plaintiff Class and the court appointed settlement administrator: provided
that such allocation may not contradict any provision of the Randalls
Employee ESOP or ERISA and shall be approved by the Court. Allocation
thereunder shall be made following approval by the Internal Revenue Service
("IRS") of the allocation methodology subject to ERISA and Internal Revenue
Code restrictions. It is anticipated that closed accounts for former
participants of the Plan will be reactivated and that the cash balance of these
reactivated accounts will then be distributed to the former Plan participants.
6. It is understood and agreed that, while the parties agree to
cooperate in seeking certification of the class described in Exhibit "A"
hereto, the Proposed Settlement is not contingent upon certification of a
class extending beyond persons who are or have been participants in or
beneficiaries of Randalls Employee ESOP as collectively defined above in
paragraph 1(a).
7. The Proposed Settlement is conditional on the following:
a. Execution of mutually satisfactory pleadings necessary to seek
preliminary and final approval of the proposed settlement, including a
mutually satisfactory form of release to be included in the Final Judgment
entered by the Court.
b. Court certification of the Plaintiff Class as defined in
paragraph 1(a) hereto under Fed.R.Civ.P.23(b)(3).
c. Acceptance by the Court that this action may proceed as a
derivative action on behalf of Randalls Food Markets, Inc. Employee Stock
Ownership Plan, including the Randalls Food Markets, Inc. Hourly Paid
Employee Stock Ownership Plan and Randalls Food Markets, Inc.
4
<PAGE>
Salaried Employee Stock Ownership Plan, which have been merged into the
Randalls Food Markets, Inc. Employee Stock Ownership Plan.
d. Preliminary approval by the Court of the proposed settlement by
March 17, 1997.
e. Final approval by the Court resulting from a fairness hearing,
the date of which will be set by mutual agreement of the parties and the
Court.
f. The Settling Defendants have the option to withdraw from the
settlement if more than 2-1/2% of the total class members opt out of the
proposed settlement.
g. Randalls shall have the right to withdraw from the Proposed
Settlement by giving written notice to Plaintiff's counsel not later than one
day before the date set by the Court for the Fairness Hearing. Such notice
shall vacate the entire Proposed Settlement.
h. All actions contemplated hereby not contradicting any provision
of ERISA or other applicable law and not causing the Randalls Employee ESOP
to fail to be a qualified plan within the meaning of section 401(a) of the
Internal Revenue Code ("Code") or its trust to fail to be exempt under
section 501(a) of the Code.
i. The provision to Plaintiffs' counsel of information about the
contemplated transaction between Randalls and an affiliate of Kohlberg
Kravis Roberts & Co. sufficient to apprise Plaintiffs' counsel of the terms of
the transaction affecting the interest of Randalls Employee ESOP and
Plaintiff Class members. It is agreed that the providing of the proposed
Subscription Agreement in substantially final form shall discharge this
obligation. Plaintiffs' counsel shall have five (5) business days to review
the proposed Subscription Agreement. It is contemplated that the parties
will seek preliminary approval of the proposed settlement upon the
satisfactory completion of Plaintiffs' counsel's review of the proposed
Subscription Agreement. Plaintiffs' counsel agrees to hold the proposed
Subscription Agreement in strictest confidence.
8. Randalls agrees that following any Registered Public Offering of
Randalls' shares, Randalls will timely file all reports required to be filed
under section (c)(I) of Rule 144 under the Securities Act of 1933.
9. The parties agree to include in the Final Judgment a release that
releases and discharges each other (including class members) and their
agents, employees, directors, and attorneys from any and all claims, demands,
or suits, known or unknown, fixed or contingent, liquidated or unliquidated,
whether or not asserted in the above case, as of the date of the judgment to
be entered by the Court, arising from or related to the events and
transactions that are the subject matter of this case or arising out of or
related to the subject matter of this case, including, but not limited to,
all claims relating to the operation of the ESOP occurring before the date of
the release, and all claims relating to acts, omissions, or consequences from
the proposed transaction between Randalls and an affiliate of Kohlberg Kravis
Roberts & Co. arising before the date of the release. The release will also
extinguish and release all claims for contribution, indemnity and set-offs
that could have been asserted between or among the parties.
5
<PAGE>
10. Each of the undersigned parties warrants and represents to the
other (i) that such party has the authority to enter into the Conditional
Settlement Agreement and (ii) that the claims, suits, rights, and/or
interests that are the subject matter are owned by the party asserting the
same.
11. Attorneys for the Plaintiffs should deliver drafts of further
documentation to effectuate the Proposed Settlement as soon as practicable.
The parties agree to cooperate with each other in the drafting and execution
of such documents and in such actions as are reasonably requested or required
to implement the terms and spirit of the Proposed Settlement.
12. This Conditional Settlement Agreement is made and performable in
Harris County, Texas and shall be construed in accordance with the laws of
the State of Texas, without regard to conflict of law principles.
13. The Settling Defendants deny liability and are entering into this
Conditional Settlement Agreement to avoid the expense and uncertainty of
further litigation.
14. This Conditional Settlement Agreement shall remain confidential
until an application for preliminary Court approval of the Proposed
Settlement is filed with the Court.
15. This Conditional Settlement Agreement may be executed in multiple
counterparts each of which shall be the original.
6
<PAGE>
SIGNED this 23rd day of February 1997
PLAINTIFFS
BRIAN POPP AND RONALD MOORE, ET AL.
By: /s/ J. Eugene Clements
----------------------------------------
J. Eugene Clements
Evelyn V. Keyes
Clements O'Neill Pierce & Nickens LLP
1000 Louisiana, Suite 1800
Houston, Texas 77002
DEFENDANTS
RANDALLS FOOD MARKETS, INC., f/k/a/
RANDALLS' MANAGEMENT CORPORATION,
ROBERT R. ONSTEAD, NANCY N. FRYE,
RONNIE W. BARCLAY, JANICE R. SHILMOELLER,
BOBBY L. GOWENS, LEE STRAUS, AND R. RANDALL
ONSTEAD JR.
By: Chas. Schwartz
-----------------------------------
Harry M. Reasoner
Allan Van Fleet
Charles W. Schwartz
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
7
<PAGE>
J. Clifford Gunter III
Ileana M. Blanco
Bracewell & Patterson, LLP
South Tower Pennzoil Place
711 Louisiana, Suite 2600
Houston, Texas 77002-2781
BANK ONE, TEXAS, N.A.
By: /s/ M. Brett Johnson as of 2/1/97
----------------------------------
Michael P. Lynn
Thomas Melsheimer, P.C.
M. Brett Johnson
State Bar No. 00790975
Lynn Stodghill Melsheimer & Tillotson, LLP
750 N. St. Paul St., 14th Floor
Dallas, Texas 75201
ARTHUR ANDERSEN LLP AND ANDERSEN WORLDWIDE, S.C.
By: /s/ Mike Wilson
------------------------------
Michael M. Wilson
Richard Frankel
Bristow, Hackerman, Wilson & Peterson
1111 Bagby, Suite 1900
Texaco Heritage Plaza
Houston, Texas 77002
8
<PAGE>
TEXAS COMMERCE BANK f/k/a AMERITRUST TEXAS, N.A.
By: [illegible]
------------------------------
Craig L. Weinstock
Janet E. Militello
Robert B. Boemer
Liddell Sapp Zivley Hill & LaBoon L.L.P.
3400 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002
9
<PAGE>
EXHIBIT A
---------
The class represented by class action Plaintiffs and of which class action
Plaintiffs are members (the "Plaintiff Class") consists of (1) participants
and former participants in and beneficiaries of the Randalls Food Markets,
Inc. Employee Stock Ownership Plan and the Randalls Food Markets, Inc. Hourly
Paid Employee Stock Ownership Plan and the Randalls Food Markets, Inc.
Salaried Employee Stock Ownership Plan, which have been merged with and into
the Randalls Food Market, Inc. Employee Stock Ownership Plan (hereinafter
collectively the "Randalls Employee ESOP"). Members of the Plaintiff Class
referenced in the preceding sentence include (1) all salaried employees and
former employees of Randalls who are or have been participants in Randalls
Employee ESOP at times on or after June 29, 1986; (2) all hourly employees
and former employees of Randalls who are or have been participants in
Randalls Employee ESOP on or after June 29, 1986; (3) all salaried and hourly
employees and former employees of Tom Thumb Food and Drugs, Inc. and any
predecessor thereof ("Tom Thumb"), formerly a wholly-owned subsidiary of the
Cullum Companies and, since August 28, 1992, a wholly owned subsidiary of
Randalls), to the extent they presently participate or have participated in
the Randalls Employee ESOP; (4) all beneficiaries of Plan participants
described in (1)-(3) who have received or are presently receiving benefits or
are entitled to receive benefits. (Plan participants and beneficiaries are
hereinafter collectively referred to as "Plan Participants.")
10
<PAGE>
Exhibit 10.2
VOTING, REPURCHASE AND SHAREHOLDERS AGREEMENT
VOTING, REPURCHASE AND SHAREHOLDERS AGREEMENT (this "Agreement"),
dated as of April 1, 1997, by and among Randall's Food Markets, Inc., a Texas
corporation (the "Company"), RFM Acquisition LLC, a Delaware limited liability
company ("Buyer"), and each of the undersigned shareholders (individually, a
"Shareholder" and collectively, the "Shareholders") of the Company.
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, Buyer, the Company and Robert R. Onstead have entered into a
Subscription Agreement dated as of the date hereof (as such agreement may be
amended from time to time, the "Subscription Agreement"; capitalized terms used
but not defined herein shall have the meanings set forth in the Subscription
Agreement) which contemplates certain transactions (the "Transactions"),
including (i) the Company's issuance to Buyer of 18,579,686 newly-issued shares
of Common Stock and an option to purchase 3,606,881 shares of Common Stock (the
"Purchase"), (ii) the Company's incurrence of indebtedness and the making of the
Debt Prepayment and the Preferred Stock Redemption, and (iii) the Company's
repurchase of up to 1,104,336 shares of Common Stock from the Company's Employee
Stock Ownership Plan (the "ESOP"), up to 200,435 Putable Shares and up to
4,280,415 Non-ESOP Shares pursuant to a tender offer (the "Tender Offer")
(provided that the numbers of shares referenced in this clause (iii) shall be
subject to reduction pursuant to Section 5.06(c) of the Subscription Agreement)
and, if fewer than 4,280,415 Non-ESOP Shares (as such number may be reduced
pursuant to Section 5.06(c) of the Subscription Agreement) shall be purchased in
the Tender Offer, the Company's repurchase of the balance of such 4,280,415
Non-ESOP Shares pursuant to the conditional repurchase commitment of certain
Shareholders contained in this Agreement;
WHEREAS, each Shareholder desires to take certain actions to support
the Transactions and agrees to refrain from taking certain actions that are
inconsistent with the Transactions;
WHEREAS, the Shareholders listed on Schedule A (the "Schedule A
Shareholders") have agreed to sell, or cause to be sold, up to the number of
shares of Common Stock set forth opposite each such Shareholder's name on
Schedule A on the Closing Date to the extent the Company shall acquire less than
4,280,415 Non-ESOP Shares (the "Repurchase Target") pursuant to the Tender
Offer;
WHEREAS, the Shareholders and Buyer desire to make
certain arrangements regarding the composition of the Board of
<PAGE>
2
Directors of the Company following the Closing and the post- Closing transfer of
shares of Common Stock;
WHEREAS, prior to the date hereof, the Board of Directors of the
Company has approved this Agreement; and
WHEREAS, it is a condition and inducement to Buyer's willingness to
enter into the Subscription Agreement that the Shareholders execute and deliver
this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties
and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
SECTION 1.01. Representations and Warranties of the Shareholders.
Each Shareholder hereby severally represents and warrants to Buyer as follows:
(a) Ownership of Common Stock. Such Shareholder is either (i) the
record holder and beneficial owner of, (ii) trustee of a trust that is the
record holder or beneficial owner of, and whose beneficiaries are the beneficial
owners (such trustee, a "Trustee") of, (iii) executor of an estate that is the
record holder or beneficial owner of, and whose beneficiaries are the beneficial
owners (such executor, an "Executor") of, (iv) director of a foundation that is
the record holder (such director, a "Foundation Director") of, or (v) the
beneficial owner but not the record holder of, the number of shares of Common
Stock as set forth opposite such Shareholder's name on Schedule B (the "Existing
Shares", and together with any shares of Common Stock acquired by such
Shareholder in any such capacities after the date hereof and prior to the
termination of this Agreement, whether upon exercise of options, conversion of
convertible securities, purchase, exchange or otherwise, the "Shares"). On the
date hereof, the Existing Shares set forth opposite such Shareholder's name on
Schedule B constitute all of the shares of Common Stock owned of record or
beneficially by such Shareholder. Except as set forth on Schedule D, such
Shareholder has sole power of disposition with respect to all of the Existing
Shares set forth opposite such Shareholder's name on Schedule B, with no
restrictions on such rights, subject to applicable federal securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Such Shareholder has the legal
capacity, power and authority to enter into and perform all of such
Shareholder's obligations under this Agreement. This
<PAGE>
3
Agreement has been duly and validly executed and delivered by such Shareholder
and constitutes a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or at law).
There is no beneficiary of or holder of a voting trust certificate or other
interest of any trust of which a Shareholder is a Trustee, any estate in respect
of which a Shareholder is an Executor or any Foundation of which a Shareholder
is a Foundation Director whose consent is required for the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. If such Shareholder is married and such Shareholder's Shares constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, such
Shareholder's spouse, enforceable against such person in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
(c) No Conflicts. (i) No filing with, and no permit, authorization,
consent or approval of, any Governmental Entity or any other Person is necessary
for the execution or delivery of this Agreement by such Shareholder or the
consummation by such Shareholder of the transactions contemplated hereby and
(ii) none of the execution or delivery of this Agreement by such Shareholder,
the consummation of the transactions contemplated hereby nor compliance by such
Shareholder with any of the terms hereof shall (1) conflict with or result in
any breach of any applicable trust, estate, foundation or other organizational
documents applicable to such Shareholder, (2) conflict with or result in any
breach of, or constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, or give rise to a right
of termination, amendment or acceleration under, any of the provisions of any
note, bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
such Shareholder is a party or by which such Shareholder or any of such
Shareholder's properties or assets may be bound, including any trust agreement,
will, testamentary document, voting agreement, shareholders agreement, voting
trust or other agreement, or (3) conflict with or result in a violation of any
Governmental Order applicable to such Shareholder or any of such Shareholder's
properties or assets.
(d) No Liens. Except as set forth on Schedule D, such Shareholder's
Shares and the certificates representing such Shares are now and at all times
during the term hereof shall be held by such Shareholder, or by a nominee or
custodian for the benefit of such Shareholder, free and clear of all liens,
claims,
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4
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
(e) Information Supplied. None of the information specifically
supplied or to be supplied by such Shareholder with respect to such Shareholder
for inclusion in the Proxy/Tender Offer Statement will, as of the date it is
first mailed to the Common Shareholders, at the time of the Shareholders Meeting
or at the time any Shares are purchased pursuant to the Tender Offer or the
conditional repurchase commitment of the Schedule A Shareholders hereunder,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) No Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any brokerage, finder's, financial advisor's or
other fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of such Shareholder.
(g) Reliance by Buyer. Such Shareholder understands and acknowledges
that Buyer is entering into the Subscription Agreement in reliance upon such
Shareholder's execution and delivery of this Agreement.
SECTION 1.02. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to the Shareholders as follows:
(a) Power, Binding Agreement. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the power and authority to enter into this Agreement and perform all of its
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a valid and binding agreement of
Buyer, enforceable against Buyer in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and general equitable principles (whether considered in a proceeding in equity
or at law).
(b) No Conflicts. Except for the filings required under the HSR Act,
(i) no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity or any other Person is necessary for the execution or
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby and (ii) none of the execution or delivery of
this Agreement by Buyer, the consummation of the transactions contemplated
hereby nor compliance by Buyer with any
<PAGE>
5
of the terms hereof shall (1) conflict with or result in any breach of the
organizational documents of Buyer, (2) conflict with or result in any breach of
or constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, or give rise to a right of
termination, amendment or acceleration under, any of the provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, or other instrument or obligation of any kind to which Buyer is a
party or by which Buyer or any of its properties or assets may be bound or (3)
conflict with or result in a violation of any Governmental Order applicable to
Buyer or to any of Buyer's property or assets.
ARTICLE II
PRE-CLOSING COVENANTS
SECTION 2.01. Voting. Each Shareholder hereby severally agrees that,
from the date hereof until the Article II Termination Date (as defined in
Section 6.01), at any meeting of the Common Shareholders, however called, or in
connection with any written consent of the Common Shareholders, such Shareholder
shall vote (or cause to be voted) the Shares held of record or beneficially by
such Shareholder (a) in favor of the Transactions, including the Amendment, the
Purchase, the execution and delivery by the Company of the Subscription
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Subscription Agreement and this Agreement and any actions
required in furtherance thereof and hereof; (b) against any action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Subscription Agreement or
this Agreement; and (c) except as specifically requested in writing by Buyer in
advance, against the following actions (other than the Transactions and other
than as contemplated by the Subscription Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of the Subsidiaries; (ii) a sale, lease
or transfer of a material amount of assets of the Company or any of the
Subsidiaries or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of the Subsidiaries; (iii) any change in the majority of
the Board of Directors of the Company; (iv) any material change in the present
capitalization of the Company or any amendment of the Company's articles of
incorporation; (v) any other material change in the Company's corporate
structure or business; or (vi) any other action which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially adversely affect the Transactions or the transactions contemplated
by the Subscription Agreement or the contemplated economic benefits of any of
the foregoing. No Shareholder shall enter into any agreement or understanding
with any Person to vote
<PAGE>
6
or give instructions in any manner inconsistent with this Section.
SECTION 2.02. PROXY. EACH SHAREHOLDER HEREBY GRANTS TO, AND
APPOINTS, BUYER AND ANY PARTNER OR MEMBER OF BUYER, IN THEIR RESPECTIVE
CAPACITIES AS REPRESENTATIVES OF BUYER, AND ANY INDIVIDUAL WHO SHALL HEREAFTER
SUCCEED TO ANY SUCH OFFICE OF BUYER, AND ANY OTHER DESIGNEE OF BUYER, EACH OF
THEM INDIVIDUALLY, SUCH SHAREHOLDER'S IRREVOCABLE (UNTIL THE ARTICLE II
TERMINATION DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION)
TO VOTE THE SHARES AS INDICATED IN SECTION 2.01 ABOVE. EACH SHAREHOLDER INTENDS
THIS PROXY TO BE IRREVOCABLE (UNTIL THE ARTICLE II TERMINATION DATE) AND COUPLED
WITH AN INTEREST AND SHALL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH OTHER
INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND
HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY SUCH SHAREHOLDER WITH RESPECT TO
SUCH SHAREHOLDER'S SHARES.
SECTION 2.03. Voting Arrangements. Each Shareholder hereby severally
agrees that, from the date hereof until the Article II Termination Date, except
pursuant to this Agreement, such Shareholder shall not deposit any Shares into a
voting trust, enter into any voting agreement with respect to any Shares or
grant any proxies with respect to any Shares, other than proxies to vote Shares
at any annual or special meeting of the Common Shareholders on matters unrelated
to the matters set forth herein.
SECTION 2.04. No Dispositions. Each Shareholder hereby severally
agrees that, from the date hereof until the Article II Termination Date, such
Shareholder shall not, except pursuant to the Subscription Agreement or this
Agreement, sell, transfer, assign, pledge, hypothecate, encumber or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, assignment, pledge,
hypothecation, encumbrance or other disposition of, any of or any interest in
any of the Shares. Notwithstanding the foregoing, (i) R. Randall Onstead, Jr.
hereby agrees not to sell in the Tender Offer any shares held of record by him
other than the 8,545 Restricted Shares held of record by him and (ii) each of
John N. Frewin, Norman P. Frewin and Rosemary Frewin Gambino may sell those
Shares set forth next to such Shareholder's name on Schedule 3.03(c) to the
Subscription Agreement but only pursuant to the provisions of the agreement
referenced next to such Shareholder's name on such Schedule.
SECTION 2.05. No Solicitation. Each Shareholder hereby severally
agrees that, from the date hereof until the Article II Termination Date, such
Shareholder shall not (whether directly or indirectly through advisors, agents
or other intermediaries), nor shall it authorize or permit any of its partners,
affiliates, employees, agents, investment bankers, attorneys, financial advisors
or other representatives, to (a) solicit, initiate or take any action knowingly
to facilitate the
<PAGE>
7
submission of inquiries, proposals or offers from any Person relating to a
Transaction Proposal, or (b) enter into or participate in any discussions or
negotiations regarding the foregoing, or furnish to any other Person any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other Person to do or seek
any of the foregoing; provided, however, that, notwithstanding any other
provision of this Agreement, if such Shareholder is a director of the Company,
such Shareholder may take any action, including casting a vote or signing a
written consent, in such Person's capacity as a director that the Board of
Directors of the Company would be permitted to take in accordance with the
Subscription Agreement. Each Shareholder shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
ARTICLE III
CONDITIONAL REPURCHASE
SECTION 3.01. Conditional Agreement to Sell Shares. (a) Except as
otherwise provided in Section 3.01(b), each Schedule A Shareholder hereby
severally agrees to sell to the Company, and the Company hereby agrees to
purchase from such Schedule A Shareholder, on the Closing Date up to that number
of Shares set forth opposite such Shareholder's name on Schedule A (with respect
to each Schedule A Shareholder, the "Committed Shares"). The Company shall
purchase Committed Shares from the Schedule A Shareholders and the Schedule A
Shareholders shall sell Committed Shares to the Company only if the number of
Non- ESOP Shares purchased by the Company pursuant to the Tender Offer (the
"Tendered Shares") shall be less than the Repurchase Target. In such
circumstances, the Schedule A Shareholders shall sell to the Company an
aggregate number of shares of Common Stock equal to the difference between the
Repurchase Target and the Tendered Shares, subject to reduction to avoid the
sale of fractional shares as described in the following sentence (the "Sold
Shares"). Each Schedule A Shareholder shall participate in such sale on a pro
rata basis, based on such Shareholder's number of Committed Shares (for each
Schedule A Shareholder, rounded down to the nearest whole share).
(b) Notwithstanding anything to the contrary contained in Section
3.01(a), with respect to any Schedule A Shareholder, such Shareholder shall have
the right to cause any other holder or holders of Common Stock (other than R.
Randall Onstead, Jr. or any other officer or employee of the Company) to sell
shares of Common Stock to the Company to satisfy, in whole or in part, such
Schedule A Shareholder's obligation hereunder to sell such Shareholder's
Committed Shares to the Company (any such holder, a
<PAGE>
8
"Designee"). Each Schedule A Shareholder may exercise this right by delivering
the following documents to the Company and Buyer no later than the 10th Business
Day prior to the consummation of the Tender Offer: (i) an irrevocable written
notice which shall disclose the name of each Designee who such Schedule A
Shareholder intends to cause to sell shares of Common Stock to the Company and
the number of shares which each such Designee shall sell and (ii) an agreement
of each such Designee to be bound by the provisions of this Agreement (including
the representations and warranties contained in Section 1.01) as if such
Designee were a Schedule A Shareholder hereunder, and (iii) an acknowledgement
by the Schedule A Shareholder that, notwithstanding the delivery of any such
notice or anything to the contrary contained in this Section 3.01(b), such
Schedule A Shareholder remains obligated to sell Committed Shares hereunder to
the extent any Designee of such Schedule A Shareholder shall fail to sell, in
accordance with the terms of this Agreement, the number of shares of Common
Stock indicated next to such Designee's name in the notice. Any notice,
agreement or acknowledgement delivered pursuant to this Section shall be in form
and substance satisfactory to the Company and Buyer.
SECTION 3.02. Purchase Price and Payment. In consideration for the
Sold Shares, and subject to the terms and conditions of this Agreement, at the
Closing, each Schedule A Shareholder shall receive $16 per share in cash,
payable by the Company by check to the order of such Shareholder. In
consideration for such payment, at the Closing, each Schedule A Shareholder
shall deliver to the Company a certificate or certificates representing all of
such Schedule A Shareholder's Sold Shares together with stock powers duly
executed and endorsed in blank, in form satisfactory to the Company and with all
required stock transfer stamps affixed. The Company shall issue a new stock
certificate to any Schedule A Shareholder to the extent such Shareholder's Sold
Shares represent only a portion of the shares of Common Stock covered by any
stock certificated delivered by such Shareholder pursuant to the preceding
sentence.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01. Certain Directors. During the term of this Agreement,
at any meeting of the Common Shareholders, however called, or in connection with
any written consent of the Common Shareholders, the Shareholders and Buyer shall
use their reasonable efforts to have nominated to the Board of Directors of the
Company and shall vote (or cause to be voted) all the shares of Common Stock
held of record or beneficially by them (a) in favor of the election of all
persons whom Buyer chooses to nominate to the Board of Directors of the Company,
(b) in favor of the election of Robert R. Onstead to the Board of Directors of
the Company for so long as he continues to hold 10% of the issued and
outstanding shares of Common Stock and is able to carry out
<PAGE>
9
the normal duties of a director, and (c) in favor of the election of R. Randall
Onstead, Jr. to the Board of Directors of the Company for so long as he remains
an executive officer of the Company and is able to carry out the normal duties
of a director. At any time that the conditions relating to Robert R. Onstead or
R. Randall Onstead, Jr. contained in clauses (b) and (c), respectively, of the
preceding sentence shall cease to be satisfied, such Shareholder agrees to
resign from the Board of Directors of the Company. In addition, Buyer agrees to
evaluate on a year-to-year basis whether it desires to have Jack W. Evans
nominated to the Board of Directors of the Company and whether it desires to
vote the shares of Common Stock held of record or beneficially by it in favor of
the election of Jack W. Evans to the Board of Directors of the Company, and
however Buyer so determines the Shareholders agree to act and vote (or cause to
be voted) their Shares in a manner consistent with Buyer's decision. The parties
acknowledge that the rights of Robert R. Onstead, R. Randall Onstead, Jr. and
Jack W. Evans to serve as directors are personal to such individuals and may not
be assigned or succeeded to by any other Person, provided, however, that upon
the death or incapacity of Robert R. Onstead the executor of his estate or his
guardian, as the case may be, shall have the right to appoint an individual to
succeed to Robert R. Onstead's rights under this Section, but only (i) if such
individual is reasonably acceptable to Buyer, (ii) for so long as such estate or
Robert R. Onstead, as the case may be, shall continue to hold 10% of the issued
and outstanding shares of Common Stock, and (iii) if such executor or guardian
shall have agreed in writing to be bound by the terms of this Agreement as if it
were a "Shareholder" hereunder. The parties hereto shall not enter into any
agreement or understanding with any Person to vote or give instructions in any
manner inconsistent with this Section.
ARTICLE V
POST-CLOSING TRANSFER OF SHARES
SECTION 5.01. General. (a) Restriction on Transfer. From and after
the Closing, each Shareholder hereby severally agrees that such Shareholder
shall not sell, transfer, assign, pledge, hypothecate, encumber or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, assignment, pledge,
hypothecation, encumbrance or other disposition of, any of or any interest in
any of the Shares during the term of this Agreement, except for (i) a transfer
made pursuant to this Agreement, (ii) a transfer upon the death or permanent
disability of a Shareholder to such Shareholder's executors, administrators,
testamentary trustees, legatees or beneficiaries, (iii) a transfer by a
Shareholder made in compliance with the federal securities laws to a trust or
custodianship the beneficiaries of which may include only such Shareholder, his
or her spouse or lineal descendants; (iv) a bona fide pledge or pledges to a
financial
<PAGE>
10
institution of, in the aggregate, not more than the lesser of 125,000 Shares and
25% of the Shares held by a Shareholder, (v) a transfer upon the death of a
Shareholder by such Shareholder's executors, administrators or testamentary
trustees (a "Shareholder's Representatives") to pay estate and similar taxes and
costs; provided, that prior to any transfer described in clause (v) above, the
Shareholder's Representatives shall have offered Buyer the right of first
refusal described in Section 5.01(c); and provided, further, in no event shall
any transfer under any clause of this Section 5.01 be made to any Person who has
a right to require the transferred Shares to be repurchased by the Company,
either immediately or upon the happening of any contingency; and provided,
further, that prior to any transfer or pledge described in clause (ii), (iii),
(iv) or (v) above, the applicable transferee or pledgee shall have agreed in
writing to be bound by the terms of this Agreement as if such transferee were a
"Shareholder" hereunder and shall have acknowledged in writing that such
transferee or pledgee is not a Person who has any rights described in the
immediately preceding proviso. Notwithstanding the foregoing, each of John N.
Frewin, Norman P. Frewin and Rosemary Frewin Gambino may sell those Shares set
forth next to such Shareholder's name on Schedule 3.03(c) to the Subscription
Agreement but only pursuant to the provisions of the agreement referenced next
to such Shareholder's name on such Schedule. No transfer of any Shares in
violation hereof shall be made or recorded on the books of the Company and any
such transfer shall be void and of no effect.
(b) Permanent Disability. For purposes of this Agreement, a
Shareholder shall be deemed to have a "permanent disability" if such Shareholder
is unable to engage in the activities required by such Shareholder's job by
reason of any medically determined physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
(c) Right of First Refusal. Prior to effecting any transaction
described in clause (v) of Section 5.01(a), a Shareholder's Representatives
shall cause any bona fide offer to purchase any or all of the Shares held by the
Shareholder's Representatives (an "Offer") received by the Shareholder's
Representatives and which the Shareholder's Representatives wish to accept to be
reduced to writing, and the Shareholder's Representatives shall notify Buyer in
writing that the Shareholder's Representatives wish to accept the Offer. The
notice shall contain an irrevocable offer to sell such Shares to Buyer or its
designee (in the manner set forth below) at a purchase price equal to the price
contained in, and on the same terms and conditions of, the Offer, and shall be
accompanied by a true copy of the Offer (which shall identify the third party
who has made the Offer (the "Offeror")). At any time within 30 days after the
date of the receipt by Buyer of such notice, Buyer shall have the right and
option to purchase, or to arrange for a
<PAGE>
11
third party (including the Company) to purchase, all of the Shares covered by
the Offer either (i) at the same price and on the same terms and conditions as
the Offer or (ii) if the Offer includes any consideration other than cash, then
at the sole option of Buyer, at the equivalent all cash price, determined in
good faith by a duly authorized compensation committee of the Board of Directors
of the Company, by delivering a certified or bank check in the appropriate
amount to the Shareholder's Representatives against delivery of certificates
representing the Shares so purchased, appropriately endorsed by the
Shareholder's Representatives. If at the end of such 30 day period, Buyer or
such third party has not tendered the purchase price for such Shares in the
manner set forth above, the Shareholder's Representatives may during the
succeeding 30 day period sell not less than all of the Shares covered by the
Offer to the Offeror at a price and on terms no less favorable to such
Shareholder's Representatives than those contained in the Offer. Promptly after
such sale, such Shareholder's Representatives shall notify Buyer of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such sale and of the terms thereof as may reasonably be
requested by Buyer. If, at the end of 30 days following the expiration of the 30
day period for Buyer to purchase such Shares, such Shareholder's Representatives
have not completed the sale of such Shares as aforesaid, all the restrictions on
sale, transfer or assignment contained in this Agreement shall again be in
effect with respect to such Shares.
(d) Other Sales to Buyer. Notwithstanding anything to the contrary
contained in Section 5.01(c) and notwithstanding the absence of an Offer, the
parties hereto acknowledge that any Shareholder's Representatives may approach
Buyer at any time regarding the sale of Shares held by such Shareholder's
Representatives to Buyer or its designee, provided that Buyer shall have no
obligation to purchase such Shares.
SECTION 5.02. (a) "Tag-Along" Right With Respect to Private Sales by
KKR Holders. (i) Private Sales of Shares by KKR Holders. Subject to the last
sentence of Section 5.03(a), with respect to any proposed Private Sale (as
defined in Section 5.04) of any Buyer Shares by a KKR Holder during the term of
this Agreement to a Person (a "Proposed Purchaser"), other than pursuant to an
Exempt Transaction (as defined in Section 5.04), each Shareholder shall have the
right and option, but not the obligation, to participate in such sale, on the
same terms and subject to the same conditions as the sale by the KKR Holder (as
defined in Section 5.04), for the number of Shares owned by such Shareholder
equalling the number derived by multiplying the total number of Buyer Shares (as
defined in Section 5.04) which the KKR Holder proposes to sell (the "Proposed
Number of Shares") by a fraction, the numerator of which is the total number of
Shares held by such Shareholder and the denominator of which is the sum of (A)
the total number of Shares held by such Shareholder, (B) the total number of
Buyer Shares, and (C) the total number of
<PAGE>
12
shares of Common Stock (determined on a fully diluted basis) owned by other
Persons entitled to the benefits of "tag-along" rights (including under this
Agreement) arising as a result of such sale.
(ii) Notices. The KKR Holder shall notify, or cause to be notified,
each Shareholder in writing of each proposed Private Sale that is subject to
Section 5.02(a)(i) above. Such notice shall set forth: (1) the Proposed Number
of Shares, (2) the name and address of the Proposed Purchaser, (3) the proposed
amount of consideration, the material terms and conditions of such sale (and if
the proposed consideration is not cash, the notice shall describe the terms of
the proposed consideration) and the proposed closing date of such sale, (4) the
total number of Buyer Shares and the total number of shares of Common Stock
(determined on a fully diluted basis) owned by Persons entitled to the benefits
of any other "tag-along" rights arising as a result of such sale and (5) an
indication that the Proposed Purchaser has been informed of the "tag-along"
right provided for in this Section 5.02 and has agreed to purchase Shares held
by such Shareholder in accordance with the terms hereof. The "tag- along" right
may be exercised by such Shareholder by delivery of a written notice from such
Shareholder to the KKR Holder (the "Tag-Along Notice") within 10 days following
receipt of the notice specified in the preceding sentence. The Tag-Along Notice
shall state the number of Shares that such Shareholder proposes to include in
such Private Sale to the Proposed Purchaser. If such Shareholder delivers a
Tag-Along Notice to the KKR Holder, such Shareholder shall (1) prior to the
closing of any such sale, execute and deliver (or cause to be executed and
delivered) any purchase agreement or other documentation required by the
Proposed Purchaser to consummate the sale (including all legal opinions,
cross-receipts and certificates), which purchase agreement and other
documentation shall be on terms no less favorable in respect of any material
term to such Shareholder than those executed by the KKR Holder and (2) at the
closing of any such sale, deliver to the Proposed Purchaser the certificate or
certificates representing the Shares to be sold pursuant to such sale by such
Shareholders, duly endorsed for transfer with signatures guaranteed, against
receipt of the purchase price thereof.
(iii) Number of Shares to be Sold. If a Tag-Along Notice is received
pursuant to Section 5.02(a)(ii), each Shareholder shall be permitted to sell to
the Proposed Purchaser up to the number of Shares determined as set forth in
Section 5.02(a)(i) above (with respect to each Shareholder, the "Proposed
Shares"), and the KKR Holder shall be permitted to sell to the Proposed
Purchaser up to a number of shares of Common Stock (the "Proposed Buyer Shares")
equal to the Proposed Number of Shares less the aggregate number of Proposed
Shares and all other shares of Common Stock being sold to such Proposed
Purchaser in such transaction pursuant to tag-along rights arising as a result
of such sale; provided, that the KKR Holder shall have the right to
<PAGE>
13
sell a number of additional shares of Common Stock up to the excess of the
Proposed Number of Shares over the number of Proposed Buyer Shares, if the
Proposed Purchaser wishes to purchase such additional shares. If no Tag-Along
Notice is received by the KKR Holder pursuant to Section 5.02(a)(ii), such KKR
Holder shall have the right for a 120-day period to sell to the Proposed
Purchaser up to the Proposed Number of Shares on terms and conditions no more
favorable in any material respect to the KKR Holder than those stated in the
Tag-Along Notice.
(b) "Tag-Along" Right With Respect to Public Sales by KKR Holders.
(i) Public Sales of Shares by KKR Holders. Subject to the last sentence of
Section 5.03(a), with respect to any proposed sale of any Buyer Shares by a KKR
Holder during the term of this Agreement in a Public Offering, each Shareholder
shall have the right and option, but not the obligation, to participate in such
Public Offering on the same terms and subject to the same conditions as the sale
by the KKR Holder, for the number of Shares owned by such Shareholder as
determined pursuant to Section 5.02(b)(iii) below.
(ii) Notices. The KKR Holder shall notify, or cause to be notified,
each Shareholder in writing of each proposed Public Offering that is subject to
Section 5.02(b)(i) above (a "Proposed Registration"). Such notice may be given
before the filing of such registration statement and need not specify any price
or other terms or conditions of such sale. If within 5 days of the delivery of
such notice to such Shareholder, the KKR Holder receives from such Shareholder a
written request (a "Request"), which Request shall be irrevocable, to register
Shares held by such Shareholder (a "Requesting Shareholder"), Shares shall be so
registered as and to the extent provided in this Section 5.02(b) if Buyer Shares
are so registered. If a Requesting Shareholder delivers a Request to the KKR
Holder, such Requesting Shareholder shall participate in such Public Offering,
if any, at the same price and on the same terms and conditions as the KKR
Holder, which price and other terms and conditions shall be determined on behalf
of the KKR Holder and such Requesting Shareholder by the KKR Holder in its sole
discretion. Nothing in this Agreement shall create any obligation on the part of
the KKR Holder to cause a registration statement to become effective under the
Securities Act or to consummate a Public Offering.
(iii) Number of Shares to be Sold. The maximum number of Shares
which shall be registered pursuant to a Request shall equal the number derived
by multiplying the total number of Shares held by a Requesting Shareholder by a
fraction, the numerator of which is the total number of Buyer Shares which the
KKR Holder proposes to sell in the Public Offering and the denominator of which
is the total number of Buyer Shares; provided, that in the event that the
aggregate number of shares of Common Stock to be sold in any Public Offering is
increased or decreased (including any decrease resulting from the advice of the
managing underwriter in an underwritten offering that, in its
<PAGE>
14
opinion, the number of Buyer Shares which the KKR Holder proposes to sell in the
Public Offering plus the aggregate number of Shares subject to Requests by the
Shareholders would be likely to have an adverse effect on the price, timing or
distribution of the shares of Common Stock offered in such Public Offering),
then the number of Shares which such Requesting Shareholder shall sell in such
Public Offering shall be increased or decreased by the product of (i) the number
of shares of Common Stock by which the total number of shares of Common Stock in
such Public Offering is increased or decreased and (ii) a fraction the numerator
of which equals the number of Shares subject to the Request of such Requesting
Shareholder and the denominator of which is the total number of shares of Common
Stock originally to be so registered.
(iv) Upon delivery of a Request, each Requesting Shareholder will,
if requested by the KKR Holder, execute and deliver to the KKR Holder a custody
agreement and power of attorney in form and substance reasonably satisfactory to
the KKR Holder with respect to the Shares to be registered pursuant to this
Section 5.02(b) (a "Custody Agreement and Power of Attorney"). The custodian and
attorney-in-fact under the Custody Agreement and Power of Attorney shall be the
KKR Holder or its designee. The Custody Agreement and Power of Attorney shall
provide, among other things, that such Shareholder shall deliver to and deposit
in custody with the custodian and attorney-in-fact named therein a certificate
or certificates representing such Shares (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as such
Requesting Shareholder's agent and attorney-in-fact with full power and
authority to act under the Custody Agreement and Power of Attorney on such
Shareholder's behalf with respect to the matters specified therein (including
executing an underwriting agreement and cross-receipts).
(v) Each Shareholder agrees that, if such Shareholder shall be a
Requesting Shareholder, such Shareholder shall execute and deliver or cause to
be executed and delivered such other agreements and other documents (such as
legal opinions, cross- receipts and certificates) as the KKR Holder itself is
delivering or as the KKR Holder may otherwise reasonably request to implement
the provision of this Section 5.02(b).
(vi) Each Requesting Shareholder shall bear a proportionate amount
of the expenses (including filing fees, underwriting discounts and commissions
and attorneys and accountants fees) relating to such Public Offering (based on
the relative number of Shares of such Shareholder which are covered by the
applicable registration statement relative to the total number of shares covered
by such registration statement).
(vii) If a Proposed Registration involves an
underwritten offering, the investment banker(s), underwriter(s)
<PAGE>
15
and manager(s) for such Public Offering shall be selected by the KKR Holder.
SECTION 5.03. "Drag-Along" Right With Respect to the Shares. (a)
Sales by KKR Holders. In the event that the KKR Holder determines, during the
term of this Agreement, to transfer either (i) at least 35% of the shares of
Common Stock (including shares subject to the Option in the event that the
Option is to be transferred) then outstanding on a fully diluted basis at the
time of such transfer or (ii) at least 15% of the shares of Common Stock
(including shares subject to the Option in the event that the Option is to be
transferred) then outstanding on a fully diluted basis at the time of such
transfer (provided that such percentage set forth in this clause (ii) equals
100% of the Buyer Shares at the time of such transfer) to a Proposed Purchaser
in a Private Sale, other than in an Exempt Transaction (a "Drag-Along Sale"),
then upon the request of the KKR Holder, each Shareholder shall transfer to such
Proposed Purchaser, at the same price and upon the same terms and conditions in
respect of any material term as such transfer by the KKR Holder, the percentage
of Shares held by such Shareholder that equals the percentage of shares to be
transferred by the KKR Holder (including shares subject to the Option in the
event that the Option is to be transferred) relative to the number of Buyer
Shares. In the event that both Sections 5.02 and 5.03 hereto apply to a single
transaction, the "drag-along" rights set forth in this Section 5.03 shall have
priority over the "tag-along" rights set forth in Section 5.02 above, and the
"tag-along" rights set forth in Section 5.02 shall not become exercisable by
such Shareholder unless the KKR Holder shall have determined not to exercise its
rights under this Section 5.03.
(b) Notice. Prior to making any Drag-Along Sale, the KKR Holder
shall, if it determines in its sole discretion that the Shareholders should
participate in such transfer, provide each Shareholder with written notice (the
"Drag-Along Notice") not less than 5 Business Days prior to the proposed date of
the Drag-Along Sale (the "Drag-Along Sale Date"). The Drag-Along Notice shall
set forth: (i) the name and address of the Proposed Purchaser; (ii) the proposed
amount and form of consideration to be paid per share of Common Stock and the
material terms and conditions of the transfer; (iii) the Drag-Along Sale Date
and the date upon which such Shareholder shall deliver to the KKR Holder the
certificates representing the Shares held by such Shareholder, duly endorsed,
and the power of attorney referred to below; and (iv) an indication that the
Proposed Purchaser has been informed of the Drag-Along Sale rights and has
agreed to acquire all of the Shares held by such Shareholder. Each Shareholder
shall (i) prior to the closing of any such transfer, execute any purchase
agreement or other documentation required by the Proposed Purchaser to
consummate the transfer, which purchase agreement and other documentation shall
be on terms no less favorable in respect of any material term to such
Shareholder than those executed by the KKR Holder, and (ii) at the closing of
<PAGE>
16
any such transfer, deliver to the Proposed Purchaser the certificate or
certificates representing the Shares held by such Shareholder, duly endorsed for
transfer with signatures guaranteed, against receipt of the purchase price
thereof.
(c) Transaction Agreements. In the event that the KKR Holder owns at
least 15% of the shares of Common Stock (including shares subject to the Option)
then outstanding on a fully diluted basis and has signed an agreement, with
respect to all such Buyer Shares, to vote in favor of or tender in connection
with a business combination transaction entered into by the Company (a
"Transaction Agreement"), then, upon the request of the KKR Holder, each
Shareholder shall execute a Transaction Agreement with the same terms and
conditions in all material respects as the Transaction Agreement signed by the
KKR Holder. Prior to entering into a Transaction Agreement, the KKR Holder
shall, if it determines in its sole discretion that such Shareholder should
execute a Transaction Agreement, provide such Shareholder with written notice
(the "Transaction Agreement Notice") not less than 5 Business Days prior to the
proposed date of the execution of the Transaction Agreement (the "Transaction
Agreement Date"). The Transaction Agreement Notice shall set forth: (i) the name
and address of the counter-parties to the Transaction Agreement; (ii) the
proposed form of Transaction Agreement; and (iii) the material terms and
conditions of the business combination with the Company to which the Transaction
Agreement relates. Each Shareholder shall, at the signing and closing of such
Transaction Agreement, execute and deliver all other documentation required by
such Transaction Agreement, which documents shall be on terms no less favorable
in respect of any material term to such Shareholder than those executed by the
KKR Holder.
(d) Effect of Drag-Along Sale. If the Shareholders receive their
proportionate share of the purchase price from a Drag-Along Sale, but have
failed to deliver certificates representing their Shares as described in this
Section 5.03, they shall for all purposes be deemed no longer to be Common
Shareholders, shall have no voting rights, shall not be entitled to any
dividends or other distributions with respect to the Common Stock held by them,
and shall have no other rights or privileges granted to shareholders under law
or this Agreement.
SECTION 5.04. Certain Definitions. For purposes of this Agreement,
the term:
(a) "Buyer Shares" shall mean the sum of the shares of Common Stock
acquired by Buyer pursuant to the Subscription Agreement or on exercise of the
Option plus the shares of Common Stock that Buyer has the right to acquire
pursuant to the Option.
(b) "Exempt Transaction" shall mean (i) sales by Buyer to any
Affiliate of Buyer, (ii) sales by any Affiliate of Buyer to another Affiliate of
Buyer or to Buyer and (iii) transfers by Buyer and its respective Affiliates to
its partners or members
<PAGE>
17
(and any subsequent sales by such partners or members) in the form of dividends
or distributions (whether upon liquidation or otherwise); provided, that prior
to any transfer described in clauses (i) and (ii) above, the applicable
transferee shall have agreed in writing to be bound by the terms of this
Agreement as if such transferee were "Buyer" hereunder; and provided, further,
that prior to any transfer described in clause (iii) above, if the transferee is
an Affiliate of KKR, such transferee shall have agreed in writing to be bound by
the provisions of this Agreement as if such transferee were "Buyer" hereunder.
(c) "KKR Holder" shall mean Buyer and any Person to whom a KKR
Holder transfers shares of Common Stock which Person is required by this
Agreement to be bound by the provisions of this Agreement.
(d) "Private Sale" shall mean any sale of shares of Common Stock
other than a sale made in a Public Offering.
(e) "Public Offering" shall mean any sale of shares of Common Stock
made in a public distribution pursuant to an effective registration statement
under the Securities Act.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Termination. Except with respect to the provisions
contained in Article I, Article II and Article VI, this Agreement shall
terminate (a) if prior to the Closing, upon the termination of the Subscription
Agreement and (b) if subsequent to the Closing, at such time as Buyer and its
Affiliates no longer own at least 10% of the shares of Common Stock (including
shares subject to the Option) then outstanding on a fully diluted basis. The
provisions contained in Article II hereof shall terminate upon the earlier to
occur of (a) the Closing and (b) the two-year anniversary of the termination of
the Subscription Agreement (the "Article II Termination Date"). The provisions
contained in Section 6.02 shall terminate (a) if prior to the Closing, upon the
termination of the Subscription Agreement and (b) if subsequent to the Closing,
the two-year anniversary of the date on which Buyer shall no longer own at least
10% of the shares of Common Stock (including shares subject to the Option) then
outstanding on a fully diluted basis. The provisions contained in Article I and
Article VI (other than Section 6.02) shall survive any of the termination events
described in this Section.
SECTION 6.02. Covenant Not to Compete. Each
Shareholder whose name is set forth on Schedule C (the "Schedule
C Shareholders") hereby severally agrees that for the period
commencing on the date hereof and (i) in the case of Robert R.
Onstead and R. Randall Onstead, Jr., ending on the later of the
<PAGE>
18
five-year anniversary of the Closing and the two-year anniversary of the date
such Shareholder shall cease to be employed by the Company, (ii) in the case of
Ann Onstead Hill and Mary Onstead, ending on the five-year anniversary of the
Closing and (iii) in the case of all other Schedule C Shareholders, the two-year
anniversary of the date such Shareholder shall cease to be employed by the
Company (the "Non-Compete Period"), such Shareholder shall not, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected in any manner with
(including as a consultant), any business which shall be engaged in the retail
selling of food, beverages or other products under the names "Randall's", "Tom
Thumb" or "Simon David", or under any other name which uses any of the foregoing
names as a component or which is (or includes a component which is) confusingly
similar to any such names (the "Trade Names"), in the United States. In addition
to the foregoing, each of the Schedule C Shareholders hereby severally agrees
that during the Non-Compete Period, such Shareholder shall not, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected in any manner with
(including as a consultant), any business which shall be engaged in the retail
selling of food, beverages or other related products under any name, including
the Trade Names, in Texas, provided, that (i) unless such business shall own,
lease or operate a Supercenter (as defined below), the retail selling of food,
beverages or other related products shall be the primary business of such
business and (ii) this sentence shall not be applicable to restaurant or
catering businesses. For purposes hereof, "Supercenter" shall mean any store of
at least 50,000 square feet at which general merchandise as well as groceries
are sold at retail. For illustrative purposes only, Wal-Mart Supercenters and
Super Kmart Centers are examples of Supercenters. In the event that this
covenant not to compete is held by any court of competent jurisdiction to be
unenforceable because it is too extensive in scope or time or territory, it
shall be deemed to be and shall be amended without any further act by the
parties hereto to conform to the scope and period of time and geographical area
which would permit it to be enforced. If this covenant is breached or threatened
to be breached, such Schedule C Shareholder expressly consents that, in addition
to any other remedy Buyer may have, Buyer shall be entitled to apply for and
receive injunctive relief in order to prevent the continuation of any existing
breach or the occurrence of any threatened breach.
SECTION 6.03. Legends. Each Shareholder agrees that (i) the
certificates representing the Shares owned by such Shareholder shall bear a
legend indicating that such Shares are subject to this Agreement, which legend
may be removed upon termination of this Agreement, (ii) any attempted or
purported transfer of any Shares in violation of this Agreement shall be null
and void and without effect and (iii) the Company shall not be required to enter
in its stock or other records, or reflect,
<PAGE>
19
recognize or give effect to for any purpose, any transfer of Shares in violation
of this Agreement.
SECTION 6.04. Registration Rights Agreement. At the Closing, the
Company and Buyer agree to execute and deliver the Registration Rights Agreement
attached as Exhibit A.
SECTION 6.05. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or sent by overnight courier (providing proof of delivery) to the Company and
Buyer in accordance with Section 9.02 of the Subscription Agreement and to the
Shareholders at their respective addresses set forth on the signature pages
hereto (or at such other address for a party as shall be specified by like
notice).
SECTION 6.06. Interpretation. (a) When a reference is made in this
Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section of this Agreement or a Schedule or Exhibit to this Agreement, as
applicable, unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
(b) For purposes of this Agreement, the term "ESOP" includes any
plan, entity or other Person who succeeds the ESOP as holder of the Common Stock
held by the ESOP.
SECTION 6.07. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 6.08. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of this
Agreement. This Agreement, other than as provided in Sections 3.01(b), 5.01(a),
5.04(b), 6.12 and 6.14, is not intended to confer upon any Person other than the
parties any rights or remedies.
SECTION 6.09. Amendment. This Agreement (including the Exhibits and
Schedules hereto) may not be amended except by an instrument in writing signed
on behalf of the Company, Buyer and any Shareholder whose rights or obligations
hereunder are adversely affected by such amendment; provided that as to the
rights or obligations of any Shareholder, this Agreement may be amended by such
Shareholder, the Company and Buyer.
<PAGE>
20
SECTION 6.10. Extension; Waiver. At any time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) subject to Section 6.09, waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 6.11. GOVERNING LAW; ARBITRATION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN
THAT STATE. ANY CONTROVERSY, DISPUTE, OR CLAIM OF WHATEVER NATURE ARISING OUT
OF, IN CONNECTION WITH, OR RELATING TO THIS AGREEMENT, INCLUDING THE EXISTENCE,
VALIDITY, INTERPRETATION OR BREACH THEREOF AND ANY CLAIM BASED ON CONTRACT, TORT
OR STATUTE, SHALL BE RESOLVED AT THE REQUEST OF ANY PARTY, BY FINAL AND BINDING
ARBITRATION CONDUCTED IN WASHINGTON, D.C. PURSUANT TO THE FEDERAL ARBITRATION
ACT AND IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION ("AAA"). ARBITRATION HEREUNDER SHALL BE CONDUCTED BY A
SINGLE ARBITRATOR SELECTED JOINTLY BY BUYER AND ROBERT R. ONSTEAD, ON BEHALF OF
THE SHAREHOLDERS (PROVIDED THAT IF HE SHALL CEASE TO HAVE THE CAPACITY TO SERVE
AS A DIRECTOR, THEN THE COMPANY SHALL JOINTLY SELECT THE ARBITRATOR WITH BUYER).
IF WITHIN 30 DAYS AFTER A DEMAND FOR ARBITRATION IS MADE, BUYER AND ROBERT R.
ONSTEAD OR THE COMPANY, AS THE CASE MAY BE, ARE UNABLE TO AGREE ON A SINGLE
ARBITRATOR, THREE ARBITRATORS SHALL BE APPOINTED. BUYER AND ROBERT R. ONSTEAD OR
THE COMPANY, AS THE CASE MAY BE, SHALL EACH SELECT ONE ARBITRATOR AND THOSE TWO
ARBITRATORS SHALL THEN SELECT WITHIN 30 DAYS A THIRD NEUTRAL ARBITRATOR. IF THE
ARBITRATORS SO SELECTED CANNOT AGREE ON THE THIRD ARBITRATOR, THE SELECTION
SHALL BE IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF AAA. THE PARTIES
AGREE TO SHARE EQUALLY THE FEES AND EXPENSES OF THE ARBITRATOR(S) HEREUNDER. ANY
DISCOVERY IN CONNECTION WITH ARBITRATION HEREUNDER SHALL BE LIMITED TO
INFORMATION DIRECTLY RELEVANT TO THE CONTROVERSY OR CLAIM IN ARBITRATION.
JUDGMENT UPON ANY ARBITRATION AWARD RENDERED MAY BE ENTERED IN ANY COURT OF
COMPETENT JURISDICTION. AN ARBITRATION AWARD HEREUNDER CANNOT INCLUDE PUNITIVE
DAMAGES. EACH PARTY HERETO UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.
SECTION 6.12. Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of Law or
otherwise by any of the parties without the prior written consent
of the other party, provided, that Buyer may assign, in whole or
<PAGE>
21
in part, any of its rights and obligations hereunder and under the Registration
Rights Agreement to one or more of its Affiliates or to any Person to whom Buyer
transfers shares in a transaction that would qualify as a Drag-Along Sale
pursuant to Section 5.03, but only if, in each case, such assignee shall have
agreed in writing to be bound by the terms hereof as if it were "Buyer"
hereunder. Subject to the foregoing, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 6.13. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
SECTION 6.14. Indemnity. Whether or not any of the Transactions are
consummated, the Company agrees to indemnify and hold harmless Buyer and each
other KKR Holder, and all current and future directors, officers, employees,
general and limited partners, members, Affiliates (including KKR) and assignees
of Buyer, of each other KKR Holder and of any of the foregoing (each, an
"Indemnified Party") from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against any Indemnified Party in any manner relating to or arising out
of (a) any Indemnified Party's purchase and/or ownership of any shares of Common
Stock, the Option or any other securities of the Company, (b) the operations of
the Company or any current or future Subsidiary, (c) any of the Transactions,
(d) any litigation to which any Indemnified Party is made a party in its
capacity as a shareholder or owner of securities (or a current or future
director, officer, employee, limited or general partner, Affiliate or assignee
of a shareholder or owner of securities) of the Company or (e) any litigation to
which any Indemnified Party is made a party relating to or arising out of any
transaction between any Indemnified Party, on the one hand, or the Company or
any current or future Subsidiary, on the other hand.
SECTION 6.15. No Recourse. Notwithstanding anything that may be
expressed or implied in this Agreement, the Company and the Shareholders
covenant, agree and acknowledge that, no recourse under this Agreement or any
documents or instruments delivered in connection with this Agreement or any of
the Transactions shall be had against any current or future director, officer,
employee, general or limited partner, member, Affiliate (including KKR) or
assignee of Buyer or any of the foregoing, whether by the enforcement of any
assessment or by any legal or
<PAGE>
22
equitable proceeding, or by virtue of any statute, regulation or other
applicable law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by
any current or future officer, agent or employee of Buyer or any current or
future member of Buyer or any current or future director, officer, employee,
general or limited partner, member, Affiliate (including KKR) or assignee of any
of the foregoing, as such for any obligation of Buyer under this Agreement or
any documents or instruments delivered in connection with this Agreement or any
of the Transactions or for any claim based on, in respect of or by reason of
such obligations or their creation.
<PAGE>
23
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement or caused this Agreement to be duly executed and
delivered as of the day and year first above written.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead, Jr.
----------------------------------
Name: R. Randall Onstead, Jr.
Title: President and CEO
RFM ACQUISITION LLC
By: /s/ Paul E. Raether
----------------------------------
Name: Paul E. Raether
Title: Chief Executive Officer
SHAREHOLDERS:
RKO MANAGEMENT LTD.
By: /s/ Robert R. Onstead
----------------------------------
Name: Robert R. Onstead
Title: General Partner
By: /s/ R. Randall Onstead, Jr.
----------------------------------
Name: R. Randall Onstead, Jr.
Title: General Partner
/s/ Robert R. Onstead
------------------------------------
ROBERT R. ONSTEAD
<PAGE>
24
ONSTEAD FOUNDATION
By: /s/ Robert R. Onstead
----------------------------------
Robert R. Onstead, Trustee
By: /s/ Ann Onstead Hill
----------------------------------
Ann Onstead Hill, Trustee
By: /s/ R. Randall Onstead, Jr.
----------------------------------
R. Randall Onstead, Jr.,
Trustee
By: /s/ Mary Onstead
----------------------------------
Mary Onstead, Trustee
By: /s/ Charles Martin Onstead
----------------------------------
Charles Martin Onstead,
Trustee
ONSTEAD CHARITABLE REMAINDER UNITRUST
By: ABILENE CHRISTIAN UNIVERSITY,
TRUSTEE
By: /s/ Jack W. Rich
----------------------------------
Name: Jack W. Rich
Title: Executive Vice President
ONSTEAD FAMILY TRUST FOR
R. RANDALL ONSTEAD, JR.
By: /s/ Lew W. Harpold
----------------------------------
Lew W. Harpold, Trustee
<PAGE>
25
ONSTEAD FAMILY TRUST FOR
ANN ONSTEAD HILL
By: /s/ Lew W. Harpold
----------------------------------
Lew W. Harpold, Trustee
ONSTEAD FAMILY TRUST FOR
MARY ONSTEAD
By: /s/ Lew W. Harpold
----------------------------------
Lew W. Harpold, Trustee
ONSTEAD FAMILY TRUST FOR
CHARLIE ONSTEAD
By: /s/ Lew W. Harpold
----------------------------------
Lew W. Harpold, Trustee
/s/ Ann Onstead Hill
----------------------------------------
ANN ONSTEAD HILL
/s/ R. Randall Onstead, Jr.
----------------------------------------
R. RANDALL ONSTEAD, JR.
/s/ Mary Onstead
----------------------------------------
MARY ONSTEAD
/s/ Charles Martin Onstead
----------------------------------------
CHARLES MARTIN ONSTEAD
R. C. BARCLAY FAMILY TRUST
By: /s/ Lew W. Harpold
------------------------------------
LEW W. HARPOLD, TRUSTEE
<PAGE>
26
RANDALL C. BARCLAY ESTATE
By: /s/ Ronnie W. Barclay
----------------------------------
Ronnie W. Barclay,
Co-Executor
By: /s/ Dian Hutchison
----------------------------------
Dian Hutchison,
Co-Executor
/s/ Ronnie W. Barclay
----------------------------------------
RONNIE W. BARCLAY
/s/ Dian Hutchison
----------------------------------------
DIAN HUTCHISON
/s/ John N. Frewin
----------------------------------------
JOHN N. FREWIN
NORMAN N. FREWIN, SR. ESTATE
By: /s/ John N. Frewin
----------------------------------
John N. Frewin, Executor
By: /s/ Rosemary Frewin Gambino
----------------------------------
Rosemary Frewin Gambino,
Executor
/s/ Joan Dowdall
----------------------------------------
JOAN DOWDALL
/s/ Norman P. Frewin
----------------------------------------
NORMAN P. FREWIN
<PAGE>
27
/s/ Rosemary Frewin Gambino
----------------------------------------
ROSEMARY FREWIN GAMBINO
/s/ Bobby L. Gowens
----------------------------------------
BOBBY L. GOWENS
/s/ Tom Arledge
----------------------------------------
TOM ARLEDGE
/s/ Mike M. Calbert
----------------------------------------
MIKE M. CALBERT
/s/ Lee Straus
----------------------------------------
LEE STRAUS
/s/ Terry Poyner
----------------------------------------
TERRY POYNER
/s/ Mark Prestidge
----------------------------------------
MARK PRESTIDGE
/s/ Joe Rollins
----------------------------------------
JOE ROLLINS
<PAGE>
SCHEDULE A
Number of
Schedule A Shareholder Committed Shares
- ---------------------- ----------------
RKO Management Ltd. 7,536,848
Robert R. Onstead 418,656
Onstead Foundation 125,000
Onstead Charitable Remainder Unitrust 312,500
Lew W. Harpold, Trustee
Onstead Family Trust for
Ann Onstead Hill 106,265
Lew W. Harpold, Trustee
Onstead Family Trust for
Mary Onstead 106,265
Lew W. Harpold, Trustee
Onstead Family Trust for
Charlie Onstead 106,265
Ann Onstead Hill 217,380
Mary Onstead 223,948
Charles Martin Onstead 269,257
Lew W. Harpold, Trustee
R.C. Barclay Family Trust 219,047
Randall C. Barclay Estate 1,506,390
Dian Hutchison 367,811
John N. Frewin 146,819
Norman N. Frewin, Sr. Estate 48,009
Joan Dowdall 48,712
Norman P. Frewin 182,140
Rosemary Frewin Gambino 141,966
<PAGE>
SCHEDULE B
Name and Address of Number of Shares of
Schedule B Shareholder Common Stock Owned
- ---------------------- ------------------
RKO Management Ltd. 7,536,848
c/o Robert R. Onstead
Randall's Food Markets, Inc.
3663 Briarpark Dr.
Houston, TX 77042
c/o R. Randall Onstead, Jr.
Randall's Food Markets, Inc.
3663 Briarpark Dr.
Houston, TX 77042
Robert R. Onstead 418,656
Randall's Food Markets, Inc.
3663 Briarpark Dr.
Houston, TX 77042
Onstead Foundation 125,000
c/o Robert R. Onstead, Trustee
Randall's Food Markets, Inc.
3663 Briarpark Dr.
Houston, TX 77042
c/o Ann Onstead Hill, Trustee
1407 Old Elm Trail
Sugar Land, TX 77477
c/o R. Randall Onstead, Jr., Trustee
Randall's Food Markets, Inc.
3663 Briarpark Dr.
Houston, TX 77042
c/o Mary Onstead, Trustee
6231 Ellsworth Avenue
Dallas, TX 75214-6197
c/o Charles M. Onstead, Trustee,
5927 Mordred
Austin, TX 78739
Onstead Charitable Remainder Unitrust 312,500
c/o Abilene Christian University, Trustee
111 Hardin Administration Bldg.
ACU Box 29125
Abilene, TX 79699-9125
<PAGE>
2
Name and Address of Number of Shares of
Schedule B Shareholder Common Stock Owned
---------------------- ------------------
Onstead Family Trust for
R. Randall Onstead, Jr. 106,265
c/o Lew W. Harpold, Trustee
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, TX 77046
Onstead Family Trust for
Ann Onstead Hill 106,265
c/o Lew W. Harpold, Trustee
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, TX 77046
Onstead Family Trust for
Mary Onstead 106,265
c/o Lew W. Harpold, Trustee
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, TX 77046
Onstead Family Trust for
Charlie Onstead 106,265
c/o Lew W. Harpold, Trustee
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, TX 77046
Ann Onstead Hill 217,380
1407 Old Elm Trail
Sugar Land, TX 77477
R. Randall Onstead, Jr. 203,336
315 Alkire Dr.
Sugar Land, TX 77478
Mary Onstead 223,948
6231 Ellsworth Avenue
Dallas, TX 75214-6197
Charles Martin Onstead 269,257
5927 Mordred
Austin, TX 78739
R.C. Barclay Family Trust 219,047
c/o Lew W. Harpold, Trustee
Looper, Reed, Mark & McGraw
Nine Greenway Plaza, Suite 1717
Houston, TX 77046
<PAGE>
3
Name and Address of Number of Shares of
Schedule B Shareholder Common Stock Owned
---------------------- ------------------
Randall C. Barclay Estate 1,506,390
c/o Ronnie W. Barclay
36 West Rivercrest
Houston, TX 77042
c/o Dian Hutchison
101 Cantergait
San Antonio, TX 78231
Ronnie W. Barclay 323,529
36 West Rivercrest
Houston, TX 77042
Dian Hutchison 367,811
101 Cantergait
San Antonio, TX 78231
John N. Frewin 146,819
32402 Watersmeat
Fulshear, TX 77441
Norman N. Frewin, Sr. Estate 48,009
c/o John Frewin
32402 Watersmeat
Fulshear, TX 77441
c/o Rosemary Frewin Gambino
P.O. Box 235
Pattison, TX 77466
Joan Dowdall 48,712
3010 Parkridge
Shreveport, LA 71108
Norman P. Frewin 182,140
702 Sandpiper St.
Sugar Land, TX 77478
Rosemary Frewin Gambino 141,966
P.O. Box 235
Pattison, TX 77466
Bobby L. Gowens 103,358
3711 Panorama
Missouri City, TX 77459
Tom Arledge 4,821
23 Turtle Rock Court
The Woodlands, TX 77381
<PAGE>
4
Name and Address of Number of Shares of
Schedule B Shareholder Common Stock Owned
---------------------- ------------------
Mike M. Calbert 30,728
2103 Tradewinds
Missouri City, TX 77459
Lee Straus 3,857
629 Wellesley
Houston, TX 77024
Terry Poyner 4,098
13114 Finchbrook
Cypress, TX 77429
Mark Prestidge 1,000
4305 McKavett
Plano, TX 75024
Joe Rollins 689
18107 Fern Bluff
Spring, TX 77379
<PAGE>
SCHEDULE C
Schedule C Shareholder
- ----------------------
Robert R. Onstead
Ann Onstead Hill
R. Randall Onstead, Jr.
Mary Onstead
Charles Martin Onstead
Tom Arledge
Mike M. Calbert
Lee Straus
Terry Poyner
Mark Prestidge
Joe Rollins
<PAGE>
Schedule D
Pledged Shares
<TABLE>
<CAPTION>
Shareholder Class of Shares # of shares Lender
- ------------------------- -------------------- --------------- ----------------------
<S> <C> <C> <C>
Mike Calbert Common 15,544.0 Randall's Food Markets
Randall C. Barclay Estate Common 123,967.0 Randall's Food & Drugs
Norman N. Frewin Estate Common 48,009.0 Randall's Food & Drugs
Class A Preferred 168.5 Randall's Food & Drugs
Rosemary Frewin Gambino Common 17,577.0 Texas Commerce Bank
Ann Onstead Hill Common 21,000.0 Wells Fargo
Dian Hutchison Common 45,671.0 Texas Commerce Bank
Charles Onstead Common 16,900.0 Texas Commerce Bank
Mary Onstead Common 28,678.0 Texas Commerce Bank
Randall Onstead Common 27,828.0 Texas Commerce Bank
</TABLE>
<PAGE>
EXHIBIT 10.3
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
among
RANDALL'S FOOD MARKETS, INC.
The Several Lenders
from Time to Time Parties Hereto
THE CHASE MANHATTAN BANK,
as Administrative Agent
NATIONAL WESTMINSTER BANK PLC,
as Syndication Agent
and
CITICORP U.S.A., INC.,
as Documentation Agent
Dated as of June 27, 1997
================================================================================
<PAGE>
Table of Contents
Page
SECTION 1. Definitions..................................................... 2
SECTION 2. Amount and Terms of Credit...................................... 28
2.1 Commitments.......................................................... 28
2.2 Minimum Amount of Each Borrowing; Maximum Number
of Borrowings........................................................ 29
2.3 Notice of Borrowing.................................................. 29
2.4 Disbursement of Funds................................................ 31
2.5 Repayment of Loans; Evidence of Debt................................. 31
2.6 Conversions and Continuations........................................ 32
2.7 Pro Rata Borrowings.................................................. 33
2.8 Interest............................................................. 33
2.9 Interest Periods..................................................... 34
2.10 Increased Costs, Illegality, etc..................................... 35
2.11 Compensation......................................................... 36
2.12 Change of Lending Office............................................. 37
2.13 Notice of Certain Costs.............................................. 37
SECTION 3. Letters of Credit............................................... 37
3.1 Letters of Credit.................................................... 37
3.2 Letter of Credit Requests............................................ 37
3.3 Letter of Credit Participations...................................... 38
3.4 Agreement to Repay Letter of Credit Drawings......................... 39
3.5 Increased Costs...................................................... 40
3.6 Successor Letter of Credit Issuer.................................... 41
SECTION 4. Fees; Commitments............................................... 41
4.1 Fees................................................................. 41
4.2 Voluntary Reduction of Revolving Credit Commitments.................. 42
4.3 Mandatory Termination of Commitments................................. 43
SECTION 5. Payments........................................................ 43
5.1 Voluntary Prepayments................................................ 43
5.2 Mandatory Prepayments................................................ 43
5.3 Method and Place of Payment.......................................... 46
5.4 Net Payments......................................................... 46
5.5 Computations of Interest and Fees.................................... 48
SECTION 6. Conditions Precedent to Initial Borrowing....................... 48
6.1 Credit Documents..................................................... 48
6.2 Closing Certificate.................................................. 48
6.3 Corporate Proceedings of Each Credit Party........................... 49
6.4 Corporate Documents.................................................. 49
6.5 No Material Adverse Change........................................... 49
6.6 Fees................................................................. 49
6.7 Equity Contribution and Redemption................................... 49
<PAGE>
ii
6.8 Recapitalization..................................................... 49
6.9 Other Indebtedness................................................... 49
6.10 Closing Date Balance Sheet........................................... 49
6.11 Solvency Certificate................................................. 49
6.12 Required Approvals................................................... 49
6.13 Existing Credit Agreement............................................ 50
6.14 Senior Notes and Preferred Stock..................................... 50
6.15 Legal Opinions....................................................... 50
6.16 Subordinated Notes................................................... 50
SECTION 7. Conditions Precedent to All Credit Events....................... 50
7.1 No Default; Representations and Warranties........................... 50
7.2 Notice of Borrowing; Letter of Credit Request........................ 50
SECTION 8. Representations, Warranties and Agreements...................... 51
8.1 Corporate Status..................................................... 51
8.2 Corporate Power and Authority........................................ 51
8.3 No Violation......................................................... 51
8.4 Litigation........................................................... 51
8.5 Margin Regulations................................................... 51
8.6 Governmental Approvals............................................... 51
8.7 Investment Company Act............................................... 52
8.8 True and Complete Disclosure......................................... 52
8.9 Financial Condition; Financial Statements............................ 52
8.10 Tax Returns and Payments............................................. 52
8.11 Compliance with ERISA................................................ 52
8.12 Subsidiaries......................................................... 53
8.13 Patents, etc......................................................... 53
8.14 Environmental Laws................................................... 53
8.15 Properties........................................................... 53
SECTION 9. Affirmative Covenants........................................... 54
9.1 Information Covenants................................................ 54
9.2 Books, Records and Inspections....................................... 56
9.3 Maintenance of Insurance............................................. 56
9.4 Payment of Taxes..................................................... 56
9.5 Consolidated Corporate Franchises.................................... 56
9.6 Compliance with Statutes, Obligations, etc........................... 56
9.7 ERISA................................................................ 56
9.8 Good Repair.......................................................... 57
9.9 Transactions with Affiliates......................................... 57
9.10 End of Fiscal Years; Fiscal Quarters................................. 57
9.11 Additional Guarantors................................................ 58
9.12 Pledges of Additional Stock and Evidence of Indebtedness............. 58
9.13 Use of Proceeds...................................................... 58
9.14 Changes in Business.................................................. 58
SECTION 10. Negative Covenants............................................. 58
<PAGE>
iii
10.1 Limitation on Indebtedness........................................... 59
10.2 Limitation on Liens.................................................. 61
10.3 Limitation on Fundamental Changes.................................... 61
10.4 Limitation on Sale of Assets......................................... 62
10.5 Limitation on Investments............................................ 63
10.6 Limitation on Dividends.............................................. 64
10.7 Limitations on Debt Payments and Amendments.......................... 65
10.8 Limitations on Sale Leasebacks....................................... 65
10.9 Consolidated Lease Expense........................................... 66
10.10 Consolidated Total Debt to Consolidated EBITDA Ratio................. 66
10.11 Consolidated EBITDA to Consolidated Interest Expense Ratio........... 66
10.12 Capital Expenditures................................................. 67
SECTION 11. Events of Default.............................................. 68
11.1 Payments............................................................. 68
11.2 Representations, etc................................................. 68
11.3 Covenants............................................................ 68
11.4 Default Under Other Agreements....................................... 68
11.5 Bankruptcy, etc...................................................... 68
11.6 ERISA................................................................ 69
11.7 Guarantee............................................................ 69
11.8 Pledge Agreement..................................................... 69
11.9 Judgments............................................................ 69
SECTION 12. The Administrative Agent....................................... 70
12.1 Appointment.......................................................... 70
12.2 Delegation of Duties................................................. 70
12.3 Exculpatory Provisions............................................... 70
12.4 Reliance by Administrative Agent..................................... 71
12.5 Notice of Default.................................................... 71
12.6 Non-Reliance on Administrative Agent and Other Lenders............... 71
12.7 Indemnification...................................................... 72
12.8 Administrative Agent in Its Individual Capacity...................... 72
12.9 Successor Agent...................................................... 72
SECTION 13. Miscellaneous.................................................. 72
13.1 Amendments and Waivers............................................... 72
13.2 Notices.............................................................. 74
13.3 No Waiver; Cumulative Remedies....................................... 74
13.4 Survival of Representations and Warranties........................... 75
13.5 Payment of Expenses and Taxes........................................ 75
13.6 Successors and Assigns; Participations and Assignments............... 75
13.7 Replacements of Lenders under Certain Circumstances.................. 77
13.8 Adjustments; Set-off................................................. 78
13.9 Counterparts......................................................... 78
13.10 Severability......................................................... 78
13.12 GOVERNING LAW........................................................ 78
13.13 Submission to Jurisdiction; Waivers.................................. 79
<PAGE>
iv
13.14 Acknowledgments...................................................... 79
13.15 WAIVERS OF JURY TRIAL................................................ 79
13.16 Confidentiality...................................................... 79
<PAGE>
v
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
Schedule 8.12 Subsidiaries
Schedule 10.1 Other Indebtedness
EXHIBITS
Exhibit A Form of Guarantee
Exhibit B Form of Pledge Agreement
Exhibit C-1 Form of Promissory Note (Term Loans)
Exhibit C-2 Form of Promissory Note (Revolving Credit and Swingline Loans)
Exhibit D Form of Letter of Credit Request
Exhibit E-1 Form of Legal Opinion of Simpson Thacher & Bartlett
Exhibit E-2 Form of Legal Opinion of Vinson & Elkins
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Closing Certificate
Exhibit H Form of Confidentiality Agreement
<PAGE>
CREDIT AGREEMENT dated as of June 27, 1997, among RANDALL'S FOOD
MARKETS, INC., a Texas corporation (the "Borrower"), the lending institutions
from time to time parties hereto (each a "Lender" and, collectively, the
"Lenders"), THE CHASE MANHATTAN BANK, as Administrative Agent (such term and
each other capitalized term used but not defined in this introductory statement
having the meaning provided in Section 1), NATIONAL WESTMINSTER BANK PLC, as
Syndication Agent, and CITICORP USA, INC., as Documentation Agent.
The Borrower has entered into a Subscription Agreement dated as of
April 1, 1997 (such Subscription Agreement, as the same may be amended,
supplemented or otherwise modified from time to time, being referred to herein
as the "Subscription Agreement"), with RFM, pursuant to which (a) RFM will
subscribe for and purchase newly issued Borrower Common Stock (and an option to
purchase additional shares of such Borrower Common Stock) in exchange for the
Equity Contribution, (b) the Borrower will redeem (the "Redemption") from the
existing common shareholders of the Borrower, for an aggregate cash amount equal
to not less than approximately $89,000,000 and not more than $96,000,000 (the
"Cash Consideration"), a portion of the Borrower Common Stock held by such
existing common shareholders and (c) after giving effect to the Equity
Contribution and the Redemption, (i) RFM will hold approximately 62% of the
Borrower Common Stock and (ii) the existing common shareholders of the Borrower
will hold the remaining Borrower Common Stock (the foregoing transactions and
the transactions related thereto, including the Equity Contribution and the
Redemption, are referred to herein as the "Recapitalization").
The Borrower has requested the Lenders to extend credit in the form
of (a) Term Loans, in an aggregate principal amount not in excess of
$125,000,000, and (b) Revolving Credit Loans at any time and from time to time
prior to the Revolving Credit Maturity Date, in an aggregate principal amount at
any time outstanding not in excess of $225,000,000 less the sum of (i) the
aggregate Letter of Credit Outstandings at such time and (ii) the aggregate
principal amount of all Swingline Loans then outstanding. The Borrower has
requested the Letter of Credit Issuer to issue Letters of Credit at any time and
from time to time prior to the L/C Maturity Date, in an aggregate face amount at
any time outstanding not in excess of $25,000,000. The Borrower has requested
Chase to extend credit in the form of Swingline Loans at any time and from time
to time prior to the Swingline Maturity Date, in an aggregate principal amount
at any time outstanding not in excess of $25,000,000.
The proceeds of the Term Loans will be used by the Borrower,
together with (a) the net proceeds from the issuance of the Subordinated Notes
and (b) the proceeds of the Equity Contribution, solely (i) to pay the Cash
Consideration, (ii) to fund the Putable Shares Reserve Fund, (iii) to repay all
principal, interest, fees and other amounts outstanding under the Existing
Credit Agreement, (iv) to repay all the Senior Notes and pay the Make-Whole
Premium, (v) to redeem all the outstanding Existing Preferred Stock and (vi) to
pay fees and expenses incurred in connection with the Recapitalization and
certain other liabilities, the financing therefor and the other transactions
contemplated hereby and thereby. Proceeds of Revolving Credit Loans and
Swingline Loans may be used by the Borrower to finance a portion of the
foregoing and for general corporate purposes (including Permitted Acquisitions),
and Letters of Credit will be used by the Borrower for general corporate
purposes.
<PAGE>
2
The parties hereto hereby agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall
have the meanings specified in this Section 1 unless the context otherwise
requires (it being understood that defined terms in this Agreement shall include
in the singular number the plural and in the plural the singular):
"ABR" shall mean, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. Any change in the ABR due to a change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective as of the opening of business on the effective day of
such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loan" shall mean each Loan bearing interest at the rate
provided in Section 2.8(a) and, in any event, shall include all Swingline
Loans.
"ABR Revolving Credit Loan" shall mean any Revolving Credit Loan
bearing interest at a rate determined by reference to the ABR.
"Acquired EBITDA" shall mean, with respect to any Acquired Entity or
Business, any Converted Restricted Subsidiary, any Sold Entity or Business
or any Converted Unrestricted Subsidiary (any of the foregoing, a "Pro
Forma Entity") for any period, the sum of the amounts for such period of
(a) income from continuing operations before income taxes and
extraordinary items, (b) interest expense, (c) depreciation expense, (d)
amortization expense, including amortization of deferred financing fees,
(e) non-recurring charges, (f) non-cash charges, (g) losses on asset sales
and (h) restructuring charges or reserves less the sum of the amounts for
such period of (i) non-recurring gains, (j) non-cash gains and (k) gains
on asset sales, all as determined on a consolidated basis for such Pro
Forma Entity in accordance with GAAP.
"Acquired Entity or Business" shall have the meaning provided in the
definition of the term "Consolidated EBITDA".
"Acquisition Subsidiary" shall mean (a) any Subsidiary of the
Borrower that is formed or acquired after the Closing Date in connection
with Permitted Acquisitions, provided that at such time (or promptly
thereafter) the Borrower designates such Subsidiary an Acquisition
Subsidiary in a written notice to the Administrative Agent, (b) any
Restricted Subsidiary on the Closing Date subsequently re-designated as an
Acquisition Subsidiary by the Borrower in a written notice to the
Administrative Agent, provided that such re-designation shall be deemed to
be an investment on the date of such re-designation in an Acquisition
Subsidiary in an amount equal to the sum of (i) the net worth of such
re-designated Restricted Subsidiary immediately prior to such re-
designation (such net worth to be calculated without regard to any
Guarantee provided by such re-designated Restricted Subsidiary) and (ii)
the aggregate principal amount of any Indebtedness owed by such
re-designated Restricted Subsidiary to the Borrower or any other
Restricted Subsidiary immediately prior to such re-designation, all
calculated, except as set forth in the parenthetical to clause (i), on a
consolidated basis in accordance with GAAP, and (c) each Subsidiary of an
Acquisition Subsidiary; provided, however, that (i) at the time of any
written re-designation by the Borrower to the Administrative
<PAGE>
3
Agent of any Acquisition Subsidiary as a Restricted Subsidiary, the
Acquisition Subsidiary so re-designated shall no longer constitute an
Acquisition Subsidiary, (ii) no Acquisition Subsidiary may be
re-designated as a Restricted Subsidiary if a Default or Event of Default
would result from such re-designation and (iii) no Restricted Subsidiary
may be re-designated as an Acquisition Subsidiary if a Default or Event of
Default would result from such re-designation. On or promptly after the
date of its formation, acquisition or re-designation, as applicable, each
Acquisition Subsidiary (other than an Acquisition Subsidiary that is a
Foreign Subsidiary) shall have entered into a tax sharing agreement
containing terms that, in the reasonable judgment of the Administrative
Agent, provide for an appropriate allocation of tax liabilities and
benefits.
"Adjusted Total Revolving Credit Commitment" shall mean at any time
the Total Revolving Credit Commitment less the aggregate Revolving Credit
Commitments of all Defaulting Lenders.
"Adjusted Total Term Loan Commitment" shall mean at any time the
Total Term Loan Commitment less the Term Loan Commitments of all
Defaulting Lenders.
"Administrative Agent" shall mean Chase, together with its
affiliates, as the arranger of the Commitments and as the administrative
agent for the Lenders under this Agreement and the other Credit Documents.
"Administrative Agent's Office" shall mean the office of the
Administrative Agent located at 270 Park Avenue, New York, New York 10017,
or such other office in New York City as the Administrative Agent may
hereafter designate in writing as such to the other parties hereto.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly,
the power (a) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such corporation or (b) to direct
or cause the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Revolving Credit Outstandings" shall have the meaning
provided in Section 5.2(b).
"Agreement" shall mean this Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Applicable ABR Margin" shall mean, with respect to each ABR Loan at
any date, the applicable percentage per annum set forth below based upon
(a) whether such loan is a Revolving Credit Loan, a Swingline Loan or a
Term Loan and (b) the Status in effect on such date:
Applicable ABR
Loan Status Margin
---- ------ ------
Revolving Credit Loans and Level I Status 1.000%
Swingline Loans Level II Status 0.750%
Level III Status 0.500%
Level IV Status 0.250%
<PAGE>
4
Applicable ABR
Loan Status Margin
---- ------ --------------
Level V Status 0.000%
Level VI Status 0.000%
Level VII Status 0.000%
Level VIII Status 0.000%
Term Loans Level I Status 1.500%
Level II Status 1.250%
Level III Status 1.000%
Level IV Status 0.750%
Level V Status 0.500%
Level VI Status 0.250%
"Applicable Eurodollar Margin" shall mean, with respect to each
Eurodollar Term Loan and Eurodollar Revolving Credit Loan at any date, the
applicable percentage per annum set forth below based upon (a) whether
such loan is a Revolving Credit Loan or a Term Loan and (b) the Status in
effect on such date:
Applicable Eurodollar
Loan Status Margin
---- ------ ---------------------
Revolving Credit Loans Level I Status 2.250%
Level II Status 2.000%
Level III Status 1.750%
Level IV Status 1.500%
Level V Status 1.250%
Level VI Status 1.000%
Level VII Status 0.875%
Level VIII Status 0.750%
Term Loans Level I Status 2.750%
Level II Status 2.500%
Level III Status 2.250%
Level IV Status 2.000%
Level V Status 1.750%
Level VI Status 1.500%
"Asset Sale Prepayment Event" shall mean any sale, transfer or other
disposition of any business units, assets or other properties of the
Borrower or any of the Restricted Subsidiaries not in the ordinary course
of business. Notwithstanding the foregoing, the term "Asset Sale
Prepayment Event" shall not include any transaction permitted by Section
10.4 (other than Section 10.4(b)).
"Authorized Officer" shall mean the Chairman of the Board, the
President, the Chief Financial Officer, the Treasurer or any other senior
officer of the Borrower designated as such in writing to the
Administrative Agent by the Borrower.
"Available Amount" shall mean, on any date (the "Reference Date"),
an amount equal to (a) the sum of (i) for the purposes of Sections 10.5(l)
and 10.5(n), $100,000,000,
<PAGE>
5
(ii) the aggregate amount of Net Cash Proceeds from Prepayment Events
refused by Term Loan Lenders and retained by the Borrower in accordance
with Section 5.2(c)(iv) on or prior to the Reference Date, (iii) an amount
equal to (x) the cumulative amount of Excess Cash Flow for all fiscal
years completed prior to the Reference Date minus (y) the portion of such
Excess Cash Flow that has been on or prior to the Reference Date (or will
be) applied to the prepayment of Loans in accordance with Section
5.2(a)(ii), (iv) the amount of any capital contributions (other than the
Equity Contribution and any equity contribution made in accordance with
Section 10.5(c)(i)) made in cash to the Borrower from and including the
Business Day immediately following the Closing Date through and including
the Reference Date, (v) an amount equal to the Net Cash Proceeds received
by the Borrower on or prior to the Reference Date from any issuance of
equity securities by the Borrower, (vi) the aggregate Distribution System
Amount for the period from and including the Closing Date through and
including the Reference Date to the extent not otherwise included in
Excess Cash Flow for such period, (vii) the aggregate amount of all cash
dividends and other cash distributions received by the Borrower or any
Guarantor from any Acquisition Subsidiaries, Minority Investments or
Unrestricted Subsidiaries on or prior to the Reference Date (other than
the portion of any such dividends and other distributions that is used by
the Borrower or any Guarantor to pay taxes), (viii) the aggregate amount
of all cash repayments of principal received by the Borrower or any
Guarantor from any Acquisition Subsidiaries, Minority Investments or
Unrestricted Subsidiaries on or prior to the Reference Date in respect of
loans made by the Borrower or any Guarantor to such Acquisition
Subsidiaries, Minority Investments or Unrestricted Subsidiaries and (ix)
the aggregate amount of all net cash proceeds received by the Borrower or
any Guarantor in connection with the sale, transfer or other disposition
of its ownership interest in any Acquisition Subsidiary, Minority
Investment or Unrestricted Subsidiary on or prior to the Reference Date
minus (b) the sum of (i) the aggregate amount of any investments
(including loans) made by the Borrower or any Restricted Subsidiary (other
than any Acquisition Subsidiary) in or to Acquisition Subsidiaries
pursuant to Section 10.5(j) on or prior to the Reference Date, (ii) the
aggregate amount of any investments (including loans) made by the Borrower
or any Restricted Subsidiary (other than any Acquisition Subsidiary)
pursuant to Section 10.5(n) on or prior to the Reference Date, (iii) the
aggregate amount of any investments made by the Borrower or any Restricted
Subsidiary to acquire the Remaining Equity pursuant to Section 10.5(l) on
or prior to the Reference Date and (iv) the aggregate price paid by the
Borrower in connection with any prepayment, repurchase or redemption of
Subordinated Notes pursuant to Section 10.7(a) on or prior to the
Reference Date.
"Available Commitment" shall mean an amount equal to the excess, if
any, of (a) the sum of (i) the amount of the Total Revolving Credit
Commitment and (ii) the amount of the Total Term Loan Commitment over (b)
the sum of (i) the aggregate principal amount of all Revolving Credit
Loans (but not Swingline Loans) then outstanding and (ii) the aggregate
Letter of Credit Outstandings at such time.
"Available Foreign Investment Amount" shall mean, on any date (the
"Investment Date"), an amount equal to (a) the sum of (i) $20,000,000,
(ii) the aggregate amount of all cash dividends and other cash
distributions received by the Borrower or any Guarantor from any
Restricted Foreign Subsidiaries on or prior to the Investment Date (other
than the portion of any such dividends and other distributions that is
used by the Borrower or any Guarantor to pay taxes), (iii) the aggregate
amount of all cash repayments of principal received by the Borrower or any
Guarantor from any Restricted Foreign Subsidiaries on or prior to the
Investment Date in respect of loans made by the Borrower or any Guarantor
to such Restricted Foreign Subsidiaries and (iv) the aggregate amount of
all net cash proceeds received by the Borrower or any Guarantor in
connection
<PAGE>
6
with the sale, transfer or other disposition of its ownership interest in
any Restricted Foreign Subsidiary on or prior to the Investment Date minus
(b) the aggregate amount of any investments (including loans) made by the
Borrower or any Restricted Subsidiary (other than any Restricted Foreign
Subsidiary) in or to Restricted Foreign Subsidiaries pursuant to Section
10.5(j) or 10.5(k) on or prior to the Investment Date.
"Bankruptcy Code" shall have the meaning provided in Section 11.5.
"Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the C/D Reserve
Percentage and (b) the C/D Assessment Rate.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Borrower" shall have the meaning provided in the preamble to this
Agreement.
"Borrower Common Stock" shall mean any class of outstanding common
stock of the Borrower after the Recapitalization.
"Borrowing" shall mean and include (a) the incurrence of Swingline
Loans from Chase on a given date, (b) the incurrence of one Type of Term
Loan on the Closing Date (or resulting from conversions on a given date
after the Closing Date) having, in the case of Eurodollar Term Loans, the
same Interest Period (provided that ABR Loans incurred pursuant to Section
2.10(b) shall be considered part of any related Borrowing of Eurodollar
Term Loans) and (c) the incurrence of one Type of Revolving Credit Loan on
a given date (or resulting from conversions on a given date) having, in
the case of Eurodollar Revolving Credit Loans, the same Interest Period
(provided that ABR Loans incurred pursuant to Section 2.10(b) shall be
considered part of any related Borrowing of Eurodollar Revolving Credit
Loans).
"Business Day" shall mean (a) for all purposes other than as covered
by clause (b) below, any day excluding Saturday, Sunday and any day that
shall be in The City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close
and (b) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Eurodollar Loans, any day that
is a Business Day described in clause (a) and which is also a day for
trading by and between banks in Dollar deposits in the relevant interbank
Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and
including in all events all amounts expended or capitalized under Capital
Leases, but excluding any amount representing capitalized interest) by the
Borrower and the Restricted Subsidiaries during such period that, in
conformity with GAAP, are or are required to be included as additions
during such period to property, plant or equipment reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries, provided
that the term "Capital Expenditures" shall not include (a) expenditures
made in connection with the replacement, substitution or restoration of
assets (i) to the extent financed from insurance proceeds paid on account
of the loss of or damage to the assets being replaced or restored or (ii)
with awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (b) the purchase price of
equipment that is purchased simultaneously with the trade-in of existing
equipment to the extent that the
<PAGE>
7
gross amount of such purchase price is reduced by the credit granted by
the seller of such equipment for the equipment being traded in at such
time, (c) the purchase of plant, property or equipment made within one
year of the sale of any asset to the extent purchased with the proceeds of
such sale or (d) expenditures that constitute any part of Consolidated
Lease Expense.
"Capitalized Lease Obligations" shall mean, as applied to any
Person, all obligations under Capital Leases of such Person or any of its
Subsidiaries, in each case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"Capital Lease", as applied to any Person, shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee
that, in conformity with GAAP, is, or is required to be, accounted for as
a capital lease on the balance sheet of that Person.
"Cash Consideration" shall have the meaning provided in the first
paragraph of this Agreement.
"C/D Assessment Rate" shall mean for any day as applied to any ABR
Loan, the annual assessment rate in effect on such day that is payable by
a member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation or any successor thereto (the "FDIC") classified as
well-capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
ss. 327.4(a) (or any successor provision) to the FDIC for the FDIC's
insuring time deposits at offices of such institution in the United
States.
"C/D Reserve Percentage" shall mean for any day as applied to any
ABR Loan, the percentage (expressed as a decimal) that is in effect on
such day, as prescribed by the Board, for determining the reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars having
a maturity that is 30 days or more.
"Change of Control" shall mean and be deemed to have occurred if (a)
(i) KKR, its Affiliates and the Management Group shall at any time not
own, in the aggregate, directly or indirectly, beneficially and of record,
at least 35% of the outstanding Voting Stock of the Borrower (other than
as the result of one or more widely distributed offerings of Borrower
Common Stock, in each case whether by the Borrower or by KKR, its
Affiliates or the Management Group) and/or (ii) any person, entity or
"group" (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) shall at any time have acquired direct
or indirect beneficial ownership of a percentage of the outstanding Voting
Stock of the Borrower that exceeds the percentage of such Voting Stock
then beneficially owned, in the aggregate, by KKR, its Affiliates and the
Management Group, unless, in the case of either clause (i) or (ii) above,
KKR, its Affiliates and the Management Group have, at such time, the right
or the ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the
Borrower; (b) at any time Continuing Directors shall not constitute a
majority of the Board of Directors of the Borrower; and/or (c) a Change of
Control (as defined in the Subordinated Note Indenture) shall occur.
"Chase" shall mean The Chase Manhattan Bank, a New York banking
corporation, and any successor thereto by merger, consolidation or
otherwise.
"Closing Date" shall mean the date of the initial Borrowing
hereunder.
<PAGE>
8
"Closing Date Store" shall mean any Store that (a) is owned, leased
or operated by the Borrower or any of the Restricted Subsidiaries and (b)
was opened for business by the Borrower or a Restricted Subsidiary on or
prior to the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect
at the date of this Agreement, and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall have the meaning provided in the Pledge
Agreement.
"Commitment Fee Rate" shall mean, with respect to the Available
Commitment on any day, the rate per annum set forth below opposite the
Status in effect on such day:
Commitment
Status Fee Rate
------ ----------
Level I Status 0.500%
Level II Status 0.425%
Level III Status 0.375%
Level IV Status 0.375%
Level V Status 0.250%
Level VI Status 0.250%
Level VII Status 0.250%
Level VIII Status 0.250%
"Commitments" shall mean, with respect to each Lender, such Lender's
Term Loan Commitment and Revolving Credit Commitment.
"Confidential Information" shall have the meaning provided in
Section 13.16.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated June 1997 delivered to the
Lenders in connection with this Agreement.
"Consolidated Earnings" shall mean, for any period, "income from
continuing operations before income taxes and extraordinary items" of the
Borrower and the Restricted Subsidiaries for such period, determined in a
manner consistent with the manner in which such amount was determined in
accordance with the audited financial statements referred to in Section
9.1(a).
"Consolidated EBITDA" shall mean, for any period, the sum, without
duplication, of the amounts for such period of (a) Consolidated Earnings,
(b) Consolidated Interest Expense, (c) depreciation expense, (d)
amortization expense, including amortization of deferred financing fees,
(e) non-recurring charges, (f) non-cash charges, (g) losses on asset
sales, (h) restructuring charges or reserves (including charges incurred
in connection with the closing, exchange or replacement of Stores), (i) in
the case of any period ending during the fiscal year ending June 27, 1998,
Transaction Expenses, (j) any expenses or charges incurred in connection
with any issuance of debt or equity securities, (k) any fees and expenses
related to Permitted Acquisitions and (l) any deduction for minority
interest expense less the sum of the amounts for such period of
<PAGE>
9
(m) non-recurring gains, (n) non-cash gains and (o) gains on asset sales,
all as determined on a consolidated basis for the Borrower and the
Restricted Subsidiaries in accordance with GAAP, provided that (i) except
as provided in clause (ii) below, there shall be excluded from
Consolidated Earnings for any period the income from continuing operations
before income taxes and extraordinary items of all Unrestricted
Subsidiaries for such period to the extent otherwise included in
Consolidated Earnings, except to the extent actually received in cash by
the Borrower or its Restricted Subsidiaries during such period through
dividends or other distributions, and (ii) for purposes of the definition
of the term "Permitted Acquisition" and Sections 10.3, 10.10 and 10.11,
(x) there shall be included in determining Consolidated EBITDA for any
period (A) the Acquired EBITDA of any Person, property, business or asset
(other than an Unrestricted Subsidiary) acquired to the extent not
subsequently sold, transferred or otherwise disposed of (but not including
the Acquired EBITDA of any related Person, property, business or assets to
the extent not so acquired) by the Borrower or any Restricted Subsidiary
during such period (each such Person, property, business or asset acquired
and not subsequently so disposed of, an "Acquired Entity or Business"),
and the Acquired EBITDA of any Unrestricted Subsidiary that is converted
into a Restricted Subsidiary during such period (each, a "Converted
Restricted Subsidiary"), in each case based on the actual Acquired EBITDA
of such Acquired Entity or Business or Converted Restricted Subsidiary for
such period (including the portion thereof occurring prior to such
acquisition or conversion) and (B) an adjustment in respect of each
Acquired Entity or Business equal to the amount of the Pro Forma
Adjustment with respect to such Acquired Entity or Business for such
period (including the portion thereof occurring prior to such acquisition
or conversion) as specified in the Pro Forma Adjustment Certificate
delivered to the Lenders and the Administrative Agent and (y) for purposes
of determining the Consolidated Total Debt to Consolidated EBITDA Ratio
only, there shall be excluded in determining Consolidated EBITDA for any
period the Acquired EBITDA of any Person, property, business or asset
(other than an Unrestricted Subsidiary) sold, transferred or otherwise
disposed of by the Borrower or any Restricted Subsidiary during such
period (each such Person, property, business or asset so sold or disposed
of, a "Sold Entity or Business"), and the Acquired EBITDA of any
Restricted Subsidiary that is converted into an Unrestricted Subsidiary
during such period (each, a "Converted Unrestricted Subsidiary"), in each
case based on the actual Acquired EBITDA of such Sold Entity or Business
or Converted Unrestricted Subsidiary for such period (including the
portion thereof occurring prior to such sale, transfer, disposition or
conversion).
"Consolidated EBITDA to Consolidated Interest Expense Ratio" shall
mean, as of any date of determination, the ratio of (a) Consolidated
EBITDA for the relevant Test Period to (b) Consolidated Interest Expense
for such Test Period.
"Consolidated Interest Expense" shall mean, for any period, cash
interest expense (including that attributable to Capital Leases in
accordance with GAAP), net of cash interest income, of the Borrower and
the Restricted Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of the Borrower and the Restricted Subsidiaries,
including, without limitation, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Hedge Agreements (other than currency swap
agreements, currency future or option contracts and other similar
agreements), but excluding, however, amortization of deferred financing
costs and any other amounts of non-cash interest, all as calculated on a
consolidated basis in accordance with GAAP, provided that (a) except as
provided in clause (b) below, there shall be excluded from Consolidated
Interest Expense for any period the cash interest expense (or income) of
all Unrestricted Subsidiaries for such
<PAGE>
10
period to the extent otherwise included in Consolidated Interest Expense
and (b) for purposes of the definition of the term "Permitted Acquisition"
and Sections 10.3, 10.10 and 10.11, there shall be included in determining
Consolidated Interest Expense for any period the cash interest expense (or
income) of any Acquired Entity or Business acquired during such period and
of any Converted Restricted Subsidiary converted during such period, in
each case based on the cash interest expense (or income) of such Acquired
Entity or Business or Converted Restricted Subsidiary for such period
(including the portion thereof occurring prior to such acquisition or
conversion) assuming any Indebtedness incurred or repaid in connection
with any such acquisition or conversion had been incurred or prepaid on
the first day of such period; provided further, however, that Consolidated
Interest Expense for the Test Periods ending on October 19, 1997, January
10, 1998, and April 4, 1998, shall be determined by (a) in the case of the
Test Period ending on October 19, 1997, multiplying Consolidated Interest
Expense for the period commencing on June 29, 1997, and ending on October
19, 1997, by 3.25, (b) in the case of the Test Period ending on January
10, 1998, multiplying Consolidated Interest Expense for the period
commencing on June 29, 1997, and ending on January 10, 1998, by 1.86, and
(c) in the case of the Test Period ending on April 4, 1998, multiplying
Consolidated Interest Expense for the period commencing on June 29, 1997,
and ending on April 4, 1998, by 1.3.
"Consolidated Lease Expense" shall mean, for any period, all rental
expenses of the Borrower and the Restricted Subsidiaries during such
period under operating leases for real or personal property (including in
connection with Permitted Sale Leasebacks), excluding real estate taxes,
insurance costs and common area maintenance charges and net of sublease
income, other than (a) obligations under vehicle leases entered into in
the ordinary course of business, (b) all such rental expenses associated
with Stores acquired after the Closing Date to the extent that such rental
expenses relate to operating leases in effect at the time of (and
immediately prior to) such acquisition and (c) Capitalized Lease
Obligations, all as determined on a consolidated basis in accordance with
GAAP, provided that there shall be excluded from Consolidated Lease
Expense for any period the rental expenses of all Unrestricted
Subsidiaries for such period to the extent otherwise included in
Consolidated Lease Expense.
"Consolidated Net Income" shall mean, for any period, the sum of (a)
the consolidated net income (or loss) of the Borrower and the Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
and (b) the Distribution System Amount for such period to the extent
otherwise deducted in arriving at such Consolidated Net Income.
"Consolidated Total Debt" shall mean, as of any date of
determination, (a) the sum of (i) all Indebtedness of the Borrower and the
Restricted Subsidiaries for borrowed money outstanding on such date and
(ii) all Capitalized Lease Obligations of the Borrower and the Restricted
Subsidiaries outstanding on such date, all calculated on a consolidated
basis in accordance with GAAP minus (b) the aggregate amount of cash
included in the cash accounts listed on the consolidated balance sheet of
the Borrower and the Restricted Subsidiaries as at such date to the extent
the use thereof for application to payment of Indebtedness is not
prohibited by law or any contract to which the Borrower or any of the
Restricted Subsidiaries is a party.
"Consolidated Total Debt to Consolidated EBITDA Ratio" shall mean,
as of any date of determination, the ratio of (a) Consolidated Total Debt
as of the last day of the relevant Test Period to (b) Consolidated EBITDA
for such Test Period.
<PAGE>
11
"Consolidated Working Capital" shall mean, at any date, the excess
of (a) the sum of all amounts (other than cash, cash equivalents and bank
overdrafts) that would, in conformity with GAAP, be set forth opposite the
caption "total current assets" (or any like caption) on a consolidated
balance sheet of the Borrower and the Restricted Subsidiaries at such date
over (b) the sum of all amounts that would, in conformity with GAAP, be
set forth opposite the caption "total current liabilities" (or any like
caption) on a consolidated balance sheet of the Borrower and the
Restricted Subsidiaries on such date, but excluding (i) the current
portion of any Funded Debt, (ii) without duplication of clause (i) above,
all Indebtedness consisting of Loans and Letter of Credit Exposure to the
extent otherwise included therein and (iii) the current portion of
deferred income taxes.
"Continuing Director" shall mean, at any date, an individual (a) who
is a member of the Board of Directors of the Borrower on the date hereof,
(b) who, as at such date, has been a member of such Board of Directors for
at least the 12 preceding months, (c) who has been nominated to be a
member of such Board of Directors, directly or indirectly, by KKR or
Persons nominated by KKR or (d) who has been nominated to be a member of
such Board of Directors by a majority of the other Continuing Directors
then in office.
"Converted Restricted Subsidiary" shall have the meaning provided in
the definition of the term "Consolidated EBITDA".
"Converted Unrestricted Subsidiary" shall have the meaning provided
in the definition of the term "Consolidated EBITDA".
"Credit Documents" shall mean this Agreement, the Guarantee, the
Pledge Agreement and any promissory notes issued by the Borrower
hereunder.
"Credit Event" shall mean and include the making (but not the
conversion or continuation) of a Loan and the issuance of a Letter of
Credit.
"Credit Party" shall mean each of the Borrower and the Guarantors.
"Cumulative Consolidated Net Income Available to Common
Stockholders" means, as of any date of determination, Consolidated Net
Income less cash dividends paid with respect to preferred stock for the
period (taken as one accounting period) commencing on the Closing Date and
ending on the last day of the most recent fiscal quarter for which Section
9.1 Financials have been delivered to the Lenders under Section 9.1.
"Debt Incurrence Prepayment Event" shall mean any issuance or
incurrence by the Borrower or any of the Restricted Subsidiaries of any
Indebtedness (excluding any Indebtedness permitted to be issued or
incurred under Section 10.1).
"Default" shall mean any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
<PAGE>
12
"Distribution Capital Expenditures" shall mean Capital Expenditures
by the Borrower and the Restricted Subsidiaries in connection with the
expansion of the Borrower's self-distribution capabilities.
"Distribution System Amount" shall mean, for any period,
non-recurring expenses for such period that are not capitalized and that
are incurred in connection with the expansion of the Borrower's
self-distribution capabilities.
"Dividends" shall have the meaning provided in Section 10.6.
"Documentation Agent" shall mean Citicorp Securities, Inc., together
with its affiliates, as the documentation agent for the Lenders under this
Agreement and the other Credit Documents.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
that is organized under the laws of the United States, any state or
territory thereof, or the District of Columbia.
"Drawing" shall have the meaning provided in Section 3.4(b).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations (other than
internal reports prepared by the Borrower or any of its Subsidiaries (a)
in the ordinary course of such Person's business or (b) as required in
connection with a financing transaction or an acquisition or disposition
of real estate) or proceedings relating in any way to any Environmental
Law or any permit issued, or any approval given, under any such
Environmental Law (hereinafter, "Claims"), including, without limitation,
(i) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law and (ii) any and all
Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health,
safety or the environment.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code and rule
of common law now or hereafter in effect and in each case as amended, and
any binding judicial or administrative interpretation thereof, including
any binding judicial or administrative order, consent decree or judgment,
relating to the environment, human health or safety or Hazardous
Materials.
"Equity Contribution" shall mean the equity contribution to the
Borrower by RFM of an aggregate cash amount of not less than $225,000,000.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to
ERISA as in effect at the date of this Agreement and any subsequent
provisions of ERISA amendatory thereof, supplemental thereto or
substituted therefor.
<PAGE>
13
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) that together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of Section 414(b) or (c) of
the Code or, solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.
"Eurodollar Loan" shall mean any Eurodollar Term Loan or Eurodollar
Revolving Credit Loan.
"Eurodollar Rate" shall mean, in the case of any Eurodollar Term
Loan or Eurodollar Revolving Credit Loan, with respect to each day during
each Interest Period pertaining to such Eurodollar Loan, the rate of
interest determined on the basis of the rate for deposits in Dollars for a
period equal to such Interest Period commencing on the first day of such
Interest Period appearing on Page 3750 of the Telerate screen as of 11:00
A.M., London time, two Business Days prior to the beginning of such
Interest Period. In the event that such rate does not appear on Page 3750
of the Telerate Service (or otherwise on such service), the "Eurodollar
Rate" for the purposes of this paragraph shall be determined by reference
to such other publicly available service for displaying eurodollar rates
as may be agreed upon by the Administrative Agent and the Borrower or, in
the absence of such agreement, the "Eurodollar Rate" for the purposes of
this paragraph shall instead be the rate per annum notified to the
Administrative Agent by the Reference Lender as the rate at which the
Reference Lender is offered Dollar deposits at or about 10:00 A.M., New
York time, two Business Days prior to the beginning of such Interest
Period, in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar
Loans are then being conducted for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its Eurodollar Term Loan or Eurodollar
Revolving Credit Loan, as the case may be, to be outstanding during such
Interest Period.
"Eurodollar Revolving Credit Loan" shall mean any Revolving Credit
Loan bearing interest at a rate determined by reference to the Eurodollar
Rate.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at
a rate determined by reference to the Eurodollar Rate.
"Event of Default" shall have the meaning provided in Section 11.
"Excess Cash Flow" shall mean, for any period, an amount equal to
the excess of (a) the sum, without duplication, of (i) Consolidated Net
Income for such period, (ii) an amount equal to the amount of all non-cash
charges to the extent deducted in arriving at such Consolidated Net
Income, (iii) decreases in Consolidated Working Capital for such period
and (iv) an amount equal to the aggregate net non-cash loss on the sale,
lease, transfer or other disposition of assets by the Borrower and the
Restricted Subsidiaries during such period (other than sales in the
ordinary course of business) to the extent deducted in arriving at such
Consolidated Net Income over (b) the sum, without duplication, of (i) an
amount equal to the amount of all non-cash credits included in arriving at
such Consolidated Net Income, (ii) the aggregate amount actually paid by
the Borrower and the Restricted Subsidiaries in cash during such period on
account of Capital Expenditures (excluding the principal amount of
Indebtedness incurred in connection with such Capital Expenditures,
whether incurred in such period or in a subsequent period), (iii) the
aggregate amount of all prepayments of Revolving Credit Loans and
Swingline Loans made during such period to the extent accompanying
<PAGE>
14
reductions of the Total Revolving Credit Commitments, (iv) the aggregate
amount of all principal payments of Indebtedness of the Borrower or the
Restricted Subsidiaries (including, without limitation, any Term Loans and
the principal component of payments in respect of Capitalized Lease
Obligations but excluding Revolving Credit Loans and Swingline Loans) made
during such period (other than in respect of any revolving credit facility
to the extent there is not an equivalent permanent reduction in
commitments thereunder), (v) an amount equal to the aggregate net non-cash
gain on the sale, lease, transfer or other disposition of assets by the
Borrower and the Restricted Subsidiaries during such period (other than
sales in the ordinary course of business) to the extent included in
arriving at such Consolidated Net Income, (vi) increases in Consolidated
Working Capital for such period, (vii) payments by the Borrower and the
Restricted Subsidiaries during such period in respect of long-term
liabilities of the Borrower and the Restricted Subsidiaries other than
Indebtedness, (viii) the amount of investments made during such period
pursuant to Section 10.5 to the extent that such investments were financed
with internally generated cash flow of the Borrower and the Restricted
Subsidiaries, (ix) the amount of dividends paid during such period
pursuant to clause (c) or (d) of the proviso to Section 10.6, (x) the
aggregate amount of expenditures actually made by the Borrower and the
Restricted Subsidiaries in cash during such period (including, without
limitation, expenditures for the payment of financing fees) to the extent
that such expenditures are not expensed during such period and (xi) the
aggregate amount of any premium, make-whole or penalty payments actually
paid in cash by the Borrower and the Restricted Subsidiaries during such
period that are required to be made in connection with any prepayment of
Indebtedness and that are accounted for as extraordinary items.
"Existing Credit Agreement" shall mean the Credit Agreement dated as
of November 1, 1993, as amended (as the same may be amended, supplemented
or otherwise modified from time to time), among the Borrower, certain of
the Subsidiaries, the banks party thereto and Texas Commerce Bank National
Association, as agent,.
"Existing Preferred Stock" shall mean (a) the 8,250 shares of Class
A preferred stock, par value $10.00 per share, of the Borrower and (b) the
5,000,000 shares of serial preferred stock, par value $10.00 per share, of
the Borrower, of which serial preferred stock 292,043 shares have been
designated as 8% convertible preferred stock.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the per annum rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
that is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 4.1.
"Final Date" shall mean the date on which the Revolving Credit
Commitments shall have terminated, no Revolving Credit Loans shall be
outstanding and the Letter of Credit Outstandings shall have been reduced
to zero.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is not a Domestic Subsidiary.
"Fronting Fee" shall have the meaning provided in Section 4.1(c).
<PAGE>
15
"Funded Debt" shall mean all Indebtedness of the Borrower and the
Restricted Subsidiaries for borrowed money that matures more than one year
from the date of its creation or matures within one year from such date
that is renewable or extendable, at the option of the Borrower or one of
the Restricted Subsidiaries, to a date more than one year from such date
or arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date, including, without limitation, all amounts of Funded Debt
required to be paid or prepaid within one year from the date of its
creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; provided,
however, that if there occurs after the date hereof any change in GAAP
that affects in any respect the calculation of any covenant contained in
Section 10, the Lenders and the Borrower shall negotiate in good faith
amendments to the provisions of this Agreement that relate to the
calculation of such covenant with the intent of having the respective
positions of the Lenders and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date
of this Agreement and, until any such amendments have been agreed upon,
the covenants in Section 10 shall be calculated as if no such change in
GAAP has occurred.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Guarantee" shall mean and include the Guarantee, made by each
Guarantor in favor of the Administrative Agent for the benefit of the
Lenders, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligations" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness of
any other Person (the "primary obligor") in any manner, whether directly
or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such Indebtedness
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such
Indebtedness or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such Indebtedness
of the ability of the primary obligor to make payment of such Indebtedness
or (d) otherwise to assure or hold harmless the owner of such Indebtedness
against loss in respect thereof; provided, however, that the term
"Guarantee Obligations" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of
any Guarantee Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the Indebtedness in respect of which such
Guarantee Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in
good faith.
"Guarantor" shall mean each Domestic Subsidiary of the Borrower that
is a Restricted Subsidiary and is or becomes a party to the Guarantee.
<PAGE>
16
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, friable asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contain dielectric fluid
containing regulated levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances", "hazardous waste", "hazardous
materials", "extremely hazardous waste", "restricted hazardous waste",
"toxic substances", "toxic pollutants", "contaminants", or "pollutants",
or words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Governmental Authority.
"Hedge Agreements" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements entered into by the Borrower in order to protect the Borrower
or any of the Restricted Subsidiaries against fluctuations in interest
rates or currency exchange rates.
"Indebtedness" of any Person shall mean (a) all indebtedness of such
Person for borrowed money, (b) the deferred purchase price of assets or
services that in accordance with GAAP would be shown on the liability side
of the balance sheet of such Person, (c) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (d) all Indebtedness of a second Person secured
by any Lien on any property owned by such first Person, whether or not
such Indebtedness has been assumed, (e) all Capitalized Lease Obligations
of such Person, (f) all obligations of such Person under interest rate
swap, cap or collar agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other
similar agreements and (g) without duplication, all Guarantee Obligations
of such Person, provided that Indebtedness shall not include trade
payables and accrued expenses, in each case arising in the ordinary course
of business.
"Interest Period" shall mean, with respect to any Term Loan or
Revolving Credit Loan, the interest period applicable thereto, as
determined pursuant to Section 2.9.
"KKR" shall mean each of Kohlberg Kravis Roberts & Co., L.P. and KKR
Associates, L.P.
"L/C Maturity Date" shall mean the date that is five Business Days
prior to the Revolving Credit Maturity Date.
"L/C Participant" shall have the meaning provided in Section 3.3(a).
"L/C Participation" shall have the meaning provided in Section
3.3(a).
"Lender" shall have the meaning provided in the preamble to this
Agreement.
"Lender Default" shall mean (a) the failure (which has not been
cured) of a Lender to make available its portion of any Borrowing or to
fund its portion of any unreimbursed payment under Section 3.3 or (b) a
Lender having notified the Administrative Agent and/or the Borrower that
it does not intend to comply with the obligations under Section 2.1(b),
2.1(d) or 3.3, in the case of either clause (a) or clause (b) above, as a
result of the appointment of a receiver or conservator with respect to
such Lender at the direction or request of any regulatory agency or
authority.
<PAGE>
17
"Letter of Credit" shall mean each standby letter of credit issued
pursuant to Section 3.1.
"Letter of Credit Commitment" shall mean $25,000,000, as the same
may be reduced from time to time pursuant to Section 3.1.
"Letter of Credit Exposure" shall mean, with respect to any Lender,
such Lender's Revolving Credit Commitment Percentage of the Letter of
Credit Outstandings.
"Letter of Credit Fee" shall have the meaning provided in Section
4.1(b).
"Letter of Credit Issuer" shall mean Chase, any of its Affiliates or
any successor pursuant to Section 3.6.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (a) the aggregate Stated Amount of all outstanding
Letters of Credit and (b) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 3.2.
"Level I Status" shall mean, on any date, the Consolidated Total
Debt to Consolidated EBITDA Ratio is greater than or equal to 6.00:1.00 as
of such date.
"Level II Status" shall mean, on any date, the circumstance that
Level I Status does not exist and the Consolidated Total Debt to
Consolidated EBITDA Ratio is greater than or equal to 5.50:1.00 as of such
date.
"Level III Status" shall mean, on any date, the circumstance that
neither Level I Status nor Level II Status exists and the Consolidated
Total Debt to Consolidated EBITDA Ratio is greater than or equal to
5.00:1.00 as of such date.
"Level IV Status" shall mean, on any date, the circumstance that
none of Level I Status, Level II Status or Level III Status exists and the
Consolidated Total Debt to Consolidated EBITDA Ratio is greater than or
equal to 4.50:1.00 as of such date.
"Level V Status" shall mean, on any date, the circumstance that none
of Level I Status, Level II Status, Level III Status or Level IV Status
exists and the Consolidated Total Debt to Consolidated EBITDA Ratio is
greater than or equal to 4.00:1.00 as of such date.
"Level VI Status" shall mean, on any date, the circumstance that
none of Level I Status, Level II Status, Level III Status, Level IV Status
or Level V Status exists and (a) in the case of Revolving Credit Loans and
Swingline Loans, the Consolidated Total Debt to Consolidated EBITDA Ratio
is greater than or equal to 3.50:1.00 as of such date and (b) in the case
of Term Loans, the Consolidated Total Debt to Consolidated EBITDA Ratio is
less than 4.00:1.00 as of such date.
"Level VII Status" shall mean, on any date, in the case of Revolving
Credit Loans and Swingline Loans, the circumstance that none of Level I
Status, Level II Status, Level III Status, Level IV Status, Level V Status
or Level VI Status exists and the Consolidated Total Debt to Consolidated
EBITDA Ratio is greater than or equal to 3:00 1:00 as of such date.
<PAGE>
18
"Level VIII Status" shall mean, on any date, in the case of
Revolving Credit Loans and Swingline Loans, the circumstance that the
Consolidated Total Debt to Consolidated EBITDA Ratio is less than
3.00:1.00 as of such date.
"Lien" shall mean any mortgage, pledge, security interest,
hypothecation, assignment, lien (statutory or other) or similar
encumbrance (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the
nature thereof).
"Loan" shall mean any Revolving Credit Loan, Swingline Loan or Term
Loan made by any Lender hereunder.
"Make-Whole Premium" shall mean the premium over the par value of
the Senior Notes, in an amount computed in accordance with the applicable
terms of the Senior Notes, paid to the holders of the Senior Notes in
connection with the Redemption.
"Management Group" shall mean, at any time, the Chairman of the
Board, the President, any Executive Vice President or Vice President, the
Treasurer and the Secretary of the Borrower at such time.
"Mandatory Borrowing" shall have the meaning provided in Section
2.1(d).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Change" shall mean any change in the business,
assets, operations, properties or financial condition of the Borrower and
its Subsidiaries taken as a whole that would materially adversely affect
the ability of the Borrower and the other Credit Parties taken as a whole
to perform their obligations under this Agreement and the other Credit
Documents taken as a whole.
"Material Adverse Effect" shall mean a circumstance or condition
affecting the business, assets, operations, properties or financial
condition of the Borrower and its Subsidiaries taken as a whole that would
materially adversely affect (a) the ability of the Borrower and the other
Credit Parties taken as a whole to perform their obligations under this
Agreement and the other Credit Documents taken as a whole or (b) the
rights and remedies of the Administrative Agent and the Lenders under this
Agreement and the other Credit Documents taken as a whole.
"Material Subsidiary" shall mean, at any date of determination, any
Restricted Subsidiary of the Borrower (a) whose total assets at the last
day of the Test Period ending on the last day of the most recent fiscal
period for which Section 9.1 Financials have been delivered were equal to
or greater than 5% of the consolidated total assets of the Borrower and
the Restricted Subsidiaries at such date or (b) whose gross revenues for
such Test Period were equal to or greater than 5% of the consolidated
gross revenues of the Borrower and the Restricted Subsidiaries for such
period, in each case determined in accordance with GAAP.
"Maturity Date" shall mean the Term Loan Maturity Date or the
Revolving Credit Maturity Date.
"Minimum Borrowing Amount" shall mean (a) with respect to a
Borrowing of Term Loans or Revolving Credit Loans, $1,000,000 and (b) with
respect to a Borrowing of Swingline Loans, $100,000.
<PAGE>
19
"Minority Investment" shall mean any Person (other than a
Subsidiary) in which the Borrower or any Restricted Subsidiary owns
capital stock or other equity interests.
"Moody's" shall mean Moody's Investors Service, Inc. or any
successor by merger or consolidation to its business.
"Net Cash Proceeds" shall mean, with respect to any Prepayment Event
or any issuance by the Borrower of equity securities, (a) the gross cash
proceeds (including payments from time to time in respect of installment
obligations, if applicable) received by or on behalf of the Borrower or
any of the Restricted Subsidiaries in respect of such Prepayment Event or
issuance, as the case may be, less (b) the sum of:
(i) in the case of any Prepayment Event, the amount, if any,
of all taxes paid or estimated to be payable by the Borrower or any
of the Restricted Subsidiaries in connection with such Prepayment
Event,
(ii) in the case of any Prepayment Event, the amount of any
reasonable reserve established in accordance with GAAP against any
liabilities (other than any taxes deducted pursuant to clause (i)
above) (A) associated with the assets that are the subject of such
Prepayment Event and (B) retained by the Borrower or any of the
Restricted Subsidiaries, provided that the amount of any subsequent
reduction of such reserve (other than in connection with a payment
in respect of any such liability) shall be deemed to be Net Cash
Proceeds of such a Prepayment Event occurring on the date of such
reduction,
(iii) in the case of any Prepayment Event, the amount of any
Indebtedness secured by a Lien on the assets that are the subject of
such Prepayment Event to the extent that the instrument creating or
evidencing such Indebtedness requires that such Indebtedness be
repaid upon consummation of such Prepayment Event,
(iv) in the case of any Asset Sale Prepayment Event, the
amount of any proceeds of such Asset Sale Prepayment Event that the
Borrower has reinvested (or intends to reinvest within one year of
the date of such Asset Sale Prepayment Event) in the business of the
Borrower or any of the Restricted Subsidiaries (subject to Section
9.14), provided that any portion of such proceeds that has not been
so reinvested within such one-year period shall (x) be deemed to be
Net Cash Proceeds of an Asset Sale Prepayment Event occurring on the
last day of such one-year period and (y) be applied to the repayment
of Term Loans in accordance with Section 5.2(a)(i), provided further
that, for purposes of the preceding proviso, such one-year period
shall be extended by up to eighteen months from the last day of such
one-year period so long as (A) such proceeds are to be reinvested
within such additional eighteen-month period under the Borrower's
business plan as most recently adopted in good faith by its Board of
Directors and (B) the Borrower believes in good faith that such
proceeds will be so reinvested within such additional eighteen-month
period, and
(v) in the case of any Prepayment Event or any issuance by the
Borrower of equity securities, reasonable and customary fees,
commissions, expenses, issuance costs, discounts and other costs
paid by the Borrower or any of the Restricted Subsidiaries in
connection with such Prepayment Event or issuance, as the case may
be (other than those payable to the Borrower or any Subsidiary of
the Borrower), in each case only to the extent not already deducted
in arriving at the amount referred to in clause (a) above.
<PAGE>
20
"Non-Defaulting Lender" shall mean and include each Lender other
than a Defaulting Lender.
"Non-Excluded Taxes" shall have the meaning provided in Section
5.4(a).
"Notice of Borrowing" shall have the meaning provided in Section
2.3.
"Notice of Conversion or Continuation" shall have the meaning
provided in Section 2.6.
"Obligations" shall mean all monetary amounts of every type or
description at any time owing to the Administrative Agent, any Lender or,
in the case of Hedge Agreements, any affiliate of a Lender pursuant to the
terms of this Agreement, any other Credit Document or any Hedge Agreement.
"Participant" shall have the meaning provided in Section
13.6(a)(ii).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall mean the acquisition, by merger or
otherwise, by the Borrower or any of the Restricted Subsidiaries of assets
or capital stock or other equity interests, so long as (a) such
acquisition and all transactions related thereto shall be consummated in
accordance with applicable law; (b) such acquisition shall, in the case of
the acquisition of capital stock or other equity interests by the Borrower
or any Restricted Domestic Subsidiary, result in the issuer of such
capital stock or other equity interests becoming a Restricted Domestic
Subsidiary and a direct Restricted Domestic Subsidiary in the case of such
an acquisition by the Borrower; (c) after giving effect to such
acquisition, no Default or Event of Default shall have occurred and be
continuing; and (d) the Borrower shall be in compliance, on a pro forma
basis after giving effect to such acquisition (including any Indebtedness
assumed or permitted to exist or incurred pursuant to Sections 10.1(j) and
10.1(k), respectively, and any related Pro Forma Adjustment), with the
covenants set forth in Sections 10.9, 10.10 and 10.11, as such covenants
are recomputed as at the last day of the most recently ended Test Period
under such Sections as if such acquisition had occurred on the first day
of such Test Period.
"Permitted Investments" shall mean (a) securities issued or
unconditionally guaranteed by the United States government or any agency
or instrumentality thereof, in each case having maturities of not more
than 24 months from the date of acquisition thereof; (b) securities issued
by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof or any political
subdivision of any such state or any public instrumentality thereof having
maturities of not more than 24 months from the date of acquisition thereof
and, at the time of acquisition, having an investment grade rating
generally obtainable from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then from
another nationally recognized rating service); (c) commercial paper issued
by any Lender or any bank holding company owning any Lender; (d)
commercial paper maturing no more than 12 months after the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-2 or P-2 from either S&P or Moody's (or, if at any time neither
S&P nor Moody's shall be rating such obligations, an equivalent rating
from another nationally recognized rating service); (e) domestic and
eurodollar certificates of deposit or bankers' acceptances maturing no
more than two years after the date of acquisition thereof issued by any
Lender or any other bank having combined
<PAGE>
21
capital and surplus of not less than $250,000,000 in the case of domestic
banks and $100,000,000 (or the dollar equivalent thereof) in the case of
foreign banks; (f) repurchase agreements with a term of not more than 30
days for underlying securities of the type described in clauses (a), (b)
and (e) above entered into with any bank meeting the qualifications
specified in clause (e) above or securities dealers of recognized national
standing; (g) shares of investment companies that are registered under the
Investment Company Act of 1940 and invest solely in one or more of the
types of securities described in clauses (a) through (f) above; and (h) in
the case of investments by any Restricted Foreign Subsidiary, other
customarily utilized high-quality investments in the country where such
Restricted Foreign Subsidiary is located.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or
governmental charges or claims not yet due or which are being contested in
good faith and by appropriate proceedings for which appropriate reserves
have been established in accordance with GAAP; (b) Liens in respect of
property or assets of the Borrower or any of its Subsidiaries imposed by
law, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business, in each case so
long as such Liens arise in the ordinary course of business and do not
individually or in the aggregate have a Material Adverse Effect; (c) Liens
arising from judgments or decrees in circumstances not constituting an
Event of Default under Section 11.9; (d) Liens incurred or deposits made
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business; (e) ground leases
in respect of real property on which facilities owned or leased by the
Borrower or any of its Subsidiaries are located; (f) easements,
rights-of-way, restrictions, minor defects or irregularities in title and
other similar charges or encumbrances not interfering in any material
respect with the business of the Borrower and its Subsidiaries taken as a
whole; (g) any interest or title of a lessor or secured by a lessor's
interest under any lease permitted by this Agreement; (h) Liens in favor
of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (i)
Liens on goods the purchase price of which is financed by a documentary
letter of credit issued for the account of the Borrower or any of its
Subsidiaries, provided that such Lien secures only the obligations of the
Borrower or such Subsidiaries in respect of such letter of credit to the
extent permitted under Section 10.1; and (j) leases or subleases granted
to others not interfering in any material respect with the business of the
Borrower and its Subsidiaries, taken as a whole.
"Permitted Sale Leaseback" shall mean any Sale Leaseback consummated
by the Borrower or any of the Restricted Subsidiaries after the Closing
Date with respect to one or more Stores, provided that (a) such Sale
Leaseback is consummated for fair value as determined at the time of
consummation in good faith by the Borrower and, in the case of any
Permitted Sale Leaseback (or series of related Permitted Sales Leasebacks)
the aggregate proceeds of which exceed $20,000,000, the Board of Directors
of the Borrower (which such determination may take into account any
retained interest or other investment of the Borrower or such Restricted
Subsidiary in connection with, and any other material economic terms of,
such Sale Leaseback) and (b) to the extent such Stores are Closing Date
Stores, the proceeds of such Sale Leaseback are applied to the prepayment
of Term Loans as provided in Section 5.2(a)(i).
<PAGE>
22
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or other
enterprise or any Governmental Authority.
"Plan" shall mean any multiemployer or single-employer plan, as
defined in Section 4001 of ERISA and subject to Title IV of ERISA, that is
or was within any of the preceding five plan years maintained or
contributed to by (or to which there is or was an obligation to contribute
or to make payments of) the Borrower, a Subsidiary or an ERISA Affiliate.
"Pledge Agreement" shall mean and include the Pledge Agreement
entered into by the Borrower, the other pledgors party thereto and the
Administrative Agent for the benefit of the Lenders, substantially in the
form of Exhibit B, as the same may be amended, supplemented or otherwise
modified from time to time.
"Prepayment Event" shall mean any Asset Sale Prepayment Event, Debt
Incurrence Prepayment Event or any Permitted Sale Leaseback with respect
to one or more Closing Date Stores.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its reference
rate in effect at its principal office in New York City (the Prime Rate
not being intended to be the lowest rate of interest charged by Chase in
connection with extensions of credit to debtors).
"Pro Forma Adjustment" shall mean, for any test period that includes
any of the six fiscal quarters first following any Permitted Acquisition,
with respect to the Acquired EBITDA of the applicable Acquired Entity or
Business, the pro forma increase or decrease in such Acquired EBITDA
projected by the Borrower in good faith as a result of reasonably
identifiable and supportable net cost savings or additional net costs, as
the case may be, realizable during such period by combining the operations
of such Acquired Entity or Business with the operations of the Borrower
and its Subsidiaries, provided that so long as such net cost savings or
additional net costs will be realizable at any time during such period, it
may be assumed, for purposes of projecting such pro forma increase or
decrease to such Acquired EBITDA, that such net cost savings or additional
net costs will be realizable during the entire such period, provided
further that any such pro forma increase or decrease to such Acquired
EBITDA shall be without duplication for net cost savings or additional net
costs actually realized during such period and already included in such
Acquired EBITDA.
"Pro Forma Adjustment Certificate" shall mean any certificate of an
Authorized Officer of the Borrower delivered pursuant to Section 9.1(h) or
setting forth the information described in clause (iv) to Section 9.1(d).
"Putable Shares" shall mean (a) the 613,457 shares of Borrower
Common Stock that were subject to repurchase obligations of the Borrower
pursuant to contractual arrangements in existence on April 1, 1997, minus
(b) any portion of such shares of Borrower Common Stock that are redeemed
in the Redemption.
"Putable Share Reserve Fund" shall mean the amount required for the
Borrower to repurchase the Putable Shares following the Closing Date.
"Recapitalization" shall have the meaning provided in the first
paragraph of this Agreement.
<PAGE>
23
"Redemption" shall have the meaning provided in the first paragraph
of this Agreement.
"Reference Lender" shall mean Chase.
"Register" shall have the meaning provided in Section 13.6(c).
"Regulation D" shall mean Regulation D of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
reserve requirements.
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and any successor to all or a portion thereof establishing
margin requirements.
"Remaining Equity" shall mean all the Borrower Common Stock (other
than any Putable Shares) that (a) is in existence on the Closing Date
after giving effect to the Redemption and (b) is not beneficially owned,
directly or indirectly, by KKR, its Affiliates or the Management Group on
the Closing Date pursuant to the 1997 management equity plan, including
any additional Borrower Common Stock or other capital stock or equity
interests in the Borrower issued in respect of such Borrower Common Stock
in existence on the Closing Date as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise, but
excluding any management equity plan or stock option plan or similar
agreement.
"Repayment Amount" shall have the meaning provided in Section
2.5(b).
"Repayment Date" shall have the meaning provided in Section 2.5(b).
"Reportable Event" shall mean an event described in Section 4043 of
ERISA and the regulations thereunder.
"Required Lenders" shall mean, at any date, (a) Non-Defaulting
Lenders having or holding a majority of the sum of (i) the Adjusted Total
Revolving Credit Commitment at such date, (ii) the Adjusted Total Term
Loan Commitment at such date and (iii) the outstanding principal amount of
the Term Loans (excluding the Term Loans held by Defaulting Lenders) at
such date or (b) if the Total Revolving Credit Commitment and the Total
Term Loan Commitment have been terminated or for the purposes of
acceleration pursuant to Section 11, the holders (excluding Defaulting
Lenders) of a majority of the outstanding principal amount of the Loans
and Letter of Credit Exposures (excluding the Loans and Letter of Credit
Exposures of Defaulting Lenders) in the aggregate at such date.
"Required Revolving Credit Lenders" shall mean, at any date, (a)
Non-Defaulting Lenders having or holding a majority of the Adjusted Total
Revolving Credit Commitment at such date or (b) if the Total Revolving
Credit Commitment has been
<PAGE>
24
terminated, the holders (excluding Defaulting Lenders) of a majority of
the outstanding principal amount of the Revolving Credit Loans and Letter
of Credit Exposures (excluding the Loans and Letter of Credit Exposures of
Defaulting Lenders) in the aggregate at such date.
"Required Term Loan Lenders" shall mean, at any date, (a)
Non-Defaulting Lenders having or holding a majority of the sum of (i) the
Adjusted Total Term Loan Commitment at such date and (ii) the outstanding
principal amount of the Term Loans (excluding the Term Loans held by
Defaulting Lenders) in the aggregate at such date or (b) if the Total Term
Loan Commitment has been terminated or for the purposes of acceleration
pursuant to Section 11 , the holders (excluding Defaulting Lenders) of a
majority of the outstanding principal amount of the Term Loans (excluding
the Term Loans of Defaulting Lenders) in the aggregate at such date.
"Requirement of Law" shall mean, as to any Person, the Certificate
of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or assets or to which such Person or any of its property or
assets is subject.
"Restricted Domestic Subsidiary" shall mean each Restricted
Subsidiary that is also a Domestic Subsidiary.
"Restricted Foreign Subsidiary" shall mean any Foreign Subsidiary
that is also a Restricted Subsidiary.
"Restricted Subsidiary" shall mean any Subsidiary of the Borrower
other than an Unrestricted Subsidiary.
"Revolving Credit Commitment" shall mean, (a) with respect to each
Lender that is a Lender on the date hereof, the amount set forth opposite
such Lender's name on Schedule 1.1 as such Lender's "Revolving Credit
Commitment" and (b) in the case of any Lender that becomes a Lender after
the date hereof, the amount specified as such Lender's "Revolving Credit
Commitment" in the Assignment and Acceptance pursuant to which such Lender
assumed a portion of the Total Revolving Credit Commitment, in each case
as the same may be changed from time to time pursuant to the terms hereof.
"Revolving Credit Commitment Percentage" shall mean at any time, for
each Lender, the percentage obtained by dividing such Lender's Revolving
Credit Commitment by the Total Revolving Credit Commitment, provided that
at any time when the Total Revolving Credit Commitment shall have been
terminated, each Lender's Revolving Credit Commitment Percentage shall be
its Revolving Credit Commitment Percentage as in effect immediately prior
to such termination.
"Revolving Credit Loan" shall have the meaning provided in Section
2.1.
"Revolving Credit Maturity Date" shall mean the date that is seven
years after the Closing Date, or, if such date is not a Business Day, the
next preceding Business Day.
"RFM" shall mean RFM Acquisition LLC, a Delaware limited liability
company, all the members of which are Affiliates of KKR and/or affiliates
of KKR that may be
<PAGE>
25
assigned rights related to the Subscription Agreement in accordance with
the terms thereof.
"Sale Leaseback" shall mean any transaction or series of related
transactions pursuant to which the Borrower or any of the Restricted
Subsidiaries sells, transfers or otherwise disposes of any property, real
or personal, whether now owned or hereafter acquired, and thereafter rents
or leases such property or other property that it intends to use for
substantially the same purpose or purposes as the property being sold,
transferred or disposed.
"S&P" shall mean Standard & Poor's Ratings Service or any successor
by merger or consolidation to its business.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 9.1 Financials" shall mean the financial statements
delivered, or required to be delivered, pursuant to Section 9.1(a) or (b)
together with the accompanying officer's certificate delivered, or
required to be delivered, pursuant to Section 9.1(e).
"Senior Notes" shall mean the (a) the 8.70% Series A Senior Notes
Due December 1, 2003 of the Borrower in an aggregate principal amount of
$39,500,000, (b) the 9.16% Series B-1 Senior Notes Due December 1, 2005 of
the Borrower in an aggregate principal amount of $71,000,000 and (c) the
9.16% Series B-2 Senior Notes Due December 1, 2003 of the Borrower in an
aggregate principal amount of $25,000,000.
"Sold Entity or Business" shall have the meaning provided in the
definition of the term "Consolidated EBITDA".
"Specified Subsidiary" shall mean, at any date of determination, (a)
any Material Subsidiary or (b) any Unrestricted Subsidiary (i) whose total
assets at the last day of the Test Period ending on the last day of the
most recent fiscal period for which Section 9.1 Financials have been
delivered were equal to or greater than 15% of the consolidated total
assets of the Borrower and its Subsidiaries at such date or (ii) whose
gross revenues for such Test Period were equal to or greater than 15% of
the consolidated gross revenues of the Borrower and its Subsidiaries for
such period, in each case determined in accordance with GAAP.
"Stated Amount" of any Letter of Credit shall mean the maximum
amount from time to time available to be drawn thereunder, determined
without regard to whether any conditions to drawing could then be met.
"Status" shall mean, as to the Borrower as of any date, the
existence of Level I Status, Level II Status, Level III Status, Level IV
Status, Level V Status, Level VI Status, Level VII Status or Level VIII
Status, as the case may be, on such date. Changes in Status resulting from
changes in the Consolidated Total Debt to Consolidated EBITDA Ratio shall
become effective (the date of such effectiveness, the "Effective Date") as
of the first day following the last day of the most recent fiscal year or
period for which (a) Section 9.1 Financials are delivered to the Lenders
under Section 9.1 and (b) an officer's certificate is delivered by the
Borrower to the Lenders setting forth, with respect to such Section 9.1
Financials, the then-applicable Status, and shall remain in effect until
the next change to be effected pursuant to this definition, provided that
(i) if
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26
the Borrower shall have made any payments in respect of interest or
commitment fees during the period (the "Interim Period") from and
including the Effective Date to but excluding the day any change in Status
is determined as provided above, then the amount of the next such payment
due on or after such day shall be increased or decreased by an amount
equal to any underpayment or overpayment so made by the Borrower during
such Interim Period, (ii) notwithstanding the foregoing, for the period
from and including the Closing Date to but excluding the day that is 180
days following the Closing Date, the Status of the Borrower for the
purposes of this Agreement shall not be any more favorable to the Borrower
than Level VI Status and (iii) each determination of the Consolidated
Total Debt to Consolidated EBITDA Ratio pursuant to this definition shall
be made with respect to the Test Period ending at the end of the fiscal
period covered by the relevant financial statements.
"Stores" shall mean any facility operated by the Borrower or any of
its Subsidiaries as a grocery store or drug store, or part of such
facility (including, without limitation, related office buildings, parking
lots or other related real property), now or hereafter owned by the
Borrower or any of its Subsidiaries, in each case including, without
limitation, the land on which such facility is located, all buildings and
other improvements thereon, all fixtures, furniture, equipment and other
tangible personal property located in or used in connection with such
facility (other than motor vehicles) related to the ownership, lease or
operation of such facility, all whether now existing or hereafter
acquired.
"Subordinated Note Indenture" shall mean the Indenture dated as of
the date hereof, as the same may be amended, supplemented or otherwise
modified from time to time, between the Borrower and Marine Midland Bank,
as trustee, pursuant to which the Subordinated Notes were issued.
"Subordinated Notes" shall mean the $150,000,000 aggregate principal
amount of Senior Subordinated Notes due 2007 of the Borrower issued on or
about the Closing Date pursuant to the Subordinated Note Indenture.
"Subscription Agreement" shall have the meaning provided in the
first paragraph of this Agreement.
"Subsidiary" of any Person shall mean and include (a) any
corporation more than 50% of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the time
stock of any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries and (b)
any partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than a 50%
equity interest at the time. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of the
Borrower.
"Swingline Commitment" shall mean $25,000,000.
"Swingline Loans" shall have the meaning provided in Section 2.1(c).
"Swingline Maturity Date" shall mean, with respect to any Swingline
Loan, the date that is five Business Days prior to the Revolving Credit
Maturity Date.
<PAGE>
27
"Syndication Agent" shall mean National Westminster Bank Plc,
together with its affiliates, as the syndication agent for the Lenders
under this Agreement and the other Credit Documents.
"Term Loan" shall have the meaning provided in Section 2.1.
"Term Loan Availability Period" shall mean the period from and
including the Closing Date to but excluding the day that is 180 days
following the Closing Date.
"Term Loan Commitment" shall mean, (a) in the case of each Lender
that is a Lender on the date hereof, the amount set forth opposite such
Lender's name on Schedule 1.1 as such Lender's "Term Loan Commitment" and
(b) in the case of any Lender that becomes a Lender after the date hereof,
the amount specified as such Lender's "Term Loan Commitment" in the
Assignment and Acceptance pursuant to which such Lender assumed a portion
of the Total Term Loan Commitment, in each case as the same may be changed
from time to time pursuant to the terms hereof.
"Term Loan Maturity Date" shall mean the date that is nine years
after the Closing Date, or, if such Date is not a Business Day, the next
preceding Business Day.
"Test Period" shall mean, for any determination under this
Agreement, the four consecutive fiscal quarters of the Borrower then last
ended.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate, expressed as a per annum rate, for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day) by
the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of
the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately 10:00
A.M., New York time, on such day (or, if such day shall not be a Business
Day, on the next preceding Business Day) by the Administrative Agent from
three New York City negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Credit Commitment.
"Total Credit Exposure" shall mean, at any date, the sum of (a) the
Total Revolving Credit Commitment at such date, (b) the Total Term Loan
Commitment at such date and (c) the outstanding principal amount of all
Term Loans at such date.
"Total Revolving Credit Commitment" shall mean the sum of the
Revolving Credit Commitments of all the Lenders.
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of all the Lenders.
"Transaction Expenses" shall mean any fees or expenses incurred or
paid by the Borrower or any of its Subsidiaries in connection with the
Recapitalization, the financing
<PAGE>
28
therefor and the other transactions contemplated hereby and thereby
(including the Make-Whole Premium).
"Transferee" shall have the meaning provided in Section 13.6(e).
"Type" shall mean (a) as to any Term Loan, its nature as an ABR Loan
or a Eurodollar Term Loan and (b) as to any Revolving Credit Loan, its
nature as an ABR Loan or a Eurodollar Revolving Credit Loan.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the present value of the accrued benefits under the Plan as
of the close of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 87 as in effect on the
date hereof, based upon the actuarial assumptions that would be used by
the Plan's actuary in a termination of the Plan, exceeds the fair market
value of the assets allocable thereto.
"Unpaid Drawing" shall have the meaning provided in Section 3.4(a).
"Unrestricted Subsidiary" shall mean (a) any Subsidiary of the
Borrower that is formed or acquired after the Closing Date, provided that
at such time (or promptly thereafter) the Borrower designates such
Subsidiary an Unrestricted Subsidiary in a written notice to the
Administrative Agent, (b) any Restricted Subsidiary on the Closing Date
subsequently re-designated as an Unrestricted Subsidiary by the Borrower
in a written notice to the Administrative Agent, provided that such
re-designation shall be deemed to be an investment on the date of such
re-designation in an Unrestricted Subsidiary in an amount equal to the sum
of (i) the net worth of such re-designated Restricted Subsidiary
immediately prior to such re-designation (such net worth to be calculated
without regard to any Guarantee provided by such re-designated Restricted
Subsidiary) and (ii) the aggregate principal amount of any Indebtedness
owed by such re-designated Restricted Subsidiary to the Borrower or any
other Restricted Subsidiary immediately prior to such re-designation, all
calculated, except as set forth in the parenthetical to clause (i), on a
consolidated basis in accordance with GAAP, and (c) each Subsidiary of an
Unrestricted Subsidiary; provided, however, that (i) at the time of any
written re-designation by the Borrower to the Administrative Agent of any
Unrestricted Subsidiary as a Restricted Subsidiary, the Unrestricted
Subsidiary so re-designated shall no longer constitute an Unrestricted
Subsidiary, (ii) no Unrestricted Subsidiary may be re-designated as a
Restricted Subsidiary if a Default or Event of Default would result from
such re-designation and (iii) no Restricted Subsidiary may be
re-designated as an Unrestricted Subsidiary if a Default or Event of
Default would result from such re-designation. On or promptly after the
date of its formation, acquisition or re-designation, as applicable, each
Unrestricted Subsidiary (other than an Unrestricted Subsidiary that is a
Foreign Subsidiary) shall have entered into a tax sharing agreement
containing terms that, in the reasonable judgment of the Administrative
Agent, provide for an appropriate allocation of tax liabilities and
benefits.
"Voting Stock" shall mean, with respect to any Person, shares of
such Person's capital stock having the right to vote for the election of
directors of such Person under ordinary circumstances.
<PAGE>
29
SECTION 2. Amount and Terms of Credit.
2.1 Commitments. (a) Subject to and upon the terms and conditions
herein set forth, each Lender having a Term Loan Commitment severally agrees to
make a loan or loans (each a "Term Loan" and, collectively, the "Term Loans") to
the Borrower, which Term Loans (i) shall be made on the Closing Date and on any
other single date during the Term Loan Availability Period, (ii) may, at the
option of the Borrower, be incurred and maintained as, and/or converted into,
ABR Loans or Eurodollar Term Loans, provided that all Term Loans made by each of
the Lenders pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Term Loans of the same Type, (iii) may be
repaid in accordance with the provisions hereof, but once repaid, may not be
reborrowed, (iv) shall not exceed for any such Lender the Term Loan Commitment
of such Lender and (v) shall not exceed in the aggregate the Total Term Loan
Commitment. On the Term Loan Maturity Date, all Term Loans shall be repaid in
full.
(b) Subject to and upon the terms and conditions herein set forth,
each Lender having a Revolving Credit Commitment severally agrees to make a loan
or loans (each a "Revolving Credit Loan" and, collectively, the "Revolving
Credit Loans") to the Borrower, which Revolving Credit Loans (i) shall be made
at any time and from time to time on and after the Closing Date and prior to the
Revolving Credit Maturity Date, (ii) may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, ABR Loans or Eurodollar
Revolving Credit Loans, provided that all Revolving Credit Loans made by each of
the Lenders pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Revolving Credit Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed for any such Lender at any time outstanding that aggregate
principal amount which, when added to the product of (x) such Lender's Revolving
Credit Commitment Percentage and (y) the sum of (I) the aggregate Letter of
Credit Outstandings at such time and (II) the aggregate principal amount of all
Swingline Loans then outstanding, equals the Revolving Credit Commitment of such
Lender at such time and (v) shall not, after giving effect thereto and to the
application of the proceeds thereof, exceed for all Lenders at any time
outstanding the aggregate principal amount that, when added to the sum of (x)
the Letter of Credit Outstandings at such time and (y) the aggregate principal
amount of all Swingline Loans then outstanding, equals the Total Revolving
Credit Commitment then in effect. On the Revolving Credit Maturity Date, all
Revolving Credit Loans shall be repaid in full.
(c) Subject to and upon the terms and conditions herein set forth,
Chase in its individual capacity agrees, at any time and from time to time on
and after the Closing Date and prior to the Swingline Maturity Date, to make a
loan or loans (each a "Swingline Loan" and, collectively, the "Swingline Loans")
to the Borrower, which Swingline Loans (i) shall be ABR Loans, (ii) shall have
the benefit of the provisions of Section 2.1(d), (iii) shall not exceed at any
time outstanding the Swingline Commitment, (iv) shall not, after giving effect
thereto and to the application of the proceeds thereof, exceed in the aggregate
at any time outstanding the principal amount that, when added to the aggregate
principal amount of all Revolving Credit Loans then outstanding and all Letter
of Credit Outstandings at such time, equals the Total Revolving Credit
Commitment then in effect and (v) may be repaid and reborrowed in accordance
with the provisions hereof. On the Swingline Maturity Date, each outstanding
Swingline Loan shall be repaid in full. Chase shall not make any Swingline Loan
after receiving a written notice from the Borrower or any Lender stating that a
Default or Event of Default exists and is continuing until such time as Chase
shall have received written notice of (i) rescission of all such notices from
the party or parties originally delivering such notice or (ii) the waiver of
such Default or Event of Default in accordance with the provisions of Section
13.1.
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30
(d) On any Business Day, Chase may, in its sole discretion, give
notice to the Lenders that all then-outstanding Swingline Loans shall be funded
with a Borrowing of Revolving Credit Loans, in which case a Borrowing of
Revolving Credit Loans constituting ABR Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Lenders pro rata based on each Lender's Revolving Credit Commitment Percentage,
and the proceeds thereof shall be applied directly to Chase to repay Chase for
such outstanding Swingline Loans. Each Lender hereby irrevocably agrees to make
such Revolving Credit Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified to it in writing by Chase notwithstanding (i)
that the amount of the Mandatory Borrowing may not comply with the minimum
amount for each Borrowing specified in Section 2.2, (ii) whether any conditions
specified in Section 7 are then satisfied, (iii) whether a Default or an Event
of Default has occurred and is continuing, (iv) the date of such Mandatory
Borrowing or (v) any reduction in the Total Commitment after any such Swingline
Loans were made. In the event that, in the sole judgment of Chase, any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code in respect of the Borrower), each Lender hereby agrees
that it shall forthwith purchase from Chase (without recourse or warranty) such
participation of the outstanding Swingline Loans as shall be necessary to cause
the Lenders to share in such Swingline Loans ratably based upon their respective
Revolving Credit Commitment Percentages, provided that all principal and
interest payable on such Swingline Loans shall be for the account of Chase until
the date the respective participation is purchased and, to the extent
attributable to the purchased participation, shall be payable to the Lender
purchasing same from and after such date of purchase.
2.2 Minimum Amount of Each Borrowing; Maximum Number of Borrowings.
The aggregate principal amount of each Borrowing of Term Loans, Revolving Credit
Loans or Swingline Loans shall be in a multiple of $100,000 and shall not be
less than the Minimum Borrowing Amount with respect thereto (except that
Mandatory Borrowings shall be made in the amounts required by Section 2.1(d)).
More than one Borrowing may be incurred on any date, provided that at no time
shall there be outstanding more than 20 Borrowings of Eurodollar Loans under
this Agreement.
2.3 Notice of Borrowing. (a) The Borrower shall give the
Administrative Agent at the Administrative Agent's Office (i) prior to 12:00
Noon (New York time) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of the Borrowing of Term Loans
if all or any of such Term Loans are to be initially Eurodollar Loans and (ii)
prior written notice (or telephonic notice promptly confirmed in writing) prior
to 10:00 A.M. (New York time) on the date of the Borrowing of Term Loans if all
such Term Loans are to be ABR Loans. Such notice (together with each notice of a
Borrowing of Revolving Credit Loans pursuant to Section 2.3(b) and each notice
of a Borrowing of Swingline Loans pursuant to Section 2.3(c), a "Notice of
Borrowing") shall be irrevocable and shall specify (i) the aggregate principal
amount of the Term Loans to be made, (ii) the date of the borrowing (which shall
be a Business Day and, in the case of the initial borrowing, shall be the
Closing Date) and (iii) whether the Term Loans shall consist of ABR Loans and/or
Eurodollar Term Loans and, if the Term Loans are to include Eurodollar Term
Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each Lender written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing of
Term Loans, of such Lender's proportionate share thereof and of the other
matters covered by the related Notice of Borrowing.
(b) Whenever the Borrower desires to incur Revolving Credit Loans
hereunder (other than Mandatory Borrowings or borrowings to repay Unpaid
Drawings), it shall give the
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31
Administrative Agent at the Administrative Agent's Office (i) prior to 12:00
Noon (New York time) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar
Revolving Credit Loans and (ii) prior to 12:00 Noon (New York time) at least one
Business Day's prior written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing of ABR Loans. Each such Notice of Borrowing, except
as otherwise expressly provided in Section 2.10, shall be irrevocable and shall
specify (i) the aggregate principal amount of the Revolving Credit Loans to be
made pursuant to such Borrowing, (ii) the date of Borrowing (which shall be a
Business Day) and (iii) whether the respective Borrowing shall consist of ABR
Loans or Eurodollar Revolving Credit Loans and, if Eurodollar Revolving Credit
Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each Lender written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing of
Revolving Credit Loans, of such Lender's proportionate share thereof and of the
other matters covered by the related Notice of Borrowing.
(c) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give the Administrative Agent written notice (or telephonic
notice promptly confirmed in writing) of each Borrowing of Swingline Loans prior
to 1:00 P.M. (New York time) on the date of such Borrowing. Each such notice
shall be irrevocable and shall specify (i) the aggregate principal amount of the
Swingline Loans to be made pursuant to such Borrowing and (ii) the date of
Borrowing (which shall be a Business Day). The Administrative Agent shall
promptly give Chase written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing of Swingline Loans and of the other matters
covered by the related Notice of Borrowing.
(d) Mandatory Borrowings shall be made upon the notice specified in
Section 2.1(d), with the Borrower irrevocably agreeing, by its incurrence of any
Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(e) Borrowings to reimburse Unpaid Drawings shall be made upon the
notice specified in Section 3.4(c).
(f) Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower. In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
2.4 Disbursement of Funds. (a) No later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing (including Mandatory
Borrowings), each Lender will make available its pro rata portion, if any, of
each Borrowing requested to be made on such date in the manner provided below,
provided that all Swingline Loans shall be made available in the full amount
thereof by Chase no later than 2:00 P.M. (New York time) on the date requested.
(b) Each Lender shall make available all amounts it is to fund under
any Borrowing in Dollars and immediately available funds to the Administrative
Agent at the Administrative Agent's Office and the Administrative Agent will
(except in the case of Mandatory Borrowings and Borrowings to repay Unpaid
Drawings) make available to the Borrower by depositing to the Borrower's account
at the Administrative Agent's Office the aggregate of the amounts so made
available in Dollars and the type of funds received. Unless the Administrative
Agent shall have been notified by any Lender prior to the date of any such
Borrowing that such Lender does not intend to make available to the
Administrative Agent its
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32
portion of the Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Lender and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (i) if paid
by such Lender, the Federal Funds Effective Rate or (ii) if paid by the
Borrower, the then-applicable rate of interest, calculated in accordance with
Section 2.8, for the respective Loans.
(c) Nothing in this Section 2.4 shall be deemed to relieve any
Lender from its obligation to fulfill its commitments hereunder or to prejudice
any rights that the Borrower may have against any Lender as a result of any
default by such Lender hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to fulfill its
commitments hereunder).
2.5 Repayment of Loans; Evidence of Debt. (a) The Borrower shall
repay to the Administrative Agent, for the benefit of the Lenders, (i) on the
Term Loan Maturity Date, the then-unpaid Term Loans, and (ii) on the Revolving
Credit Maturity Date, the then-unpaid Revolving Credit Loans. The Borrower shall
repay to the Administrative Agent, for the account of Chase, on the Swingline
Maturity Date, the then-unpaid Swingline Loans.
(b) The Borrower shall repay to the Administrative Agent, for the
benefit of the Lenders of Term Loans, on each date set forth below (each a
"Repayment Date"), the principal amount of the Term Loans set forth below
opposite such Repayment Date (each a "Repayment Amount"):
Number of Months From Closing Date Repayment Amount
---------------------------------- ----------------
12 $ 500,000
24 500,000
36 500,000
48 500,000
60 500,000
72 500,000
84 500,000
96 500,000
108 121,000,000
To the extent that the aggregate principal amount of Term Loans outstanding on
the last day of the Term Loan Availability Period is less than $125,000,000, the
Repayment Amounts shall automatically be decreased, in the inverse order of
maturity, by the amount of such difference.
(c) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to the
appropriate lending office of such
<PAGE>
33
Lender resulting from each Loan made by such lending office of such Lender from
time to time, including the amounts of principal and interest payable and paid
to such lending office of such Lender from time to time under this Agreement.
(d) The Administrative Agent shall maintain the Register pursuant to
Section 13.6, and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount of each Loan made
hereunder, whether such Loan is a Term Loan, a Revolving Credit Loan or a
Swingline Loan, the Type of each Loan made and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender or Chase hereunder and
(iii) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's share thereof.
(e) The entries made in the Register and accounts and subaccounts
maintained pursuant to paragraphs (c) and (d) of this Section 2.5 shall, to the
extent permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain such
account, such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans made to the Borrower by such Lender in accordance
with the terms of this Agreement.
2.6 Conversions and Continuations. (a) The Borrower shall have the
option on any Business Day to convert all or a portion equal to at least the
Minimum Borrowing Amount of the outstanding principal amount of Term Loans or
Revolving Credit Loans of one Type into a Borrowing or Borrowings of another
Type or to continue the outstanding principal amount of any Eurodollar Term
Loans or Eurodollar Revolving Credit Loans as Eurodollar Term Loans or
Eurodollar Revolving Credit Loans, as the case may be, for an additional
Interest Period, provided that (i) no partial conversion of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans shall reduce the outstanding
principal amount of Eurodollar Term Loans or Eurodollar Revolving Credit Loans
made pursuant to a single Borrowing to less than the Minimum Borrow ing Amount,
(ii) ABR Loans may not be converted into Eurodollar Term Loans or Eurodollar
Revolving Credit Loans if a Default or Event of Default is in existence on the
date of the conversion and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such conversion,
(iii) Eurodollar Loans may not be continued as Eurodollar Term Loans or
Eurodollar Revolving Credit Loans for an additional Interest Period if a Default
or Event of Default is in existence on the date of the proposed continuation and
the Administrative Agent has or the Required Lenders have determined in its or
their sole discretion not to permit such continuation and (iv) Borrowings
resulting from conversions pursuant to this Section 2.6 shall be limited in
number as provided in Section 2.2. Each such conversion or continuation shall be
effected by the Borrower by giving the Administrative Agent at the
Administrative Agent's Office prior to 12:00 Noon (New York time) at least three
Business Days' (or one Business Day's notice in the case of a conversion into
ABR Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each a "Notice of Conversion or Continuation") specifying the Term
Loans or Revolving Credit Loans to be so converted or continued, the Type of
Term Loans or Revolving Credit Loans to be converted or continued into and, if
such Term Loans or Revolving Credit Loans are to be converted into or continued
as Eurodollar Term Loans or Eurodollar Revolving Credit Loans, the Interest
Period to be initially applicable thereto. The Administrative Agent shall give
each Lender notice as promptly as practicable of any such proposed conversion or
continuation affecting any of its Term Loans or Revolving Credit Loans.
(b) If any Default or Event of Default is in existence at the time of any
proposed continuation of any Eurodollar Term Loans or Eurodollar Revolving
Credit Loans and the Administrative Agent has or the Required Lenders have
determined in its or their sole discretion
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34
not to permit such continuation, such Eurodollar Term Loans or Eurodollar
Revolving Credit Loans shall be automatically converted on the last day of the
current Interest Period into ABR Loans. If upon the expiration of any Interest
Period in respect of Eurodollar Term Loans or Eurodollar Revolving Credit Loans,
the Borrower has failed to elect a new Interest Period to be applicable thereto
as provided in paragraph (a) above, the Borrower shall be deemed to have elected
to convert such Borrowing of Eurodollar Term Loans or Eurodollar Revolving
Credit Loans, as the case may be, into a Borrowing of ABR Loans effective as of
the expiration date of such current Interest Period.
2.7 Pro Rata Borrowings. Each Borrowing of Term Loans or Revolving
Credit Loans under this Agreement shall be granted by the Lenders pro rata on
the basis of their then-applicable Commitments. It is understood that no Lender
shall be responsible for any default by any other Lender in its obligation to
make Loans hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it hereunder, regardless of the failure of any other
Lender to fulfill its commitments hereunder.
2.8 Interest. (a) The unpaid principal amount of each ABR Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum that shall at all times be the
Applicable ABR Margin plus the ABR in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Term Loan or Eurodollar
Revolving Credit Loan shall bear interest from the date of the Borrowing thereof
until maturity thereof (whether by acceleration or otherwise) at a rate per
annum that shall at all times be the Applicable Eurodollar Margin in effect from
time to time plus the relevant Eurodollar Rate.
(c) If all or a portion of (i) the principal amount of any Loan or (ii)
any interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum that is (x) in the case of overdue principal, the rate that
would otherwise be applicable thereto plus 2% or (y) in the case of any overdue
interest, to the extent permitted by applicable law, the rate described in
Section 2.8(a) plus 2% from and including the date of such non-payment to but
excluding the date on which such amount is paid in full (after as well as before
judgment).
(d) Interest on each Loan shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each ABR Loan, quarterly in arrears on the last day of
each March, June, September and December, (ii) in respect of each Eurodollar
Term Loan or Eurodollar Revolving Credit Loan, on the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three-month intervals after the first
day of such Interest Period, (iii) in respect of each Loan (except, in the case
of prepayments, any ABR Loan), on any prepayment (on the amount prepaid), at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 5.5.
(f) The Administrative Agent, upon determining the interest rate for any
Borrowing of Eurodollar Loans, shall promptly notify the Borrower and the
relevant Lenders thereof. Each such determination shall, absent clearly
demonstrable error, be final and conclusive and binding on all parties hereto.
2.9 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion or Continuation in respect of the making of,
or conversion into or
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35
continuation as, a Borrowing of Eurodollar Term Loans or Eurodollar Revolving
Credit Loans (in the case of the initial Interest Period applicable thereto) or
prior to 10:00 A.M. (New York time) on the third Business Day prior to the
expiration of an Interest Period applicable to a Borrowing of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans, the Borrower shall have the right to
elect by giving the Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) the Interest Period applicable to such Borrowing,
which Interest Period shall, at the option of the Borrower, be a one, two,
three, six or (in the case of Revolving Credit Loans, if available to all the
Lenders making such loans as determined by such Lenders in good faith based on
prevailing market conditions) a nine or twelve month period. Notwith standing
anything to the contrary contained above:
(a) the initial Interest Period for any Borrowing of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans shall commence on the date of such
Borrowing (including the date of any conversion from a Borrowing of ABR Loans)
and each Interest Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding Interest Period expires;
(b) if any Interest Period relating to a Borrowing of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans begins on the last Business Day of
a calendar month or begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period,
such Interest Period shall end on the last Business Day of the calendar month
at the end of such Interest Period;
(c) if any Interest Period would otherwise expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day, provided that if any Interest Period in respect of a Eurodollar
Term Loan or Eurodollar Revolving Credit Loan would otherwise expire on a day
that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the
next preceding Business Day; and
(d) the Borrower shall not be entitled to elect any Interest Period in
respect of any Eurodollar Term Loan or Eurodollar Revolving Credit Loan if
such Interest Period would extend beyond the applicable Maturity Date of such
Loan.
2.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender shall have reasonably determined (which
determination shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising on or after the Closing Date
affecting the interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided for
in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to any
Eurodollar Loans (other than any such increase or reduction attributable to
taxes) because of (x) any change since the date hereof in any applicable law,
governmental rule, regulation, guideline or order (or in the interpretation or
administration thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order), such as, for example, but
not limited to, a change in official reserve requirements, and/or (y) other
circumstances affecting the interbank Eurodollar market or the position of
such Lender in such market; or
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36
(iii) at any time, that the making or continuance of any Eurodollar Loan
has become unlawful by compliance by such Lender in good faith with any law,
governmental rule, regulation, guideline or order (or would conflict with any
such governmental rule, regulation, guideline or order not having the force of
law even though the failure to comply therewith would not be unlawful), or has
become impracticable as a result of a contingency occurring after the date
hereof that materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall within a reasonable time thereafter give notice
(if by telephone confirmed in writing) to the Borrower and to the Administrative
Agent of such determination (which notice the Administrative Agent shall
promptly transmit to each of the other Lenders). Thereafter (x) in the case of
clause (i) above, Eurodollar Term Loans and Eurodollar Revolving Credit Loans
shall no longer be available until such time as the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such
notice by the Administrative Agent no longer exist (which notice the
Administrative Agent agrees to give at such time when such circumstances no
longer exist), and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Term Loans or Eurodollar Revolving Credit
Loans that have not yet been incurred shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower shall pay to such Lender,
promptly after receipt of written demand therefor, such additional amounts (in
the form of an increased rate of, or a different method of calculating, interest
or otherwise as such Lender in its reasonable discretion shall determine) as
shall be required to compensate such Lender for such increased costs or
reductions in amounts receivable hereunder (it being agreed that a written
notice as to the additional amounts owed to such Lender, showing in reasonable
detail the basis for the calculation thereof, submitted to the Borrower by such
Lender shall, absent clearly demonstrable error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 2.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the circumstances
described in Section 2.10(a)(ii) or (iii), the Borrower may (and in the case of
a Eurodollar Loan affected pursuant to Section 2.10(a)(iii) shall) either (i) if
the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel
said Borrowing by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Lender pursuant to Section 2.10(a)(ii) or (iii) or (ii) if the affected
Eurodollar Loan is then outstanding, upon at least three Business Days' notice
to the Administrative Agent, require the affected Lender to convert each such
Eurodollar Revolving Credit Loan and Eurodollar Term Loan into an ABR Loan,
provided that if more than one Lender is affected at any time, then all affected
Lenders must be treated in the same manner pursuant to this Section 2.10(b).
(c) If, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority, the
National Association of Insurance Commissioners, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by a Lender or its parent with any request or directive made or adopted after
the date hereof regarding capital adequacy (whether or not having the force of
law) of any such authority, association, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Lender's or its
parent's capital or assets as a consequence of such Lender's commitments or
obligations hereunder to a level below that which such Lender or its parent
could have achieved but for such adoption, effectiveness, change or compliance
(taking into consideration such Lender's or its parent's policies with respect
to capital adequacy), then from time to time, promptly after demand by such
Lender
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37
(with a copy to the Administrative Agent), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender or its parent
for such reduction, it being understood and agreed, however, that a Lender shall
not be entitled to such compensation as a result of such Lender's compliance
with, or pursuant to any request or directive to comply with, any such law, rule
or regulation as in effect on the date hereof. Each Lender, upon determining in
good faith that any additional amounts will be payable pursuant to this Section
2.10(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth in reasonable detail the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not,
subject to Section 2.13, release or diminish any of the Borrower's obligations
to pay additional amounts pursuant to this Section 2.10(c) upon receipt of such
notice.
2.11 Compensation. If (a) any payment of principal of any Eurodollar
Term Loan or Eurodollar Revolving Credit Loan is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Eurodollar Loan as a result of a payment or conversion pursuant to Section
2.5, 2.6, 2.10, 5.1, 5.2 or 13.7, as a result of acceleration of the maturity of
the Loans pursuant to Section 11 or for any other reason, (b) any Borrowing of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans is not made as a
result of a withdrawn Notice of Borrowing, (c) any ABR Loan is not converted
into a Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a result of a
withdrawn Notice of Conversion or Continuation, (d) any Eurodollar Loan is not
continued as a Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a
result of a withdrawn Notice of Conversion or Continuation or (e) any prepayment
of principal of any Eurodollar Term Loan or Eurodollar Revolving Credit Loan is
not made as a result of a withdrawn notice of prepayment pursuant to Section 5.1
or 5.2, the Borrower shall, after receipt of a written request by such Lender
(which request shall set forth in reasonable detail the basis for requesting
such amount), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses that such Lender may reasonably incur as a result of such payment,
failure to convert, failure to continue or failure to prepay, including, without
limitation, any loss, cost or expense (excluding loss of anticipated profits)
actually incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Eurodollar Loan.
2.12 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.10(a)(ii),
2.10(a)(iii), 2.10(b), 3.5 or 5.4 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event, provided that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 2.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Section 2.10, 3.5 or 5.4.
2.13 Notice of Certain Costs. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice required by Section 2.10,
2.11, 3.5 or 5.4 is given by any Lender more than 180 days after such Lender has
knowledge (or should have had knowledge) of the occurrence of the event giving
rise to the additional cost, reduction in amounts, loss, tax or other additional
amounts described in such Sections, such Lender shall not be entitled to
compensation under Section 2.10, 2.11, 3.5 or 5.4, as the case may be, for any
such amounts incurred or accruing prior to the giving of such notice to the
Borrower.
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SECTION 3. Letters of Credit.
3.1 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower, at any time and from time to time on
or after the Closing Date and prior to the L/C Maturity Date, may request that
the Letter of Credit Issuer issue, for the account of the Borrower, a standby
letter of credit or letters of credit in such form as may be approved by the
Letter of Credit Issuer in its reasonable discretion.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued
the Stated Amount of which, when added to the Letter of Credit Outstandings at
such time, would exceed the Letter of Credit Commitment then in effect; (ii) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
sum of (x) the Letter of Credit Outstandings at such time and (y) the aggregate
principal of all Revolving Credit Loans and Swingline Loans then outstanding,
would exceed the Total Revolving Credit Commitment then in effect; (iii) each
Letter of Credit shall have an expiry date occurring no later than one year
after the date of issuance thereof, unless otherwise agreed upon by the
Administrative Agent and the Letter of Credit Issuer, provided that in no event
shall such expiry date occur later than the L/C Maturity Date; (iv) each Letter
of Credit shall be denominated in Dollars; and (v) no Letter of Credit shall be
issued by the Letter of Credit Issuer after it has received a written notice
from the Borrower or any Lender stating that a Default or Event of Default has
occurred and is continuing until such time as the Letter of Credit Issuer shall
have received a written notice of (x) rescission of such notice from the party
or parties originally delivering such notice or (y) the waiver of such Default
or Event of Default in accordance with the provisions of Section 13.1.
(c) Upon at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) to the Administrative Agent and the Letter
of Credit Issuer (which notice the Administrative Agent shall promptly transmit
to each of the Lenders), the Borrower shall have the right, on any day,
permanently to terminate or reduce the Letter of Credit Commitment in whole or
in part, provided that, after giving effect to such termination or reduction,
the Letter of Credit Outstandings shall not exceed the Letter of Credit
Commitment.
3.2 Letter of Credit Requests. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, it shall give the
Administrative Agent and the Letter of Credit Issuer at least five (or such
lesser number as may be agreed upon by the Administrative Agent and the Letter
of Credit Issuer) Business Days' written notice thereof. Each notice shall be
executed by the Borrower and shall be in the form of Exhibit D (each a "Letter
of Credit Request"). The Administrative Agent shall promptly transmit copies of
each Letter of Credit Request to each Lender.
(b) The making of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that the Letter of Credit may be
issued in accordance with, and will not violate the requirements of, Section
3.1(b).
3.3 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Lender
that has a Revolving Credit Commitment (each such other Lender, in its capacity
under this Section 3.3, an "L/C Participant"), and each such L/C Participant
shall be deemed irrevocably and unconditionally to have purchased and received
from the Letter of Credit Issuer, without recourse or warranty, an undivided
interest and participation (each an "L/C Participation"), to the extent of such
L/C Participant's Revolving Credit Commitment Percentage, in such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto, and any
security therefor or guaranty pertaining thereto (although Letter of Credit Fees
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will be paid directly to the Administrative Agent for the ratable account of the
L/C Participants as provided in Section 4.1(b) and the L/C Participants shall
have no right to receive any portion of any Fronting Fees).
(b) In determining whether to pay under any Letter of Credit, the Letter
of Credit Issuer shall have no obligation relative to the L/C Participants other
than to confirm that any documents required to be delivered under such Letter of
Credit have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by the Letter of Credit Issuer under or in connection with any Letter of Credit
issued by it, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for the Letter of Credit Issuer any resulting
liability.
(c) In the event that the Letter of Credit Issuer makes any payment under
any Letter of Credit issued by it and the Borrower shall not have repaid such
amount in full to the Letter of Credit Issuer pursuant to Section 3.4(a), the
Letter of Credit Issuer shall promptly notify the Administrative Agent and each
L/C Participant of such failure, and each L/C Participant shall promptly and
unconditionally pay to the Administrative Agent, for the account of the Letter
of Credit Issuer, the amount of such L/C Participant's Revolving Credit
Commitment Percentage of such unreimbursed payment in Dollars and in same day
funds; provided, however, that no L/C Participant shall be obligated to pay to
the Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of such unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Letter of Credit
Issuer so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any
L/C Participant required to fund a payment under a Letter of Credit, such L/C
Participant shall make available to the Administrative Agent for the account of
the Letter of Credit Issuer such L/C Participant's Revolving Credit Commitment
Percentage of the amount of such payment on such Business Day in same day funds.
If and to the extent such L/C Participant shall not have so made its Revolving
Credit Commitment Percentage of the amount of such payment available to the
Administrative Agent for the account of the Letter of Credit Issuer, such L/C
Participant agrees to pay to the Administrative Agent for the account of the
Letter of Credit Issuer, forthwith on demand, such amount, together with
interest thereon for each day from such date until the date such amount is paid
to the Administrative Agent for the account of the Letter of Credit Issuer at
the Federal Funds Effective Rate. The failure of any L/C Participant to make
available to the Administrative Agent for the account of the Letter of Credit
Issuer its Revolving Credit Commitment Percentage of any payment under any
Letter of Credit shall not relieve any other L/C Participant of its obligation
hereunder to make available to the Administrative Agent for the account of the
Letter of Credit Issuer its Revolving Credit Commitment Percentage of any
payment under such Letter of Credit on the date required, as specified above,
but no L/C Participant shall be responsible for the failure of any other L/C
Participant to make available to the Administrative Agent such other L/C
Participant's Revolving Credit Commitment Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment in respect of
an unpaid reimbursement obligation as to which the Administrative Agent has
received for the account of the Letter of Credit Issuer any payments from the
L/C Participants pursuant to paragraph (c) above, the Letter of Credit Issuer
shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each L/C Participant that has paid its Revolving Credit
Commitment Percentage of such reimbursement obligation, in Dollars and in same
day funds, an amount equal to such L/C Participant's share (based upon the
proportionate aggregate amount originally funded by such L/C Participant to the
aggregate amount funded by all L/C Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective L/C Participations.
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(e) The obligations of the L/C Participants to make payments to the
Administrative Agent for the account of the Letter of Credit Issuer with respect
to Letters of Credit shall be irrevocable and not subject to counterclaim,
set-off or other defense or any other qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), the Administrative Agent, the Letter of Credit
Issuer, any Lender or other Person, whether in connection with this Agreement,
any Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower and
the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default;
provided, however, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of any unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
3.4 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Administrative Agent in Dollars in immediately available funds at the
Administrative Agent's Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
until reimbursed, an "Unpaid Drawing") immediately after, and in any event on
the date of, such payment, with interest on the amount so paid or disbursed by
the Letter of Credit Issuer, to the extent not reimbursed prior to 5:00 P.M.
(New York time) on the date of such payment or disbursement, from and including
the date paid or disbursed to but excluding the date the Letter of Credit Issuer
is reimbursed therefor, at a rate per annum that shall at all times be the
Applicable ABR Margin plus the ABR as in effect from time to time, provided
that, notwithstanding anything contained in this Agreement to the contrary, (i)
unless the Borrower shall have notified the Administrative Agent and the Letter
of Credit Issuer prior to 10:00 A.M. on the date of such drawing that the
Borrower intends to reimburse the Letter of Credit Issuer for the amount of such
drawing with funds other than the proceeds of Loans, the Borrower shall be
deemed to have given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make Revolving Credit Loans (which shall initially
be ABR Loans) on the date on which such drawing is honored in an amount equal to
the amount of such drawing and (ii) each Lender shall, on such date, make
Revolving Credit Loans in an amount equal to such Lender's pro rata portion of
such Borrowing in accordance with the provisions of Section 2.4.
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(b) The Borrower's obligations under this Section 3.4 to reimburse the
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
that the Borrower or any other Person may have or have had against the Letter of
Credit Issuer, the Administrative Agent or any Lender (including in its capacity
as an L/C Participant), including, without limitation, any defense based upon
the failure of any drawing under a Letter of Credit (each a "Drawing") to
conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such Drawing, provided that
the Borrower shall not be obligated to reimburse the Letter of Credit Issuer for
any wrongful payment made by the Letter of Credit Issuer under the Letter of
Credit issued by it as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.
(c) Each payment by the Letter of Credit Issuer under any Letter of Credit
shall constitute a request by the Borrower for an ABR Revolving Credit Loan in
the amount of the Unpaid Drawing in respect of such Letter of Credit. The Letter
of Credit Issuer shall notify the Borrower and the Administrative Agent, by
10:00 A.M. (New York time) on any Business Day on which the Letter of Credit
Issuer intends to honor a drawing under a Letter of Credit, of (i) the Letter of
Credit Issuer's intention to honor such drawing and (ii) the amount of such
drawing. Unless otherwise instructed by the Borrower by 10:30 A.M. (New York
time) on such Business Day, the Administrative Agent shall promptly notify each
Lender of such drawing and the amount of its Revolving Credit Loan to be made in
respect thereof, and each Lender shall be irrevocably obligated to make an ABR
Revolving Credit Loan to the Borrower in the amount of its Revolving Credit
Commitment Percentage of the applicable Unpaid Drawing by 12:00 noon (New York
time) on such Business Day by making the amount of such Revolving Credit Loan
available to the Administrative Agent at the Administrative Agent's Office. Such
Revolving Credit Loans shall be made without regard to the Minimum Borrowing
Amount. The Administrative Agent shall use the proceeds of such Revolving Credit
Loans solely for purpose of reimbursing the Letter of Credit Issuer for the
related Unpaid Drawing.
3.5 Increased Costs. If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or actual compliance by the Letter of Credit Issuer or any L/C
Participant with any request or directive made or adopted after the date hereof
(whether or not having the force of law), by any such authority, central bank or
comparable agency shall either (a) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by the Letter of Credit Issuer, or any L/C Participant's L/C
Participation therein, or (b) impose on the Letter of Credit Issuer or any L/C
Participant any other conditions affecting its obligations under this Agreement
in respect of Letters of Credit or L/C Participations therein or any Letter of
Credit or such L/C Participant's L/C Participation therein; and the result of
any of the foregoing is to increase the cost to the Letter of Credit Issuer or
such L/C Participant of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such L/C Participant hereunder (other than any such increase
or reduction attributable to taxes) in respect of Letters of Credit or L/C
Participations therein, then, promptly after receipt of written demand to the
Borrower by the Letter of Credit Issuer or such L/C Participant, as the case may
be (a copy of which notice shall be sent by the Letter of Credit Issuer or such
L/C Participant to the Administrative Agent), the Borrower shall pay to the
Letter of Credit Issuer or such L/C Participant such additional amount or
amounts as will compensate the Letter of Credit Issuer or such L/C Participant
for such increased cost or reduction, it being understood and agreed, however,
that the Letter of Credit Issuer or a L/C Participant shall not be entitled to
such compensation as a result of such Person's compliance with, or pursuant to
any request or
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42
directive to comply with, any such law, rule or regulation as in effect on the
date hereof. A certificate submitted to the Borrower by the Letter of Credit
Issuer or a L/C Participant, as the case may be (a copy of which certificate
shall be sent by the Letter of Credit Issuer or such L/C Participant to the
Administrative Agent), setting forth in reasonable detail the basis for the
determination of such additional amount or amounts necessary to compensate the
Letter of Credit Issuer or such L/C Participant as aforesaid shall be conclusive
and binding on the Borrower absent clearly demonstrable error.
3.6 Successor Letter of Credit Issuer. The Letter of Credit Issuer
may resign as Letter of Credit Issuer upon 60 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower. If the Letter of Credit
Issuer shall resign as Letter of Credit Issuer under this Agreement, then the
Borrower shall appoint from among the Lenders with Revolving Credit Commitments
a successor issuer of Letters of Credit, whereupon such successor issuer shall
succeed to the rights, powers and duties of the Letter of Credit Issuer, and the
term "Letter of Credit Issuer" shall mean such successor issuer effective upon
such appointment. At the time such resignation shall become effective, the
Borrower shall pay to the resigning Letter of Credit Issuer all accrued and
unpaid fees pursuant to Sections 4.1(c) and (d). The acceptance of any
appointment as the Letter of Credit Issuer hereunder by a successor Lender shall
be evidenced by an agreement entered into by such successor, in a form
satisfactory to the Borrower and the Administrative Agent and, from and after
the effective date of such agreement, such successor Lender shall have all the
rights and obligations of the previous Letter of Credit Issuer under this
Agreement and the other Credit Documents. After the resignation of the Letter of
Credit Issuer hereunder, the resigning Letter of Credit Issuer shall remain a
party hereto and shall continue to have all the rights and obligations of a
Letter of Credit Issuer under this Agreement and the other Loan Documents with
respect to Letters of Credit issued by it prior to such resignation, but shall
not be required to issue additional Letters of Credit. After any retiring Letter
of Credit Issuer's resignation as Letter of Credit Issuer, the provisions of
this Agreement relating to the Letter of Credit Issuer shall inure to its
benefit as to any actions taken or omitted to be taken by it (a) while it was
Letter of Credit Issuer under this Agreement or (b) at any time with respect to
Letters of Credit issued by such Letter of Credit Issuer.
SECTION 4. Fees; Commitments.
4.1 Fees. (a) The Borrower agrees to pay to the Administrative
Agent, for the account of each Lender having a Term Loan Commitment or a
Revolving Credit Commitment (in each case pro rata according to the respective
Commitments of all such Lenders), a commitment fee for each day (i) in the case
of the Term Loan Commitments, from and including the Closing Date to but
excluding the last day of the Term Loan Availability Period and (ii) in the case
of the Revolving Credit Commitments, from and including the Closing Date to but
excluding the Final Date. Such commitment fee shall be payable (i) in the case
of the Term Loan Commitments, in arrears (x) on September 30, 1997 (for the
period ended on such day), and (y) on the last day of the Term Loan Availability
Period (for the period ended on such day for which no payment has been received
pursuant to clause (i)(x) above) and (ii) in the case of the Revolving Credit
Commitments, in arrears (x) September 30, 1997 (for the period ended on such
day), (y) on the last day of each March, June, September and December (for the
three-month period (or portion thereof) ended on the such day for which no
payment has been received pursuant to clause (ii)(x) above) and (z) on the Final
Date (for the period ended on such date for which no payment has been received
pursuant to clause (ii)(y) above), and shall be computed for each day during
such period at a rate per annum equal to the Commitment Fee Rate in effect on
such day on the Available Commitments in effect on such day. Notwithstanding the
foregoing, the Borrower shall not be obligated to pay any amounts to any
Defaulting Lender pursuant to this Section 4.1.
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43
(b) The Borrower agrees to pay to the Administrative Agent for the account
of the Lenders pro rata on the basis of their respective Letter of Credit
Exposure, a fee in respect of each Letter of Credit (the "Letter of Credit
Fee"), for the period from and including the date of issuance of such Letter of
Credit to but not including the termination date of such Letter of Credit
computed at the per annum rate for each day equal to the Applicable Eurodollar
Margin for Revolving Credit Loans minus 0.125% per annum on the average daily
Stated Amount of such Letter of Credit. Such Letter of Credit Fees shall be due
and payable quarterly in arrears on the last day of each March, June, September
and December and on the date upon which the Total Revolving Credit Commitment
terminates and the Letter of Credit Outstandings shall have been reduced to
zero.
(c) The Borrower agrees to pay to the Administrative Agent for the account
of the Letter of Credit Issuer a fee in respect of each Letter of Credit issued
by it (the "Fronting Fee"), for the period from and including the date of
issuance of such Letter of Credit to but not including the termination date of
such Letter of Credit, computed at the rate for each day equal to 0.125% per
annum on the average daily Stated Amount of such Letter of Credit. Such Fronting
Fees shall be due and payable quarterly in arrears on the last day of each
March, June, September and December and on the date upon which the Total
Revolving Credit Commitment terminates and the Letter of Credit Outstandings
shall have been reduced to zero.
(d) The Borrower agrees to pay directly to the Letter of Credit Issuer
upon each issuance of, drawing under, and/or amendment of, a Letter of Credit
issued by it such amount as the Letter of Credit Issuer and the Borrower shall
have agreed upon for issuances of, drawings under or amendments of, letters of
credit issued by it.
(e) The Borrower agrees to pay to the Administrative Agent, on the Closing
Date, the fees in the amounts and on the dates previously agreed to in writing
by the Borrower and the Administrative Agent. The Administrative Agent agrees to
pay to each Lender, for its own account on the Closing Date, the fees in the
amounts and on the dates previously agreed to in writing by the Administrative
Agent and such Lender.
4.2 Voluntary Reduction of Revolving Credit Commitments. Upon at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at the Administrative Agent's
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), the Borrower shall have the right, without premium or penalty, on
any day, permanently to terminate or reduce the Revolving Credit Commitments in
whole or in part, provided that (a) any such reduction shall apply
proportionately and permanently to reduce the Revolving Credit Commitment of
each of the Lenders, (b) any partial reduction pursuant to this Section 4.2
shall be in the amount of at least $1,000,000 and (c) after giving effect to
such termination or reduction and to any prepayments of the Loans made on the
date thereof in accordance with this Agreement, the sum of (i) the aggregate
outstanding principal amount of the Revolving Credit Loans and the Swingline
Loans and (ii) the Letter of Credit Outstandings shall not exceed the Total
Revolving Credit Commitment.
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44
4.3 Mandatory Termination of Commitments. (a) The Total Term Loan
Commitment shall be reduced at 5:00 P.M. (New York time) on the Closing Date by
an amount equal to the greater of (i) the aggregate principal amount of Term
Loans borrowed on the Closing Date and (ii) $110,000,000. The Total Term Loan
Commitment shall terminate upon the earlier of (i) any borrowing of Term Loans
following the Closing Date and (ii) at 5:00 P.M. (New York time) on the last day
of the Term Loan Availability Period.
(b) The Total Revolving Credit Commitment shall terminate at 5:00 P.M.
(New York time) on the Revolving Credit Maturity Date.
(c) The Swingline Commitment shall terminate at 5:00 P.M. (New York time)
on the Swingline Maturity Date.
SECTION 5. Payments.
5.1 Voluntary Prepayments. The Borrower shall have the right to
prepay Term Loans, Revolving Credit Loans and Swingline Loans, without premium
or penalty, in whole or in part from time to time on the following terms and
conditions: (a) the Borrower shall give the Administrative Agent at the
Administrative Agent's Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to make such prepayment, the amount of such
prepayment and (in the case of Eurodollar Term Loans and Eurodollar Revolving
Credit Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower no later than (i) in the case of Term Loans or
Revolving Credit Loans, 10:00 A.M. (New York time) one Business Day prior to, or
(ii) in the case of Swingline Loans, 10:00 A.M. (New York time) on, the date of
such prepayment and shall promptly be transmitted by the Administrative Agent to
each of the Lenders or Chase, as the case may be; (b) each partial prepayment of
any Borrowing of Term Loans or Revolving Credit Loans shall be in a multiple of
$100,000 and in an aggregate principal amount of at least $1,000,000 and each
partial prepayment of Swingline Loans shall be in a multiple of $100,000 and in
an aggregate principal amount of at least $100,000, provided that no partial
prepayment of Eurodollar Term Loans or Eurodollar Revolving Credit Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Term
Loans or Eurodollar Revolving Credit Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount for Eurodollar Term Loans or
Eurodollar Revolving Credit Loans; and (c) any prepayment of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans pursuant to this Section 5.1 on any
day other than the last day of an Interest Period applicable thereto shall be
subject to compliance by the Borrower with the applicable provisions of Section
2.11. Each prepayment of Term Loans pursuant to this Section 5.1 shall be
applied to reduce the Repayment Amounts in such order as the Borrower may
determine. At the Borrower's election in connection with any prepayment pursuant
to this Section 5.1, such prepayment shall not be applied to any Term Loan or
Revolving Credit Loan of a Defaulting Lender.
5.2 Mandatory Prepayments. (a) Term Loan Prepayments. (i) On each
occasion that a Prepayment Event occurs, the Borrower shall, within five
Business Days after the occurrence of such Prepayment Event, offer to prepay, in
accordance with paragraph (c) below, the principal amount of Term Loans in an
amount equal to 100% of the Net Cash Proceeds from such Prepayment Event;
provided, however, that the Borrower may elect to not so apply to the prepayment
of Term Loans up to $30,000,000 of Net Cash Proceeds from any (x) Permitted Sale
Leaseback with respect to one or more Closing Date Stores or (y) Debt Incurrence
Prepayment Event in the aggregate during the term of this Agreement.
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45
(ii) Not later than the date that is six months after the last day of any
fiscal year (commencing with the fiscal year ending June 27, 1998), the Borrower
shall offer to prepay, in accordance with paragraph (c) below, the principal of
Term Loans in an amount equal to (x) 50% of Excess Cash Flow for such fiscal
year (or, in the case of the fiscal year ending June 27, 1998, for the period
from and including the Closing Date to and including June 27, 1998), minus (y)
the amount of any such Excess Cash Flow that the Borrower has, prior to such
date, reinvested in the business of the Borrower or any of its Subsidiaries
(subject to Section 9.14).
(b) Aggregate Revolving Credit Outstandings. If on any date the sum of the
outstanding principal amount of the Revolving Credit Loans and Swingline Loans
and the aggregate amount of Letter of Credit Outstandings (all the foregoing,
collectively, the "Aggregate Revolving Credit Outstandings") exceeds the Total
Revolving Credit Commitment as then in effect, the Borrower shall forthwith
repay on such date the principal amount of Swingline Loans and, after all
Swingline Loans have been paid in full, Revolving Credit Loans, in an amount
equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Credit Loans, the Aggregate Revolving
Credit Outstandings exceed the Total Revolving Credit Commitment then in effect,
the Borrower shall pay to the Administrative Agent an amount in cash equal to
such excess and the Administrative Agent shall hold such payment for the benefit
of the Lenders as security for the obligations of the Borrower hereunder
(including, without limitation, obligations in respect of Letter of Credit
Outstandings) pursuant to a cash collateral agreement to be entered into in form
and substance satisfactory to the Administrative Agent (which shall permit
certain investments in Permitted Investments satisfactory to the Administrative
Agent, until the proceeds are applied to the secured obligations).
(c) Application to Repayment Amounts. Each prepayment of Term Loans
required by Section 5.2(a) shall be applied to reduce the Repayment Amounts in
such order as the Borrower may determine. With respect to each such prepayment,
(i) the Borrower will, not later than the date specified in Section 5.2(a) for
offering to make such prepayment, give the Administrative Agent telephonic
notice (promptly confirmed in writing) requesting that the Administrative Agent
provide notice of such prepayment to each Term Loan Lender, (ii) each Term Loan
Lender will have the right to refuse any such prepayment by giving written
notice of such refusal to the Borrower within fifteen Business Days after such
Lender's receipt of notice from the Administrative Agent of such prepayment (and
the Borrower shall not prepay any such Term Loans until the date that is
specified in the immediately following clause), (iii) the Borrower will make all
such prepayments not so refused upon the earlier of (x) such fifteenth Business
Day and (y) such time as the Borrower has received notice from each Lender that
it consents to or refuses such prepayment and (iv) any prepayment so refused may
be retained by the Borrower.
(d) Application to Term Loans. With respect to each prepayment of Term
Loans required by Section 5.2(a), the Borrower may designate the Types of Loans
that are to be prepaid and the specific Borrowing(s) pursuant to which made,
provided that (i) Eurodollar Term Loans may be designated for prepayment
pursuant to this Section 5.2 only on the last day of an Interest Period
applicable thereto unless all Eurodollar Term Loans with Interest Periods ending
on such date of required prepayment and all ABR Term Loans have been paid in
full; and (ii) if any prepayment of Eurodollar Term Loans made pursuant to a
single Borrowing shall reduce the outstanding Term Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar
Term Loans, such Borrowing shall immediately be converted into ABR Loans. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its reasonable discretion with a view, but no obligation, to minimize breakage
costs owing under Section 2.11.
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(e) Application to Revolving Credit Loans. With respect to each prepayment
of Revolving Credit Loans required by Section 5.2(b), the Borrower may designate
the Types of Loans that are to be prepaid and the specific Borrowing(s) pursuant
to which made, provided that (i) Eurodollar Revolving Credit Loans may be
designated for prepayment pursuant to this Section 5.2 only on the last day of
an Interest Period applicable thereto unless all Eurodollar Revolving Credit
Loans with Interest Periods ending on such date of required prepayment and all
ABR Loans have been paid in full; (ii) if any prepayment of Eurodollar Revolving
Credit Loans made pursuant to a single Borrowing shall reduce the outstanding
Revolving Credit Loans made pursuant to such Borrowing to an amount less than
the Minimum Borrowing Amount for Eurodollar Revolving Credit Loans, such
Borrowing shall immediately be converted into ABR Loans; (iii) each prepayment
of any Loans made pursuant to a Borrowing shall be applied pro rata among such
Loans; and (iv) notwithstanding the provisions of the preceding clause (iii), no
prepayment made pursuant to Section 5.2(b) of Revolving Credit Loans shall be
applied to the Revolving Credit Loans of any Defaulting Lender. In the absence
of a designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in its
reasonable discretion with a view, but no obligation, to minimize breakage costs
owing under Section 2.11.
(f) Eurodollar Interest Periods. In lieu of making any payment pursuant to
this Section 5.2 in respect of any Eurodollar Loan other than on the last day of
the Interest Period therefor, so long as no Default or Event of Default shall
have occurred and be continuing, the Borrower at its option may deposit with the
Administrative Agent an amount equal to the amount of the Eurodollar Loan to be
prepaid and such Eurodollar Loan shall be repaid on the last day of the Interest
Period therefor in the required amount. Such deposit shall be held by the
Administrative Agent in a corporate time deposit account established on terms
reasonably satisfactory to the Administrative Agent, earning interest at the
then-customary rate for accounts of such type. Such deposit shall constitute
cash collateral for the Obligations, provided that the Borrower may at any time
direct that such deposit be applied to make the applicable payment required
pursuant to this Section 5.2.
(g) Minimum Amount. No prepayment shall be required pursuant to Section
5.2(a)(i) unless and until the amount at any time of Net Cash Proceeds from
Prepayment Events required to be applied at or prior to such time pursuant to
such Section and not yet applied at or prior to such time to prepay Term Loans
pursuant to such Section exceeds $15,000,000 in the aggregate.
(h) Foreign Asset Sales. Notwithstanding any other provisions of this
Section 5.2, (i) to the extent that any of or all the Net Cash Proceeds of any
asset sale by a Restricted Foreign Subsidiary giving rise to an Asset Sale
Prepayment Event (a "Foreign Asset Sale") are prohibited or delayed by
applicable local law from being repatriated to the United States, the portion of
such Net Cash Proceeds so affected will not be required to be applied to repay
Term Loans at the times provided in this Section 5.2 but may be retained by the
applicable Restricted Foreign Subsidiary so long, but only so long, as the
applicable local law will not permit repatriation to the United States (the
Borrower hereby agreeing to cause the applicable Restricted Foreign Subsidiary
to promptly take all actions required by the applicable local law to permit such
repatriation), and once such repatriation of any of such affected Net Cash
Proceeds is permitted under the applicable local law, such repatriation will be
immediately effected and such repatriated Net Cash Proceeds will be promptly
(and in any event not later than two Business Days after such repatriation)
applied to the repayment of the Term Loans pursuant to this Section 5.2 and (ii)
to the extent that the Borrower has determined in good faith that repatriation
of any of or all the Net Cash Proceeds of any Foreign Asset Sale would have a
material adverse tax cost consequence with respect to such Net Cash Proceeds,
the Net Cash Proceeds so affected may be retained by the applicable Restricted
Foreign Subsidiary, provided that, in the case of this clause (ii), on or before
the date on which any Net Cash Proceeds so retained would
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47
otherwise have been required to be applied to reinvestments or prepayments
pursuant to Section 5.2(a), (x) the Borrower applies an amount equal to such Net
Cash Proceeds to such reinvestments or prepayments as if such Net Cash Proceeds
had been received by the Borrower rather than such Restricted Foreign Subsidiary
or (y) such Net Cash Proceeds are applied to the repayment of Indebtedness of a
Restricted Foreign Subsidiary.
5.3 Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments under this Agreement shall be made,
without set-off, counterclaim or deduction of any kind, to the Administrative
Agent for the ratable account of the Lenders entitled thereto, the Letter of
Credit Issuer or Chase, as the case may be, not later than 12:00 Noon (New York
time) on the date when due and shall be made in immediately available funds and
in lawful money of the United States of America at the Administrative Agent's
Office, it being understood that written or facsimile notice by the Borrower to
the Administrative Agent to make a payment from the funds in the Borrower's
account at the Administrative Agent's Office shall constitute the making of such
payment to the extent of such funds held in such account. The Administrative
Agent will thereafter cause to be distributed on the same day (if payment was
actually received by the Administrative Agent prior to 2:00 P.M. (New York time)
on such day) like funds relating to the payment of principal or interest or Fees
ratably to the Lenders entitled thereto.
(b) Any payments under this Agreement that are made later than 2:00 P.M.
(New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
5.4 Net Payments. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any current or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding (i) net income taxes and franchise taxes (imposed in lieu
of net income taxes) imposed on the Administrative Agent or any Lender and (ii)
any taxes imposed on the Administrative Agent or any Lender as a result of a
current or former connection between the Administrative Agent or such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded
Taxes") are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement; provided, however, that the
Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of America or a
state thereof if such Lender fails to comply with the requirements of paragraph
(b) of this Section 5.4. Whenever any Non-Excluded Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the
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Borrower shall indemnify the Administrative Agent and the Lenders for any
incremental taxes, interest, costs or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this Section 5.4(a) shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated or organized under the laws of
the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent two copies of
either United States Internal Revenue Service Form 1001 or Form 4224 or, in
the case of Non-U.S. Lender claiming exemption from U.S. Federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", a Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for purposes
of Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement;
(ii) deliver to the Borrower and the Administrative Agent two further
copies of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously delivered by
it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such forms
or certifications as may reasonably be requested by the Borrower or the
Administrative Agent;
unless in any such case any change in treaty, law or regulation has occurred
prior to the date on which any such delivery would otherwise be required that
renders any such form inapplicable or would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises the Borrower and the Administrative Agent. Each Person that shall become
a Participant pursuant to Section 13.6 or a Lender pursuant to Section 13.6
shall, upon the effectiveness of the related transfer, be required to provide
all the forms and statements required pursuant to this Section 5.4(b), provided
that in the case of a Participant such Participant shall furnish all such
required forms and statements to the Lender from which the related participation
shall have been purchased.
(c) The Borrower shall not be required to indemnify any Non-U.S. Lender,
or to pay any additional amounts to any Non-U.S. Lender, in respect of U.S.
Federal withholding tax pursuant to paragraph (a) above to the extent that (i)
the obligation to withhold amounts with respect to U.S. Federal withholding tax
existed on the date such Non-U.S. Lender became a party to this Agreement (or,
in the case of a Non-U.S. Participant, on the date such Participant became a
Participant hereunder); provided, however, that this clause (i) shall not apply
to the extent that (x) the indemnity payments or additional amounts any Lender
(or Participant) would be entitled to receive (without regard to this clause
(i)) do not exceed the indemnity payment or additional amounts that the person
making the assignment, participation or transfer to such Lender (or Participant)
would have been entitled to receive in the absence of such assignment,
participation or transfer, or (y) such assignment, participation or transfer had
been requested by the Borrower, (ii) the obligation to pay such additional
amounts would not have arisen but for a failure by such Non-U.S. Lender or
Non-U.S.
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49
Participant to comply with the provisions of paragraph (b) above or (iii) any of
the representations or certifications made by a Non-U.S. Lender or Non-U.S.
Participant pursuant to paragraph (b) above are incorrect at the time a payment
hereunder is made, other than by reason of any change in treaty, law or
regulation having effect after the date such representations or certifications
were made.
(d) If the Borrower determines in good faith that a reasonable basis
exists for contesting any taxes for which indemnification has been demanded
hereunder, the relevant Lender or the Administrative Agent, as applicable, shall
cooperate with the Borrower in challenging such taxes at the Borrower's expense
if so requested by the Borrower. If any Lender or the Administrative Agent, as
applicable, receives a refund of a tax for which a payment has been made by the
Borrower pursuant to this Agreement, which refund in the good faith judgment of
such Lender or Administrative Agent, as the case may be, is attributable to such
payment made by the Borrower, then the Lender or the Administrative Agent, as
the case may be, shall reimburse the Borrower for such amount as the Lender or
Administrative Agent, as the case may be, determines to be the proportion of the
refund as will leave it, after such reimbursement, in no better or worse
position than it would have been in if the payment had not been required. A
Lender or Administrative Agent shall claim any refund that it determines is
available to it, unless it concludes in its reasonable discretion that it would
be adversely affected by making such a claim. Neither the Lender nor the
Administrative Agent shall be obliged to disclose any information regarding its
tax affairs or computations to the Borrower in connection with this paragraph
(d) or any other provision of this Section 5.4.
(e) Each Lender represents and agrees that, on the date hereof and at all
times during the term of this Agreement, it is not and will not be a conduit
entity participating in a conduit financing arrangement (as defined in Section
7701(1) of the Code and the regulations thereunder) with respect to the
Borrowings hereunder unless the Borrower has consented to such arrangement prior
thereto.
5.5 Computations of Interest and Fees. (a) Interest on Eurodollar
Loans and, except as provided in the next succeeding sentence, ABR Loans shall
be calculated on the basis of a 360-day year for the actual days elapsed.
Interest on ABR Loans in respect of which the rate of interest is calculated on
the basis of the Prime Rate and interest on overdue interest shall be calculated
on the basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed.
(b) Fees and Letter of Credit Outstandings shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed.
SECTION 6. Conditions Precedent to Initial Borrowing.
The initial Borrowing under this Agreement is subject to the satisfaction
of the following conditions precedent:
6.1 Credit Documents. The Administrative Agent shall have received
(a) this Agreement, executed and delivered by a duly authorized officer of the
Borrower and each Lender, (b) the Guarantee, executed and delivered by a duly
authorized officer of each Guarantor, (c) the Pledge Agreement, executed and
delivered by each pledgor party thereto and (d) all certificates representing
securities pledged under the Pledge Agreement, accompanied by instruments of
transfer and undated stock powers endorsed in blank.
6.2 Closing Certificate. The Administrative Agent shall have
received a certificate of each Credit Party, dated the Closing Date,
substantially in the form of Exhibit G, with appropriate insertions, executed by
the President or any Vice President and the Secretary or
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50
any Assistant Secretary of such Credit Party, and attaching the documents
referred to in Sections 6.3 and 6.4.
6.3 Corporate Proceedings of Each Credit Party. The Administrative
Agent shall have received a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each
Credit Party (or a duly authorized committee thereof) authorizing (a) the
execution, delivery and performance of the Credit Documents and the Subscription
Agreement (and any agreements relating thereto) to which it is a party and (b)
in the case of the Borrower, the extensions of credit contemplated hereunder.
6.4 Corporate Documents. The Administrative Agent shall have
received true and complete copies of the certificate of incorporation and
by-laws of each Credit Party.
6.5 No Material Adverse Change. There shall have been no material
adverse change in the business, assets, operations, properties, financial
condition or prospects of the Borrower and its Subsidiaries taken as a whole
since June 29, 1996.
6.6 Fees. The Administrative Agent shall have received the fees
referred to in Section 4.1(e) to be received on the Closing Date.
6.7 Equity Contribution and Redemption. (a) The Equity Contribution
and (b) the Redemption shall have been made or shall be made simultaneously with
the making of the initial Loans.
6.8 Recapitalization. (a) The Recapitalization shall have been
consummated, or shall be consummated simultaneously with the making of the
initial Loans, in accordance with applicable law and the Subscription Agreement
and (b) RFM and other Affiliates of KKR shall have received shares representing
approximately [62]% of the shares of Borrower Common Stock expected to be
outstanding immediately after the Recapitalization. The Subscription Agreement
shall not have been amended since April 1, 1997, in any material respect that
is, in the reasonable judgment of the Administrative Agent, adverse to the
interests of the Lenders.
6.9 Other Indebtedness. After giving effect to the Recapitalization
and the other transactions contemplated hereby, the Borrower and its
Subsidiaries shall have outstanding no Indebtedness or preferred stock other
than (a) the extensions of credit under this Agreement, (b) the Subordinated
Notes and (c) Indebtedness permitted under Section 10.1, other than under
clauses (j), (k) and (n) thereof.
6.10 Closing Date Balance Sheet. The Lenders shall have received a
pro forma consolidated closing balance sheet of the Borrower giving effect to
the Recapitalization, the financing therefor and the other transactions
contemplated hereby and thereby, dated the date of the corresponding pro forma
balance sheet included in the offering memorandum for the Subordinated Notes.
6.11 Solvency Certificate. The Lenders shall have received a
certificate from the Treasurer of the Borrower or other executive officer of the
Borrower with the responsibility for financial matters, in form and substance
reasonably satisfactory to the Administrative Agent, as to the solvency of the
Borrower and its Subsidiaries on a consolidated basis after giving effect to the
Recapitalization, the making of the initial Loans and the consummation of the
other transactions contemplated hereby.
6.12 Required Approvals. All requisite material Governmental
Authorities and third parties shall have approved or consented to the
Recapitalization and the other transactions
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51
contemplated hereby to the extent required, all applicable appeal periods shall
have expired and there shall be no governmental or judicial action, actual or
threatened, that has or could have a reasonable likelihood of restraining,
preventing or imposing materially burdensome conditions on the Recapitalization,
the financing therefor or the other transactions contemplated hereby or thereby.
6.13 Existing Credit Agreement. All loans outstanding under, and all
other amounts due in respect of, the Existing Credit Agreement shall have been
repaid in full; the commitments under the Existing Credit Agreement shall have
been permanently terminated; all obligations under the Existing Credit Agreement
and security interests relating thereto shall have been discharged; and the
Administrative Agent shall have received reasonably satisfactory evidence of
such repayment, termination and discharge.
6.14 Senior Notes and Preferred Stock. Prior to or substantially
concurrently with the making of the initial Loans, (a) all the Senior Notes
shall have been repaid and the Make-Whole Premium shall have been paid and (b)
all the outstanding Preferred Stock shall have been redeemed.
6.15 Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinions of (a) Simpson
Thacher & Bartlett, special New York counsel to the Borrower, substantially in
the form of Exhibit E-1, (b) Vinson & Elkins, counsel to the Borrower,
substantially in the form of Exhibit E-2, and the Borrower hereby instructs such
counsel to deliver such legal opinions.
6.16 Subordinated Notes. The Borrower shall have received gross
proceeds of not less than approximately $149,750,000 from the sale at par of the
Subordinated Notes.
SECTION 7. Conditions Precedent to All Credit Events. The agreement
of each Lender to make any Loan requested to be made by it on any date
(including, without limitation, its initial Loan, but excluding Mandatory
Borrowings) and the obligation of the Letter of Credit Issuer to issue Letters
of Credit on any date is subject to the satisfaction of the following conditions
precedent:
7.1 No Default; Representations and Warranties. At the time of each
Credit Event and also after giving effect thereto (a) there shall exist no
Default or Event of Default and (b) all representations and warranties made by
any Credit Party contained herein or in the other Credit Documents shall be true
and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event (except where such representations and warranties expressly relate
to an earlier date, in which case such representations and warranties shall have
been true and correct in all material respects as of such earlier date).
7.2 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Term Loan, each Revolving Credit Loan (other than any Revolving
Credit Loan made pursuant to Section 3.4(a)) and each Swingline Loan, the
Administrative Agent shall have received a Notice of Borrowing (whether in
writing or by telephone) meeting the requirements of Section 2.3.
(b) Prior to the issuance of each Letter of Credit, the Administrative
Agent and the Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 3.2(a).
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52
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Lenders that all
the applicable conditions specified above exist as of that time.
SECTION 8. Representations, Warranties and Agreements. In order to induce
the Lenders to enter into this Agreement, to make the Loans and issue or
participate in Letters of Credit as provided for herein, the Borrower makes the
following representations and warranties to, and agreements with, the Lenders,
all of which shall survive the execution and delivery of this Agreement and the
making of the Loans and the issuance of the Letters of Credit:
8.1 Corporate Status. The Borrower and each Material Subsidiary (a)
is a duly organized and validly existing corporation or other entity in good
standing under the laws of the jurisdiction of its organization and has the
corporate or other organizational power and authority to own its property and
assets and to transact the business in which it is engaged and (b) has duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except where the failure
to be so qualified could not reasonably be expected to result in a Material
Adverse Effect.
8.2 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
8.3 No Violation. Neither the execution, delivery and performance by
any Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof nor the consummation of the
Recapitalization and the other transactions contemplated therein will (a)
contravene any applicable provision of any material law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (b) result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of the Borrower or any of the Restricted
Subsidiaries pursuant to, the terms of any material indenture (including the
Senior Note Indenture), loan agreement, lease agreement, mortgage, deed of
trust, agreement or other material instrument to which the Borrower or any of
the Restricted Subsidiaries is a party or by which it or any of its property or
assets is bound or (c) violate any provision of the certificate of incorporation
or By-Laws of the Borrower or any of the Restricted Subsidiaries.
8.4 Litigation. Except as set forth in the Borrower's audited
financial statements for the fiscal year ended June 29, 1996, there are no
actions, suits or proceedings (including, without limitation, Environmental
Claims) pending or, to the knowledge of the Borrower, threatened with respect to
the Borrower or any of its Subsidiaries that could reasonably be expected to
result in a Material Adverse Effect.
8.5 Margin Regulations. Neither the making of any Loan hereunder nor
the use of the proceeds thereof will violate the provisions of Regulation G, T,
U or X of the Board.
8.6 Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any
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53
Governmental Authority is required to authorize or is required in connection
with (a) the execution, delivery and performance of any Credit Document or (b)
the legality, validity, binding effect or enforceability of any Credit Document,
except any of the foregoing the failure to obtain or make could not reasonably
be expected to have a Material Adverse Effect.
8.7 Investment Company Act. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
8.8 True and Complete Disclosure. (a) All factual information and
data (taken as a whole) heretofore or contemporaneously furnished by the
Borrower, any of its Subsidiaries or any of their respective authorized
representatives in writing to the Administrative Agent and/or any Lender on or
before the Closing Date (including, without limitation, (i) the Confidential
Information Memorandum and (ii) all information contained in the Credit
Documents) for purposes of or in connection with this Agreement or any
transaction contemplated herein was true and complete in all material respects
on the date as of which such information or data is dated or certified and was
not incomplete by omitting to state any material fact necessary to make such
information and data (taken as a whole) not misleading at such time in light of
the circumstances under which such information or data was furnished, it being
understood and agreed that for purposes of this Section 8.8(a), such factual
information and data shall not include projections and pro forma financial
information.
(b) The projections and pro forma financial information contained in the
information and data referred to in paragraph (a) above were based on good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results.
8.9 Financial Condition; Financial Statements. (a) The consolidated
balance sheet of the Borrower and its Subsidiaries at June 29, 1996, and the
related consolidated statements of operations, redeemable stock and
stockholders' equity and cash flows for the fiscal year ended as of such date,
which statements have been audited by Arthur Anderson LLP, independent certified
public accountants, who delivered an unqualified opinion with respect thereto,
and (b) the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries at April 5, 1997, and the related consolidated statements of
operations, redeemable stock and stockholders' equity and cash flows for the
respective fiscal quarters and portions of the fiscal year ended as of such
dates, in each case present fairly in all material respects the consolidated
financial position of the Borrower and its Subsidiaries at the respective dates
of said statements and the results of operations for the respective periods
covered thereby. All such financial statements have been prepared in accordance
with GAAP consistently applied except to the extent provided in the notes to
said financial statements and, in the case of said financial statements referred
to in clause (b), subject to normal year-end audit adjustments. There has been
no Material Adverse Change since June 29, 1996, other than solely as a result of
changes in general economic conditions.
8.10 Tax Returns and Payments. Each of the Borrower and its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it that have become due, other than
those not yet delinquent or contested in good faith. The Borrower and each of
its Subsidiaries have paid, or have provided adequate reserves (in the good
faith judgment of the management of the Borrower) in accordance with GAAP for
the payment of, all material federal, state and foreign income taxes applicable
for all prior fiscal years and for the current fiscal year to the Closing Date.
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54
8.11 Compliance with ERISA. Each Plan is in compliance with ERISA,
the Code and any applicable Requirement of Law; no Reportable Event has occurred
(or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or is reasonably likely to be insolvent or in
reorganization), and no written notice of any such insolvency or reorganization
has been given to the Borrower, any Subsidiary or any ERISA Affiliate; no Plan
(other than a multiemployer plan) has an accumulated or waived funding
deficiency (or is reasonably likely to have such a deficiency); neither the
Borrower nor any Subsidiary nor any ERISA Affiliate has incurred (or is
reasonably likely expected to incur) any liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code or has been notified in
writing that it will incur any liability under any of the foregoing Sections
with respect to any Plan; no proceedings have been instituted (or are reasonably
likely to be instituted) to terminate or to reorganize any Plan or to appoint a
trustee to administer any Plan, and no written notice of any such proceedings
has been given to the Borrower, any Subsidiary or any ERISA Affiliate; and no
lien imposed under the Code or ERISA on the assets of the Borrower or any
Subsidiary or any ERISA Affiliate exists (or is reasonably likely to exist) nor
has the Borrower, any Subsidiary or any ERISA Affiliate been notified in writing
that such a lien will be imposed on the assets of the Borrower, any Subsidiary
or any ERISA Affiliate on account of any Plan, except to the extent that a
breach of any of the foregoing representations, warranties or agreements in this
Section 8.11 would not result, individually or in the aggregate, in an amount of
liability that would be reasonably likely to have a Material Adverse Effect or
relates to any matter disclosed in the financial statements of the Borrower
contained in the Confidential Information Memorandum. No Plan (other than a
multiemployer plan) has an Unfunded Current Liability that would, individually
or when taken together with any other liabilities referenced in this Section
8.11, be reasonably likely to have a Material Adverse Effect. With respect to
Plans that are multiemployer plans (as defined in Section 3(37) of ERISA), the
representations and warranties in this Section 8.11, other than any made with
respect to (a) liability under Section 4201 or 4204 of ERISA or (b) liability
for termination or reorganization of such Plans under ERISA, are made to the
best knowledge of the Borrower.
8.12 Subsidiaries. Schedule 8.12 lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each case existing on the Closing Date. To the knowledge of the
Borrower, each Material Subsidiary as of the Closing Date has been so designated
on Schedule 8.12.
8.13 Patents, etc.. The Borrower and each of the Restricted
Subsidiaries have obtained all patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, except where the failure to obtain
any such rights could not reasonably be expected to have a Material Adverse
Effect.
8.14 Environmental Laws. (a) Other than instances of noncompliance
that could not reasonably be expected to have a Material Adverse Effect: (i) the
Borrower and each of its Subsidiaries are in compliance with all Environmental
Laws in all jurisdictions in which the Borrower and each of its Subsidiaries are
currently doing business (including, without limitation, having obtained all
material permits required under Environmental Laws) and (ii) the Borrower will
comply and cause each of its Subsidiaries to comply with all such Environmental
Laws (including, without limitation, all permits required under Environmental
Laws).
(b) Neither the Borrower nor any of its Subsidiaries has treated, stored,
transported or disposed of Hazardous Materials at or from any currently or
formerly owned Real Estate (as defined in Section 9.1(f)) or facility relating
to its business in a manner that could reasonably be expected to have a Material
Adverse Effect.
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55
8.15 Properties. The Borrower and each of the Restricted
Subsidiaries have good title to or leasehold interest in all properties that are
necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, free and clear of all Liens (other
than any Liens permitted by this Agreement) and except where the failure to have
such good title could not reasonably be expected to have a Material Adverse
Effect.
SECTION 9. Affirmative Covenants. The Borrower hereby covenants and agrees
that on the Closing Date and thereafter, for so long as this Agreement is in
effect and until the Commitments, the Swingline Commitment and each Letter of
Credit have terminated and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
9.1 Information Covenants. The Borrower will furnish to each Lender
and the Administrative Agent:
(a) Annual Financial Statements. As soon as available and in any event on
or before the date on which such financial statements are required to be filed
with the SEC, the consolidated balance sheet of (i) the Borrower and the
Restricted Subsidiaries and (ii) the Borrower and its Subsidiaries, in each
case as at the end of such fiscal year and the related consolidated statement
of operations, redeemable stock and stockholders' equity cash flows for such
fiscal year, setting forth comparative consolidated figures for the preceding
fiscal year, and certified by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to the
scope of audit or as to the status of the Borrower or any of the Material
Subsidiaries as a going concern, together in any event with a certificate of
such accounting firm stating that in the course of its regular audit of the
business of the Borrower and the Material Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any Default or Event of Default
relating to Section 10.9, 10.10 and 10.11 that has occurred and is continuing
or, if in the opinion of such accounting firm such a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in any event
on or before the date on which such financial statements are required to be
filed with the SEC with respect to each of the first three quarterly
accounting periods in each fiscal year of the Borrower, the consolidated
balance sheet of (i) the Borrower and the Restricted Subsidiaries and (ii) the
Borrower and its Subsidiaries, in each case as at the end of such quarterly
period and the related consolidated statement of operations, redeemable stock
and stockholders' equity income for such quarterly accounting period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly period, and the related consolidated statement of cash flows for the
elapsed portion of the fiscal year ended with the last day of such quarterly
period, and setting forth comparative consolidated figures for the related
periods in the prior fiscal year or, in the case of such consolidated balance
sheet, for the last day of the prior fiscal year, all of which shall be
certified by an Authorized Officer of the Borrower, subject to changes
resulting from audit and normal year-end audit adjustments.
(c) Budgets. Within 60 days after the commencement of each fiscal year of
the Borrower, budgets of the Borrower in reasonable detail for the fiscal year
as customarily prepared by management of the Borrower for its internal use,
setting forth the principal assumptions upon which such budgets are based.
(d) Officer's Certificates. At the time of the delivery of the financial
statements provided for in Sections 9.1(a) and (b), a certificate of an
Authorized Officer of the Borrower to the effect that no Default or Event of
Default exists or, if any Default or Event of Default
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56
does exist, specifying the nature and extent thereof, which certificate shall
set forth (i) the calculations required to establish whether the Borrower and
its Subsidiaries were in compliance with the provisions of Sections 10.9,
10.10 and 10.11 as at the end of such fiscal year or period, as the case may
be, (ii) a specification of any change in the identity of the Restricted
Subsidiaries, Unrestricted Subsidiaries, Acquisition Subsidiaries and Foreign
Subsidiaries as at the end of such fiscal year or period, as the case may be,
from the Restricted Subsidiaries, Unrestricted Subsidiaries, Acquisition
Subsidiaries, and Foreign Subsidiaries, respectively, provided to the Lenders
on the Closing Date or the most recent fiscal year or period, as the case may
be, (iii) the then applicable Status and (iv) the amount of any Pro Forma
Adjustment not previously set forth in a Pro Forma Adjustment Certificate or
any change in the amount of a Pro Forma Adjustment set forth in any Pro Forma
Adjustment Certificate previously provided and, in either case, in reasonable
detail, the calculations and basis therefor; and at the time of the delivery
of the financial statements provided for in Section 9.1(a), a certificate of
an Authorized Officer of the Borrower setting forth in reasonable detail the
Available Amount as at the end of the fiscal year to which such financial
statements relate.
(e) Notice of Default or Litigation. Promptly after an Authorized Officer
of the Borrower or any of its Subsidiaries obtains knowledge thereof, notice
of (i) the occurrence of any event that constitutes a Default or Event of
Default, which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with respect
thereto, and (ii) any litigation or governmental proceeding pending against
the Borrower or any of its Subsidiaries that could reasonably be expected to
result in a Material Adverse Effect.
(f) Environmental Matters. The Borrower will promptly advise the Lenders
in writing after obtaining knowledge of any one or more of the following
environmental matters, unless such environmental matters would not,
individually or when aggregated with all other such matters, be reasonably
expected to result in a Material Adverse Effect:
(i) Any pending or threatened Environmental Claim against the
Borrower or any of its Subsidiaries or any Real Estate (as defined below);
(ii) Any condition or occurrence on any Real Estate that (x)
results in noncompliance by the Borrower or any of its Subsidiaries with
any applicable Environmental Law or (y) could reasonably be anticipated to
form the basis of an Environmental Claim against the Borrower or any of
its Subsidiaries or any Real Estate;
(iii) Any condition or occurrence on any Real Estate that
could reasonably be anticipated to cause such Real Estate to be subject to
any restrictions on the ownership, occupancy, use or transferability of
such Real Estate under any Environmental Law; and
(iv) The taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any Real
Estate.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Borrower's response thereto. The term "Real Estate" shall mean land, buildings
and improvements owned or leased by the Borrower or any of its Subsidiaries,
but excluding all operating fixtures and equipment, whether or not
incorporated into improvements.
(g) Other Information. Promptly upon filing thereof, copies of any filings
on Form 10-K, 10-Q or 8-K or registration statements with, and reports to,
the SEC by the Borrower or any
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57
of its Subsidiaries (other than amendments to any registration statement (to
the extent such registration statement, in the form it becomes effective, is
delivered to the Lenders), exhibits to any registration statement and any
registration statements on Form S-8) and copies of all financial statements,
proxy statements, notices and reports that the Borrower or any of its
Subsidiaries shall send to the holders of any publicly issued debt of the
Borrower and/or any of its Subsidiaries (including the Subordinated Notes) in
their capacity as such holders (in each case to the extent not theretofore
delivered to the Lenders pursuant to this Agreement) and, with reasonable
promptness, such other information (financial or otherwise) as the
Administrative Agent on its own behalf or on behalf of any Lender may
reasonably request in writing from time to time.
(h) Pro Forma Adjustment Certificate. Not later than the consummation of
the acquisition of any Acquired Entity or Business by the Borrower or any
Restricted Subsidiary for which there shall be a Pro Forma Adjustment, a
certificate of an Authorized Officer of the Borrower setting forth the amount
of such Pro Forma Adjustment and, in reasonable detail, the calculations and
basis therefor.
9.2 Books, Records and Inspections. The Borrower will, and will
cause each of the Specified Subsidiaries to, permit officers and designated
representatives of the Administrative Agent or the Required Lenders to visit and
inspect any of the properties or assets of the Borrower and any such Specified
Subsidiary in whomsoever's possession to the extent that it is within the
Borrower's or such Specified Subsidiary's control to permit such inspection, and
to examine the books of account of the Borrower and any such Specified
Subsidiary and discuss the affairs, finances and accounts of the Borrower and of
any such Specified Subsidiary with, and be advised as to the same by, its and
their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Administrative Agent or the
Required Lenders may desire.
9.3 Maintenance of Insurance. The Borrower will, and will cause each
of the Material Subsidiaries to, at all times maintain in full force and effect,
with insurance companies that the Borrower believes (in the good faith judgment
of the management of the Borrower) are financially sound and responsible at the
time the relevant coverage is placed or renewed, insurance in at least such
amounts and against at least such risks (and with such risk retentions) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and will furnish to the Lenders, upon written
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
9.4 Payment of Taxes. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful material claims that, if
unpaid, could reasonably be expected to become a material Lien upon any
properties of the Borrower or any of the Restricted Subsidiaries, provided that
neither the Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of the Borrower) with respect thereto in
accordance with GAAP.
9.5 Consolidated Corporate Franchises. The Borrower will do, and
will cause each Material Subsidiary to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence, corporate
rights and authority, except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect; provided,
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58
however, that the Borrower and its Subsidiaries may consummate any transaction
permitted under Section 10.3 or 10.4.
9.6 Compliance with Statutes, Obligations, etc. The Borrower will,
and will cause each Subsidiary to, comply with all applicable laws, rules,
regulations and orders, except to the extent the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
9.7 ERISA. Promptly after the Borrower or any Subsidiary or any
ERISA Affiliate knows or has reason to know of the occurrence of any of the
following events that, individually or in the aggregate (including in the
aggregate such events previously disclosed or exempt from disclosure hereunder,
to the extent the liability therefor remains outstanding), would be reasonably
likely to have a Material Adverse Effect, the Borrower will deliver to each of
the Lenders a certificate of an Authorized Officer or any other senior officer
of the Borrower setting forth details as to such occurrence and the action, if
any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices (required, proposed or otherwise)
given to or filed with or by the Borrower, such Subsidiary, such ERISA
Affiliate, the PBGC, a Plan participant (other than notices relating to an
individual participant's benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary of
the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan; that a
Plan having an Unfunded Current Liability has been or is to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA
(including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, a Subsidiary or an
ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the PBGC has notified the Borrower, any Subsidiary
or any ERISA Affiliate of its intention to appoint a trustee to administer any
Plan; that the Borrower, any Subsidiary or any ERISA Affiliate has failed to
make a required installment or other payment pursuant to Section 412 of the Code
with respect to a Plan; or that the Borrower, any Subsidiary or any ERISA
Affiliate has incurred or will incur (or has been notified in writing that it
will incur) any liability (including any contingent or secondary liability) to
or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code.
9.8 Good Repair. The Borrower will, and will cause each of the
Restricted Subsidiaries to, ensure that its properties and equipment used or
useful in its business in whomsoever's possession they may be to the extent that
it is within the Borrower's or such Restricted Subsidiary's control to cause
same, are kept in good repair, working order and condition, normal wear and tear
excepted, and that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
customary for companies in similar businesses and consistent with third party
leases, except in each case to the extent the failure to do so could not be
reasonably expected to have a Material Adverse Effect.
9.9 Transactions with Affiliates. The Borrower will conduct, and
cause each of the Restricted Subsidiaries to conduct, all transactions with any
of its Affiliates on terms that are substantially as favorable to the Borrower
or such Restricted Subsidiary as it would obtain in a comparable arm's-length
transaction with a Person that is not an Affiliate, provided that the foregoing
restrictions shall not apply to (a) the payment of customary annual fees to KKR
and its
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59
Affiliates for management, consulting and financial services rendered to the
Borrower and its Subsidiaries, and investment banking fees paid to KKR and its
Affiliates for services rendered to the Borrower and its Subsidiaries in
connection with divestitures, acquisitions, financings and other transactions,
(b) customary fees paid to members of the Board of Directors of the Borrower and
its Subsidiaries and (c) transactions permitted by Section 10.6.
9.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for
financial reporting purposes, cause (a) each of its, and each of its
Subsidiaries', fiscal years to end on the last Saturday in June of each year and
(b) each of its, and each of its Subsidiaries', fiscal quarters to end on dates
consistent with such fiscal year-end and the Borrower's past practice; provided,
however, that the Borrower may, upon written notice to the Administrative Agent,
change the financial reporting convention specified above to any other financial
reporting convention reasonably acceptable to the Administrative Agent, in which
case the Borrower and the Administrative Agent will, and are hereby authorized
by the Lenders to, make any adjustments to this Agreement that are necessary in
order to reflect such change in financial reporting.
9.11 Additional Guarantors. The Borrower will cause (a) any direct
or indirect Domestic Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) formed or otherwise purchased or acquired after the date
hereof and (b) any Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) that is not a Domestic Subsidiary on the date hereof but
subsequently becomes a Domestic Subsidiary (other than any Unrestricted
Subsidiary or Acquisition Subsidiary), in each case to execute a supplement to
the Guarantee, in form and substance reasonably satisfactory to the
Administrative Agent, in order to become a Guarantor.
9.12 Pledges of Additional Stock and Evidence of Indebtedness. The
Borrower will pledge, and, in the case of clause (c), will cause each direct
Domestic Subsidiary to pledge, to the Administrative Agent, for the benefit of
the Lenders, (a) all the capital stock of each direct Domestic Subsidiary (other
than any Unrestricted Subsidiary, Acquisition Subsidiary or any Domestic
Subsidiary the assets of which consist primarily of capital stock of Foreign
Subsidiaries) and 65% of all the capital stock of each direct Foreign Subsidiary
(other than any Unrestricted Subsidiary or Acquisition Subsidiary), in each
case, formed or otherwise purchased or acquired after the date hereof, in each
case pursuant to a supplement to the Pledge Agreement in form and substance
reasonably satisfactory to the Administrative Agent, (b) all the capital stock
of any direct Domestic Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) and 65% of all the capital stock of each direct Foreign
Subsidiary (other than any Unrestricted Subsidiary or Acquisition Subsidiary),
in each case that is not a direct Subsidiary on the date hereof but subsequently
becomes a direct Subsidiary (other than an Unrestricted Subsidiary or
Acquisition Subsidiary), in each case pursuant to a supplement to the Pledge
Agreement in form and substance reasonably satisfactory to the Administrative
Agent, and (c) all evidences of Indebtedness in excess of $5,000,000 received by
the Borrower or any of the direct Domestic Subsidiaries (other than any
Unrestricted Subsidiary or Acquisition Subsidiary) in connection with any
disposition of assets pursuant to Section 10.4(b), in each case pursuant to a
supplement to the Pledge Agreement in form and substance reasonably satisfactory
to the Administrative Agent.
9.13 Use of Proceeds. The Borrower will use the Letters of Credit
and the proceeds of all Loans for the purposes set forth in the introductory
statement to this Agreement.
9.14 Changes in Business. The Borrower and its Subsidiaries taken as
a whole will not fundamentally and substantively alter the character of their
business taken as a whole from the business conducted by the Borrower and its
Subsidiaries taken as a whole on the date hereof and other business activities
incidental or related to any of the foregoing.
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60
SECTION 10. Negative Covenants. The Borrower hereby covenants and agrees
that on the Closing Date and thereafter, for so long as this Agreement is in
effect and until the Commitments, the Swingline Commitment and each Letter of
Credit have terminated and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
10.1 Limitation on Indebtedness. The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness arising under the Credit Documents;
(b) Indebtedness of (i) the Borrower to any Subsidiary of the Borrower and
(ii) Indebtedness of any Restricted Subsidiary to the Borrower or any other
Subsidiary of the Borrower;
(c) Indebtedness in respect of any bankers' acceptance, letter of credit,
warehouse receipt or similar facilities entered into in the ordinary course of
business;
(d) except as provided in clauses (j) and (k) below, Guarantee Obligations
incurred by (i) Restricted Subsidiaries in respect of Indebtedness of the
Borrower or other Restricted Subsidiaries that is permitted to be incurred
under this Agreement and (ii) the Borrower in respect of Indebtedness of the
Restricted Subsidiaries that is permitted to be incurred under this Agreement;
(e) Guarantee Obligations incurred in the ordinary course of business in
respect of obligations of suppliers, customers, franchisees, lessors and
licensees;
(f) (i) Indebtedness (including Indebtedness arising under Capital Leases)
incurred within 270 days of the acquisition, construction or improvement of
fixed or capital assets to finance the acquisition, construction or
improvement of such fixed or capital assets or otherwise incurred in respect
of Capital Expenditures permitted by Section 10.12, (ii) Indebtedness arising
under Capital Leases entered into in connection with Permitted Sale Leasebacks
and (iii) Indebtedness arising under Capital Leases, other than Capital Leases
in effect on the date hereof and Capital Leases entered into pursuant to
subclauses (i) and (ii) above, provided that the aggregate amount of
Indebtedness incurred pursuant to this subclause (iii) shall not exceed
$100,000,000 at any time outstanding, and (iv) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i), (ii) or
(iii) above, provided that the principal amount thereof is not increased above
the principal amount thereof outstanding immediately prior to such
refinancing, refunding, renewal or extension;
(g) Indebtedness outstanding on the date hereof and listed on Schedule
10.1 and any refinancing, refunding, renewal or extension thereof, provided
that (i) the principal amount thereof is not increased above the principal
amount thereof outstanding immediately prior to such refinancing, refunding,
renewal or extension, except to the extent otherwise permitted hereunder, and
(ii) the direct and contingent obligors with respect to such Indebtedness are
not changed;
(h) Indebtedness in respect of Hedge Agreements;
(i) Indebtedness in respect of the Subordinated Notes;
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61
(j) (i) Indebtedness of a Person or Indebtedness attaching to assets of a
Person that, in either case, becomes a Restricted Subsidiary (including a
Restricted Subsidiary that is also an Acquisition Subsidiary) or Indebtedness
attaching to assets that are acquired by the Borrower or any Restricted
Subsidiary (including any Acquisition Subsidiary), in each case after the
Closing Date as the result of a Permitted Acquisition, provided that (w) such
Indebtedness existed at the time such Person became a Restricted Subsidiary or
at the time such assets were acquired and, in each case, was not created in
anticipation thereof, (x) such Indebtedness is not guaranteed in any respect
by the Borrower or any Restricted Subsidiary (other than any such person that
so becomes a Restricted Subsidiary), (y)(A) the Borrower pledges the capital
stock of such Person to the Administrative Agent to the extent required under
Section 9.12, (B) such Person executes a supplement to the Guarantee to the
extent required under Section 9.11 and (C) if any such Indebtedness is
secured, (1) the Guarantee referred to in the preceding subclause (B) is
equally and ratably secured or (2) in the case of assets acquired by the
Borrower or any Restricted Subsidiary (other than any Acquisition Subsidiary),
the Borrower's obligations hereunder or such Restricted Subsidiary's
Guarantee, as the case may be, are equally and ratably secured, provided that
the requirements of this subclause (y) shall not apply to an aggregate amount
at any time outstanding of up to (and including) $75,000,000 of the aggregate
of (1) such Indebtedness and (2) all Indebtedness as to which the proviso to
clause (k)(i)(y) below then applies, and (z) the aggregate amount of such
Indebtedness and all Indebtedness incurred under clause (k) below, when taken
together, does not exceed $200,000,000 in the aggregate at any time
outstanding, provided that, when calculating the outstanding amount of
Indebtedness for purposes of this subclause (z), Indebtedness of any
Acquisition Subsidiary, Indebtedness attaching to assets of any Acquisition
Subsidiary and Indebtedness attaching to assets acquired by any Acquisition
Subsidiary shall be excluded, and (ii) any refinancing, refunding, renewal or
extension of any Indebtedness specified in subclause (i) above, provided that,
except to the extent otherwise permitted hereunder, (x) the principal amount
of any such Indebtedness is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or
extension and (y) the direct and contingent obligors with respect to such
Indebtedness are not changed;
(k) (i) Indebtedness of the Borrower or any Restricted Subsidiary
(including any Acquisition Subsidiary) incurred to finance a Permitted
Acquisition, provided that (x) such Indebtedness is not guaranteed in any
respect by any Restricted Subsidiary (other than any Person acquired (the
"acquired Person") as a result of such Permitted Acquisition or the Restricted
Subsidiary so incurring such Indebtedness) or, in the case of Indebtedness of
any Restricted Subsidiary, by the Borrower, (y)(A) the Borrower pledges the
capital stock of such acquired Person to the Administrative Agent to the
extent required under Section 9.12, (B) such acquired Person executes a
supplement to the Guarantee to the extent required under Section 9.11 and (C)
if a guarantee by such acquired Person of any such Indebtedness is secured by
assets of such acquired Person, the Guarantee referred to in the preceding
subclause (B) is equally and ratably secured, provided that the requirements
of this subclause (y) shall not apply to an aggregate amount at any time
outstanding of up to (and including) $75,000,000 of the aggregate of (1) such
Indebtedness and (2) all Indebtedness as to which the proviso to clause
(j)(i)(y) above then applies, and (z) the aggregate amount of such
Indebtedness and all Indebtedness assumed or permitted to exist under clause
(j) above, when taken together, does not exceed $200,000,000 in the aggregate
at any time outstanding, provided that, when calculating the outstanding
amount of Indebtedness for purposes of this subclause (z), Indebtedness of any
Acquisition Subsidiary shall be excluded, and (ii) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i) above,
provided that (x) the principal amount of any such Indebtedness is not
increased above the principal amount thereof outstanding immediately prior to
such refinancing, refunding, renewal or extension and (y) the direct and
contingent obligors with respect to such Indebtedness are not changed, except
to the extent otherwise permitted hereunder;
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62
(l) Indebtedness of Restricted Foreign Subsidiaries in an aggregate amount
at any time outstanding not to exceed (i) $20,000,000 minus (ii) the amount
equal to (x) the aggregate amount of Indebtedness incurred and outstanding at
such time pursuant to clause (n) below minus (y) $200,000,000;
(m) (i) Indebtedness incurred in connection with any Permitted Sale
Leaseback and (ii) any refinancing, refunding, renewal or extension of any
Indebtedness specified in subclause (i) above, provided that, except to the
extent otherwise permitted hereunder, (x) the principal amount of any such
Indebtedness is not increased above the principal amount thereof outstanding
immediately prior to such refinancing, refunding, renewal or extension and (y)
the direct and contingent obligors with respect to such Indebtedness are not
changed; and
(n) (i) additional Indebtedness, provided that the aggregate amount of
Indebtedness incurred and remaining outstanding pursuant to this clause (n)
shall not at any time exceed the sum of (x) $200,000,000 and (y) the amount
equal to (A) $20,000,000 minus (B) the aggregate amount of Indebtedness then
outstanding under clause (l) above, and (ii) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i) above.
10.2 Limitation on Liens. The Borrower will not, and will not permit
any of the Restricted Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any Restricted Subsidiary, whether now owned or
hereafter acquired, except:
(a) Liens arising under the Credit Documents;
(b) Permitted Liens;
(c) Liens securing Indebtedness permitted pursuant to Section 10.1(f),
provided that such Liens attach at all times only to the assets so financed;
(d) Liens existing on the date hereof;
(e) Liens existing on the assets of any Person that becomes a Restricted
Subsidiary, or existing on assets acquired, pursuant to a Permitted
Acquisition to the extent the Liens on such assets secure Indebtedness
permitted by Section 10.1(j), provided that such Liens attach at all times
only to the same assets that such Liens attached to, and secure only the same
Indebtedness that such Liens secured, immediately prior to such Permitted
Acquisition;
(f) (i) Liens placed upon the capital stock of any Restricted Subsidiary
acquired pursuant to a Permitted Acquisition to secure Indebtedness of the
Borrower or any other Restricted Subsidiary incurred pursuant to Section
10.1(k) in connection with such Permitted Acquisition, (ii) Liens placed upon
the assets of such Restricted Subsidiary to secure a guarantee by such
Restricted Subsidiary of any such Indebtedness of the Borrower or any other
Restricted Subsidiary and (iii) Liens placed upon the capital stock or assets
of any Acquisition Subsidiary to secure Indebtedness of such Acquisition
Subsidiary incurred pursuant to Section 10.1(k) in connection with any
Permitted Acquisition;
(g) the replacement, extension or renewal of any Lien permitted by clauses
(a) through (f) above upon or in the same assets theretofore subject to such
Lien or the replacement, extension or renewal (without increase in the amount
or change in any direct or contingent obligor) of the Indebtedness secured
thereby; and
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63
(h) additional Liens so long as the aggregate principal amount of the
obligations so secured does not exceed $25,000,000 at any time outstanding.
10.3 Limitation on Fundamental Changes. Except as expressly
permitted by Section 10.4 or 10.5, the Borrower will not, and will not permit
any of the Restricted Subsidiaries to, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all its business units, assets or
other properties, except that:
(a) any Subsidiary of the Borrower or any other Person may be merged or
consolidated with or into the Borrower, provided that (i) the Borrower shall
be the continuing or surviving corporation or the Person formed by or
surviving any such merger or consolidation (if other than the Borrower) shall
be a corporation organized or existing under the laws of the United States,
any state thereof, the District of Columbia or any territory thereof (the
Borrower or such Person, as the case may be, being herein referred to as the
"Successor Borrower"), (ii) the Successor Borrower (if other than the
Borrower) shall expressly assume all the obligations of the Borrower under
this Agreement and the other Credit Documents pursuant to a supplement hereto
or thereto in form reasonably satisfactory to the Administrative Agent, (iii)
no Default or Event of Default would result from the consummation of such
merger or consolidation, (iv) the Successor Borrower shall be in compliance,
on a pro forma basis after giving effect to such merger or consolidation, with
the covenants set forth in Sections 10.9, 10.10 and 10.11, as such covenants
are recomputed as at the last day of the most recently ended Test Period under
such Section as if such merger or consolidation had occurred on the first day
of such Test Period, (v) each Guarantor, unless it is the other party to such
merger or consolidation, shall have by a supplement to the Guarantee confirmed
that its Guarantee shall apply to the Successor Borrower's obligations under
this Agreement and (vi) the Borrower shall have delivered to the
Administrative Agent an officer's certificate and an opinion of counsel, each
stating that such merger or consolidation and such supplement to this
Agreement or any Guarantee comply with this Agreement, provided further that
if the foregoing are satisfied, the Successor Borrower (if other than the
Borrower) will succeed to, and be substituted for, the Borrower under this
Agreement;
(b) any Subsidiary of the Borrower or any other Person may be merged or
consolidated with or into any one or more Subsidiaries of the Borrower,
provided that (i) in the case of any merger or consolidation involving one or
more Restricted Subsidiaries, (A) a Restricted Subsidiary shall be the
continuing or surviving corporation or (B) the Borrower shall take all steps
necessary to cause the Person formed by or surviving any such merger or
consolidation (if other than a Restricted Subsidiary) to become a Restricted
Subsidiary, (ii) in the case of any merger or consolidation involving one or
more Guarantors, a Guarantor shall be the continuing or surviving corporation
or the Person formed by or surviving any such merger or consolidation (if
other than a Guarantor) shall execute a supplement to the Guarantee in form
and substance reasonably satisfactory to the Administrative Agent in order to
become a Guarantor, (iii) no Default or Event of Default would result from the
consummation of such merger or consolidation, (iv) the Borrower shall be in
compliance, on a pro forma basis after giving effect to such merger or
consolidation, with the covenants set forth in Sections 10.9, 10.10 and 10.11,
as such covenants are recomputed as at the last day of the most recently ended
Test Period under such Section as if such merger or consolidation had occurred
on the first day of such Test Period, and (v) the Borrower shall have
delivered to the Administrative Agent an Officers' Certificate stating that
such merger or consolidation and such supplement to any Guarantee comply with
this Agreement;
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64
(c) any Restricted Subsidiary that is not a Guarantor may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower, a Guarantor or any other Restricted
Subsidiary of the Borrower; and
(d) any Guarantor may sell, lease, transfer or otherwise dispose of any or
all of its assets (upon voluntary liquidation or otherwise) to the Borrower or
any other Guarantor.
10.4 Limitation on Sale of Assets. The Borrower will not, and will
not permit any of the Restricted Subsidiaries to, (i) convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired (other than any such sale, transfer, assignment
or other disposition resulting from any casualty or condemnation, of any assets
of the Borrower or the Restricted Subsidiaries) or (ii) sell any shares owned by
it of any Restricted Subsidiary's capital stock to any Person other than the
Borrower, a Guarantor or a Restricted Foreign Subsidiary, except that:
(a) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of used or surplus equipment, vehicles, inventory and other
assets in the ordinary course of business;
(b) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of other assets for fair value, provided that (i) the
aggregate amount of such sales, transfers and disposals by the Borrower and
the Restricted Subsidiaries taken as a whole pursuant to this clause (b) shall
not exceed in the aggregate $175,000,000 during the term of this Agreement,
(ii) any consideration in excess of $5,000,000 received by the Borrower or any
Guarantor in connection with such sales, transfers and other dispositions of
assets pursuant to this clause (b) that is in the form of Indebtedness shall
be pledged to the Administrative Agent pursuant to Section 9.12, (iii) with
respect to any such sale, transfer or disposition (or series of related sales,
transfers or dispositions) in an aggregate amount in excess of $10,000,000,
the Borrower shall be in compliance, on a pro forma basis after giving effect
to such sale, transfer or disposition, with the covenants set forth in
Sections 10.9, 10.10 and 10.11, as such covenants are recomputed as at the
last day of the most recently ended Test Period under such Sections as if such
sale, transfer or disposition had occurred on the first day of such Test
Period, and (iv) after giving effect to any such sale, transfer or
disposition, no Default or Event of Default shall have occurred and be
continuing;
(c) the Borrower and the Restricted Subsidiaries may make sales of assets
to the Borrower or to any Restricted Subsidiary, provided that any such sales
to Restricted Foreign Subsidiaries must be for fair value;
(d) any Restricted Subsidiary may effect any transaction permitted by
Section 10.3;
(e) in addition to selling or transferring accounts receivable pursuant to
the other provisions hereof, the Borrower and the Restricted Subsidiaries may
sell or discount without recourse accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;
and
(f) the Borrower and the Restricted Subsidiaries may sell, transfer or
otherwise dispose of Stores in connection with Permitted Sale Leasebacks.
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65
10.5 Limitation on Investments. The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, make any advance, loan, extensions
of credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets of, or make any other investment
in, any Person, except:
(a) extensions of trade credit and asset purchases in the ordinary course
of business;
(b) Permitted Investments;
(c) loans and advances to officers, directors and employees of the
Borrower or any of its Subsidiaries (i) to finance the purchase of capital
stock of the Borrower and (ii) for additional purposes not contemplated by
subclause (i) above in an aggregate principal amount at any time outstanding
with respect to this clause (ii) not exceeding $10,000,000;
(d) investments existing on the date hereof and any extensions, renewals
or reinvestments thereof, so long as the aggregate amount of all investments
pursuant to this clause (d) is not increased at any time above the amount of
such investments existing on the date hereof;
(e) investments in Hedge Agreements permitted by Section 10.1(h);
(f) investments received in connection with the bankruptcy or
reorganization of suppliers or customers and in settlement of delinquent
obligations of, and other disputes with, customers arising in the ordinary
course of business;
(g) investments to the extent that payment for such investments is made
solely with capital stock of the Borrower;
(h) investments constituting non-cash proceeds of sales, transfers and
other dispositions of assets to the extent permitted by Section 10.4;
(i) investments in any Guarantor;
(j) investments constituting Permitted Acquisitions, provided that the
aggregate amount of any such investment made by the Borrower or any Restricted
Subsidiary (other than any Acquisition Subsidiary) in any Acquisition
Subsidiary shall not exceed the Available Amount at the time of such
investment, provided further that the aggregate amount of any such investment
made by the Borrower or any Restricted Subsidiary (other than any Restricted
Foreign Subsidiary) in any Restricted Foreign Subsidiary shall not exceed (i)
the Available Foreign Investment Amount at the time of such investment minus
(ii) the portion of the Available Foreign Investment Amount being used at such
time for investments made pursuant to clause (n) below;
(k) investments in any Restricted Foreign Subsidiary, provided that the
aggregate amount of any such investment made by the Borrower or any Restricted
Subsidiary (other than any Restricted Foreign Subsidiary) shall not exceed (i)
the Available Foreign Investment Amount at the time of such investment minus
(ii) the portion of the Available Foreign Investment Amount being used at such
time for investments made pursuant to clause (n) below;
(l) investments made to pay for the repurchase, retirement or other
acquisition of the Remaining Equity in an aggregate amount at the time of such
investment not in excess of the lesser of (i) the Available Amount at such
time and (ii) the aggregate amount of such investments then permitted to be
made under the Subordinated Note Indenture;
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(m) (i) investments made to pay for the repurchase of Putable Shares with
amounts in the Putable Shares Reserve Fund and (ii) investments made to
repurchase or retire common stock of the Borrower owned by the Borrower's
employee stock ownership plan or key employee stock ownership plan; and
(n) additional investments (including investments in Minority Investments,
Unrestricted Subsidiaries and Acquisition Subsidiaries) in an aggregate amount
at the time of such investment not in excess of the sum of (i) the Available
Amount at such time and (ii) the amount equal to one-half of the Available
Foreign Investment Amount at such time.
10.6 Limitation on Dividends. The Borrower will not declare or pay
any dividends (other than dividends payable solely in its capital stock or
rights, warrants or options to purchase its capital stock) or return any capital
to its stockholders or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for consideration, any shares of any
class of its capital stock or the capital stock of any direct or indirect parent
of the Borrower now or hereafter outstanding (or any warrants for or options or
stock appreciation rights in respect of any of such shares), or set aside any
funds for any of the foregoing purposes, or permit any of the Restricted
Subsidiaries to purchase or otherwise acquire for consideration (other than in
connection with an investment permitted by Section 10.5) any shares of any class
of the capital stock of the Borrower, now or hereafter outstanding (or any
options or warrants or stock appre ciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "Dividends"), provided that,
so long as no Default or Event of Default exists or would exist after giving
effect thereto, (a) the Borrower may effect the Redemption, (b) the Borrower may
redeem in whole or in part any capital stock of the Borrower for another class
of capital stock or rights to acquire capital stock of the Borrower or with
proceeds from substantially concurrent equity contributions or issuances of new
shares of capital stock, provided that such other class of capital stock
contains terms and provisions at least as advantageous to the Lenders as those
contained in the capital stock redeemed thereby, (c) the Borrower may repurchase
shares of its capital stock (and/or options or warrants in respect thereof) held
by its officers, directors and employees so long as such repurchase is pursuant
to, and in accordance with the terms of, management and/or employee stock plans,
stock subscription agreements or shareholder agreements, (d) the Borrower may
make investments permitted by Section 10.5 and (e) the Borrower may declare and
pay dividends on its capital stock, provided that (i) the aggregate amount of
dividends paid pursuant to this clause (e) shall not at any time exceed 50% of
Cumulative Consolidated Net Income Available to Common Stockholders at such time
and (ii) at the time of the payment of any such dividends and after giving
effect thereto, the Consolidated Total Debt to Consolidated EBITDA Ratio on the
date of such payment of such dividends shall be less than 3.50:1.00.
10.7 Limitations on Debt Payments and Amendments. (a) The Borrower
will not optionally prepay, repurchase or redeem or otherwise defease any
Subordinated Notes; provided, however, that so long as no Default or Event of
Default has occurred and is continuing, the Borrower may optionally prepay,
repurchase or redeem Subordinated Notes (i) for an aggregate price not in excess
of the Available Amount at the time of such prepayment, repurchase or redemption
or (ii) with the proceeds of subordinated Indebtedness that (A) is permitted by
Section 10.1 and (B) has terms material to the interests of the Lenders not
materially less advantageous to the Lenders.
(b) The Borrower will not waive, amend, modify, terminate or release the
Subordinated Note Indenture, to the extent that any such waiver, amendment,
supplement, modification, termination or release would be adverse to the Lenders
in any material respect.
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10.8 Limitations on Sale Leasebacks. The Borrower will not, and will
not permit any of the Restricted Subsidiaries to, enter into or effect any Sale
Leasebacks of Stores, other than Permitted Sale Leasebacks.
10.9 Consolidated Lease Expense. The Borrower will not permit
Consolidated Lease Expense for any fiscal year of the Borrower set forth below
to exceed the amount set forth below opposite such fiscal year:
Fiscal Year Amount
----------- ------
1998 $ 85,000,000
1999 90,000,000
2000 100,000,000
2001 110,000,000
2002 120,000,000
2003 130,000,000
2004 140,000,000
2005 140,000,000
2006 140,000,000
10.10 Consolidated Total Debt to Consolidated EBITDA Ratio. The
Borrower will not permit the Consolidated Total Debt to Consolidated EBITDA
Ratio for any Test Period ending during any period set forth below to be greater
than the ratio set forth below opposite such period:
Period Ratio
------ -----
Closing Date through second fiscal quarter of 1998 6.00:1.00
Third fiscal quarter of 1998 6.50:1.00
Last fiscal quarter of 1998 through
second fiscal quarter of 1999 6.75:1.00
Last two fiscal quarters of 1999 6.50:1.00
First two fiscal quarters of 2000 5.75:1.00
Last two fiscal quarters of 2000 5.00:1.00
First two fiscal quarters of 2001 4.50:1.00
Last two fiscal quarters of 2001 4.00:1.00
Fiscal year 2002 3.50:1.00
Fiscal year 2003 through Term Loan Maturity Date 3.00:1.00
10.11 Consolidated EBITDA to Consolidated Interest Expense Ratio.
The Borrower will not permit the Consolidated EBITDA to Consolidated Interest
Expense Ratio for
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any Test Period ending during any period set forth below to be less than the
ratio set forth below opposite such period:
Period Ratio
------ -----
Fiscal year 1998 1.75:1.00
Fiscal year 1999 1.75:1.00
First two fiscal quarters of 2000 1.90:1.00
Last two fiscal quarters of 2000 2.00:1.00
First two fiscal quarters of 2001 2.25:1.00
Last two fiscal quarters of 2001 2.50:1.00
Fiscal year 2002 2.75:1.00
Fiscal year 2003 through Term Loan Maturity Date 3.00:1.00
10.12 Capital Expenditures. (a) The Borrower will not, and will not
permit any of the Restricted Subsidiaries to, make any Capital Expenditures
(other than Distribution Capital Expenditures and Permitted Acquisitions that
constitute Capital Expenditures), that would cause the aggregate amount of such
Capital Expenditures made by the Borrower and the Restricted Subsidiaries in any
fiscal year of the Borrower set forth below to exceed the amount set forth below
opposite such fiscal year:
Fiscal Year Amount
----------- ------
1998 $225,000,000
1999 180,000,000
2000 180,000,000
2001 150,000,000
2002 150,000,000
2003 150,000,000
2004 150,000,000
2005 150,000,000
2006 150,000,000
To the extent that Capital Expenditures (other than Distribution Capital
Expenditures and Permitted Acquisitions that constitute Capital Expenditures)
made by the Borrower and the Restricted Subsidiaries during any fiscal year are
less than the maximum amount permitted to be made for such fiscal year, 75% of
such unused amount (each such amount, a "carry-forward amount") may be carried
forward to the immediately succeeding fiscal year and utilized to make such
Capital Expenditures in such succeeding fiscal year in the event the amount set
forth above for such succeeding fiscal year has been used (it being understood
and agreed that (a) no carry-forward amount may be carried forward beyond the
first three fiscal years immediately succeeding the fiscal year in which it
arose, (b) no portion of the carry-forward amount available for any fiscal year
may be used until the entire amount of such Capital Expenditures permitted to be
made in such fiscal year (without giving effect to such carry-forward amount)
shall be made
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and (c) if the carry-forward amount available for any fiscal year is the sum of
amounts carried forward from each of the two or three immediately preceding
fiscal years, no portion of such carry-forward amount from the earlier of the
two or three immediately preceding fiscal years may be used until the entire
portion of such carry-forward amount from the more recent immediately preceding
fiscal year shall have been used for such Capital Expenditures made in such
fiscal year).
(b) The Borrower will not, and will not permit any of the Restricted
Subsidiaries to, make Distribution Capital Expenditures in excess of $80,000,000
during the term of this Agreement.
SECTION 11. Events of Default. Upon the occurrence of any of the following
specified events (each an "Event of Default"):
11.1 Payments. The Borrower shall (a) default in the payment when
due of any principal of the Loans or (b) default, and such default shall
continue for five or more days, in the payment when due of any interest on the
Loans or any Fees or any Unpaid Drawings or of any other amounts owing hereunder
or under any other Credit Document; or
11.2 Representations, etc.. Any representation, warranty or
statement made or deemed made by any Credit Party herein or in the Guarantee,
the Pledge Agreement or any certificate delivered or required to be delivered
pursuant hereto or thereto shall prove to be untrue in any material respect on
the date as of which made or deemed made; or
11.3 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 9.1(e) or Section 10 or (b) default in the due performance or observance
by it of any term, covenant or agreement (other than those referred to in
Section 11.1 or 11.2 or clause (a) of this Section 11.3) contained in this
Agreement, the Guarantee or the Pledge Agreement and such default shall continue
unremedied for a period of at least 30 days after receipt of written notice by
the Borrower from the Administrative Agent or the Required Lenders; or
11.4 Default Under Other Agreements. (a) The Borrower or any of the
Restricted Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) in excess of $20,000,000 in the
aggregate, for the Borrower and such Subsidiaries, beyond the period of grace,
if any, provided in the instrument or agreement under which such Indebtedness
was created or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or (except in the case of
Indebtedness consisting of any Hedge Agreement) any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity; or (b) without limiting the provisions
of clause (a) above, any such Indebtedness (other than Indebtedness consisting
of any Hedge Agreement) shall be declared to be due and payable, or required to
be prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment, prior to the stated maturity thereof; or
11.5 Bankruptcy, etc.. The Borrower or any Specified Subsidiary
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any Specified Subsidiary and the petition is not
controverted within 10 days after commencement of the case; or an involuntary
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case is commenced against the Borrower or any Specified Subsidiary and the
petition is not dismissed within 60 days after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower or any Specified
Subsidiary; or the Borrower or any Specified Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
Specified Subsidiary; or there is commenced against the Borrower or any
Specified Subsidiary any such proceeding that remains undismissed for a period
of 60 days; or the Borrower or any Specified Subsidiary is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any Specified Subsidiary suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower or any Specified Subsidiary makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any Specified
Subsidiary for the purpose of effecting any of the foregoing; or
11.6 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code; any Plan is or shall have been terminated or is the subject of
termination proceedings under ERISA (including the giving of written notice
thereof); an event shall have occurred or a condition shall exist in either case
entitling the PBGC to terminate any Plan or to appoint a trustee to administer
any Plan (including the giving of written notice thereof); any Plan shall have
an accumulated funding deficiency (whether or not waived); the Borrower or any
Subsidiary or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code (including
the giving of written notice thereof); (b) there could result from any event or
events set forth in clause (a) of this Section 11.6 the imposition of a lien,
the granting of a security interest, or a liability, or the reasonable
likelihood of incurring a lien, security interest or liability; and (c) such
lien, security interest or liability will or would be reasonably likely to have
a Material Adverse Effect; or
11.7 Guarantee. The Guarantee or any material provision thereof
shall cease to be in full force or effect or any Guarantor thereunder or any
Credit Party shall deny or disaffirm in writing such Guarantor's obligations
under the Guarantee; or
11.8 Pledge Agreement. The Pledge Agreement or any material
provision thereof shall cease to be in full force or effect (other than pursuant
to the terms hereof or thereof or as a result of acts or omissions of the
Administrative Agent or any Lender) or any Pledgor thereunder or any Credit
Party shall deny or disaffirm in writing such Pledgor's obligations under the
Pledge Agreement; or
11.9 Judgments. One or more judgments or decrees shall be entered
against the Borrower or any of the Restricted Subsidiaries involving a liability
of $20,000,000 or more in the aggregate for all such judgments and decrees for
the Borrower and the Restricted Subsidiaries (to the extent not paid or fully
covered by insurance provided by a carrier not disputing coverage) and any such
judgments or decrees shall not have been satisfied, vacated, discharged or
stayed or bonded pending appeal within 60 days from the entry thereof; or
11.10 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Lenders, by
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written notice to the Borrower, take any or all of the following actions,
without prejudice to the rights of the Administrative Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default specified
in Section 11.5 shall occur with respect to the Borrower or any Specified
Subsidiary, the result that would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i), (ii) and (iv) below shall
occur automatically without the giving of any such notice): (i) declare the
Total Term Loan Commitment and the Total Revolving Commitment terminated,
whereupon the Commitments and Swingline Commitment, if any, of each Lender or
Chase, as the case may be, shall forthwith terminate immediately and any Fees
theretofore accrued shall forthwith become due and payable without any other
notice of any kind; (ii) declare the principal of and any accrued interest in
respect of all Loans and all Obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) terminate any Letter of Credit that may be terminated in
accordance with its terms; and/or (iv) direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the occurrence of an
Event of Default specified in Section 11.5 with respect to the Borrower or any
Specified Subsidiary, it will pay) to the Administrative Agent at the
Administrative Agent's Office such additional amounts of cash, to be held as
security for the Borrower's reimbursement obligations for Drawings that may
subsequently occur thereunder, equal to the aggregate Stated Amount of all
Letters of Credit issued and then outstanding.
SECTION 12. The Administrative Agent.
12.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Credit Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Administrative Agent. Neither the Syndication Agent
nor the Documentation Agent, in their respective capacities as such, shall have
any obligations, duties or responsibilities under this Agreement.
12.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
12.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Credit Document (except for its or such Person's own gross negligence or
willful misconduct) or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any Guarantor or any officer thereof contained in this Agreement or any other
Credit Document or in any certificate, report,
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statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Credit Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Credit Document or
for any failure of the Borrower or any Guarantor to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document, or to inspect the properties, books or
records of the Borrower.
12.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other 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 Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the Lender specified in the Register
with respect to any amount owing hereunder as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Credit Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
12.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders, provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders (except to the extent that
this Agreement requires that such action be taken only with the approval of the
Required Lenders or each of the Lenders, as applicable).
12.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender 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 hereinafter taken, including any review of the affairs of
the Borrower or any Guarantor, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and any Guarantor and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it
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will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Credit Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower and any Guarantor. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, assets, operations, properties, financial
condition, prospects or creditworthiness of the Borrower or any Guarantor that
may come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective portions of the Total Credit Exposure in
effect on the date on which indemnification is sought (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their respective
portions of the Total Credit Exposure in effect immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing, provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The agreements in this Section 12.7 shall
survive the payment of the Loans and all other amounts payable hereunder.
12.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and any Guarantor
as though the Administrative Agent were not the Administrative Agent hereunder
and under the other Credit Documents. With respect to the Loans made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Credit Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
12.9 Successor Agent. The Administrative Agent may resign as
Administrative Agent upon 20 days' prior written notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Credit Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Borrower (which approval shall not be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 12 shall inure to its
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benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Credit Documents.
SECTION 13. Miscellaneous.
13.1 Amendments and Waivers. Neither this Agreement nor any other
Credit Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 13.1. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the relevant
Credit Party or Credit Parties written amendments, supplements or modifications
hereto and to the other Credit Documents for the purpose of adding any
provisions to this Agreement or the other Credit Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Credit Documents or any Default
or Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall directly (i) forgive any
portion of any Loan or extend the final scheduled maturity date of any Loan or
reduce the stated rate, or forgive any portion, or extend the date for the
payment, of any interest or fee payable hereunder (other than as a result of
waiving the applicability of any post-default increase in interest rates) or
extend the final expiration date of any Lender's Commitment or extend the final
expiration date of any Letter of Credit beyond the L/C Maturity Date or increase
the aggregate amount of the Commitments of any Lender, in each case without the
written consent of each Lender directly and adversely affected thereby, or (ii)
amend, modify or waive any provision of this Section 13.1 or reduce the
percentages specified in the definitions of the terms "Required Lenders",
"Required Revolving Credit Lenders" and "Required Term Loan Lenders", or consent
to the assignment or transfer by the Borrower of its rights and obligations
under any Credit Document to which it is a party (except as permitted pursuant
to Section 10.3), in each case without the written consent of each Lender
directly and adversely affected thereby, or (iii) amend, modify or waive any
provision of Section 12 without the written consent of the then-current
Administrative Agent, or (iv) amend, modify or waive any provision of Section 3
without the written consent of the Letter of Credit Issuer, or (v) amend, modify
or waive any provisions hereof relating to Swingline Loans without the written
consent of Chase, or (vi) change any Revolving Credit Commitment to a Term Loan
Commitment, or change any Term Loan Commitment to a Revolving Credit Commitment,
in each case without the prior written consent of each Lender directly and
adversely affected thereby, or (vii) decrease any Repayment Amount or extend any
scheduled Repayment Date, in each case without the written consent of the
Required Term Loan Lenders, or (viii) except to the extent permitted under the
applicable Credit Document, release all or substantially all the Collateral
under the Pledge Agreement or release all or substantially all the Guarantors
under the Guarantee, in each case without the written consent of (x) the
Required Revolving Credit Lenders and (y) the Required Term Loan Lenders and
provided further, that at any time that no Default or Event of Default has
occurred and is continuing, the Revolving Credit Commitment of any Lender may be
increased to finance a Permitted Acquisition, with the consent of such Lender,
the Borrower and the Administrative Agent (which consent, in the case of the
Administrative Agent, shall not be unreasonably withheld) and without the
consent of the Required Lenders, so long as (i) the Increased Commitment Amount
(as defined below) at such time, when added to the amount of Indebtedness
incurred pursuant to Section 10.1(k) and outstanding at such time, does not
exceed the limits set forth therein, (ii) the Borrower shall pledge the Capital
Stock of any person acquired pursuant thereto to the Administrative Agent for
the benefit of the Lenders to the extent required under Section 9.12 and (iii)
to the extent determined by the Administrative Agent to be necessary to ensure
pro rata borrowings commencing with the initial borrowing after giving effect to
such increase, the
<PAGE>
75
Borrower shall prepay any Eurodollar Loans outstanding immediately prior to such
initial borrowing; as used herein, the "Increased Commitment Amount" means, at
any time, aggregate amount of all increases pursuant to this proviso made at or
prior to such time less the aggregate amount of all voluntary reductions of the
Revolving Credit Commitments made prior to such time. Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
affected Lenders and shall be binding upon the Borrower, such Lenders, the
Administrative Agent and all future holders of the affected Loans. In the case
of any waiver, the Borrower, the Lenders and the Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Credit Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing, it being understood that no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
13.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or three days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth on Schedule 1.1 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Randall's Food Markets, Inc.
3663 Briarpack Drive
Houston, TX 77042-5229
Attention: Lee E. Straus
Fax: (713) 268-3601
with a copy to:
Randall's Food Markets, Inc.
In care of Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, NY 10019
Attention: Nils Brous
Fax: (212) 750-0003
The Administrative Agent: The Chase Manhattan Bank
c/o Loan and Agency Services Group
One Chase Manhattan Plaza, Eighth Floor
New York, NY 10081
Attention: Sandra Miklave
Fax: (212) 552-5658
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Ellen Gertzog
Fax: (212) 270-5646
<PAGE>
76
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Sections 2.3, 2.6, 2.9, 4.2 and 5.1 shall not be
effective until received.
13.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Credit Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
13.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Loans hereunder.
13.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Credit Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees, disbursements and other charges of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all its reasonable and documented costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Credit Documents and any such other documents, including,
without limitation, the reasonable fees, disbursements and other charges of
counsel to each Lender and of counsel to the Administrative Agent, (c) to pay,
indemnify, and hold harmless each Lender and the Administrative Agent from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes, if
any, that may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other
Credit Documents and any such other documents, and (d) to pay, indemnify, and
hold harmless each Lender and the Administrative Agent and their respective
directors, officers, employees, trustees and agents from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever,
including, without limitation, reasonable and documented fees, disbursements and
other charges of counsel, with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower, any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided that the Borrower shall
have no obligation hereunder to the Administrative Agent or any Lender nor any
of their respective directors, officers, employees and agents with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the party to be indemnified or (ii) disputes among the
Administrative Agent, the Lenders and/or their transferees. The agreements in
this Section 13.5 shall survive repayment of the Loans and all other amounts
payable hereunder.
13.6 Successors and Assigns; Participations and Assignments. (a) (i)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the
<PAGE>
77
Administrative Agent and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(ii) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Loan owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Credit Documents (including to loan derivative
counterparties in respect of swaps or similar arrangements having the practical
or economic effect thereof). In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Credit Documents, and the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Credit
Documents. In no event shall any Participant under any such participation have
any right to approve any amendment or waiver of any provision of any Credit
Document, or any consent to any departure by any Credit Party therefrom, except
to the extent that such amendment, waiver or consent would directly forgive any
principal of any Loan or reduce the stated rate, or forgive any portion, or
postpone the date for the payment, of any interest or fee payable hereunder
(other than as a result of waiving the applicability of any post-default
increase in interest rates), or increase the aggregate amount of the Commitments
of any Lender or postpone the date of the final scheduled maturity of any Loan,
in each case to the extent subject to such participation. The Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement, provided that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 13.7 as fully as if it were
a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.10 and 2.11 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender, provided that no Participant shall be entitled to receive
any greater amount pursuant to any such Section than the transferor Lender would
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(iii) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any Affiliate (with the consent of the Borrower if any increased costs
would result therefrom) thereof or, with the consent of the Borrower and the
Administrative Agent (which in each case shall not be unreasonably withheld, it
being understood that, without limitation, the Borrower shall have the right to
withhold its consent to any assignment if, in order for such assignment to
comply with applicable law, the Borrower would be required to obtain the consent
of, or make any filing or registration with, any Governmental Authority), to an
additional bank or fund that is regularly engaged in making, purchasing or
investing in loans or securities or financial institution (an "Assignee") all or
any part of its rights and obligations under this Agreement and the other Credit
Documents pursuant to an Assignment and Acceptance, substantially in the form of
Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of
an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower
and the Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register,
<PAGE>
78
provided that, except in the case of an assignment of all of a Lender's
interests under this Agreement, unless otherwise agreed to by the Borrower and
the Administrative Agent, no such assignment to an Assignee (other than any
Lender or any Affiliate thereof) shall be in an aggregate principal amount of
less than $5,000,000. Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein and (y)
the assigning Lender thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this Agreement to the contrary, the consent of the Borrower shall
not be required for any assignment that occurs at any time when any of the
events described in Section 11.5 shall have occurred and be continuing with
respect to the Borrower.
(b) Nothing herein shall prohibit any Lender from pledging or assigning
all or any portion of its Loans to any Federal Reserve Bank in accordance with
applicable law. In order to facilitate such pledge or assignment, the Borrower
hereby agrees that, upon request of any Lender at any time and from time to time
after the Borrower has made its initial borrowing hereunder, the Borrower shall
provide to such Lender, at the Borrower's own expense, a promissory note,
substantially in the form of Exhibit C-1 or C-2, as the case may be, evidencing
the Term Loans and Revolving Credit Loans, respectively, owing to such Lender.
(c) The Administrative Agent, on behalf of the Borrower, shall maintain at
the address of the Administrative Agent referred to in Section 13.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and the Borrower, the Administrative Agent and the Lenders shall treat
each Person whose name is recorded in the Register as the owner of a Loan or
other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Credit Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) (i) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
(e) Subject to Section 13.16, the Borrower authorizes each Lender to
disclose to any Participant or Assignee (each, a "Transferee") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates that has been delivered to
such Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in connection
with such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement, provided that neither the Administrative
Agent nor any Lender shall provide to
<PAGE>
79
any Transferee or prospective Transferee any of the Confidential Information
unless such person shall have previously executed a Confidentiality Agreement in
the form of Exhibit H.
13.7 Replacements of Lenders under Certain Circumstances. The
Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 2.10, 2.12, 3.5 or 5.4, (b)
is affected in the manner described in Section 2.10(a)(iii) and as a result
thereof any of the actions described in such Section is required to be taken or
(c) becomes a Defaulting Lender, with a replacement bank or other financial
institution, provided that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) the Borrower shall repay (or
the replacement bank or institution shall purchase, at par) all Loans and other
amounts (other than any disputed amounts), pursuant to Section 2.10, 2.11, 2.12,
3.5 or 5.4, as the case may be) owing to such replaced Lender prior to the date
of replacement, (iv) the replacement bank or institution, if not already a
Lender, and the terms and conditions of such replacement, shall be reasonably
satisfactory to the Administrative Agent, (v) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of Section
13.6 (provided that the Borrower shall be obligated to pay the registration and
processing fee referred to therein) and (vi) any such replacement shall not be
deemed to be a waiver of any rights that the Borrower, the Administrative Agent
or any other Lender shall have against the replaced Lender.
13.8 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 11.5, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) After the occurrence and during the continuance of an Event of
Default, in addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, without prior notice to the Borrower, any such
notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
13.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and
<PAGE>
80
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
13.10 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.11 Integration. This Agreement and the other Credit Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Credit Documents.
13.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13.13 Submission to Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Credit Documents to which it is a
party, or for recognition and enforcement of any judgment in respect thereof,
to the non-exclusive general jurisdiction of the courts of the State of New
York, the courts of the United States of America for the Southern District of
New York and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in Section 13.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 13.13 any special, exemplary, punitive or consequential damages.
13.14 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Credit Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection with
this Agreement or any of the other
<PAGE>
81
Credit Documents, and the relationship between Administrative Agent and
Lenders, on one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Credit Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
13.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.16 Confidentiality. The Administrative Agent and each Lender
shall hold all non-public information furnished by or on behalf of the Borrower
in connection with such Lender's evaluation of whether to become a Lender
hereunder or obtained by such Lender or the Administrative Agent pursuant to the
requirements of this Agreement ("Confidential Information"), in accordance with
its customary procedure for handling confidential information of this nature and
(in the case of a Lender that is a bank) in accordance with safe and sound
banking practices and in any event may make disclosure as required or requested
by any governmental agency or representative thereof or pursuant to legal
process or to such Lender's or the Administrative Agent's attorneys,
professional advisors or independent auditors or Affiliates, provided that
unless specifically prohibited by applicable law or court order, each Lender and
the Administrative Agent shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and provided further that in no event shall any
Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Borrower or any Subsidiary of the Borrower. Each
Lender and the Administrative Agent agrees that it will not provide to
prospective Transferees or to prospective direct or indirect contractual
counterparties in swap agreements to be entered into in connection with Loans
made hereunder any of the Confidential Information unless such Person shall have
previously executed a Confidentiality Agreement in the form of Exhibit H.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
RANDALL'S FOOD MARKETS, INC.
by /s/ LEE E. STRAUS
--------------------------------------
Name: Lee E. Straus
Title: Senior Vice President
<PAGE>
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender,
by /s/ DEBORAH DAVEY
--------------------------------------
Name: Deborah Davey
Title: Vice President
NATIONAL WESTMINSTER BANK
PLC, as Syndication Agent and as a
Lender,
by /s/ WAKEFIELD SMITH
--------------------------------------
Name: W. Wakefield Smith
Title: Vice President
CITICORP USA, INC., as
Documentation Agent and as a Lender,
by /s/ MICHAEL M. LEYLAND
--------------------------------------
Name: Michael M. Leyland
Title: Attorney-in-Fact
BANK OF AMERICA, ILLINOIS,
by /s/ FRANCIS J. GRIFFIN
--------------------------------------
Name: Francis J. Griffin
Title: Attorney-in-Fact
BANK OF MONTREAL,
by /s/ B.A. BLUCHER
--------------------------------------
Name: B.A. Blucher
Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI TRUST,
by /s/ NICHOLAS J. CAMPBELL, JR.
--------------------------------------
Name: Nicholas J. Campbell, Jr.
Title: Vice President
<PAGE>
BANKBOSTON, N.A.,
by /s/ LINDA H. THOMAS
--------------------------------------
Name: Linda H. Thomas
Title: Managing Director
BANKERS TRUST COMPANY,
by /s/ MARY JO JOLLY
--------------------------------------
Name: Mary Jo Jolly
Title: Assistant Vice President
CIBC, INC.
by /s/ CHRISTOPHER P. KLEXZKOWSKI
--------------------------------------
Name: Christopher P. Klexzkowski
Title: Director, CIBC Wood Gundy
Securities Corp., AS AGENT
CREDIT LYONNAIS, NEW YORK
BRANCH,
by /s/ ARTULA KOC
--------------------------------------
Name: Artula Koc
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
by /s/ RONALD WOLINSKY
--------------------------------------
Name: Ronald Wolinsky
Title: Vice President & Group Leader
THE FIRST NATIONAL BANK OF
CHICAGO,
by /s/ KENNETH A. SELLE
--------------------------------------
Name: Kenneth A. Selle
Title: Authorized Agent
<PAGE>
FIRSTUST BANK,
by /s/ ED D'ANCONA
--------------------------------------
Name: Ed D'Ancona
Title: Vice President
FIRST UNION NATIONAL BANK,
by /s/ JORGE GONZALEZ
--------------------------------------
Name: Jorge Gonzalez
Title: Senior Vice President
FLEET NATIONAL BANK,
by /s/ MARK A. SIEGEL
--------------------------------------
Name: Mark A. Siegel
Title: Assistant Vice President
THE FUJI BANK, LIMITED, HOUSTON,
by /s/ PHILIP C. LAUINGER III
--------------------------------------
Name: Philip C. Lauinger III
Title: Vice President & Manager
GENERAL ELECTRIC CAPITAL
CORPORATION,
by /s/ ROGER M. BURNS
--------------------------------------
Name: Roger M. Burns
Title: Authorized Signatory
GOLDMAN SACHS CREDIT
PARTNERS L.P.,
by /s/ EDWARD C. FROST
--------------------------------------
Name: Edward C. Frost
Title: Authorized Signatory
<PAGE>
INDUSTRIAL BANK OF JAPAN,
LIMITED
by /s/ TAKUYA HONJO
--------------------------------------
Name: Takuya Honjo
Title: Senior Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
by /s/ ADAM J. SILVER
--------------------------------------
Name: Adam J. Silver
Title: Associate
THE LONG-TERM CREDIT BANK OF
JAPAN,
by /s/ SHUICHI TAJIMA
--------------------------------------
Name: Shuichi Tajima
Title: Deputy General Manager
MERRILL LYNCH CAPITAL
CORPORATION,
by /s/ HOWARD B. SYSLER
--------------------------------------
Name: Howard B. Sysler
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by /s/ TOSHIHIRO HAYASHI
--------------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A.,
by /s/ FOREST SCOTT SIGNHOFF
--------------------------------------
Name: Forest Scott Signhoff
Title: Senior Vice President
<PAGE>
ROYAL BANK OF CANADA,
by /s/ KAREN T. HULL
--------------------------------------
Name: Karen T. Hull
Title: Retail Group Manager
THE SAKURA BANK, LTD.,
by /s/ YOSHIKAZU NAGURA
--------------------------------------
Name: Yoshikazu Nagura
Title: Vice President
THE SUMITOMO BANK, LIMITED,
by /s/ JOHN C. KISSINGER
--------------------------------------
Name: John C. Kissinger
Title: Joint General Manager
WELLS FARGO BANK, N.A.,
by /s/ ALAN W. WRAY
--------------------------------------
Name: Alan W. Wray
Title: Vice President
THE BANK OF NOVA SCOTIA,
by /s/ F.C.G. ASHBY
--------------------------------------
Name: F.C.G. Ashby
Title: Senior Manager-Loan Operation
<PAGE>
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENt"), dated as of June 18,
1997, between Randall's Food Markets, Inc., a Texas corporation (the "COMPANY"),
and RFM Acquisition LLC, a Delaware limited liability company ("BUYER"). *
W I T N E S S E T H :
WHEREAS, Buyer, the Company and Robert R. Onstead have entered into a
Subscription Agreement dated as of April 1, 1997 (as such agreement may be
amended from time to time, the "SUBSCRIPTION AGREEMENT") which contemplates
certain transactions, including (i) the Company's issuance to Buyer of
18,579,686 newly-issued shares (the "SHARES") of Common Stock and the Option
(collectively, the "PURCHASE"), (ii) the Company's incurrence of indebtedness
and repayment of indebtedness as further described in the Subscription
Agreement, and (iii) the Company's repurchase of up to 1,104,336 shares of
Common Stock from the Company's Employee Stock Ownership Plan (the "ESOP"), up
to 200,435 Putable Shares (as defined in the Subscription Agreement) and up to
4,280,415 Non-ESOP shares (as defined in the Subscription Agreement) pursuant to
a tender offer and, if fewer than 4,280,415 Non-ESOP Shares (as such number may
be reduced pursuant to Section 5.06(c) of the Subscription Agreement) shall be
purchased in the tender offer, the Company's repurchase of the balance of such
4,280,415 Non-ESOP Shares pursuant to the conditional repurchase commitment of
certain shareholders of the Company;
WHEREAS, it is a condition and inducement to Buyer's willingness to
consummate the Purchase that the Company execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. For purposes of this Agreement:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act or the Exchange Act
and other federal securities laws.
- ------------------------
* May include one or more affiliates.
<PAGE>
2
"DEMAND PARTY" shall mean (a) Buyer or (b) any other Holder or
Holders, including any current or future general or limited partner of Buyer or
any current or future general or limited partner of any such partner that may
become a Holder; PROVIDED, that to be a Demand Party under this clause (b), a
Holder or Holders must either individually or in the aggregate with all other
Holders with whom it is acting together to demand registration own at least 10%
of the Registrable Securities.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"HOLDER" shall mean Buyer and any other holder of Registrable
Securities (including any direct or indirect transferees of Buyer) who agrees in
writing to be bound by the provisions of this Agreement as a "Holder" hereunder.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OPTION" shall mean the option to purchase 3,606,881 shares of Common
Stock (subject to adjustment as provided therein) issued to Buyer as of the date
hereof and all options issued upon transfer, division or combination of, or in
substitution for, any thereof.
"REGISTRABLE SECURITIES" shall mean (i) any Common Stock (including
the Shares) held by any Holder, including shares issued or issuable upon the
conversion, exchange or exercise of any security convertible, exchangeable or
exercisable into Common Stock (including the Option), (ii) any security of the
Company held by any Holder which is convertible, exchangeable or exercisable
into Common Stock (including the Option) and (iii) any Common Stock or any
security convertible, exchangeable or exercisable into Common Stock which may be
issued or distributed in respect thereof by way of stock dividend or stock split
or other distribution, recapitalization or reclassification. As to any
particular Registrable Securities, once issued, such Registrable Securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale by the Holder of such securities shall have become effective
under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, or (c) such securities shall have ceased to be
outstanding. For purposes of this Agreement, any required calculation of the
amount of, or percentage of, Registrable Securities shall be based on the number
of shares of Common Stock which are Registrable Securities, including shares
issuable upon the conversion, exchange or exercise of any security convertible,
exchangeable or exercisable into Common Stock (including the Option).
<PAGE>
3
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including (a) all Commission
and stock exchange or NASD registration and filing fees (including, if
applicable, the fees and expenses of any "qualified independent underwriter," as
such term is defined in Schedule E to the Bylaws of the NASD, and of its
counsel), (b) all fees and expenses of complying with securities or blue sky
laws (including fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities), (c) all
printing, messenger and delivery expenses, (d) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange pursuant to Section 4.01(h) and all rating agency fees, (e) the fees
and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, (f) the
reasonable fees and disbursements of counsel selected pursuant to Article VII,
(g) any fees and disbursements of underwriters customarily paid by the issuers
or sellers of securities, including liability insurance if the Company so
desires or if the underwriters so require, and the reasonable fees and expenses
of any special experts retained in connection with the requested registration,
but excluding underwriting discounts and commissions and transfer taxes, if any,
and (h) other reasonable out-of-pocket expenses of Holders.
SECTION 1.02. OTHER DEFINED TERMS. The following terms shall have
the meanings defined for such terms in the Sections set forth below:
TERM SECTION
- ---- -------
"AAA" 8.10
"Agreement" Recitals
"Buyer" Recitals
"Company" Recitals
"Indemnified Parties" 5.01
"Majority Holders 8.04
"Purchase" Recitals
"Shares" Recitals
"Subscription Agreement" Recitals
"Supplemental Agreements" 8.02
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS.(a) Capitalized terms
used but not defined herein shall have the meanings set forth in the
Subscription Agreement.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Article, Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
<PAGE>
4
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE II
INCIDENTAL REGISTRATIONS
SECTION 2.01. RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the
Company at any time after the date hereof proposes to register Common Stock (or
any security which is convertible, exchangeable or exercisable into Common
Stock) under the Securities Act (other than a registration on Form S-4 or S-8,
or any successor or other forms promulgated for similar purposes), whether or
not for sale for its own account, in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will,
at each such time, give prompt written notice to all Holders of its intention to
do so and of such Holders' rights under this Article II. Upon the written
request of any such Holder made within 30 days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof; PROVIDED, that
(a) if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to proceed with the proposed registration of the securities to be sold by
it, the Company may, at its election, give written notice of such determination
to each Holder and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith), and
(b) if such registration involves an underwritten offering, all Holders
requesting to be included in the Company's registration must sell their
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company, with such differences, including
any with respect to indemnification and liability insurance, as may be customary
or appropriate in combined primary and secondary offerings. If a registration
requested pursuant to this Section involves an underwritten public offering, any
Holder requesting to be included in such registration may elect, in writing
prior to the effective date of the registration statement filed in connection
with such registration, not to register such securities in connection with such
registration. Nothing in this Section shall operate to limit the right of any
Holder to (i) request the registration of Common Stock issuable upon conversion,
exchange or exercise of securities held by such Holder notwithstanding the fact
that at the time of request such Holder does not hold the Common Stock
underlying such securities or (ii) request the
<PAGE>
5
registration at one time of both securities convertible, exchangeable or
exercisable into Common Stock and the Common Stock underlying any such
securities.
SECTION 2.02. EXPENSES. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Article II.
SECTION 2.03. PRIORITY IN INCIDENTAL REGISTRATIONS. If a
registration pursuant to this Article II involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of Registrable Securities requested to be included in such
registration would be likely to have an adverse effect on the price, timing or
distribution of the securities to be offered in such offering as contemplated by
the Company (other than the Registrable Securities), then the Company shall
include in such registration (a) first, 100% of the securities the Company
proposes to sell, (b) second, to the extent of the amount of Registrable
Securities requested to be included in such registration which, in the opinion
of such managing underwriter, can be sold without having the adverse effect
referred to above, the amount of Registrable Securities which the Holders have
requested to be included in such registration, such amount to be allocated pro
rata among all requesting Holders on the basis of the relative amount of
Registrable Securities then held by each such Holder (PROVIDED, that any such
amount thereby allocated to any such Holder that exceeds such Holder's request
shall be reallocated among the remaining requesting Holders in like manner) and
(c) third, shares of Common Stock of other Persons who have registration rights
with respect to the Common Stock held by such Persons, to the extent of the
number of shares requested by such Persons to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, such amount to be allocated pro rata among
all such requesting Persons on the basis of the relative number of shares of
Common Stock then held by each such Person.
ARTICLE III
REGISTRATION ON REQUEST
SECTION 3.01. REQUEST BY THE DEMAND PARTY. At any time after the
date hereof, upon the written request of the Demand Party requesting that the
Company effect the registration under the Securities Act of all or part of such
Demand Party's Registrable Securities and specifying the amount and intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all other Holders, and thereupon will, as
expeditiously as possible, use its best efforts to effect the registration under
the Securities Act of:
<PAGE>
6
(a) the Registrable Securities which the Company has been so
requested to register by the Demand Party (including, if such request relates to
a security which is convertible, exchangeable or exercisable into shares of
Common Stock, and if the Demand Party so requests, the shares of Common Stock
issuable upon such conversion, exchange or exercise); and
(b) all other Registrable Securities of the same class(es) or series
as are to be registered at the request of a Demand Party and which the Company
has been requested to register by any other Holder thereof by written request
given to the Company within 15 days after the giving of such written notice by
the Company (which request shall specify the amount and intended method of
disposition of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered; PROVIDED, that with respect to any Demand Party other than Buyer,
the Company shall not be obligated to effect any registration of Registrable
Securities under this Section unless such Demand Party requests that the Company
register at least 10% of the Registrable Securities; and PROVIDED, FURTHER,
that, unless Holders of a majority of the Registrable Securities consent thereto
in writing, the Company shall not be obligated to file a registration statement
relating to any registration request under this Article III (x) (other than a
registration statement on Form S-3 or any successor or similar short-form
registration statement) within a period of nine months after the effective date
of any other registration statement relating to any registration request under
this Article III or to any registration effected under Article II, in either
case which was not effected on Form S-3 (or any successor or similar short-form
registration statement) or (y) if with respect thereto the managing underwriter,
the Commission, the Securities Act, or the form on which the registration
statement is to be filed, would require the conduct of an audit other than the
regular audit conducted by the Company at the end of its fiscal year, in which
case the filing may be delayed until the completion of such regular audit
(unless the Holders of the Registrable Securities to be registered agree to pay
the expenses of the Company in connection with such an audit other than the
regular audit). Nothing in this Article III shall operate to limit the right of
any Holder to (i) request the registration of Common Stock issuable upon
conversion, exchange or exercise of securities held by such Holder
notwithstanding the fact that at the time of request such Holder does not hold
the Common Stock underlying such securities (ii) request the registration at one
time of both securities convertible, exchangeable or exercisable into Common
Stock and the Common Stock underlying any such securities.
SECTION 3.02. REGISTRATION STATEMENT FORM. The Company shall select
the registration statement form for any registration pursuant to this Article
III; PROVIDED, that if any
<PAGE>
7
registration requested pursuant to this Article III which is proposed by the
Company to be effected by the filing of a registration statement on Form S-3 (or
any successor or similar short-form registration statement) shall be in
connection with an underwritten public offering, and if the managing underwriter
shall advise the Company in writing that, in its opinion, the use of another
form of registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other form.
SECTION 3.03. EXPENSES. The Company will pay all Registration
Expenses in connection with the first six registrations of each class or series
of Registrable Securities pursuant to this Article III; PROVIDED, that for
purposes hereof, a request to register Common Stock into which a security is
convertible, exchangeable or exercisable in conjunction with a registration of
such security shall be deemed to be one request for registration of a class or
series of Registrable Securities. All expenses for any subsequent registrations
of Registrable Securities pursuant to this Article III shall be paid pro rata by
the Company and all other Persons (including the Holders) participating in such
registration on the basis of the relative number of shares of Common Stock
(including shares underlying any securities convertible, exchangeable or
exercisable into Common Stock) of each such Person included in such
registration.
SECTION 3.04. EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Article III will not be deemed to have been effected
unless it has become effective and all of the Registrable Securities registered
thereunder have been sold; PROVIDED, that if within 180 days after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other Governmental Entity, such registration shall be
deemed not to have been effected.
SECTION 3.05. SELECTION OF UNDERWRITERS. If a requested registration
pursuant to this Article III involves an underwritten offering, the investment
banker(s), underwriter(s) and manager(s) for such registration shall be selected
by the Holders of a majority of the Registrable Securities which are held by
Holders and which the Company has been requested to register; PROVIDED, HOWEVER,
that such investment banker(s), underwriter(s) and manager(s) shall be
reasonably satisfactory to the Company.
SECTION 3.06. PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this Article III involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities to be included in such registration (including
securities of the Company which are not Registrable Securities) would be likely
to have an adverse effect on the price, timing or distribution of
<PAGE>
8
the securities to be offered in such offering as contemplated by the Holders,
then the Company shall include in such registration only the Registrable
Securities requested to be included in such registration. In the event that the
number of Registrable Securities requested to be included in such registration
exceeds the number which, in the opinion of such managing underwriter, can be
sold without having the adverse effect referred to above, the number of such
Registrable Securities to be included in such registration shall be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities then held by each such Holder (PROVIDED, that
any shares thereby allocated to any such Holder that exceed such Holder's
request shall be reallocated among the remaining requesting Holders in like
manner). In the event that the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of
the managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number of
securities that, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above.
SECTION 3.07. ADDITIONAL RIGHTS. If the Company at any time grants
to any other holders of Common Stock (or securities that are convertible,
exchangeable or exercisable into Common Stock) any rights to request the Company
to effect the registration under the Securities Act of any such shares of Common
Stock (or any such securities) on terms more favorable to such holders than the
terms set forth in this Article III, the terms of this Article III shall be
deemed amended or supplemented to the extent necessary to provide the Holders
such more favorable rights and benefits.
ARTICLE IV
REGISTRATION PROCEDURES
SECTION 1.041. REGISTRATION PROCEDURES. If and whenever the Company
is required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:
(a) prepare and, in any event within 120 days after the end of the
period within which a request for registration may be given to the Company, file
with the Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that the Company may discontinue any
registration of its securities which is being effected pursuant to Article II at
any time prior to the effective date of the registration statement relating
thereto;
<PAGE>
9
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period not in excess of 180 days and to comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement; PROVIDED, that before filing a
registration statement or prospectus, or any amendments or supplements thereto,
the Company will furnish to counsel selected pursuant to Article VII hereof
copies of all documents proposed to be filed, which documents will be subject to
the review of such counsel;
(c) furnish to each seller of such Registrable Securities such number
of copies of such registration statement and of each amendment and supplement
thereto (in each case including all exhibits filed therewith, including any
documents incorporated by reference), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and summary prospectus), in conformity with the requirements of the Securities
Act, and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this subsection (d), it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
Governmental Entities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities;
(f) notify each seller of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the Company's becoming
aware that the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or
<PAGE>
10
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller, prepare and furnish to
such seller a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable (but not more than 18 months) after
the effective date of the registration statement, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act;
(h) (i) if such Registrable Securities are Common Stock (including
Common Stock issuable upon conversion, exchange or exercise of another
security), use its best efforts to list such Registrable Securities on any
securities exchange on which the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is then permitted under
the rules of such exchange; (ii) if such Registrable Securities are convertible,
exchangeable or exercisable into Common Stock, upon the reasonable request of
sellers of a majority of such Registrable Securities, use its best efforts to
list such securities and, if requested, the Common Stock underlying such
securities, notwithstanding that at the time of request such sellers hold only
such securities, on any securities exchange so requested, if such Registrable
Securities are not already so listed and if such listing is then permitted under
the rules of such exchange; and (iii) use its best efforts to provide a transfer
agent and registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions in
favor of underwriters and other Persons in addition to, or in substitution for
the provisions of Article V hereof, and take such other actions as sellers of a
majority of shares of such Registrable Securities or the underwriters, if any,
reasonably requested in order to expedite or facilitate the disposition of such
Registrable Securities;
(j) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of the type
customarily covered by "cold comfort" letters as the seller or sellers of a
majority of shares of such Registrable Securities shall reasonably request;
<PAGE>
11
(k) make available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(l) notify counsel (selected pursuant to Article VII hereof) for the
Holders of Registrable Securities included in such registration statement and
the managing underwriter or agent, immediately, and confirm the notice in
writing (i) when the registration statement, or any post-effective amendment to
the registration statement, shall have become effective, or any supplement to
the prospectus or any amendment prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request of the
Commission to amend the registration statement or amend or supplement the
prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the registration
statement for offering or sale in any jurisdiction, or of the institution or
threatening of any Actions for any of such purposes;
(m) make every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(n) if requested by the managing underwriter or agent or any Holder
of Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent and with
respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(o) cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing
<PAGE>
12
underwriter or agent, if any, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legends) representing securities to
be sold under the registration statement, and enable such securities to be in
such denominations and registered in such names as the managing underwriter or
agent, if any, or such Holders may request;
(p) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or opinions from
counsel for the Company in customary form and in form, substance and scope
reasonably satisfactory to such Holders, underwriters or agents and their
counsel;
(q) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the NASD; and
(r) use its best efforts to make available the executive officers of
the Company to participate with the Holders of Registrable Securities and any
underwriters in any "road shows" or other selling efforts that may be reasonably
requested by the Holders in connection with the methods of distribution for the
Registrable Securities.
SECTION 4.02. INFORMATION SUPPLIED. The Company may require each
seller of Registrable Securities as to which any registration is being effected
to furnish the Company with such information regarding such seller and pertinent
to the disclosure requirements relating to the registration and the distribution
of such securities as the Company may from time to time reasonably request in
writing.
SECTION 4.03. RESTRICTIONS ON DISPOSITION. Each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 4.01(f), such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 4.01(f), and,
if so directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 4.01(b) shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 4.01(f) and including the date when
each seller of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 4.01(f).
<PAGE>
13
ARTICLE V.
INDEMNIFICATION
SECTION 5.01. INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Article II or Article III, the Company shall, and it hereby does, indemnify
and hold harmless, to the extent permitted by law, the seller of any Registrable
Securities covered by such registration statement, each Affiliate of such seller
and their respective directors and officers or general and limited partners (and
any director, officer, Affiliate, employee, agent and controlling Person of any
of the foregoing), each Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act
(collectively, the "INDEMNIFIED PARTIES"), against any and all Actions (whether
or not an Indemnified Party is a party thereto), losses, damages or liabilities,
joint or several, and expenses (including reasonable attorney's fees and
reasonable expenses of investigation) to which such Indemnified Party may become
subject under the Securities Act, common law or otherwise, insofar as such
Actions, losses, damages, liabilities or expenses arise out of, relate to or are
based upon (a) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (b) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading; PROVIDED, that the Company shall not be liable to any Indemnified
Party in any such case to the extent that any such Action, loss, damage,
liability or expense arises out of, relates to or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation
thereof; and, PROVIDED, FURTHER, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
with respect to any preliminary, final or summary prospectus, or any amendment
or supplement thereto, to the extent that any such Action, loss, damage,
liability or expense of such underwriter or controlling Person results from the
fact that such underwriter sold Registrable Securities to a Person to whom there
was not sent or
<PAGE>
14
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus (including any documents incorporated by reference therein) or of the
final prospectus, as then amended or supplemented (including any documents
incorporated by reference therein), whichever is most recent, if the Company has
previously furnished copies thereof to such underwriter. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Party and shall survive the transfer of securities by
any seller.
SECTION 5.02. INDEMNIFICATION BY THE SELLER. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Article III or Article IV
herein, that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable Securities or
any underwriter to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 5.01) the Company and all other prospective
sellers or any underwriter, as the case may be, with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller or underwriter
specifically stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or supplement,
or a document incorporated by reference into any of the foregoing. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the prospective sellers, or any of
their respective Affiliates, directors, officers or controlling Persons and
shall survive the transfer of securities by any seller. In no event shall the
liability of any selling Holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
SECTION 5.03. NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any Action
with respect to which a claim for indemnification may be made pursuant to this
Article V, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such Action; PROVIDED, that the failure of the indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Article V, except to the extent that the indemnifying
party is materially prejudiced by such failure to give notice. In case any such
Action is brought against an
<PAGE>
15
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such Action, the indemnifying party will be entitled to
participate in and to assume the defense thereof (at its expense), jointly with
any other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such Indemnified Party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party will settle any Action or consent to the
entry of any judgment without the prior written consent of the indemnified
party, unless such settlement or judgment (i) includes as an unconditional term
thereof the giving by the claimant or plaintiff of a release to such Indemnified
Party from all liability in respect of such Action and (ii) does not involve the
imposition of equitable remedies or the imposition of any obligations on such
indemnified party and does not otherwise adversely affect such indemnified
party, other than as a result of the imposition of financial obligations for
which such indemnified party will be indemnified hereunder.
SECTION 5.04. CONTRIBUTION. (a) If the indemnification provided for
in this Article V from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any Actions, losses, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Actions, losses, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such Actions, losses, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party under this Section
5.04 as a result of the Actions, losses, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any Action.
(b) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5.04 were determined by pro rata
allocation or by any other method of
<PAGE>
16
allocation which does not take account of the equitable considerations referred
to in Section 5.04(a). No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
SECTION 5.05. OTHER INDEMNIFICATION. Indemnification similar to that
specified in this Article V (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under any Law or with
any Governmental Entity other than as required by the Securities Act.
SECTION 5.06. NON-EXCLUSIVITY. The obligations of the parties under
this Article V shall be in addition to any liability which any party may
otherwise have to any other party.
ARTICLE VI.
RULE 144
SECTION 6.01. RULE 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, it will, upon the request of any Holder,
make publicly available such information), and it will take such further action
as any Holder may reasonably request, all to the extent required from time to
time to enable such Holder to sell shares of Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding anything contained in this Article VI, the
Company may deregister under Section 12 of the Exchange Act if it then is
permitted to do so pursuant to the Exchange Act.
ARTICLE VII.
SELECTION OF COUNSEL
SECTION 7.01. SELECTION OF COUNSEL. In connection with any
registration of Registrable Securities pursuant to Articles II and III hereof,
the Holders of a majority of the Registrable Securities covered by any such
registration may
<PAGE>
17
select one counsel to represent all Holders of Registrable Securities covered by
such registration; PROVIDED, HOWEVER, that in the event that the counsel
selected as provided above is also acting as counsel to the Company in
connection with such registration, the remaining Holders shall be entitled to
select one additional counsel to represent all such remaining Holders.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. "TAG-ALONG" RIGHTS. Those Persons who have been
granted "tag-along" rights pursuant to Section 5.02(b) of the Shareholders
Agreement shall be permitted to participate in any registration pursuant to
Article II or Article III hereof in accordance with the terms of such
agreement. In respect of any registration in which such Person shall
participate, such Person shall have the rights and obligations of a Holder
hereunder.
SECTION 8.02. OTHER INVESTORS. The Company may enter into
agreements with other purchasers of Common Stock who are then employees of
the Company (or its successor) or any of the Subsidiaries, making them
parties hereto (and thereby giving them all, or a portion, of the rights,
preferences and privileges of a "Holder" hereunder) with respect to
additional shares of Common Stock (the "SUPPLEMENTAL AGREEMENTS"); PROVIDED,
HOWEVER, that pursuant to any such Supplemental Agreement, each such
purchaser shall have expressly agreed to be bound by all of the terms of this
Agreement as if such purchaser were a "Holder" hereunder. All shares of
Common Stock issued or issuable pursuant to such Supplemental Agreements
shall be deemed to be Registrable Securities.
SECTION 8.03. HOLDBACK AGREEMENT. If any registration hereunder
shall be in connection with an underwritten public offering, each Holder
agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any equity securities of
the Company, or of any security convertible, exchangeable or exercisable into
any equity security of the Company (in each case, other than as part of such
underwritten public offering), within 7 days before, or 180 days (or such
lesser period as the managing underwriters may permit) after, the effective
date of such registration (except as part of such registration), and the
Company hereby also so agrees and agrees to cause each other holder of any
equity security, or of any security convertible, exchangeable or exercisable
into any equity security, of the Company purchased from the Company (at any
time other than in a public offering) to so agree.
SECTION 8.04. AMENDMENTS AND WAIVERS. This Agreement may not be
amended except by an instrument in writing signed on behalf of the Company
and the Holders of a majority of the
<PAGE>
18
Registrable Securities (the "MAJORITY HOLDERS"); PROVIDED, HOWEVER, that no
such amendment that is adverse to Buyer or any of its successors and assigns
shall be effective as against any such Person for so long as such Person
holds any Registrable Securities unless agreed to in writing by such Person.
Each Holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any amendment authorized by this Section,
whether or not such Registrable Securities shall have been marked to indicate
such amendment.
SECTION 8.05. SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. In addition, and whether or not
any express assignment shall have been made, the provisions of this Agreement
which are for the benefit of the parties hereto other than the Company shall
also be for the benefit of and enforceable by any subsequent Holder.
SECTION 8.06. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Buyer, to
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Attention: Nils P. Brous
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
(b) if to the Company, to
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Financial Officer
(c) if to any other Holder, to the address of such other Holder as
shown in the stock record books of the Company, or to such other address as any
of the above shall have designated in writing to all of the other above.
SECTION 8.07. INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not
<PAGE>
19
affect in any way the meaning or interpretation of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
SECTION 8.08. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.09. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter of this
Agreement. Except for the indemnification provisions of Article V and as
provided in Section 8.05, this Agreement is not intended to confer upon any
Person other than the parties any rights or remedies.
SECTION 8.10. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN
THAT STATE. ANY CONTROVERSY, DISPUTE, OR CLAIM OF WHATEVER NATURE ARISING OUT
OF, IN CONNECTION WITH, OR RELATING TO THIS AGREEMENT, INCLUDING THE EXISTENCE,
VALIDITY, INTERPRETATION OR BREACH THEREOF AND ANY CLAIM BASED ON CONTRACT, TORT
OR STATUTE, SHALL BE RESOLVED AT THE REQUEST OF EITHER THE COMPANY OR THE
MAJORITY HOLDERS, BY FINAL AND BINDING ARBITRATION CONDUCTED IN WASHINGTON, D.C.
PURSUANT TO THE FEDERAL ARBITRATION ACT AND IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA").
ARBITRATION HEREUNDER SHALL BE CONDUCTED BY A SINGLE ARBITRATOR SELECTED JOINTLY
BY THE COMPANY AND THE MAJORITY HOLDERS. IF WITHIN 30 DAYS AFTER A DEMAND FOR
ARBITRATION IS MADE, THE COMPANY AND THE MAJORITY HOLDERS ARE UNABLE TO AGREE ON
A SINGLE ARBITRATOR, THREE ARBITRATORS SHALL BE APPOINTED. THE COMPANY AND THE
MAJORITY HOLDERS SHALL EACH SELECT ONE ARBITRATOR AND THOSE TWO ARBITRATORS
SHALL THEN SELECT WITHIN 30 DAYS A THIRD NEUTRAL ARBITRATOR. IF THE ARBITRATORS
SELECTED BY THE COMPANY AND THE MAJORITY HOLDERS CANNOT AGREE ON THE THIRD
ARBITRATOR, THE SELECTION SHALL BE IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION
RULES OF AAA. THE COMPANY AND THE MAJORITY HOLDERS AGREE TO SHARE EQUALLY THE
FEES AND EXPENSES OF THE ARBITRATOR(S) HEREUNDER. ANY DISCOVERY IN CONNECTION
WITH ARBITRATION HEREUNDER SHALL BE LIMITED TO INFORMATION DIRECTLY RELEVANT TO
THE CONTROVERSY OR CLAIM IN ARBITRATION. JUDGMENT UPON ANY ARBITRATION AWARD
RENDERED MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION. THE COMPANY AND
THE MAJORITY HOLDERS EACH UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.
<PAGE>
20
SECTION 8.11. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
SECTION 8.12. NO RECOURSE. Notwithstanding anything that may be
expressed or implied in this Agreement, the Company and each Holder covenant,
agree and acknowledge that no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement or any of the
Transactions shall be had against any current or future director, officer,
employee, general or limited partner, member, Affiliate (including KKR) or
assignee of Buyer or of any of the foregoing, whether by the enforcement of any
assessment or by any legal or equitable proceeding, or by virtue of any statute,
regulation or other applicable law, it being expressly agreed and acknowledged
that no personal liability whatsoever shall attach to, be imposed on or
otherwise be incurred by any current or future officer, agent or employee of
Buyer or any current or future member of Buyer or any current or future
director, officer, employee, partner, member, Affiliate (including KKR) or
assignee of any of the foregoing, as such for any obligation of Buyer under this
Agreement or any documents or instruments delivered in connection with this
Agreement or any of the Transactions for any claim based on, in respect of or by
reason of such obligations or their creation.
<PAGE>
21
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the date first written above.
RANDALL'S FOOD MARKETS, INC.
By:/s/ R. RANDALL ONSTEAD, JR.
--------------------------------------
Name: R. Randall Onstead, Jr.
Title: Chief Executive Officer
RFM ACQUISITION LLC
By:/s/ NILS P. BROUS
--------------------------------------
Name: Nils P. Brous
Title: Vice President, Secretary
and Treasurer
<PAGE>
EXHIBIT 10.5
EMPLOYMENT, CONSULTING AND RETIREMENT AGREEMENT
THIS EMPLOYMENT, CONSULTING, AND RETIREMENT AGREEMENT ("Agreement") is
made by and between RANDALL'S FOOD MARKETS, INC., a Texas corporation
("Randall's") and Robert R. Onstead, of Harris County, Texas ("Onstead").
W I T N E S S E T H:
WHEREAS, Onstead has served and continues to serve as Chairman of the
Board of Directors of Randall's (the "Board") and has been and continues to be
employed by Randall's as an officer; and
WHEREAS, Onstead, at various times, has been an employee, officer, and
director of certain of Randall's affiliated and subsidiary companies, and/or
their predecessors or successors in interest (collectively, with Randall's, the
"Randall's Entities" or, individually, a "Randall's Entity"); and
WHEREAS, Onstead, by reason of his experience with Randall's and as a
businessman is uniquely suited to act as Chairman of the Board and as an officer
of Randall's; and
WHEREAS, Onstead possesses considerable experience and knowledge of the
business and affairs of Randall's, its objectives, policies, methods, personnel,
and operations; and
WHEREAS, Randall's recognizes that Onstead's past contributions to
Randall's have been substantial and meritorious and that Onstead's standing and
reputation within the business community, locally and nationally, are of great
value to Randall's; and
WHEREAS, Randall's anticipates a reorganization and transition among its
executive officers and desires to retain Onstead in the employ of Randall's for
such time as is necessary to assure that Randall's is prepared for this
reorganization and transition and desires to secure the consulting services of
Onstead for a period after the transition so that Onstead's experience and
knowledge will continue to be available to Randall's; and
WHEREAS, Randall's and Onstead desire to continue such employment
relationship and to establish such consulting relationship on the terms and
conditions, and for the consideration, hereinafter set forth for the period
provided herein;
<PAGE>
NOW, THEREFORE, for and in consideration of the compensation, benefits,
and perquisites to be paid to Onstead under this Agreement and the mutual
promises, covenants, and undertakings contained in this Agreement, and intending
to be legally bound, Randall's and Onstead agree as follows:
ARTICLE 1: EMPLOYMENT, CONSULTING ENGAGEMENT, DUTIES, AND COMPENSATION
1.1 Employment and Consulting Engagement. Randall's agrees to continue to
employ Onstead and to engage Onstead as a consultant and Onstead agrees to
continue to be employed by Randall's and to act as a consultant in accordance
with and subject to the terms and conditions of this Agreement.
1.2 Service. During the term of this Agreement, Onstead and Randall's
agree as follows:
(i) Commencing on the effective date of this Agreement (the
"Effective Date"), and continuing until July 1, 1998, or for such longer
time as Onstead and the Board may establish (the "Initial Period"),
Randall's shall (a) employ Onstead as an officer of Randall's and (b) for
the full term of the Initial Period, cause Onstead to be nominated for
election as a director of Randall's and as Chairman of the Board and use
its best efforts to secure such election. Upon expiration of the Initial
Period, Onstead shall retire, whereupon his common law employee
relationship with Randall's shall cease.
(ii) Commencing upon the expiration of the Initial Period and
continuing thereafter until the date as of which ten percent (10%) of the
common stock of Randall's (or any entity interest in a successor to
Randall's as a result of a transaction involving a merger, reorganization,
recapitalization, or the like) (hereinafter "Stock") is tradable on a
national stock exchange, Randall's shall engage Onstead in the position of
consultant. Hereinafter such period of time shall be referred to as the
"Consulting Period."
(iii) Commencing upon the expiration of the Initial Period and until
Onstead's ownership of Stock falls below ten percent (10%) of the
outstanding Stock, Randall's shall cause Onstead to be nominated as a
director of Randall's and use its best efforts to secure such election.
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<PAGE>
1.3 Duties and Extent of Services.
(i) While Onstead serves as an officer during the Initial Period, he
will not engage in any other business or professional activity without
regard to whether that business or professional activity is pursued for
gain, profit, or any other monetary advantage; however, this should not be
construed as preventing Onstead from making passive investments in
enterprises that do not require services on his part in the operation or
the affairs of such enterprise. During the Initial Period, Onstead will
devote his full time, attention, and energies to the operation of
Randall's. The specific duties of Onstead during the Initial Period shall
be as determined by the Chief Executive Officer in consultation with the
Board in their sole discretion.
(ii) While Onstead serves as consultant during the Consulting
Period, he will devote time, attention, and energy as needed and as
reasonable in light of the circumstances to assist Randall's senior
executives and the Board with the understanding that he will not be
involved actively in the management of Randall's. As consultant, Onstead
may assist in ongoing projects and in development of an appropriate agenda
for the operation of Randall's, provide trouble shooting, render
constructive advice, and monitor strategic and fiscal matters of
Randall's. Onstead's duties as consultant will also be to facilitate as
much as possible the communication between management of Randall's and the
Board but will in no way preempt sound communication between those
parties. The specific duties of Onstead during the Consulting Period shall
be as determined by the Chief Executive Officer in consultation with the
Board in their sole discretion. At all times during the Consulting Period,
Onstead shall be an independent contractor with Randall's.
(iii) Notwithstanding the foregoing Sections 1.3(i) and 1.3(ii),
during the Initial Period and the Consulting Period, Onstead shall not be
expected to be available during reasonable vacation periods during each
year, during any period of illness or other incapacity, and during any
reasonable times allotted to personal affairs or professional activities.
1.4 Compensation. During the term of this Agreement, Onstead shall receive
the following minimum annual compensation:
(i) During the Initial Period, Randall's shall pay to Onstead a
monthly salary of $41,667 and Randall's shall furnish to Onstead benefits
and perquisites as in effect on the day immediately preceding the
Effective Date; provided, however, that in the event of any change or
modification of any employee pension plan, employee welfare plan, or
program sponsored or maintained by the Randall's Entities on or after the
Effective Date, including changes, if any, that may result in a
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<PAGE>
reduction or termination of benefits, Onstead and any beneficiaries
claiming through him in such plan or plans will be subject to such changes
and modifications on the same terms and conditions as all other
participants or beneficiaries similarly situated.
(ii) During the Consulting Period and up to the last day of the
calendar month in which the Consulting Period ends, Randall's shall pay
Onstead a monthly consulting fee of $16,667, payable in accordance with
Randall's normal payroll practices respecting executives. Randall's agrees
that any outside director fees and/or any other consulting fees which
Onstead receives from any source during the Consulting Period may be
retained by Onstead and shall not operate to reduce the amounts payable by
Randall's to Onstead as provided herein.
(iii) Nothing in this Agreement shall limit the Board, in its sole
discretion, from increasing in any year Onstead's compensation from that
minimum compensation which is established herein.
1.5 Location and Conditions of Employment and Consulting Engagement. The
Chief Executive Officer shall determine Onstead's principal place of business in
consultation with the Board in their sole discretion.
1.6 Working Facilities. Randall's shall furnish to Onstead a private
office, at a location or locations to be determined by the Chief Executive
Officer in consultation with the Board in their sole discretion, together with
appropriate office furniture and equipment for as long as Onstead shall live.
Further, except as otherwise provided pursuant to Section 4.2, Randall's shall
furnish to Onstead for as long as he shall live (i) a personal secretary devoted
on a full time basis exclusively to Onstead's use and (ii) unlimited use of a
WATS Line or comparable worldwide long distance service. Notwithstanding
anything in the foregoing to the contrary, the total value of all facilities and
services provided to Onstead pursuant to this Section 1.6 shall not exceed
$100,000 per annum.
1.7 Chairman Emeritus. Commencing upon the expiration of the Initial
Period and continuing thereafter for as long as Onstead shall live, Randall's
shall cause Onstead to be nominated for the honorary title of Chairman Emeritus
of the Board and shall use its best efforts to secure such election.
Notwithstanding the foregoing, Onstead may, at his option, decline or refuse
such title, or resign from such position, at any time without loss of any other
benefit pursuant to this Agreement.
ARTICLE 2: PERQUISITES, BENEFITS, INSURANCE, AND INDEMNITIES
2.1 Perquisites. Commencing on the effective date of this Agreement and
continuing through the earlier of (a) the date as of which Onstead owns less
than three percent (3%) of the outstanding common stock of Randall's (or, if
applicable, three percent (3%) of the outstanding equity interest in a successor
to Randall's as a result of a transaction including a merger,
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<PAGE>
reorganization, recapitalization, or the like) (such date hereinafter referred
to as the "Liquidation Date") or (b) the date which is thirty (30) days after
the effective date of a "Corporate Change" (as defined in Section 3.4),
Randall's shall provide to Onstead the benefits and perquisites set forth in
this Article 2.1 subject to the approval of the Chief Executive Officer in his
sole discretion.
(i) Business and Entertainment Expenses - Randall's shall reimburse
Onstead for, or pay on behalf of Onstead, reasonable and appropriate
expenses incurred by Onstead for business related purposes, including dues
and fees to industry and professional organizations and costs of
entertainment and business development in accordance with business and
entertainment expense policies and procedures adopted by Randall's from
time to time for its top executives; provided, however, that in no event
shall Randall's reimburse Onstead for political contributions.
(ii) Conventions and Conferences - Randall's shall reimburse Onstead
for, or pay on behalf of Onstead, reasonable and appropriate expenses
incurred by Onstead in traveling to and attending up to two (2) business
conventions or conferences for the grocery industry or any related
business including costs incurred in connection with Onstead's spouse
accompanying him on such trips. Such reimbursable expenses shall include,
but not be limited to, reasonable and appropriate expenses incurred for
first class travel and the cost of meals and entertainment.
2.2 Other Randall's Benefits. During the Initial Period, Onstead and, to
the extent applicable, Onstead's family, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans, and programs, including
improvements or modifications of the same, which are now, or may hereafter be,
available to similarly-situated Randall's executives. Such benefits, plans, and
programs may include, without limitation, any profit sharing plan, employee
stock ownership plan, thrift plan, pension plan, health insurance or health care
plan, disability insurance, and the like. Randall's shall not, however, by
reason of this Section 2.2 be obligated to institute, maintain, or refrain from
changing, amending or discontinuing, any such benefit plan or program, so long
as such changes are similarly applicable to executives generally.
Notwithstanding the foregoing, nothing in this Section 2.2 shall be deemed to
create any rights or benefits for Onstead which would not otherwise be provided
by the terms of any such benefit plan or program respecting Onstead's applicable
status as an executive employee, consultant, or retiree.
2.3 Lifetime Medical/Dental Insurance. Randall's shall furnish to Onstead
for life and to Onstead's Spouse for life, at no cost to Onstead or Onstead's
Spouse, medical and dental insurance on the same terms and conditions as it is
offered to officers of Randall's who are currently employed. For purposes of
this Section 2.3, the term "Spouse" shall mean the spouse to whom Onstead is
married at the time of coverage and, for purposes of providing coverage to
Onstead's spouse after his death, the spouse of Onstead on the date of his
death.
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<PAGE>
2.4 Lifetime Life Insurance. Notwithstanding any other provision in this
Agreement to the contrary, for as long as Onstead shall live and regardless of
Onstead's status as an employee, consultant, or retiree, Randall's shall
continue to provide life insurance in the same amounts and under the same terms
as is offered to officers of Randall's who are currently employed. Any other
special policies (not available to Randall's executives generally) insuring the
life of Onstead as in effect on the day immediately preceding the Effective Date
shall no longer be the obligation of Randall's from and after the Effective
Date.
2.5 Liability Insurance. Randall's agrees to maintain on behalf of
Onstead, on a basis no less favorable than as provided by Randall's on behalf of
Onstead on the day prior to the Effective Date, all insurance coverages
respecting any liability or potential liability which Onstead may incur in the
scope of his employment, in the scope of his consulting engagement, in his
status as a fiduciary, or as an officer or director of any Randall's Entity.
Such coverages shall be maintained during Onstead's active employment and during
his consulting engagement hereunder and at least for such "trailing" periods as
are provided by such coverages on the day prior to the Effective Date.
2.6 Indemnities. Randall's agrees to maintain on behalf of Onstead, on a
basis no less favorable than as provided by Randall's on behalf of Onstead on
the day prior to the Effective Date, all contractual provisions (whether
embodied in articles of incorporation, bylaws, board resolutions, agreements, or
otherwise) which in any way limit the liability of, or provide advances or
protections to, or indemnify Onstead respecting his employment, his consulting
relationship, his status as a fiduciary, or his position as an officer or
director of any Randall's Entity.
ARTICLE 3: TERMINATION OF EMPLOYMENT AND CONSULTING ENGAGEMENT
3.1 Termination by Randall's. Notwithstanding the provisions of Article 1,
Randall's shall have the right to terminate Onstead's employment pursuant to
Section 1.2(i) or his consulting engagement pursuant to Section 1.2(ii) at any
time for any of the following reasons:
(i) upon Onstead's death;
(ii) upon Onstead's becoming incapacitated by accident, sickness, or
any other circumstance which renders him mentally or physically incapable
of performing the duties and services required of him hereunder for a
period of at least 120 consecutive days or for a period of 180 business
days during any 12-month period;
(iii) for cause, which for purposes of this Agreement shall mean
Onstead's gross negligence or willful misconduct in performance of the
duties and services required of him pursuant to this Agreement, or
Onstead's indictment for a felony or final conviction of a misdemeanor
involving moral turpitude;
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(iv) for Onstead's material breach of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty (30) days
following written notice to Onstead by Randall's of such breach;
(v) in connection with the insolvency, liquidation, or the
occurrence of any other event resulting in the discontinuance of the
existence of Randall's (without a successor thereto); or
(vi) for any reason other than as specified above.
3.2 Termination by Onstead. Notwithstanding the provisions of Article 1,
Onstead shall have the right to terminate his employment pursuant to Section
1.2(i) or his consulting engagement pursuant to Section 1.2(ii) at any time for
any of the following reasons:
(i) a material breach by Randall's of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty (30) days
following written notice of such breach by Onstead to Randall's; or
(ii) for any reason other than as specified in Section 3.2(i) above.
3.3 Notice. If Randall's or Onstead desire to terminate Onstead's
employment or consulting engagement hereunder at any time prior to expiration of
the term of employment as provided in Section 1.2(i) or the expiration of the
consulting engagement as provided in Section 1.2(ii), it or he shall do so by
giving written notice to the other party that it or he has elected to terminate
Onstead's employment and/or consulting engagement hereunder, as applicable, and
stating the effective date and reason for such termination, provided that no
such action shall alter or amend any other provisions hereof or rights arising
hereunder. Randall's expressly agrees that any such termination of the
employment and/or consulting engagement shall not extinguish Randall's
obligations pursuant to Section 1.2(i)(b) or Section 1.2(iii).
3.4 Change of Control. Notwithstanding any other provision of this
Agreement to the contrary, in the event that (a) Randall's sells, leases, or
exchanges all or substantially all of its assets to another person or entity
(other than Kohlberg Kravis Roberts & Co. or an entity which controls or is
controlled by, or is under common control with Kohlberg Kravis Roberts & Co.) or
(b) any person or entity (other than Kohlberg Kravis Roberts & Co. or an entity
which controls or is controlled by, or is under common control with Kohlberg
Kravis Roberts & Co.), including a "group" as contemplated by Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, acquires or gains ownership
or control (including without limitation, power to vote) of more than fifty
percent (50%) of the outstanding shares of Randall's voting stock (based on
voting power), or as a result of or in connection with a contested election of
directors of Randall's, the persons who were directors of Randall's before such
election shall cease to constitute a majority
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of the Board (each such event is referred to herein as a "Corporate Change"),
then upon the expiration of thirty (30) days after the effective date of such
Corporate Change, Onstead's employment pursuant to Section 1.2(i) and/or his
consulting engagement pursuant to Section 1.2(ii) shall terminate.
ARTICLE 4: EFFECT OF TERMINATION AND RETIREMENT
4.1 Survival of Certain Benefits. If Onstead's employment and/or
consulting engagement hereunder shall terminate for any reason whatsoever,
Onstead's rights and Randall's obligations pursuant to Section 1.2(i)(b),
Section 1.2(iii), Section 1.6, Section 1.7, Section 2.1, Section 2.3, Section
2.4, Section 2.5, Section 2.6, Section 4.2, Section 4.3, Section 4.4, and any
other Section which by its terms or context so provides shall survive such
termination. Further, unless otherwise expressly provided herein, upon
termination of Onstead's employment and/or consulting engagement hereunder,
Onstead shall be entitled to such benefits as governed by the terms of the
relevant benefit plans and programs of Randall's.
4.2 Compensation and Benefits After Termination.
(i) If Onstead's employment and/or consulting engagement pursuant to
Section 1.2(i) and or Section 1.2(ii), respectively, is terminated prior
to the expiration of the term provided in such sections by Randall's
pursuant to Section 3.1(i), Section 3.1(ii), Section 3.1(iii), Section
3.1(iv) or Section 3.1(v), or by Onstead pursuant to Section 3.2(ii), or
by operation of Section 3.4, compensation provided pursuant to Section
1.4(i) and/or Section 1.4(ii), as applicable, shall terminate
contemporaneously with the termination of Onstead's employment and/or
consulting engagement.
(ii) If Onstead's employment pursuant to Section 1.2(i) is
terminated prior to the expiration of the term provided in such section by
Randall's pursuant to Section 3.1(vi) or by Onstead pursuant to Section
3.2(i), Randall's shall pay, within 30 days of the effective date of such
termination, to Onstead the aggregate amount Onstead would have received
for the remainder of the Initial Period pursuant to Section 1.4(i) and an
amount equal to the economic value of the benefits provided pursuant to
Section 2.2 which Onstead would have received had such termination not
occurred.
(iii) If Onstead's consulting engagement pursuant to Section 1.2(ii)
is terminated prior to the expiration of the term provided in such section
by Randall's pursuant to Section 3.1(vi) or by Onstead pursuant to Section
3.2(i), Randall's shall continue to pay all amounts due to Onstead
pursuant to Section 1.4(ii) in the same
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amounts and at the same times as provided thereunder throughout the entire
Consulting Period as though Onstead had remained a consultant.
4.3 No Duty to Mitigate Losses. Onstead shall have no duty to find new
employment following the termination of his employment and/or consulting
engagement. Any salary or remuneration received by Onstead from a third party
for the providing of personal services (whether by employment or by functioning
as an independent contractor) following Onstead's termination of his employment
or consulting engagement hereunder shall not reduce Randall's obligation to make
any payments or provide any benefits under this Agreement.
4.4 Retirement Payments. In recognition of Onstead's past service and
contributions to Randall's, Randall's shall pay to Onstead on the first day of
each calendar month, beginning as of the earlier of (a) the first day of the
calendar month coinciding with the expiration of the Initial Period, or (b) the
first day of the calendar month next following the expiration of the Initial
Period, a monthly retirement payment of $8,333. Such payments shall continue to
Onstead through the earlier of (i) the last day of the calendar month which
contains the Liquidation Date or (ii) the date which is thirty (30) days after
the effective date of a Corporate Change.
ARTICLE 5: CONFIDENTIAL INFORMATION
5.1 Proprietary and Confidential Information. In accordance with Onstead's
existing and continuing obligations, Onstead agrees and acknowledges that the
various Randall's Entities have developed and own valuable "Proprietary and
Confidential Information" which constitutes valuable and unique property
including, without limitation, concepts, ideas, plans, strategies, analyses,
surveys, and proprietary information related to the past, present, or
anticipated business of various of the Randall's Entities, including, but not
limited to, costs, prices, uses, applications of products and services, results
of investigations or experiments, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, pricing policy, financial
information, policy and/or procedure manuals, training and recruiting
procedures, accounting procedures, the status and content of Randall's Entities'
contracts with suppliers, employees, and customers, the Randall's Entities'
business philosophy, and servicing, retailing, or marketing methods and
techniques at any time used, developed, or investigated by any Randall's Entity
which are not generally available to the public or which are maintained as
confidential by any Randall's Entity. Moreover, Onstead agrees and acknowledges
that the term Proprietary and Confidential Information of the Randall's Entities
includes, without limitation, all analyses, correspondence, data or information,
memoranda, notes, records, or other documents, including charts or drawings, and
all copies thereof, which are in Onstead's possession, custody, or control and
which are related in any manner to the past, present, or anticipated business of
any of the Randall's Entities. Except as may be required by law, Onstead agrees
that he will not at any time, either during or subsequent to the term of this
Agreement, disclose to others, permit to be disclosed, use, permit to be used,
copy, or permit to be copied, except in pursuance of his services on behalf of
any Randall's Entity, any
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such Proprietary and Confidential Information (whether or not developed by
Onstead) without Randall's prior written consent. Except as may be required by
law, Onstead further agrees to maintain in confidence any proprietary and
confidential information of third parties received or of which Onstead has
knowledge as a result of his employment, consulting engagement, association, or
work with any Randall's Entity. Onstead agrees that in the event of an actual
breach by Onstead of the provisions of this Section, Randall's shall be entitled
to inform all potential or new employers of this Agreement. The prohibitions of
this Section 5.1 shall not apply, however, to information in the public domain
(but only if the same becomes part of the public domain through a means other
than a disclosure prohibited hereunder).
5.2 Documents. Onstead agrees to leave in his office or deliver to
Randall's following the relationship covered by this Agreement correspondence,
memoranda, notes, records, drawings, sketches, plans, supplier lists, employee
lists, customer lists, product compositions, data or information, analyses, or
other documents and all copies thereof (all of which are hereafter referred to
as the "Documents") which are in his possession, custody, or control and which
are related in any manner to the past, present, or anticipated business of any
of the Randall's Entities. In this regard, Onstead hereby grants and conveys to
Randall's all right, title, and interest in and to, including without
limitation, the right to possess, print, copy, and sell or otherwise dispose of,
any reports, records, papers, summaries, photographs, drawings, data,
information, or other documents, and writings, and copies, abstracts or
summaries thereof, which may have been prepared by Onstead or under his
direction or which may have come into Onstead's possession in any way during the
term of his employment and/or consulting engagement with any of the Randall's
Entities which relate in any manner to past, present, or anticipated business of
any of the Randall's Entities.
5.3 Covenants Regarding Other Employees. During the term of this
Agreement, Onstead agrees not to solicit or induce any employee of any Randall's
Entity to terminate their employment, accept employment with anyone else, or to
interfere in a similar manner with the business of any Randall's Entity.
ARTICLE 6: NON-COMPETITION
Onstead and Randall's agree and acknowledge that Onstead has
contemporaneously herewith, agreed to a Covenant not to Compete with Randall's
as set forth in Section 6.02 of the Voting, Repurchase, and Shareholders
Agreement dated as of April 2, 1997 among a Randall's Entity, an affiliate of
Kohlberg Kravis Roberts & Co., and certain shareholders of Randall's.
ARTICLE 7: MISCELLANEOUS
7.1 Effective Date. The Effective Date of this Agreement shall be the
"closing date" of the "transactions" which are the subject of the Subscription
Agreement dated as of April 2, 1997 among a Randall's Entity, an affiliate of
Kohlberg Kravis Roberts & Co., and Robert R. Onstead.
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7.2 Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to Randall's to: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Executive Officer
and
Kohlberg Kravis Roberts & Co.
c/o Mr. David Sorkin
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
If to Onstead to: Robert R. Onstead
3663 Briarpark
Houston, Texas 77042
7.3 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
7.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
7.5 Severability. If, as a result of arbitration proceedings pursuant to
Section 7.13 or as the result of the determination of a court of competent
jurisdiction, it is determined that any provision of this Agreement is invalid
or unenforceable, then the invalidity or unenforceability of that provision
shall not affect the validity or enforceability of any other provision of this
Agreement, and all other provisions shall remain in full force and effect.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
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7.7 Withholding of Taxes. Randall's may withhold from any compensation,
perquisites, or benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
7.8 Headings. The Section headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
7.9 Gender and Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.10 Affiliate; Affiliated Company. Unless the context otherwise provides,
as used in this Agreement, the term "affiliate" or "affiliated company" shall
mean any entity which owns or controls, is owned or controlled by, or is under
common ownership or control with, Randall's.
7.11 Assignment. This Agreement, and the rights and obligations of the
parties hereunder, are personal and neither this Agreement, nor any right,
benefit, or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.
7.12 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to employment and consulting engagement of Onstead by
Randall's. Each party to this Agreement acknowledges that no representation,
inducement, promise or agreement, oral or written, has been made by either
party, or by anyone acting on behalf of either party, which is not embodied
herein, and that no agreement, statement, or promise relating to the employment
and consulting engagement of Onstead by Randall's, which is not contained in
this Agreement, shall be valid or binding. Any modification of this Agreement
will be effective only if it is in writing and signed by the party to be
charged.
7.13 Enforcement and Remedies. The terms of this Agreement have been
carefully considered and agreed upon by Randall's and Onstead and represent the
sole obligations of Randall's and Onstead with respect to Onstead's employment
and consulting engagement with Randall's. If a dispute arises out of or related
to this Agreement and the dispute cannot be settled through direct discussions,
Randall's and Onstead agree that they shall first endeavor to settle the dispute
in an amicable fashion, including the use of a mediator. If such efforts fail to
resolve the dispute, then any and all claims, demands, causes of action,
disputes, controversies, and other matters in question arising out of or
relating to this Agreement, any of its provisions, or the relationship between
the parties created by this Agreement, whether sounding in contract, tort, or
otherwise, whether provided by statute or the common law, for damages or any
other relief (all of which are referred to herein as "Claims"), shall be
resolved by binding arbitration pursuant to the Commercial Arbitration Rules
then in effect with the American Arbitration Association. The arbitration
proceeding shall be
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conducted in Houston, Texas. The enforcement of this agreement to arbitrate, the
validity, construction, and interpretation of this agreement to arbitrate, and
all procedural aspects of the proceeding pursuant to this agreement to arbitrate
shall be governed by and construed pursuant to the Commercial Arbitration Rules
then in effect with the American Arbitration Association. In deciding the
substance of the parties' Claims, the arbitrators shall apply the substantive
laws of the State of Texas (excluding Texas choice-of-law principles that might
call for the application of some other state's law). Only actual damages may be
awarded. It is expressly agreed that the arbitrators shall have no authority to
award treble, exemplary, or punitive damages of any type under any circumstances
regardless of whether such damages may be available under the applicable law.
Any and all of the arbitrators' orders and decisions may be enforceable in, and
judgment upon any award rendered in the arbitration proceeding may be confirmed
and entered by, any federal or state court having jurisdiction. Any costs of
attorney fees, arbitration, mediation, or litigation which are incurred as a
result of a Claim shall be paid by the party who incurs the costs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in multiple counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument, this 1st day
of April, 1997.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead
--------------------------------
Name: R. Randall Onstead
Title: President and CEO
Robert R. Onstead
/s/ Robert R. Onstead
--------------------------------
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between RANDALL'S
FOOD MARKETS, INC., a Texas corporation ("Randall's") and R. Randall Onstead,
Jr. of Fort Bend County, Texas ("Onstead").
W I T N E S S E T H:
WHEREAS, Onstead has been and continues to be employed by Randall's as an
officer and has served and continues to serve on the Board of Directors of
Randall's (the "Board"); and
WHEREAS, Onstead, at various times, has been an employee, officer, and
director of certain of Randall's affiliated and subsidiary companies, and/or
their predecessors or successors in interest (collectively, with Randall's, the
"Randall's Entities" or, individually, a "Randall's Entity"); and
WHEREAS, Randall's presently employs Onstead and Randall's desires to
continue to employ Onstead in an executive capacity on the terms and conditions
and for the consideration hereinafter set forth, and Onstead desires to continue
in the employ of Randall's on such terms and conditions and for such
consideration;
NOW, THEREFORE, for and in consideration of the compensation to be paid to
Onstead under this Agreement and the mutual promises, covenants, and
undertakings contained in this Agreement, and intending to be legally bound,
Randall's and Onstead agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Employment. Randall's agrees to employ Onstead and Onstead agrees be
employed by Randall's in accordance with and subject to the terms and conditions
of this Agreement.
1.2 Position. During the term of employment under this Agreement,
Randall's shall (a) employ Onstead in the position of President and Chief
Executive Officer of Randall's, or in such other executive positions as the
parties mutually may agree, and (b) cause Onstead to be nominated for election
as a director of Randall's and use its best efforts to secure such election.
1.3 Duties and Services. Onstead agrees to serve in the position referred
to in Section 1.2 and to perform diligently and to the best of his abilities the
duties and services appertaining to such office, as well as such additional
duties and services appropriate to such office
<PAGE>
which the parties mutually may agree upon from time to time. Onstead's
employment shall also be subject to the policies maintained and established by
Randall's, as the same may be amended from time to time.
1.4 Other Interests. Onstead agrees, during the period of his employment
hereunder, to devote his primary business time, energy, and best efforts to the
business and affairs of Randall's and its affiliates and not to engage, directly
or indirectly, in any other business, investment, or activity that interferes
with Onstead's performance of his duties hereunder, is contrary to the interests
of any Randall's Entity, or requires any significant portion of Onstead's
business time.
1.5 Duty of Loyalty. Onstead acknowledges and agrees that during his
employment with Randall's he owes a fiduciary duty of loyalty, fidelity, and
allegiance to act at all times in the best interests of Randall's and to do no
act which would injure the business, interests, or reputation of any Randall's
Entity. In keeping with these duties, Onstead shall make full disclosure to
Randall's of all business opportunities pertaining to Randall's business and
shall not appropriate for Onstead's own benefit business opportunities
concerning the subject matter of the fiduciary relationship.
1.6 Location and Conditions of Employment. During Onstead's employment
pursuant to Section 1.1, Randall's may not, without Onstead's consent (which
consent shall not be unreasonably withheld), require Onstead's principal place
of business to be anywhere other than within 20 miles of Onstead's principal
place of business on the day immediately preceding the Effective Date.
Notwithstanding the forgoing, in the event (a) Randall's shall not be the
surviving entity in any merger or consolidation (or survives only as a
subsidiary of an entity), (b) Randall's sells, leases or exchanges, or agrees to
sell, lease or exchange all or substantially all of its assets to another person
or entity, (c) Randall's is to be dissolved or liquidated, (d) any person or
entity (other than Kohlberg Kravis Roberts & Co. or an entity which controls or
is controlled by, or is under common control with Kohlberg Kravis Roberts &
Co.), including a "group" as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, acquires or gains ownership or control
(including without limitation, power to vote) of more than fifty percent (50%)
of the outstanding shares of Randall's voting stock (based on voting power), or
as a result of or in connection with a contested election of directors of
Randall's, the persons who were directors of Randall's before such election
shall cease to constitute a majority of the Board (each such event is referred
to herein as a "Corporate Change"), then at no time subsequent to the earlier of
(x) such Corporate Change or (y) the approval by the shareholders of Randall's
of such merger, consolidation, reorganization, sale, lease or exchange of assets
or dissolution or such election of directors (with the earlier of such time
referred to herein as "Time of Change"), may Randall's, without Onstead's
consent, require Onstead's principal place of business to be anywhere other than
within 20 miles of Onstead's principal place of business on the day immediately
preceding the Time of Change. For purposes of the parenthetical in clause (c) of
the preceding
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sentence, "control" shall mean the power to direct or cause the direction of the
management and policies of the controlled entity through the ownership of more
than fifty percent (50%) of the equity interests in such controlled entity.
1.7 Working Facilities. Randall's shall not take any action that would
materially adversely affect the physical conditions existing on the day
immediately preceding the Effective Date in or under which Onstead performs his
employment duties.
ARTICLE 2: COMPENSATION, PERQUISITES, BENEFITS, INSURANCE AND INDEMNITIES
2.1 Base Salary. During the term of this Agreement, Onstead shall receive
a minimum monthly base salary equal to the greater of (i) $35,417 or (ii) such
greater amount as the parties mutually may agree upon from time to time.
Onstead's annual base salary shall be paid in equal installments in accordance
with Randall's standard policy regarding payment of compensation to executives
but no less frequently than monthly.
2.2 Bonuses. While Onstead is actively employed under this Agreement,
Onstead shall be entitled to participate in the Randalls Corporate Incentive
Plan, as amended and in effect for top executives from time to time, which is
attached, in its current form, as Exhibit A hereto. Further, for the fiscal year
ending June 28, 1997, Onstead shall be entitled to participate in the Randalls
Corporate Incentive Plan in accordance with the thresholds, award levels, and
allocation percentages as adopted by the Compensation Committee of the Board and
as set forth in Schedules 1 through 3 attached as Exhibit B hereto.
2.3 Perquisites. While Onstead is actively employed under this Agreement,
he shall be entitled to participate in, on the same basis as his participation,
and as such perquisites are maintained, on the day immediately preceding the
effective date of this Agreement (the "Effective Date"), those perquisites which
are extended to similarly-situated executives of Randall's; provided, however,
that no company car allowance or country club dues shall be included in
Onstead's perquisites. In addition, and not by way of limitation, Onstead shall
be afforded the following perquisites and benefits as incidences of his
employment:
(i) Business and Entertainment Expenses - Randall's shall reimburse
Onstead for, or pay on behalf of Onstead, reasonable and appropriate
expenses, pursuant to and in accordance with Randall's reimbursement
policy, incurred by Onstead for business related purposes, including dues
and fees to industry and professional organizations and costs of
entertainment and business development.
(ii) Club Memberships - In addition to the other business and
entertainment expenses reimbursable pursuant to Section 2.3(i) above,
Randall's
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shall pay to Onstead an amount equal to the sum of (A) the full initiation
fee for Onstead's personal membership to the Houston Country Club, plus
(B) any federal income tax and payroll tax for which Onstead will be
liable as a result of clause (A) and as a result of this clause (B).
(iii) Life Insurance - Notwithstanding any other provision in this
Agreement to the contrary, Randall's shall continue to provide life
insurance in the same amounts and under the same terms as in effect for
Onstead on the day immediately preceding the Effective Date; provided,
however, that the Split Dollar Life Insurance Agreement between Onstead
and Randall's dated March 31, 1992 (the "Split Dollar Agreement"), shall
be amended to provide that upon Onstead's termination of employment
pursuant to Section 3.2(vi), Section 3.3(i), or Section 3.3(ii) of this
Agreement, Randall's shall transfer all right, title, and interest in its
investment in the policies thereunder to Onstead. Further, within 10 days
after the effective date of any such termination, Randall's shall transfer
custody of any and all insurance policies covered by the Split Dollar
Agreement to Onstead.
(iv) Stock Incentive Plan - While employed by Randall's, Onstead
shall participate in the 1997 Stock Purchase and Option Plan for Key
Employees of Randall's Food Markets, Inc. and Subsidiaries, attached in
draft form as Exhibit C hereto. Randall's agrees to adopt such plan in
substantially the same form as attached in Exhibit C on or before the
effective date. Randall's agrees that, pursuant to such plan, Onstead
shall be granted, as of the Effective Date and in recognition of Onstead's
existing ownership of Randall's common stock ("Stock"), an option for the
number of shares of Stock equal to the quotient of $4.5 million divided by
the per share price set forth in the Voting, Repurchase and Shareholders
Agreement dated as of April 2, 1997, among a Randall's Entity, an
affiliate of Kohlberg Kravis Roberts & Co, and shareholders of Randall's,
with such number to be rounded up to the nearest integer. Randall's
further agrees that the foregoing option shall comply with the terms
attached hereto as Exhibit D.
(v) Other Randall's Benefits - While employed by Randall's, Onstead
and, to the extent applicable, Onstead's family, dependents, and
beneficiaries, shall be allowed to participate in all benefits, plans, and
programs, including improvements or modifications of the same, which are
now, or may hereafter be, available to similarly-situated Randall's
executives. Such benefits, plans, and programs may include, without
limitation, any profit sharing plan, employee stock ownership plan, thrift
plan, pension plan, health insurance or health care plan, disability
insurance, and the like. Randall's shall not, however, by reason of this
Section 2.3(iv) be obligated to institute, maintain, or refrain from
changing, amending, or
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discontinuing, any such benefit plan or program, so long as such changes
are similarly applicable to executives generally.
2.4 Liability Insurance. Randall's agrees to maintain on behalf of
Onstead, on a basis no less favorable than as provided by Randall's on behalf of
Onstead on the day prior to the Effective Date, all insurance coverages
respecting any liability or potential liability which Onstead may incur in the
scope of his employment, in his status as a fiduciary, or as an officer or
director of any Randall's Entity. Such coverages shall be maintained during
Onstead's active employment hereunder and at least for such "trailing" periods
as are provided by such coverages on the day prior to the Effective Date.
2.5 Indemnities. Randall's agrees to maintain on behalf of Onstead, on a
basis no less favorable than as provided by Randall's on behalf of Onstead on
the day prior to the Effective Date, all contractual provisions (whether
embodied in articles of incorporation, bylaws, board resolutions, agreements, or
otherwise) which in any way limit the liability of, or provide advances or
protections to, or indemnify Onstead respecting his employment, his status as a
fiduciary, or his position as an officer or director of any Randall's Entity.
2.6 Line of Credit. At any time after the Effective Date and for the term
of Onstead's employment hereunder, Randall's shall extend to Onstead a line of
credit (the "Line of Credit") of up to $750,000 with such Line of Credit to bear
interest at the rate prescribed in section 7872(f)(2) of the Internal Revenue
Code of 1986, as amended. Such interest shall be payable every six months.
Amounts advanced by Randall's to Onstead pursuant to the Line of Credit shall be
repaid to Randall's at such times and amounts as determined in Onstead's
discretion; provided, however, that Randall's shall offset any compensation due
to Onstead and payable in cash upon the termination of Onstead's employment
against any outstanding balance under the Line of Credit. Further, such Line of
Credit shall be secured by any shares of Stock held by Onstead pursuant to the
Management Shareholders Agreement entered into by Onstead in 1997 and any cash
proceeds from the disposition of any such stock or any options held by Onstead
pursuant to such agreement that are realized upon or after the termination of
Onstead's employment shall be applied against any remaining outstanding balance
under the Line of Credit; and, provided further, any remaining outstanding
balance shall be due and payable not later than 180 days after the effective
date of such termination. In addition to the foregoing provisions, at Onstead's
option and regardless of whether such security agreement is enforceable under
Texas law, upon making any withdrawal under the Line of Credit pursuant to this
Section 2.6, Onstead may execute a security agreement which secures all or a
portion of the outstanding balance under such Line of Credit with Onstead's
residence.
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2.7 Increases in Compensation, Perquisites, Benefits, Insurance, and
Indemnities. Nothing in this Agreement shall limit the Board, in its sole
discretion, from increasing at any time Onstead's compensation, perquisites,
benefits, liability insurance, and/or indemnity protection above and beyond the
minimums or levels established herein.
ARTICLE 3: TERM AND TERMINATION OF EMPLOYMENT
3.1 Term. The employment relationship created herein is a calendar
month-to-month at-will relationship. Such at-will relationship may be terminated
at any time by either Randall's in accordance with Section 3.2 or by Onstead in
accordance with Section 3.3 upon thirty (30) days' prior written notice to the
other party, provided that no such action shall alter or amend any other
provisions hereof or rights arising hereunder. A written notice by Randall's or
Onstead given to the other party pursuant to this Section 3.1 shall state that
it or he has elected to terminate Onstead's employment hereunder and the
effective date and the reason for such termination.
3.2 Termination by Randall's. Randall's shall have the right to terminate
Onstead's employment pursuant to Section 1.2 at any time for the following
reasons:
(i) upon Onstead's death;
(ii) upon Onstead's becoming incapacitated by accident, sickness, or
any other circumstance which renders him mentally or physically incapable
of performing the duties and services required of him hereunder for a
period of at least 120 consecutive days or for a period of 180 business
days during any 12-month period;
(iii) for cause, which for purposes of this Agreement shall mean
Onstead's gross negligence or willful misconduct in performance of the
duties and services required of him pursuant to this Agreement, or
Onstead's indictment for a felony or final conviction of a misdemeanor
involving moral turpitude;
(iv) for Onstead's material breach of any material provision of this
Agreement which, if correctable, remains uncorrected for 30 days following
written notice to Onstead by Randall's of such breach;
(v) in connection with the insolvency, liquidation, or the
occurrence of any other event resulting in the discontinuance of the
existence of Randall's (without a successor thereto); or
(vi) for any reason other than as specified above.
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3.3 Termination by Onstead. Onstead shall have the right to terminate his
employment pursuant to Section 1.2 at any time for the following reasons:
(i) the assignment to Onstead by the Board of duties materially
inconsistent with the duties associated with the position described in
Section 1.2;
(ii) a material breach by Randall's of any material provision of
this Agreement which, if correctable, remains uncorrected for 30 days
following written notice of such breach by Onstead to Randall's; or
(iii) for any reason other than as specified above.
ARTICLE 4: EFFECT OF TERMINATION
4.1 Survival of Certain Benefits. Upon termination of Onstead's employment
for any reason whatsoever, Onstead's rights and Randall's obligations pursuant
to Section 2.4, Section 2.5, Section 2.6, and any other Section which by its
terms or context so provides shall survive such termination. Further, unless
otherwise expressly provided herein, upon termination of Onstead's employment
hereunder, Onstead shall be entitled to such benefits as governed by the terms
of the relevant benefit plans and programs of Randall's.
4.2 Compensation Through Termination. In the event of Onstead's
termination for any reason whatsoever, Randall's shall pay to Onstead (or, in
the case of Onstead's death, to his designated beneficiary), within 10 days of
the later of (a) the effective date of such termination or (b) the date
Randall's has notice of such termination (hereinafter referred to as the
"Payment Date"), Onstead's regular salary through the date of such termination
and any unpaid bonus or incentive compensation, including but not limited to any
bonus pursuant to Section 2.2, which is due and payable as of the effective date
of such termination. Notwithstanding the foregoing, compensation pursuant to the
Randall's Food Markets, Inc. 1997 Stock Option Plan attached as Exhibit B shall
be governed by the terms of such plan. Further, in the event Onstead's
employment is terminated pursuant to Section 3.2(vi), Randall's shall pay to
Onstead (or, in the case of Onstead's death, to his designated beneficiary) an
allocable portion of any bonus or incentive compensation, including but not
limited to any bonus pursuant to Section 2.2, which would have been paid in the
future but for Onstead's termination and which takes into account any
performance or period of time which elapsed before Onstead's effective date of
termination. Such bonus shall be paid at the time and in the manner as is
customary or as is prescribed by the terms of any written plan or policy
pursuant to which such bonus or incentive compensation is paid.
4.3 Cessation of Compensation and Benefits. If Onstead's employment is
terminated by Randall's pursuant to Section 3.2(i), Section 3.2(ii), Section
3.2(iii),Section 3.2(iv), or Section 3.2(v), or by Onstead pursuant to Section
3.3(iii), compensation, bonuses and incentive
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compensation (except as otherwise provided for in Section 4.2), perquisites, and
benefits provided pursuant to Section 2.1, Section 2.2, and Section 2.3 shall
terminate contemporaneously with the termination of Onstead's employment and no
severance benefits shall be payable hereunder.
4.4 Severance Benefits for Involuntary Termination. In the event Onstead's
employment is terminated by Randall's pursuant to Section 3.2(vi) or by Onstead
pursuant to Section 3.3(i) or Section 3.3(ii):
(i) In the event such termination occurs within two years of the
Effective Date, Randall's shall pay, on or before the Payment Date, a
severance payment equal to three times the sum of (a) Onstead's annual
salary as of the date of his termination and (1)) the annual average of
the total value of all bonuses paid or payable on account of the
immediately preceding three calendar years (including, but not limited to,
bonuses pursuant to Section 2.2);
(ii) In the event such termination occurs after two years from the
Effective Date, Randall's shall pay, on or before the Payment Date, a
severance payment equal to two times the sum of (a) Onstead's annual
salary as of the date of his termination and (b) the annual average of the
total value of all bonuses paid or payable on account of the immediately
preceding two calendar years (including, but not limited to, bonuses
pursuant to Section 2.2);
(iii) Regardless of the timing of such termination, for a period of
two years from the effective date of Onstead's termination, Randall's
shall furnish to Onstead, to Onstead's Spouse, and to any dependents of
Onstead and/or Onstead's Spouse who would qualify for coverage under
Randall's medical and dental plans if Onstead had remained employed, at no
cost to Onstead, Onstead's Spouse, or Onstead's dependents, medical and
dental insurance on the same terms and conditions as it is offered to
similarly-situated executives of Randall's who are currently employed (and
such executives' spouses and dependents); provided, however, in the event
Onstead terminates within two years of the Effective Date, the foregoing
coverages shall be provided for a term of three years from the effective
date of such termination. For purposes of this Section 4.4(iii), the term
"Spouse" shall mean the spouse to whom Onstead is married at the time of
coverage and, if applicable, for purposes of providing coverage to
Onstead's spouse after his death, the spouse of Onstead on the date of his
death; and
(iv) Regardless of the timing of such termination, Randall's
obligation to transfer all right, title, and interest in its investment in
the policies underlying the Split Dollar Agreement (as defined in Section
2.3(iii)) shall be triggered upon the effective date of any such
termination.
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4.5 No Duty to Mitigate Losses. Onstead shall have no duty to find new
employment following the termination of his employment. Any salary, benefits, or
other remuneration received by Onstead from a third party for the providing of
personal services (whether by employment or by functioning as an independent
contractor) following Onstead's termination of his employment hereunder shall
not reduce Randall's obligation to make any payments or provide any benefits
under this Agreement.
ARTICLE 5: CONFIDENTIAL INFORMATION
5.1 Proprietary and Confidential Information. In accordance with Onstead's
existing and continuing obligations, Onstead agrees and acknowledges that the
various Randall's Entities have developed and own "Proprietary and Confidential
Information" which constitutes valuable and unique property including, without
limitation, concepts, ideas, plans, strategies, analyses, surveys, and
proprietary information related to the past, present, or anticipated business of
various of the Randall's Entities, including, but not limited to, costs, prices,
uses, applications of products and services, results of investigations or
experiments, and all apparatus, products, processes, compositions, samples,
formulas, computer programs, pricing policy, financial information, policy
and/or procedure manuals, training and recruiting procedures, accounting
procedures, the status and content of Randall's Entities' contracts with
suppliers, employees, and customers, the Randall's Entities' business
philosophy, and servicing, retailing, or marketing methods and techniques at any
time used, developed, or investigated by any Randall's Entity which are not
generally available to the public or which are maintained as confidential by any
Randall's Entity. Moreover, Onstead agrees and acknowledges that the term
Proprietary and Confidential Information of the Randall's Entities includes,
without limitation, all analyses, correspondence, data or information,
memoranda, notes, records, or other documents, including charts or drawings, and
all copies thereof which are in Onstead's possession, custody, or control and
which are related in any manner to the past, present, or anticipated business of
any of the Randall's Entities. Except as may be required by law, Onstead agrees
that he will not at any time, either during or subsequent to his employment with
Randall's, disclose to others, permit to be disclosed, use, permit to be used,
copy, or permit to be copied, except in pursuance of his services on behalf of
any Randall's Entity, any such Proprietary and Confidential Information (whether
or not developed by Onstead) without Randall's prior written consent. Except as
may be required by law, Onstead further agrees to maintain in confidence any
proprietary and confidential information of third parties received or of which
Onstead has knowledge as a result of his employment, association, or work with
any Randall's Entity. Onstead agrees that in the event of an actual breach by
Onstead of the provisions of this Section, Randall's shall be entitled to inform
all potential or new employers of this Agreement. The prohibitions of this
Section 5.1 shall not apply, however, to information in the public domain (but
only if the same becomes part of the public domain through a means other than a
disclosure prohibited hereunder).
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5.2 Documents. Onstead agrees to leave in his office or deliver to
Randall's at the termination of his employment all correspondence, memoranda,
notes, records, drawings, sketches, plans, supplier lists, employee lists,
customer lists, product compositions, data or information, analyses, or other
documents and all copies thereof (all of which are hereafter referred to as the
"Documents"), which are in his possession, custody, or control and which are
related in any manner to the past, present, or anticipated business of any of
the Randall's Entities. In this regard, Onstead hereby grants and conveys to
Randall's all right, title, and interest in and to, including without
limitation, the right to possess, print, copy, and sell or otherwise dispose of,
any reports, records, papers, summaries, photographs, drawings, data,
information, or other documents, and writings, and copies, abstracts or
summaries thereof, which may have been prepared by Onstead or under his
direction or which may have come into Onstead's possession in any way during the
term of his employment with any of the Randall's Entities which relate in any
manner to past, present, or anticipated business of any of the Randall's
Entities.
ARTICLE 6: NON-COMPETITION
Onstead and Randall's agree and acknowledge that Onstead has
contemporaneously herewith, agreed to a Covenant not to Compete with Randall's
as set forth in Section 6.02 of the Voting, Repurchase and Shareholders
Agreement dated as April 2, 1997, among a Randall's Entity, an affiliate of
Kohlberg Kravis Roberts & Co., and certain shareholders of Randall's.
ARTICLE 7: MISCELLANEOUS
7.1 Effective Date. The Effective Date of this Agreement shall be the
"closing date" of the "transactions" which are the subject of the Subscription
Agreement dated as of April 2, 1997, among a Randall's Entity, an affiliate of
Kohlberg Kravis Roberts & Co., and Robert R. Onstead.
7.2 Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to Randall's to: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Financial Officer
and
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Kohlberg Kravis Roberts & Co.
c/o Mr. David Sorkin
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017-3954
If to Onstead to: R. Randall Onstead, Jr.
315 West Alkire Lake Drive
Sugar Land, Texas 77478
7.3 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
7.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
7.5 Severability. If, as a result of arbitration proceedings pursuant to
Section 7.13 or as the result of the determination of a court of competent
jurisdiction, it is determined that any provision of this Agreement is invalid
or unenforceable, then the invalidity or unenforceability of that provision
shall not affect the validity or enforceability of any other provision of this
Agreement, and all other provisions shall remain in full force and effect.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
7.7 Withholding of Taxes. Randall's may withhold from any compensation,
perquisites, or benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or governmental regulation
or ruling.
7.8 Headings. The Section headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
7.9 Gender and Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
7.10 Affiliate, Affiliated Company. Unless the context otherwise provides,
as used in this Agreement, the term "affiliate" or "affiliated company" shall
mean any entity which owns or controls, is owned or controlled by, or is under
common ownership or control with, Randall's.
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7.11 Assignment. This Agreement, and the rights and obligations of the
parties hereunder, are personal and neither this Agreement, nor any right,
benefit, or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.
7.12 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties, and agreements between the
parties with respect to the employment of Onstead by Randall's. Each party to
this Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party, or by anyone acting
on behalf of either party, which is not embodied herein and that no agreement,
statement, or promise relating to the employment of Onstead by Randall's which
is not contained in this Agreement shall be valid or binding. Any modification
of this Agreement will be effective only if it is in writing and signed by the
party to be charged.
7.13 Enforcement and Remedies. The terms of this Agreement have been
carefully considered and agreed upon by Randall's and Onstead and represent the
sole obligations of Randall's and Onstead with respect to Onstead's employment
with Randall's. If a dispute arises out of or related to this Agreement and the
dispute cannot be settled through direct discussions, Randall's and Onstead
agree that they shall first endeavor to settle the dispute in an amicable
fashion, including the use of a mediator. If such efforts fail to resolve the
dispute, then any and all claims, demands, causes of action, disputes,
controversies, and other matters in question arising out of or relating to this
Agreement, any of its provisions, or the relationship between the parties
created by this Agreement, whether sounding in contract, tort, or otherwise,
whether provided by statute or the common law, for damages or any other relief
(all of which are referred to herein as "Claims"), shall be resolved by binding
arbitration pursuant to the Commercial Arbitration Rules then in effect with the
American Arbitration Association. The arbitration proceeding shall be conducted
in Houston, Texas. The enforcement of this agreement to arbitrate, the validity,
construction, and interpretation of this agreement to arbitrate, and all
procedural aspects of the proceeding pursuant to this agreement to arbitrate
shall be governed by and construed pursuant to the Commercial Arbitration Rules
then in effect with the American Arbitration Association. In deciding the
substance of the parties' Claims, the arbitrators shall apply the substantive
laws of the State of Texas (excluding Texas choice-of-law principles that might
call for the application of some other state's law). Only actual damages may be
awarded. It is expressly agreed that the arbitrators shall have no authority to
award treble, exemplary, or punitive damages of any type under any circumstances
regardless of whether such damages may be available under the applicable law.
Any and all of the arbitrators' orders and decisions may be enforceable in, and
judgment upon any award rendered in the arbitration proceeding may be confirmed
and entered by, any federal or state court having jurisdiction. Any costs of
attorney fees, arbitration, mediation, or litigation which are incurred as a
result of a Claim shall be paid by the party who incurs the costs.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in multiple counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument, this 1st day
of April, 1997.
RANDALL'S FOOD MARKETS, INC.
By: /s/ Robert R. Onstead
-------------------------
Name: Robert R. Onstead
Title: Chairman
R. Randall Onstead, Jr.
/s/ R. Randall Onstead, Jr.
-----------------------------
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EXHIBIT 10.7
EMPLOYMENT AND CONSULTING AGREEMENT
THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement") is entered into by
and between Mr. Ronnie W. Barclay ("Barclay"), a resident of Houston, Texas, and
Randall's Food Markets, Inc. ("Randall's"), a Texas corporation, having its
principal place of business in Houston, Texas.
WITNESSETH:
WHEREAS, Barclay is presently an employee and officer of Randall's and, at
various times, has been an employee, officer, and director of Randall's, certain
of its affiliated and subsidiary companies, and/or their predecessors or
successors in interest (collectively, with Randall's, the "Randall's Entities"
or, individually, a "Randall's Entity"); and
WHEREAS, Randall's anticipates a reorganization and transition among its
executive officers and desires to retain Barclay in the employ of Randall's for
such time as is necessary to assure that Randall's is prepared for this
reorganization and transition and desires to secure the consulting services of
Barclay for a period after the transition so that Barclay's experience and
knowledge will be available to Randall's; and
WHEREAS, Randall's and Barclay desire to continue Barclay's employment on
a temporary basis and to establish a consulting relationship on such terms and
conditions, and for the consideration, hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual covenants and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Barclay and
Randall's hereby agree as follows:
ARTICLE 1: EMPLOYMENT, CONSULTING ENGAGEMENT, DUTIES AND COMPENSATION
1.1 Employment Engagement. Randall's agrees to continue to employ Barclay
and Barclay agrees to continue to be employed by Randall's in accordance with
and subject to the terms of this Agreement.
1.2 Service and Duties. Barclay and Randall's agree that during the period
commencing on the Effective Date (as such term is defined in Section 7.1), and
ending on the effective date of Barclay's termination of employment pursuant to
Section 3.1, Randall's shall employ Barclay as the Executive Vice President and
Chief Administrative Officer of Randall's, or in such other executive positions
as the parties mutually may agree. Barclay agrees to serve in such position(s)
and to perform diligently and to the best of his abilities the duties and
services appertaining to such office, as well as additional duties and services
appropriate to such office which the parties mutually may agree upon from time
to time. Barclay's employment shall also be subject to the policies maintained
and established by Randall's, as the same may be amended from time to time.
<PAGE>
1.3 Other Interests. Barclay agrees, during the period of his employment
hereunder, to devote his primary business time, energy, and best efforts to the
business and affairs of the Randall's Entities and not to engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Barclay's performance of his duties hereunder, is contrary to the interests of
any Randall's Entity, or requires any significant portion of Barclay's business
time.
1.4 Duty of Loyalty. Barclay acknowledges and agrees that during his
employment with Randall's he owes a fiduciary duty of loyalty, fidelity, and
allegiance to act at all times in the best interests of Randall's and to do no
act which would injure the business, interests, or reputation of any Randall's
Entity. In keeping with those duties, Barclay shall make full disclosure to
Randall's of all business opportunities pertaining to Randall's business and
shall not appropriate for Barclay's own benefit business opportunities
concerning the subject matter of the fiduciary relationship.
1.5 Location and Conditions of Employment. During Barclay's employment
pursuant to Section 1.1, Randall's may not, without Barclay's consent (which
consent shall not be unreasonably withheld), require Barclay's principal place
of business to be anywhere other than within 20 miles of Barclay's job location
on the day immediately preceding the Effective Date.
ARTICLE 2: COMPENSATION, PERQUISITES, BENEFITS, INSURANCE AND INDEMNITIES
2.1 Base Salary. During the term of his employment, Barclay shall receive
a base salary equivalent to $16,667 per month, or such greater amount as the
parties mutually may agree upon from time to time. Barclay's base salary shall
be paid in equal installments in accordance with Randall's standard policy
regarding payment of compensation to executives but no less frequently than
monthly.
2.2 Perquisites. Subject to the approval of Randall's Chief Executive
Officer in his sole discretion, while Barclay is actively employed under this
Agreement, he shall be entitled to participate in those perquisites which are
extended to similarly situated executives of Randall's. In addition, and not by
way of limitation, and subject to the approval of Randall's Chief Executive
Officer in his sole discretion, Barclay shall be afforded the following
perquisites and benefits as incidences of his employment:
(i) Business and Entertainment Expenses - Randall's shall reimburse
Barclay for, or pay on behalf of Barclay, reasonable and appropriate
expenses incurred by Barclay for business related purposes.
(ii) Other Randall's Benefits - While employed by Randall's,
Barclay, and to the extent applicable, Barclay's family, dependents, and
beneficiaries, shall be allowed to participate in all benefits, plans, and
programs, including improvements or modifications of the same, which are
now, or may hereafter be, available to similarly-situated Randall's
executives. Such benefits, plans, and programs may include, without
limitation, any profit sharing plan, employee stock ownership plan, thrift
plan, pension plan, health insurance or health care plan, disability
insurance,
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and the like. Randall's shall not however, by reason of this Section
2.2(ii), be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing, any benefit plan or program, so long as such
changes are similarly applicable to executives generally.
2.3 Increases in Compensation, Perquisites, and Benefits. Nothing in this
Agreement shall limit Randall's, in its sole discretion, from increasing at any
time Barclay's compensation, benefits, and perquisites above and beyond the
minimums or levels established herein.
2.4 Liability Insurance. Randall's agrees to maintain on behalf of
Barclay, on a basis no less favorable to Barclay than as provided by Randall's
on behalf of Barclay on the day prior to the Effective Date, all insurance
coverages respecting any liability or potential liability which Barclay may
incur in the future or may have incurred in the past in the scope of his
employment, in the scope of his consulting engagement, in his status as a
fiduciary, or as an officer or director of any Randall's Entity. Such coverages
shall be maintained during Barclay's active employment and during his consulting
engagement hereunder and at least for such "trailing periods" as are provided by
such coverages on the day prior to the Effective Date. Notwithstanding the
foregoing, in no event shall this Section 2.4 be construed to obligate Randall's
to reimburse Barclay for any insurance premiums paid by Barclay for his personal
umbrella insurance or any other insurance premiums. Further, notwithstanding any
other provision in this Agreement to the contrary, this Section 2.4 shall
survive the termination of Barclay's employment and Barclay's death.
2.5 Indemnities. Randall's agrees to maintain on behalf of Barclay, on a
basis no less favorable to Barclay than as provided by Randall's on behalf of
Barclay on the day prior to the Effective Date, all contractual provisions
(whether embodied in articles of incorporation, bylaws, board resolutions,
agreements, or otherwise) which in any way limit the liability of, or provide
advances or protections to, or indemnify Barclay respecting his past, present,
or future employment, consulting relationship, status as a fiduciary, or
position as an officer, or director of any Randall's Entity. Notwithstanding any
other provision in this Agreement to the contrary, this Section 2.5 shall
survive the termination of Barclay's employment and Barclay's death.
ARTICLE 3: TERM AND EFFECT OF TERMINATION OF EMPLOYMENT
3.1 Term. The employment relationship created herein is intended to be
temporary and is a calendar month-to-month at-will relationship. Such at-will
relationship may be terminated at any time by either Randall's or Barclay upon
thirty (30) days' prior written notice to the other party, provided that no
action shall alter or amend any other provisions hereof or rights arising
hereunder. A written notice by Randall's or Barclay given to the other party
pursuant to this Section 3.1 shall state that it or he has elected to terminate
Barclay's employment hereunder and the effective date of such termination (the
"Termination Date"). As of the Termination Date and except as provided in
Article 6, Barclay shall terminate from employment with, and as an officer and
director of, Randall's and any other Randall's Entity and from any other
positions, posts, offices, or assignments respecting his association with
Randall's or any other Randall's Entity. Except as otherwise provided in Article
6, Barclay acknowledges and agrees that he shall have no authority to and will
not act as an employee, officer, director, or in any other capacity for any
Randall's Entity from and after the
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Termination Date. Notwithstanding anything in the foregoing to the contrary,
from and after the Termination Date, Barclay shall be permitted to continue, and
Randall's agrees that it will take no action to remove Barclay, as a member or
director or officer of the Texas Marketing Education Advisory Board and/or the
Texas A&M University Center for Executive Development.
3.2 Compensation Through Termination. Randall's shall pay to Barclay his
regular salary and benefits to the Termination Date. Such amounts shall be paid
less customary withholding for taxes and applicable deductions. Payments made
pursuant to this Section 3.2 together with payments made pursuant to Section 3.4
and, if applicable, Section 3.9 and Section 3.10, are in full satisfaction of
all wages, benefits, and other compensation owed by any other Randall's Entities
to Barclay for employment or service with any of the Randall's Entities through
the Termination Date. All of Barclay's executive perquisites and benefits,
except as otherwise provided herein, shall cease as of the Termination Date;
provided, however, that Sections 2.4 and Section 2.5 shall survive Barclay's
termination of employment.
3.3 Expenses. Barclay shall, within thirty (30) days of the Termination
Date, submit all actual, reasonable, and customary expenses incurred by him in
the course of his employment with proper documentation, which, upon
verification, Randall's shall reimburse promptly in accordance with Randall's
reimbursement policy. Barclay acknowledges and agrees that he will not incur and
has no authority to incur any employment related expenses after the Termination
Date and further agrees that Randall's shall have no obligation to reimburse
expenses not submitted within the time period set forth above except as provided
in Section 6.3.
3.4 Outplacement Services. Beginning upon a date of Barclay's choice
subsequent to the Termination Date, Randall's shall provide, through a vendor
mutually agreed to by Barclay and Randall's, outplacement services for Barclay
in accordance with its customary policy of providing outplacement services for
officers upon severance of employment; provided, however, that such outplacement
services shall in no event be provided for a period in excess of one (1) year;
and, provided further, that such outplacement services shall in no event be
provided after December 31, 1998. Notwithstanding anything in the foregoing to
the contrary, the total cost to Randall's of such outplacement services shall
not exceed $30,000.
3.5 Continuing Rights in Benefit Plans. Except as otherwise expressly
provided herein, Barclay shall be entitled to receive the benefits to which he
is entitled under any employee pension benefit plans or employee welfare benefit
plans sponsored or maintained by the Randall's Entities according to their
terms. In the event of any change or modification of any such plans after the
Effective Date, including changes, if any, that may result in a reduction or
termination of benefits, Barclay and any beneficiaries claiming through him in
such plan or plans will be subject to such changes and modifications on the same
terms and conditions as all other participants or beneficiaries.
3.6 Cooperation. Barclay shall cooperate with the Randall's Entities to
the extent reasonably required in all matters relating to the winding up of his
pending work on behalf of any of the Randall's Entities and the orderly transfer
of any such pending work as designated by Randall's pending the Termination
Date. Barclay shall take such further action and execute any such
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further documents as may be reasonably necessary or appropriate in order to
carry out the provisions and purposes of this Agreement.
3.7 Company Assets. Promptly after Barclay's termination of employment,
Barclay shall deliver to Randall's any property of any Randall's Entity or
Entities that is in his possession or control, including, without limitation,
any credit cards furnished by Randall's for his use.
3.8 Severance Agreement. Barclay shall have thirty (30) days (or, if
longer, the applicable period prescribed for valid waiver of claims under the
Age Discrimination in Employment Act or the Older Workers Benefit Protection
Act) from and after the Termination Date (the "Consideration Period") to
consider whether to execute the Severance Agreement and Release attached hereto
as Exhibit A (the "Severance Agreement"). At any time during the Consideration
Period, Barclay may elect (at his option and in his sole discretion) to execute
the Severance Agreement. Barclay shall exercise any such election by executing
and delivering the Severance Agreement to Randall's and upon such action, the
Severance Agreement shall be binding upon Randall's; provided, however, that
such election must be made within the Consideration Period and in accordance
with the foregoing provisions of this Section 3.8.
3.9 Death Benefit - Death Before Termination Date. In the event of
Barclay's death while he is employed pursuant to Section 1.1, except as provided
in this Section 3.9 and except as provided in Section 2.2, Section 2.4, Section
2.5, Section 3.3, and Section 3.5, all of Randall's obligations pursuant to this
Agreement shall cease immediately upon such death; provided, however, that
Barclay's estate shall be entitled to any unpaid amounts of Barclay's base
salary (less applicable payroll tax withholding and deductions) though the end
of the calendar month in which Barclay's death occurs; and provided further,
that Randall's shall pay to Barclay's estate, within thirty (30) days after
Randall's has received notice of Barclay's death, a lump sum cash payment in an
amount equal to $865,857 (less any applicable payroll tax withholding).
Notwithstanding anything to the contrary in the foregoing, in the event of
Barclay's death while he is employed pursuant to Section 1.1, any "qualified
beneficiary" (as such term is defined in section 4980B(g)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) with respect to Barclay shall be
entitled to continue medical and/or dental insurance for thirty-six (36) months
following the date of Barclay's death on the same terms and conditions and for
the same employee premium (reduced, if applicable, to reflect only such
qualified beneficiary's coverage) as set forth in Section 6.3.
3.10 Death Benefit - Death On Or After Termination Date. In the event of
Barclay's death on or after the Termination Date but before the expiration of
his consulting engagement pursuant to Section 6.1, except as provided in this
Section 3.10 and except as provided in Section 2.2, Section 2.4, Section 2.5,
Section 3.2, Section 3.3, and Section 3.5, all of Randall's obligations pursuant
to this Agreement shall cease immediately upon such death; provided, however,
that Randall's shall pay to Barclay's estate, within thirty (30) days after
Randall's has received notice of Barclay's death, a lump sum cash payment in an
amount equal to the difference between (a) $865,857 and (b) the sum of (i) any
amounts paid out to Barclay by Randall's pursuant to Article 5 and Article 6
(other than as reimbursements for travel or related expenses or medical or
dental expenses) up to the date such death benefit payment is made and (ii) any
amounts forfeited by Barclay under this Agreement due to any breach of this
Agreement by Barclay (other than any breach
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due to his death). The foregoing payment shall be net of any applicable payroll
tax withholding. Notwithstanding anything to the contrary in the foregoing, in
the event that Barclay has executed and delivered the Severance Agreement to
Randall's in accordance with Section 3.8 and Barclay has not revoked the
Severance Agreement within the seven-day period referred to in paragraph 16
thereof, then the figure "$218,000" shall be substituted in place of the figure
"$865,857" for purposes of determining the amount of the payment due Barclay's
estate under the immediately preceding sentence. Notwithstanding anything to the
contrary in the foregoing, in the event of Barclay's death on or after the
Termination Date, any "qualified beneficiary" (as such term is defined in
section 4980B(g)(l) of the Code) with respect to Barclay shall be entitled to
continue medical and/or dental insurance following the date of Barclay's death
for the remaining unexpired portion of the term of thirty-six (36) months, on
the same terms and conditions, and for the same employee premium (reduced, if
applicable, to reflect only such qualified beneficiary's coverage) set forth in
Section 6.3.
ARTICLE 4: CONFIDENTIAL INFORMATION
4.1 Proprietary and Confidential Information. In accordance with Barclay's
existing and continuing obligations, Barclay agrees and acknowledges that the
various Randall's Entities have developed and own valuable "Proprietary and
Confidential Information" which constitutes valuable and unique property
including, without limitation, concepts, ideas, plans, strategies, analyses,
surveys, and proprietary information related to the past, present, or
anticipated business of various of the Randall's Entities, including, but not
limited to, costs, prices, uses, applications of products and services, results
of investigations or experiments, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, pricing policy, financial
information, policy and/or procedure manuals, training and recruiting
procedures, accounting procedures, the status and content of Randall's Entities'
contracts with suppliers, employees, and customers, the Randall's Entities'
business philosophy, and servicing, retailing, or marketing methods and
techniques at any time used, developed, or investigated by any Randall's Entity
which are not generally available to the public or which are maintained as
confidential by any Randall's Entity. Moreover, Barclay agrees and acknowledges
that the term Proprietary and Confidential Information of the Randall's Entities
includes, without limitation, all analyses, correspondence, data or information,
memoranda, notes, records, or other documents, including charts or drawings, and
all copies thereof, made, composed, or received by Barclay, solely or jointly
with others, and which are in Barclay's possession, custody, or control and
which are related in any manner to the past, present, or anticipated business of
any of the Randall's Entities. Except as may be required by law, Barclay agrees
that he will not at any time, either during or subsequent to the term of this
Agreement, disclose to others, permit to be disclosed, use, permit to be used,
copy, or permit to be copied, except in pursuance of his services on behalf of
any Randall's Entity pursuant to Article 6, any such Proprietary and
Confidential Information (whether or not developed by Barclay) without Randall's
prior written consent. Except as may be required by law, Barclay further agrees
to maintain in confidence any proprietary and confidential information of third
parties received or of which Barclay has knowledge as a result of his
employment, consulting engagement, association, or work with any Randall's
Entity. Barclay agrees that Randall's shall be entitled to inform all potential
or new employers of this Agreement. The prohibitions of this Section 4.1 shall
not apply, however, to information in the public domain (but only if the same
becomes part of the public domain through a means other than a disclosure
prohibited hereunder).
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4.2 Documents. Barclay agrees to leave in his office or deliver to
Randall's at the termination of his employment all correspondence, memoranda,
notes, records, drawings, sketches, plans, supplier lists, employee lists,
customer lists, product compositions, data or information, analysis, or other
documents and all copies thereof (all of which are hereafter referred to as the
"Documents") which are in his possession, custody, or control and which are
related in any manner to the past, present, or anticipated business of any of
the Randall's Entities. In this regard, Barclay hereby grants and conveys to
Randall's all right, title, and interest in and to, including, without
limitation, the right to possess, print, copy, and sell or otherwise dispose of
any reports, records, papers, summaries, photographs, drawings, data,
information, or other documents, and writings, and copies, abstracts or
summaries thereof which may have been prepared by Barclay or under his direction
or which may have come into Barclay's possession in any way during the term of
his employment with any of the Randall's Entities which relate in any manner to
past, present, or anticipated business of any of the Randall's Entities. Barclay
acknowledges that all work performed, including but not limited to all Documents
and other writings authored in whole or in part by him pursuant to his
employment or his consulting engagement shall be deemed "work made for hire"
under the Copyright Act and further agrees to assign, and does hereby assign, to
Randall's all rights therein, including, without limitation, all copyrights
therein, all rights to prepare derivative works therefrom, and all writer's,
consultant's, architect's, engineer's, or other proprietary or "moral" rights
therein for the full term thereof, throughout the world. Barclay shall not use,
sell, or reproduce such work or any part thereof, without Randall's prior
written permission. Notwithstanding anything in the foregoing to the contrary,
however, Randall's and Barclay agree that Barclay may keep copies of speeches
that Barclay delivered while employed by Randall's and, after the date which is
two (2) years after the Termination Date, such speeches shall be considered to
be in the public domain and may be used by Barclay as he sees fit. In the event
of a breach or threatened breach of any of the provisions of Section 4.1 or
Section 4.2, Randall's shall be entitled to an injunction ordering the return of
such Proprietary and Confidential Information and Documents and any and all
copies thereof and restraining Barclay from using or disclosing, for Barclay's
benefit or the benefit of others, in whole or in part, any Proprietary and
Confidential Information, including, but not limited to, the Proprietary and
Confidential Information which such Documents contain, constitute, or embody.
Barclay further agrees that any breach or threatened breach of any of the
provisions of Section 4.1 or Section 4.2 would cause irreparable injury to
Randall's for which it would have no adequate remedy at law. Nothing herein
shall be construed as prohibiting Randall's from pursuing any other remedies
available to it for any such breach or threatened breach, including the recovery
of damages.
ARTICLE 5: NON-COMPETITION AND COVENANTS REGARDING EMPLOYEES
5.1 Non-Competition. Barclay and Randall's agree and acknowledge that
Randall's Entities have developed and own valuable Proprietary and Confidential
Information (as defined in Section 4.1) and that Randall's Entities have
developed substantial goodwill. Barclay and Randall's further agree and
acknowledge that Randall's has a substantial and legitimate interest in
protecting its Proprietary and Confidential Information and goodwill. Randall's
and Barclay further agree and acknowledge that the provisions of this Section
5.1 are reasonably necessary to protect Randall's legitimate business interests.
During the two (2) year period following the Termination Date, Barclay shall
not, as a shareholder, director, employee, officer, partner, consultant, or
otherwise, at
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any location in the United States, engage directly or indirectly in any business
or enterprise which is "in competition" with any Randall's Entity. A business or
enterprise "in competition" with any Randall's Entity includes any business or
enterprise that is engaged in any business activity of wholesale or retail
grocery distribution within Texas. However, Barclay shall be allowed to purchase
and hold for investment less than two percent (2%) of the shares of any
corporation in competition with any Randall's Entity whose shares are regularly
traded on a national securities exchange or in the over-the-counter market.
Barclay further agrees that the existence of any claim or cause of action of
Barclay against Randall's, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Randall's of any or all of
this Section 5.1. Barclay agrees that the scope of the restrictions as to time,
geographic area, and scope of activity in this Section 5.1 are reasonably
necessary for the protection of Randall's legitimate business interests and are
not oppressive or injurious to the public interest. As independent and valuable
consideration for Barclay's obligations pursuant to this Section 5.1, Randall's
agrees to pay to Barclay a total of $200,000 over the two (2) year term of this
Section 5.1 in equal bi-weekly installments (less any applicable withholding for
taxes) with the first installment payable as of the Termination Date. Barclay
agrees that in the event of a breach or threatened breach of any of the
provisions of this Section 5.1, Randall's shall be entitled to inform all
potential or new employers of Barclay of this Section 5.1, and Randall's shall
be entitled to injunctive relief against Barclay's activities to the extent
allowed by law. Barclay further agrees that any breach or threatened breach of
any of the provisions of this Section 5.1 would cause irreparable injury to
Randall's for which it would have no adequate remedy at law. Barclay and
Randall's acknowledge that in the event Barclay breaches any obligation under
this Section 5.1, the amount of damages caused by such breach is impossible or
difficult to quantify. Therefore, Barclay and Randall's agree that, in the event
Barclay materially breaches any of his obligations pursuant to this Section 5.1,
as liquidated damages, all payments pursuant to this Section 5.1 shall cease
immediately and no further payments shall be paid pursuant to this Section 5.1.
Barclay and Randall's agree that the liquidated damages provided herein are a
reasonable measure of recovery of damages in the event of a breach of Barclay's
obligations pursuant to this Section 5.1 and are not provided as a penalty and
further, that such liquidated damages shall serve as the only measure of damages
in the event of such a breach. Nothing herein shall be construed as prohibiting
Randall's from pursuing any other remedies available to it for any such breach
or threatened breach; provided, however, that any recovery of damages shall be
in accordance with the foregoing liquidated damage provisions. Notwithstanding
anything in the foregoing to the contrary, not more than once in any six (6)
month period (or, if the Board of Directors of Randall's (the "Board") so
consents in its sole discretion, on a more frequent basis), Barclay may consult
with the Board with respect to any proposed activity or a reasonable number of
proposed activities of Barclay and, if Barclay obtains written permission from
the Board to engage in such activity or activities, such activity or activities
shall not constitute a breach of Barclay's obligations pursuant to this Section
5.1.
5.2 Covenants Regarding Employees and Suppliers. Barclay agrees that
during the three (3) year period following the Termination Date, he will not, at
any location in the United States, solicit or induce any employee of any
Randall's Entity to terminate employment, accept employment with anyone else, or
to interfere in a similar manner with the business of any Randall's Entity.
Barclay further agrees that during the three (3) year period following the
Termination Date, he will not, at any location in the United States, in
connection with or for the benefit of any business
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"in competition" (as defined in Section 5.1) with any Randall's Entity, solicit,
contact, canvass, or attempt to solicit, contact, or canvass any of the
suppliers or employees of any Randall's Entity with whom Barclay had direct or
indirect contact while he was performing services for any Randall's Entity.
Notwithstanding anything in the foregoing to the contrary, Barclay may contact
suppliers of Randall's so long as that contact does not involve or concern the
business activity of wholesale or retail grocery distribution in Texas.
ARTICLE 6: CONSULTING ENGAGEMENT
6.1 Consulting Services. From and after the Termination Date, Barclay will
consult and cooperate with Randall's on matters involving pending or future
litigation in which Randall's is or may be involved and such other matters and
at such times and places as Randall's may reasonably request. It is contemplated
that Barclay's consulting services will be rendered on an irregular and
part-time basis. Barclay will not be required to follow any established work
schedule or to report to Randall's at any specified times, either when
performing consulting services or during periods when Barclay is not performing
services but is holding himself available to so perform; provided, however, that
Barclay's presence and cooperation at certain conferences, depositions, and
court appearances which relate to matters involving litigation may be required
from time to time. In the performance of consulting services requested by
Randall's, Barclay shall coordinate the furnishing of his services with
representatives of Randall's, but the method and manner of performance of such
services shall be within the control of Barclay; provided, however, that in
matters involving litigation, Barclay shall cooperate fully with Randall's and
Randall's outside counsel. Randall's shall not exercise supervision of Barclay
in the performance of his consulting services.
6.2 Consulting Term. Barclay's engagement as a consultant by Randall's
pursuant to this Agreement shall continue until the expiration of three (3)
years from the Termination Date.
6.3 Consulting Fee. Recognizing that Barclay's consulting services will be
rendered on an irregular and part-time basis, and in consideration for Barclay's
covenants and promises in Section 6.1, Randall's shall pay Barclay a consulting
fee of $6,000 per annum payable as one lump sum amount of $18,000 upon the
Termination Date. As further payment for Barclay's consulting services,
Randall's shall furnish to Barclay medical and dental insurance for thirty-six
(36) months following the Termination Date on the same terms and conditions as
it is offered to officers of Randall's who are currently employed and as set
forth in Randall's medical and dental plan(s), subject to Randall's right to
amend, modify, or terminate such plan(s) providing such medical and/or dental
insurance; and, further provided, that any employee premium due for such medical
and/or dental insurance shall be paid by Barclay on or before the first day of
each month to which such insurance relates. Notwithstanding the foregoing, in
the event medical and/or dental insurance becomes available to Barclay through
another employer, (a) Barclay agrees to notify Randall's of such availability
within thirty (30) days of the time such insurance becomes available and (b)
irrespective of the time Barclay gives such notice, the medical and/or dental
insurance, as applicable, provided pursuant to this paragraph 18 shall cease
immediately upon such availability. The consideration set forth in this Section
6.3 shall constitute payment in full for Barclay holding himself available to
provide consulting services and for any and all consulting services actually
performed for Randall's by Barclay. Barclay will pay all social security,
federal income taxes, and all other
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liabilities and taxes incurred by, or on behalf of, or for the benefit of,
Barclay arising out of the performance of consulting services, and Randall's
shall have no liability for any such taxes or other liabilities.
6.4 Consulting Expenses. To the extent that Barclay incurs travel and/or
other related expenses at the request of Randall's in the performance of
Barclay's consulting services, Randall's agrees to reimburse Barclay for such
actual and reasonable expenses so incurred.
6.5 Confidential Information. Barclay recognizes and acknowledges that as
a consultant he will have access to Proprietary and Confidential Information (as
defined in Section 4.1) during his engagement as a consultant. Barclay expressly
agrees that the provisions of Section 4.1 will at all times apply to any
Proprietary and Confidential Information which he has access to as a consultant.
6.6 Consulting Documents. Barclay further agrees to deliver to Randall's
at the termination of his consulting engagement all Documents in accordance with
the provisions of Section 4.2; and Barclay further agrees that Section 4.2 shall
apply in its entirety to his consulting engagement with Randall's.
ARTICLE 7: MISCELLANEOUS
7.1 Effective Date. The Effective Date of this Agreement shall be the date
upon which this Agreement is signed by both Barclay and an authorized officer of
Randall's.
7.2 Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States registered or certified
mall, return receipt requested, postage prepaid, addressed as follows:
If to Randall's to: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Executive Officer
and
Kohlberg Kravis Roberts & Co.
c/o Mr. David Sorkin
Simpson Thatcher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
If to Barclay to: Ronnie W. Barclay
36 West Rivercrest
Houston, Texas 77042
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7.3 Assignability. Barclay's rights and obligations hereunder may not be
sold, transferred, assigned, or otherwise alienated as this Agreement is
personal to Barclay.
7.4 Remedies. Barclay and Randall's agree that, because damages at law for
any breach or nonperformance of this Agreement by Barclay, while recoverable,
will be inadequate, this Agreement may be enforced in equity by specific
performance, injunction, accounting, or otherwise. Further, Barclay and
Randall's agree that, in the event Barclay breaches any of his obligations under
this Agreement, Barclay's right to continued coverage under Randall's medical
and dental plan(s) pursuant to Section 6.3 shall be forfeited; provided,
however, that in the event of such a forfeiture, Barclay, and any "qualified
beneficiary" (as such term is defined in section 4980B(g)(l) of the Code) with
respect to Barclay, shall have the right to elect COBRA coverage pursuant to
Section 7.5.
7.5 COBRA Rights. Upon the termination of Barclay's medical and/or dental
insurance by reason of (a) the expiration of the thirty-six (36) month period
provided by Section 6.3, Section 3.9, or Section 3.10 together with Section 6.3,
(b) the availability to Barclay of medical and/or dental insurance through
another employer, or (c) forfeiture pursuant to Section 7.4, such termination
shall be treated as a qualifying event pursuant to section 4980B(f)(3) of the
Code for purposes of determining the COBRA rights of Barclay and/or any
"qualified beneficiary" (as such term is defined in section 4980B(g)(1) of the
Code) with respect to Barclay.
7.6 Enforcement of Agreement. No waiver or nonaction with respect to any
breach by the other party of any provision of this Agreement, nor the waiver or
nonaction with respect to any breach of the provisions of similar agreements
with other employees shall be construed to be a waiver of any succeeding breach
of such provision, or as a waiver of the provision itself. Should any provisions
hereof be held to be invalid or wholly or partially unenforceable, such holdings
shall not invalidate or void the remainder of this Agreement. Portions held to
be invalid or unenforceable shall be revised and reduced in scope so as to be
valid and enforceable, or, if such is not possible, then such portion shall be
deemed to have been wholly excluded with the same force and effect as if they
had never been included herein.
7.7 Choice of Law. This Agreement shall be governed by and construed and
enforced, in all respects, in accordance with the laws of the State of Texas.
7.8 Merger. This Agreement supersedes, replaces, and merges all previous
agreements and discussions relating to the same or similar subject matters
between Barclay and Randall's and constitutes the entire agreement between
Barclay and Randall's with respect to the subject matter of this Agreement. This
Agreement may not be changed or terminated orally, and no change, termination,
or waiver of this Agreement or any of the provisions herein contained shall be
binding unless made in writing and signed by all parties, and in the case of
Randall's, by an authorized officer.
7.9 Confidentiality. Barclay agrees that, following execution of this
Agreement, he will not disclose the terms thereof or the consideration for it
received from Randall's, to any other person, except in the case where, and only
to the extent that, there is a bona fide need for such disclosure to a third
party, such as in connection with obtaining advice or furnishing personal
financial information, and, in each such case, only on the condition that such
other person keeps such
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information strictly confidential. The foregoing exception notwithstanding,
Barclay agrees that such information will in no case be disclosed to any
employee or former employee of any of the Randall's Entities. The foregoing
obligations of confidentiality shall not apply to information that is required
to be disclosed as a result of any applicable law, rule, or regulation of any
governmental authority, any stock exchange, or any court.
7.10 Agreement Voluntary. Barclay acknowledges and agrees that he has
carefully read this Agreement and that he has entered into this Agreement for
the above stated consideration. Barclay warrants that he is fully competent to
execute this Agreement which he understands to be contractual. Barclay further
acknowledges that he executes this Agreement of his own free will, after having
a reasonable period of time to review, study, and deliberate regarding its
meaning and effect, and after being advised to consult an attorney, and without
reliance on any representation of any kind or character not expressly set forth
herein. Finally, fully knowing its effect and for the consideration stated
above, Barclay voluntarily executes this Agreement.
7.11 Headings. The section headings contained herein are for the purpose
of convenience only and are not intended to define or limit the contents of such
sections.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in multiple counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument, this 1st day
of April, 1997.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead
--------------------------
Name: R. Randall Onstead
Title: President and CEO
Ronnie W. Barclay
/s/ Ronnie W. Barclay
------------------------------
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EXHIBIT A
SEVERANCE AGREEMENT AND RELEASE
THIS SEVERANCE AGREEMENT AND RELEASE ("Agreement and Release") is entered
into by and between Mr. Ronnie W. Barclay ("Barclay"), a resident of Houston,
Texas, and Randall's Food Markets, Inc. ("Randall's"), a Texas corporation,
having its principal place of business in Houston, Texas.
WITNESSETH:
WHEREAS, Barclay at various times, has been an employee, officer, and
director of Randall's, certain of its affiliated and subsidiary companies,
and/or their predecessors or successors in interest (collectively, with
Randall's, the "Randall's Entities" or, individually, a "Randall's Entity"); and
WHEREAS, Barclay has terminated from any and all positions he holds with
Randall's or any other Randall's Entity, in the capacity of an employee,
officer, director, or any other position or capacity held by virtue of his
employment by Randall's or any other Randall's Entity; and
WHEREAS, Barclay and Randall's have previously entered into a certain
Employment and Consulting Agreement (the "E and C Agreement") pursuant to which,
following Barclay's termination of employment with Randall's and at Barclay's
election, Barclay may enter into this Agreement and Release whereby Barclay
releases any claims or causes of action he may have arising from or relating to
his employment or service or association with Randall's or any of the other
Randall's Entities; and
WHEREAS, Barclay desires to release any claims or causes of action he may
have arising from or relating to his employment or service or association with
Randall's or any of the other Randall's Entities;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Barclay and
Randall's hereby agree:
1. Termination. Barclay hereby acknowledges that the payments made
pursuant to Section 3.2 of the E and C Agreement together with the outplacement
services provided pursuant to Section 3.4 of the E and C Agreement are in full
satisfaction of all wages, benefits, and other compensation owed by any of the
Randall's Entities to Barclay for employment or service to the effective date of
his termination of employment (the "Termination Date").
<PAGE>
2. Severance Payments. Randall's agrees to pay to Barclay the following
severance payments:
(a) For the period, if any, beginning on the Effective Date (as such
term is defined in paragraph 18) and ending on the Severance Payment
Date (as defined below), Randall's shall pay to Barclay, on a
bi-weekly basis, an amount equal to (a) his regular salary less (b)
any amount paid during such bi-weekly time period pursuant to
Section 5.1 of the E and C Agreement; provided, however, that any
payment pursuant to this subparagraph 2(a) shall be further reduced
for any customary payroll tax withholding and applicable deductions;
and
(b) On the Severance Payment Date, Randall's shall pay to Barclay a lump
sum cash payment in an amount equal to $647,857 less the gross
amount (after adding back in any withholding and deductions) paid
pursuant to subparagraph 2(a) above (if any). Any payment pursuant
to this subparagraph 2(b) shall be further reduced for any customary
payroll tax withholding and applicable deductions.
For purposes of this paragraph 2, the term "Severance Payment Date" shall mean
the later of (i) the Effective Date or (ii) the earlier of (A) the date of the
closing of the "transactions" which are the subject of the Subscription
Agreement dated as of April 2, 1997, among a Randall's Entity, an affiliate of
Kohlberg Kravis Roberts & Co., and Robert R. Onstead, or (B) September 1, 1997.
Barclay acknowledges and agrees that these severance payments exceed and fully
satisfy any claim for severance he may have pursuant to any plan for severance
maintained by any Randall's Entity. In the event that Barclay is entitled to
severance payments pursuant to any severance plan or program of any Randall's
Entity that cannot be voluntarily released by Barclay, the severance payment,
set forth in this paragraph 2 shall be offset and reduced by any such payments.
3. Prior Rights and Obligations. Except as otherwise expressly provided
herein or in the E and C Agreement, this Agreement and Release extinguishes all
rights, if any, which Barclay may have, and obligations, if any, which any of
the Randall's Entities may have, contractual or otherwise, relating to the
employment or resignation or termination of employment of Barclay with Randall's
or any of the other Randall's Entities. All of Barclay's executive perquisites
and benefits, except as otherwise provided herein or in the E and C Agreement,
shall cease as of the Effective Date.
4. Stock Option and Restricted Stock Plan. This Agreement and Release
shall hereby amend the Restricted Period as set forth in the Restricted Stock
Agreement effective September 30, 1996, between Randall's and Barclay (the
"Restricted Stock Agreement"). The Restricted Period in paragraph 2 of the
Restricted Stock Agreement shall expire as of the Effective Date and the shares
subject to such Restricted Stock Agreement shall be delivered to Barclay at the
same time the severance payment pursuant to subparagraph 2(b) is made provided
that the conditions precedent set forth in paragraph 7 of the Restricted Stock
Agreement are met.
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5. Company Assets. Barclay hereby represents and warrants that he has no
claim or right, title, or interest in any property designated on the books of
any Randall's Entities as property or assets of any of the Randall's Entities.
Promptly after execution of this Agreement and Release, Barclay shall deliver to
Randall's any such property in his possession or control.
6. Barclay's Representation. Barclay represents, warrants, and agrees that
he has not filed any claims, appeals, complaints, charges, or lawsuits against
any of the Randall's Entities or their respective employees, officers,
directors, shareholders, agents, and representatives (collectively, including
the Randall's Entities, the "Randall's Parties") with any governmental agency or
court and that he will not file or permit to be filed or accept benefit from any
such claim, complaint, or petition filed with any court by him or on his behalf
at any time hereafter; provided, however, this shall not limit Barclay from
benefiting as a class member in Brian G. Popp and Ronald D. Moore v. Randalls
Food Markets, Inc., et al. and this shall not limit Barclay from filing an
action for the sole purpose of enforcing his rights under this Agreement and
Release or under the E and C Agreement, and provided further, this paragraph 6
shall not limit Barclay from filing an action for the sole purpose of enforcing
his rights pursuant to any plan maintained by Randall's which is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Barclay
represents and warrants that no other person or entity has any interest or
assignment of any claims or causes of action, if any, he may have against any
Randall's Party and which, except as provided herein, he now releases in their
entirety.
7. Release. Barclay agrees to release, acquit, and discharge and does
hereby release, acquit, and discharge Randall's, all Randall's Entities, and all
Randall's Parties, collectively and individually, from any and all claims and
from any and all causes of action, of any kind or character, whether now known
or not known, he may have against any of them, including, but not limited to,
any claim for salary, benefits, expenses, costs, damages, compensation,
remuneration, or wages; and all claims or causes of action arising from his
employment, termination of employment, or any alleged discriminatory employment
practices, including, but not limited to, any and all claims or causes of action
arising under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Texas Commission
on Human Rights Act, or any and all claims or causes of action arising under any
other federal, state, or local laws pertaining to discrimination in employment
or equal employment opportunity. This release also applies to any claims brought
by any person or agency or class action under which Barclay may have a right or
benefit; provided, however, this release shall not limit Barclay from benefiting
as a class member in Brian G. Popp and Ronald D. Moore v. Randalls Food Markets,
Inc., et al.; and provided further, however, this release shall not discharge
Barclay's rights pursuant to any plan maintained by Randall's which is subject
to ERISA. Notwithstanding anything to the contrary in the foregoing, nothing in
this paragraph 7 shall serve to waive or release any rights or claims that may
arise after the date this Agreement is executed and nothing in this paragraph 7
shall affect any future obligation Randall's may have pursuant to Section 2.4
and Section 2.5 of the E and C Agreement.
8. No Admissions. Barclay expressly understands and agrees that the terms
of this Agreement and Release are contractual and not merely recitals and that
the agreements herein and consideration paid is to compromise doubtful and
disputed claims, if any, avoid litigation, and buy
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peace, and that no statement or consideration given shall be construed as an
admission of liability by any Randall's Party, all such liability being
expressly denied.
9. Assignability. Barclay's rights and obligations hereunder may not be
sold, transferred, assigned, or otherwise alienated as this Agreement and
Release is personal to Barclay.
10. Remedies. Barclay and Randall's agree that, because damages at law for
any breach or nonperformance of this Agreement and Release by Barclay, while
recoverable, will be inadequate, this Agreement and Release may be enforced in
equity by specific performance, injunction, accounting, or otherwise.
11. Enforcement of Agreement and Release. No waiver or nonaction with
respect to any breach by the other party of any provision of this Agreement and
Release, nor the waiver or nonaction with respect to any breach of the
provisions of similar agreements with other employees shall be construed to be a
waiver of any succeeding breach of such provision, or as a waiver of the
provision itself. Should any provisions hereof be held to be invalid or wholly
or partially unenforceable, such holdings shall not invalidate or void the
remainder of this Agreement and Release. Portions held to be invalid or
unenforceable shall be revised and reduced in scope so as to be valid and
enforceable, or, if such is not possible, then such portion shall be deemed to
have been wholly excluded with the same force and effect as if they had never
been included herein.
12. Choice of Law. This Agreement and Release shall be governed by and
construed and enforced, in all respects, in accordance with the laws of the
State of Texas.
13. Merger. This Agreement and Release supersedes, replaces, and merges
all previous agreements (other than the E and C Agreement) and discussions
relating to the same or similar subject matters between Barclay and Randall's
and constitutes the entire agreement between Barclay and Randall's with respect
to the subject matter of this Agreement and Release. This Agreement and Release
may not be changed or terminated orally, and no change, termination, or waiver
of this Agreement and Release or any of the provisions herein contained shall be
binding unless made in writing and signed by all parties, and in the case of
Randall's, by an authorized officer.
14. No Derogatory Comments. Following the Effective Date, each of the
Randall's Parties and Barclay shall refrain from making public or private
comments relating to any Randall's Party and Barclay, respectively, which are
derogatory or which may tend to injure any such party in its business, public or
private affairs.
15. Confidentiality. Barclay agrees that, following execution of this
Agreement and Release, he will not disclose the terms hereof or the
consideration for it received from Randall's, to any other person, except in the
case where, and only to the extent that, there is a bona fide need for such
disclosure to a third party, such as in connection with obtaining advice or
furnishing personal financial information, and, in each such case, only on the
condition that such other person keeps such information strictly confidential.
The foregoing exception notwithstanding, Barclay agrees that such information
will in no case be disclosed to any employee or former employee of any of the
Randall's Entities. The foregoing obligations of confidentiality shall not apply
to information that is required
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to be disclosed as a result of any applicable law, rule, or regulation of any
governmental authority, any stock exchange, or any court.
16. ADEA Rights. Barclay acknowledges and agrees:
(a) that he has at least twenty-one (21) days or, if longer, the
applicable period for valid waiver of claims under the Age Discrimination
in Employment Act or the Older Workers Benefit Protection Act to review
this Agreement and Release before accepting;
(b) that he has been advised in writing by Randall's to consult with
an attorney regarding the terms of this Agreement and Release;
(c) that, if he accepts this Agreement and Release, he has seven (7)
days following the execution of this Agreement and Release to revoke this
Agreement and Release.
17. Agreement and Release Voluntary. Barclay acknowledges and agrees that
he has carefully read this Agreement and Release and understands that, except as
expressly reserved herein, it is a release of all claims, known and unknown,
past or present, including all claims under the Age Discrimination in Employment
Act. Barclay further agrees that he has entered into this Agreement and Release
for the above stated consideration. Barclay warrants that he is fully competent
to execute this Agreement and Release which he understands to be contractual.
Barclay further acknowledges that he executes this Agreement and Release of his
own free will, after having a reasonable period of time to review, study, and
deliberate regarding its meaning and effect, and after being advised to consult
an attorney, and without reliance on any representation of any kind or character
not expressly set forth herein. Finally, fully knowing its effect and for the
consideration stated above, Barclay voluntarily executes this Agreement and
Release.
18. Effective Date. The "Effective Date" of this Agreement and Release
shall be the eighth day after Barclay's execution and delivery to Randall's of
this Agreement and Release in accordance with the terms and conditions set forth
in Section 3.8 of the E and C Agreement, provided that Barclay has not revoked
this Agreement and Release pursuant to paragraph 16(c). If Barclay revokes this
Agreement and Release pursuant to paragraph 16(c), then this Agreement and
Release shall be null and void.
19. Death Benefits. In the event of Barclay's death prior to his receipt
of all payments and other benefits provided for herein, Barclay's heirs,
administrators, or legatees shall be entitled under this Agreement and Release
to all of such remaining payments and benefits that otherwise would have been
due Barclay.
20. Headings. The paragraph headings contained herein are for the purpose
of convenience only and are not intended to define or limit the contents of such
paragraphs.
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21. Notices. Any notices required or permitted to be given under this
Agreement and Release shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Randall's to: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Executive Officer
and
Kohlberg Kravis Roberts & Co.
c/o Mr. David Sorkin
Simpson Thatcher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
If to Barclay to: Ronnie W. Barclay
36 West Rivercrest
Houston, Texas 77042
IN WITNESS WHEREOF, the parties have caused this Agreement and Release to
be executed in multiple counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument, this ______ day of ___________________, __________.
RANDALL'S FOOD MARKETS, INC.
By:
--------------------------
Name:
----------------------
Title:
---------------------
Ronnie W. Barclay
-----------------------------
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EXHIBIT 10.8
AGREEMENT AND RELEASE
THIS AGREEMENT AND RELEASE is entered into by and between Mr. Bobby L.
Gowens ("Gowens"), a resident of Missouri City, Texas, and Randall's Food
Markets, Inc. ("Randall's"), a Texas corporation, having its principal place of
business in Houston, Texas.
WITNESSETH:
Gowens is presently an employee and officer of Randall's and, at various
times, has been an employee, officer, and director of Randall's, certain of its
affiliated and subsidiary companies, and/or their predecessors or successors in
interest (collectively, with Randall's, the "Randall's Entities" or,
individually, a "Randall's Entity"); and
Gowens is voluntarily resigning from any and all positions he holds with
Randall's or any other Randall's Entity, in the capacity of an employee,
officer, advisor, or any other position or capacity held by virtue of his
employment by or association with Randall's or any other Randall's Entity; and
Gowens desires to release any claims or causes of action he may have
arising from or relating to his employment or service or association with
Randall's or any of the other Randall's Entities; and
Gowens and Randall's desire to establish their respective rights and
obligations for the future and provide for the engagement of Gowens as a
consultant for Randall's; and
Now, therefore, for and in consideration of the mutual covenants and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Gowens and
Randall's hereby agree:
1. Termination. As of the effective date of this Agreement and Release,
Gowens hereby resigns from employment with, and as an officer of, Randall's and
any other Randall's Entity. Except as otherwise provided in paragraphs 17
through 20 herein, Gowens further resigns any other positions, posts, offices,
or assignments respecting his association with Randall's or any other Randall's
Entity. Randall's hereby accepts Gowens' resignation. Except as otherwise
provided in paragraphs 17 through 20 herein, Gowens acknowledges and agrees that
he has no authority to and will not act as an employee, officer, or in any other
capacity for any Randall's Entity from the effective date of this Agreement and
Release forward. Randall's shall pay Gowens his regular salary and benefits to
the date of his resignation. Such amounts shall be paid less customary
withholding for taxes and applicable deductions. Gowens acknowledges that the
payments made pursuant to this paragraph together with the outplacement services
provided pursuant to paragraph 7 are in full satisfaction of all wages,
benefits, and other compensation owed by any of the Randall's Entities to Gowens
for employment or service to the effective date of this Agreement and Release
with any of the Randall's Entities.
<PAGE>
2. Severance Payments. Randall's agrees to pay to Gowens the following
severance payments:
(a) From the effective date of this Agreement and Release through the
Severance Payment Date (as defined hereafter), Randall's shall
continue to pay to Gowens, on a bi-weekly basis, his regular salary
(less customary withholding for taxes and applicable deductions);
and
(b) On the Severance Payment Date, Randall's shall pay to Gowens a lump
sum payment which is equal to $625,000 less the gross amount (after
adding back in any withholding and deductions) paid in subparagraph
2(a) above. Such amount shall be further reduced for any customary
withholding for taxes and applicable deductions.
For purposes of this paragraph 2, the term Severance Payment Date shall mean the
earlier of: (i) the date of the closing of the "transactions" which are the
subject of the Subscription Agreement dated as of April 2, 1997, among a
Randall's Entity, an affiliate of Kohlberg Kravis Roberts & Co., and Robert R.
Onstead (hereinafter the "Subscription Agreement") or (ii) September 1, 1997;
provided, however, that the Severance Payment Date shall not be before the
expiration of seven (7) days after the date of execution of this Agreement and
Release. Gowens acknowledges and agrees that these severance payments exceed and
fully satisfy any claim for severance he may have pursuant to any plan for
severance maintained by any Randall's Entity. In the event that Gowens is
entitled to severance payments pursuant to any severance plan or program of any
Randall's Entity that cannot be voluntarily released by Gowens, the severance
payments set forth in this paragraph shall be offset and reduced by any such
payments.
3. Prior Rights and Obligations. Except as otherwise expressly provided
herein, this Agreement and Release extinguishes all rights, if any, which Gowens
may have, and obligations, if any, which any of the Randall's Entities may have,
contractual or otherwise, relating to the employment or resignation or
termination of employment of Gowens with Randall's or any of the other Randall's
Entities. All of Gowens' executive perquisites and benefits, except as otherwise
provided herein, shall cease as of the effective date of this Agreement and
Release.
4. Liability Insurance and Indemnities. With respect to Gowens' services
through the effective date of this Agreement and Release in the scope of his
employment, in his status as a fiduciary, or as an officer or director of any
Randall's Entity, and with respect to Gowens' services as a consultant
hereunder, Randall's agrees to maintain on behalf of Gowens, on a basis no less
favorable than as provided by Randall's on behalf of Gowens on the day prior to
the effective date of this Agreement:
(a) All insurance coverages respecting any liability or potential
liability which Gowens' may incur or may have incurred. Such coverages
shall be maintained during the full term of Gowens' consulting engagement
and for at least such "trailing periods" as are provided by such coverages
on the day prior to the effective date of this Agreement and Release.
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(b) All contractual provisions (whether embodied in articles of
incorporation, bylaws, board resolutions, agreements, or otherwise) which
in any way limit the liability of, or provide advances to or protections
to, or indemnify Gowens.
Notwithstanding anything in the foregoing to the contrary, Randall's shall not
continue to reimburse Gowens for his personal umbrella insurance premiums or any
other insurance premiums after the effective date of this Agreement and Release.
5. Stock Option and Restricted Stock Plan and Repurchase Agreement. This
Agreement and Release shall hereby amend the Restricted Period as set forth in
the Restricted Stock Agreement effective September 30, 1996, between Randall's
and Gowens (the "Restricted Stock Agreement"). The Restricted Period in
paragraph 2 of the Restricted Stock Agreement shall expire as of the effective
date of this Agreement and Release and the shares subject to such Restricted
Stock Agreement shall be delivered to Gowens at the same time the severance
payment pursuant to paragraph 2 is made provided that the conditions precedent
set forth in paragraph 7 of the Restricted Stock Agreement are met. This
Agreement and Release shall extinguish all repurchase obligations and rights of
Randall's Management Corporation, Inc. (and/or any Randall's Entity) and Gowens
under the Repurchase Agreement between Randall's Management Corporation, Inc.
and Gowens dated January 15, 1982 (the "Repurchase Agreement"); provided,
however, that if the closing of the "transactions" which are the subject of the
Subscription Agreement does not occur on or before December 31, 1997, such
repurchase obligations and rights shall be revived effective January 1, 1998,
and shall continue thereafter in full force and effect pursuant to the terms of
the Repurchase Agreement.
6. Continuing Rights in Benefit Plans. Except as otherwise provided
herein, Gowens shall be entitled to receive the benefits to which he is entitled
under any employee pension benefit plans or employee welfare benefit plans
sponsored or maintained by the Randall's Entities according to their terms. In
the event of any change or modification of any such plans after the effective
date of this Agreement and Release, including changes, if any, that may result
in a reduction or termination of benefits, Gowens and any beneficiaries claiming
through him in such plan or plans will be subject to such changes and
modifications on the same terms and conditions as all other participants or
beneficiaries.
7. Outplacement Services. Beginning on the date of Gowens' choice,
Randall's shall provide, through a vendor mutually agreed to by Gowens and
Randall's, outplacement services for Gowens in accordance with its customary
policy of providing outplacement services for officers upon severance of
employment; provided, however, that such outplacement services shall in no event
be provided for a period in excess of one (1) year; and, provided further, that
such outplacement services shall in no event be provided after December 31,
1998. Notwithstanding anything in the foregoing to the contrary, the total cost
to Randall's of such outplacement services shall not exceed $30,000.
8. Expenses. Gowens shall, within thirty (30) days of the effective date
of this Agreement and Release, submit all actual, reasonable, and customary
expenses incurred by him in the course of his employment with proper
documentation, which, upon verification, Randall's shall
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reimburse promptly in accordance with Randall's reimbursement policy. Gowens
acknowledges and agrees that he has not incurred and has no authority to incur
any employment related expenses after the effective date of this Agreement and
Release and further agrees that Randall's shall have no obligation to reimburse
expenses not submitted within the time period set forth above except as provided
in paragraph 19.
9. Company Assets. Gowens hereby represents and warrants that he has no
claim or right, title, or interest in any property designated on the books of
any Randall's Entities as property or assets of any of the Randall's Entities.
On or before the effective date of this Agreement and Release, Gowens shall
deliver to Randall's any such property in his possession or control, including,
without limitation, any credit cards furnished by Randall's for his use.
10. Proprietary and Confidential Information. In accordance with Gowens'
existing and continuing obligations, Gowens agrees and acknowledges that the
various Randall's Entities have developed and own valuable "Proprietary and
Confidential Information" which constitutes valuable and unique property
including, without limitation, concepts, ideas, plans, strategies, analyses,
surveys, and proprietary information related to the past, present, or
anticipated business of various of the Randall's Entities, including, but not
limited to, costs, prices, uses, applications of products and services, results
of investigations or experiments, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, pricing policy, financial
information, policy and/or procedure manuals, training and recruiting
procedures, accounting procedures, the status and content of Randall's Entities'
contracts with suppliers, employees, and customers, the Randall's Entities'
business philosophy, and servicing, retailing, or marketing methods and
techniques at any time used, developed, or investigated by any Randall's Entity
which are not generally available to the public or which are maintained as
confidential by any Randall's Entity. Moreover, Gowens agrees and acknowledges
that the term Proprietary and Confidential Information of the Randall's Entities
includes, without limitation, all analyses, correspondence, data or information,
memoranda, notes, records, or other documents, including charts or drawings, and
all copies thereof, made, composed, or received by Gowens, solely or jointly
with others, and which are in Gowens' possession, custody, or control and which
are related in any manner to the past, present, or anticipated business of any
of the Randall's Entities. Except as may be required by law, Gowens agrees that
he will not at any time, either during or subsequent to the term of this
Agreement and Release, disclose to others, permit to be disclosed, use, permit
to be used, copy, or permit to be copied, except in pursuance of his services on
behalf of any Randall's Entity pursuant to paragraph 17 of this Agreement and
Release, any such Proprietary and Confidential Information (whether or not
developed by Gowens) without Randall's prior written consent. Except as may be
required by law, Gowens further agrees to maintain in confidence any proprietary
and confidential information of third parties received or of which Gowens has
knowledge as a result of his employment, association, or work with any Randall's
Entity. Gowens agrees that Randall's shall be entitled to inform all potential
or new employers of this Agreement and Release. The prohibitions of this
paragraph 10 shall not apply, however, to information in the public domain (but
only if the same becomes part of the public domain through a means other than a
disclosure prohibited hereunder).
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11. Documents. Gowens agrees to leave in his office or deliver to
Randall's at the termination of his employment all correspondence, memoranda,
notes, records, drawings, sketches, plans, supplier lists, employee lists,
customer lists, product compositions, data or information, analysis, or other
documents and all copies thereof (all of which are hereafter referred to as the
"Documents") which are in his possession, custody, or control and which are
related in any manner to the past, present, or anticipated business of any of
the Randall's Entities. In this regard, Gowens hereby grants and conveys to
Randall's all right, title and interest in and to, including, without
limitation, the right to possess, print, copy, and sell or otherwise dispose of,
any reports, records, papers, summaries, photographs, drawings, data,
information, or other documents, and writings, and copies, abstracts or
summaries thereof, which may have been prepared by Gowens or under his direction
or which may have come into Gowens' possession in any way during the term of his
employment with any of the Randall's Entities which relate in any manner to
past, present, or anticipated business of any of the Randall's Entities. Gowens
acknowledges that all work performed, including, but not limited to, all
Documents and other writings authored in whole or in part by him pursuant to his
employment or his consulting engagement shall be deemed "work made for hire"
under the Copyright Act and further agrees to assign, and does hereby assign, to
Randall's all rights therein, including, without limitation, all copyrights
therein, all rights to prepare derivative works therefrom, and all writer's,
consultant's, architect's, engineer's, or other proprietary or "moral" rights
therein for the full term thereof, throughout the world. Gowens shall not use,
sell, or reproduce such work, or any part thereof, without Randall's prior
written permission. Notwithstanding anything in the foregoing to the contrary,
however, Randall's and Gowens agree that Gowens may keep copies of speeches that
Gowens delivered while employed by Randall's and, after the expiration of two
(2) years from the effective date of this Agreement and Release, such speeches
shall be considered to be in the public domain and may be used by Gowens as he
sees fit. In the event of a breach or threatened breach of any of the provisions
of paragraphs 10 and 11, Randall's shall be entitled to an injunction ordering
the return of such Proprietary and Confidential Information and Documents and
any and all copies thereof and restraining Gowens from using or disclosing, for
Gowens' benefit or the benefit of others, in whole or in part, any Proprietary
and Confidential Information, including, but not limited to, the Proprietary and
Confidential Information which such Documents contain, constitute, or embody.
Gowens further agrees that any breach or threatened breach of any of the
provisions of paragraphs 10 and 11 would cause irreparable injury to Randall's
for which it would have no adequate remedy at law. Nothing herein shall be
construed as prohibiting Randall's from pursuing any other remedies available to
it for any such breach or threatened breach, including the recovery of damages.
12. Cooperation. Gowens shall cooperate with the Randall's Entities to the
extent reasonably required in all matters relating to the winding up of his
pending work on behalf of any of the Randall's Entities and the orderly transfer
of any such pending work as designated by Randall's. Gowens shall take such
further action and execute any such further documents as may be reasonably
necessary or appropriate in order to carry out the provisions and purposes of
this Agreement.
13. Gowens' Representation. Gowens represents, warrants, and agrees that
he has not filed any claims, appeals, complaints, charges, or lawsuits against
any of the Randall's Entities or their respective employees, officers,
directors, shareholders, agents, and representatives (collectively,
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including the Randall's Entities, the "Randall's Parties") with any governmental
agency or court and that he will not file or permit to be filed or accept
benefit from any such claim, complaint, or petition filed with any court by him
or on his behalf at any time hereafter; provided, however, this shall not limit
Gowens from benefiting as a class member in Brian G. Popp and Ronald D. Moore v.
Randalls Food Markets, Inc., et al. and this shall not limit Gowens from filing
an action for the sole purpose of enforcing his rights under this Agreement and
Release; and provided further, this paragraph 13 shall not limit Gowens from
filing an action for the sole purpose of enforcing his rights pursuant to any
plan maintained by Randall's which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Gowens represents and warrants that
no other person or entity has any interest or assignment of any claims or causes
of action, if any, he may have against any Randall's Party and which, except as
provided herein, he now releases in their entirety.
14. Release. Gowens agrees to release, acquit, and discharge and does
hereby release, acquit, and discharge Randall's, all Randall's Entities, and all
Randall's Parties, collectively and individually, from any and all claims and
from any and all causes of action, of any kind or character, whether now known
or not known, he may have against any of them, including, but not limited to,
any claim for salary, benefits, expenses, costs, damages, compensation,
remuneration, or wages; and all claims or causes of action arising from his
employment, termination of employment, or any alleged discriminatory employment
practices, including, but not limited to, any and all claims or causes of action
arising under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Texas Commission
on Human Rights Act, or any and all claims or causes of action arising under any
other federal, state, or local laws pertaining to discrimination in employment
or equal employment opportunity. This release also applies to any claims brought
by any person or agency or class action under which Gowens may have a right or
benefit; provided, however, this release shall not limit Gowens from benefiting
as a class member in Brian G. Popp and Ronald D. Moore v. Randalls Food Markets,
Inc., et al.; and provided further, however, this release shall not discharge
Gowens' rights pursuant to any plan maintained by Randall's which is subject to
ERISA. Notwithstanding anything to the contrary in the foregoing, nothing in
this paragraph 14 shall serve to waive or release any rights or claims that may
arise after the date this Agreement and Release is executed and nothing in this
paragraph 14 shall affect any future obligation Randall's may have pursuant to
paragraph 4.
15. No Admissions. Gowens expressly understands and agrees that the terms
of this Agreement and Release are contractual and not merely recitals and that
the agreements herein and consideration paid is to compromise doubtful and
disputed claims, if any, avoid litigation, and buy peace, and that no statement
or consideration given shall be construed as an admission of liability by any
Randall's Party, all such liability being expressly denied.
16. Noncompetition. Gowens and Randall's agree and acknowledge that
Randall's Entities have developed and own valuable Proprietary and Confidential
Information (as defined in paragraph 10 of this Agreement and Release) and that
Randall's Entities have developed substantial goodwill. Gowens and Randall's
further agree and acknowledge that Randall's has a substantial and legitimate
interest in protecting its Proprietary and Confidential Information and
goodwill. Randall's and Gowens further agree and acknowledge that the provisions
of this paragraph are reasonably necessary to protect Randall's legitimate
business interests. During the two (2) year period
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<PAGE>
following the effective date of this Agreement and Release, Gowens shall not, as
a shareholder, director, employee, officer, partner, consultant, or otherwise,
at any location in the United States, engage directly or indirectly in any
business or enterprise which is "in competition" with any Randall's Entity. A
business or enterprise "in competition" with any Randall's Entity includes any
business or enterprise that is engaged in any business activity of wholesale or
retail grocery distribution within Texas. However, Gowens shall be allowed to
purchase and hold for investment less than two percent (2%) of the shares of any
corporation in competition with any Randall's Entity whose shares are regularly
traded on a national securities exchange or in the over-the-counter market.
Gowens further agrees that the existence of any claim or cause of action of
Gowens against Randall's, whether predicated on this Agreement and Release or
otherwise, shall not constitute a defense to the enforcement by Randall's of any
or all of this paragraph 16. Gowens agrees that the scope of the restrictions as
to time, geographic area, and scope of activity in this paragraph 16 are
reasonably necessary for the protection of Randall's legitimate business
interests and are not oppressive or injurious to the public interest. As
independent and valuable consideration for Gowens' obligations pursuant to this
paragraph 16, Randall's agrees to pay to Gowens a total of $2OO,OOO over the two
(2) year term of this paragraph 16 in equal bi-weekly installments (less any
applicable withholding for taxes) with the first installment payable as of the
effective date of this Agreement and Release. Gowens agrees that in the event of
a breach or threatened breach of any of the provisions of this paragraph 16,
Randall's shall be entitled to inform all potential or new employers of Gowens
of this paragraph 16, and Randall's shall be entitled to injunctive relief
against Gowens' activities to the extent allowed by law. Gowens further agrees
that any breach or threatened breach of any of the provisions of this paragraph
16 would cause irreparable injury to Randall's for which it would have no
adequate remedy at law. Gowens and Randall's acknowledge that in the event
Gowens breaches any obligation under this paragraph 16, the amount of damages
caused by such breach is impossible or difficult to quantify. Therefore, Gowens
and Randall's agree that, in the event Gowens materially breaches any of his
obligations pursuant to this paragraph 16, as liquidated damages, all payments
pursuant to this paragraph 16 shall cease immediately and no further payments
shall be paid pursuant to this paragraph 16. Gowens and Randall's agree that the
liquidated damages provided herein are a reasonable measure of recovery of
damages in the event of a breach of Gowens' obligations pursuant to this
paragraph 16 and are not provided as a penalty and, further, that such
liquidated damages shall serve as the only measure of damages in the event of
such a breach. Nothing herein shall be construed as prohibiting Randall's from
pursuing any other remedies available to it for any such breach or threatened
breach; provided, however, that any recovery of damages shall be in accordance
with the foregoing liquidated damage provisions. Notwithstanding anything in the
foregoing to the contrary, not more than once in any six (6) month period (or,
if the Board of Directors of Randall's (the "Board") so consents, in its sole
discretion, on a more frequent basis), Gowens may consult with the Board with
respect to any proposed activity or a reasonable number of proposed activities
of Gowens and, if Gowens obtains written permission from the Board to engage in
such activity or activities, such activity or activities shall not constitute a
breach of Gowens' obligations pursuant to this paragraph 16.
17. Consulting Services. From and after the effective date of this
Agreement and Release, Gowens will consult and cooperate with Randall's on
matters involving pending or future litigation in which Randall's is or may be
involved and such other matters and at such times and places as Randall's may
reasonably request. It is contemplated that Gowens' consulting services will
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<PAGE>
be rendered on an irregular and part-time basis. Gowens will not be required to
follow any established work schedule or to report to Randall's at any specified
times, either when performing consulting services or during periods when Gowens
is not performing services but is holding himself available to so perform;
provided, however, that Gowens' presence and cooperation at certain conferences,
depositions, and court appearances which relate to matters involving litigation
may be required from time to time. In the performance of consulting services
requested by Randall's, Gowens shall coordinate the furnishing of his services
with representatives of Randall's, but the method and manner of performance of
such services shall be within the control of Gowens; provided, however, that in
matters involving litigation, Gowens shall cooperate fully with Randall's and
Randall's outside counsel. Randall's shall not exercise supervision of Gowens in
the performance of his consulting services.
18. Consulting Fee. Recognizing that Gowens' consulting services will be
rendered on an irregular and part-time basis, and in consideration for Gowens'
covenants and promises in paragraph 17, Randall's shall pay Gowens a consulting
fee of $25,000 per annum payable as one lump sum amount of $75,000 at the same
time that the severance payment pursuant to paragraph 2 is made. As further
payment for Gowens' consulting services, Randall's shall furnish to Gowens
medical and dental insurance for thirty-six (36) months following the effective
date of this Agreement and Release on the same terms and conditions as it is
offered to officers of Randall's who are currently employed and as set forth in
Randall's medical and dental plan(s), subject to Randall's right to amend,
modify, or terminate such plan(s) or program(s) providing such medical and/or
dental insurance; and, further provided, that any employee premium due for such
medical and/or dental insurance shall be paid by Gowens on or before the first
day of each month to which such insurance relates. Notwithstanding the
foregoing, in the event medical and/or dental insurance becomes available to
Gowens through another employer, (a) Gowens agrees to notify Randall's of such
availability within thirty (30) days of the time such insurance becomes
available and (b) irrespective of the time Gowens gives such notice, the medical
and/or dental insurance, as applicable, provided pursuant to this paragraph 18
shall cease immediately upon such availability. The consideration set forth in
this paragraph 18 shall constitute payment in full for Gowens holding himself
available to provide consulting services and for any and all consulting services
actually performed for Randall's by Gowens. Gowens will pay all social security,
federal income taxes, and all other liabilities and taxes incurred by, or on
behalf of, or for the benefit of, Gowens arising out of the performance of
consulting services, and Randall's shall have no liability for any such taxes or
other liabilities.
19. Consulting Expenses. To the extent that Gowens incurs travel and/or
related expenses at the request of Randall's in the performance of Gowens'
consulting services, Randall's agrees to reimburse Gowens for such actual and
reasonable expenses so incurred.
20. Consulting Engagement. Gowens' engagement as a consultant by Randall's
pursuant to this Agreement and Release shall continue until the expiration of
three (3) years from the effective date of this Agreement and Release.
21. Confidential Information. Gowens recognizes and acknowledges that as a
consultant he will have access to Proprietary and Confidential Information (as
defined in paragraph 10) during his engagement as a consultant. Gowens expressly
agrees that the provisions of paragraph 10 of this
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<PAGE>
Agreement and Release will at all times apply to any Proprietary and
Confidential Information which he has access to as a consultant.
22. Consulting Documents. Gowens further agrees to deliver to Randall's at
the termination of his consulting engagement all Documents in accordance with
the provisions of paragraph 11; and Gowens further agrees that paragraph 11
shall apply in its entirety to his consulting engagement with Randall's.
23. Covenants Regarding Employees and Suppliers. Gowens agrees that during
the three (3) year period following the effective date of this Agreement and
Release, he will not, at any location in the United States, solicit or induce
any employee of any Randall's Entity to terminate employment, accept employment
with anyone else, or to interfere in a similar manner with the business of any
Randall's Entity. Gowens further agrees that during the three (3) year period
following the effective date of this Agreement and Release, he will not, at any
location in the United States, in connection with or for the benefit of any
business "in competition" (as defined in paragraph 16) with any Randall's
Entity, solicit, contact, canvass, or attempt to solicit, contact, or canvass
any of the suppliers or employees of any Randall's Entity with whom Gowens had
direct or indirect contact while he was performing services for any Randall's
Entity. Notwithstanding anything in the foregoing to the contrary, Gowens may
contact suppliers of Randall's so long as that contact does not involve or
concern the business activity of wholesale or retail grocery distribution in
Texas.
24. Assignability. Gowens' rights and obligations hereunder may not be
sold, transferred, assigned, or otherwise alienated as this Agreement and
Release is personal to Gowens.
25. Remedies. Gowens and Randall's agree that, because damages at law for
any breach or nonperformance of this Agreement and Release by Gowens or
Randall's, while recoverable, will be inadequate, this Agreement and Release may
be enforced in equity by specific performance, injunction, accounting, or
otherwise. If a lawsuit is brought by (a) a party to this Agreement and Release
to enforce any provision of the same or (b) any person or entity claiming rights
pursuant to paragraph 35 to enforce any provision of the same, the prevailing
party shall be entitled to recover all reasonable attorneys fees and costs of
court from the non-prevailing party. Further, Gowens and Randall's agree that,
in the event Gowens breaches any of his obligations under this Agreement and
Release, Gowens' right to continued medical and dental insurance pursuant to
paragraph 18 shall be forfeited; provided, however, that in the event of such a
forfeiture, Gowens, and any "qualified beneficiary" (as such term is defined in
section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended (the
"Code")), with respect to Gowens, shall have the right to elect COBRA coverage
pursuant to paragraph 26 below.
26. COBRA Rights. Upon the termination of Gowens' medical and/or dental
insurance by reason of (a) the expiration of the thirty-six (36) month period
provided by paragraph 18 or by paragraph 35 together with paragraph 18, (b) the
availability to Gowens of medical and/or dental insurance through another
employer, or (c) forfeiture pursuant to paragraph 25, such termination shall be
treated as a qualifying event pursuant to section 4980B(f)(3) of the Code for
purposes of
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<PAGE>
determining the COBRA rights of Gowens and/or any "qualified beneficiary" (as
such term is defined in section 4980B(g)(l) of the Code) with respect to Gowens.
27. Enforcement of Agreement and Release. No waiver or nonaction with
respect to any breach by the other party of any provision of this Agreement and
Release, nor the waiver or nonaction with respect to any breach of the
provisions of similar agreements with other employees shall be construed to be a
waiver of any succeeding breach of such provision, or as a waiver of the
provision itself. Should any provisions hereof be held to be invalid or wholly
or partially unenforceable, such holdings shall not invalidate or void the
remainder of this Agreement and Release. Portions held to be invalid or
unenforceable shall be revised and reduced in scope so as to be valid and
enforceable, or, if such is not possible, then such portion shall be deemed to
have been wholly excluded with the same force and effect as if they had never
been included herein.
28. Choice of Law. This Agreement and Release shall be governed by and
construed and enforced, in all respects, in accordance with the laws of the
State of Texas.
29. Merger. This Agreement and Release supersedes, replaces, and merges
all previous agreements and discussions relating to the same or similar subject
matters between Gowens and Randall's and constitutes the entire agreement
between Gowens and Randall's with respect to the subject matter of this
Agreement and Release. This Agreement and Release may not be changed or
terminated orally, and no change, termination, or waiver of this Agreement and
Release or any of the provisions herein contained shall be binding unless made
in writing and signed by all parties, and in the case of Randall's, by an
authorized officer.
30. No Derogatory Comments. Following the effective date of this Agreement
and Release, each of the Randall's Parties and Gowens shall refrain from making
public or private comments relating to any Randall's Party and Gowens,
respectively, which are derogatory or which may tend to injure any such party in
its business, public or private affairs.
31. Confidentiality. Gowens agrees that, following execution of this
Agreement and Release, he will not disclose the terms thereof or the
consideration for it received from Randall's, to any other person, except in the
case where, and only to the extent that, there is a bona fide need for such
disclosure to a third party, such as in connection with obtaining advice or
furnishing personal financial information, and, in each such case, only on the
condition that such other person keeps such information strictly confidential.
The foregoing exception notwithstanding, Gowens agrees that such information
will in no case be disclosed to any employee or former employee of any of the
Randall's Entities. The foregoing obligations of confidentiality shall not apply
to information that is required to be disclosed as a result of any applicable
law, rule, or regulation of any governmental authority, any stock exchange, or
any court.
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32. ADEA Rights. Gowens acknowledges and agrees:
(a) that he has at least twenty-one (21) days or, if longer, the
applicable period for valid waiver of claims under the Age Discrimination
in Employment Act or the Older Workers Benefit Protection Act to review
this Agreement and Release before accepting;
(b) that he has been advised in writing by Randall's to consult with
an attorney regarding the terms of this Agreement and Release;
(c) that, if he accepts this Agreement and Release, he has seven (7)
days following the execution of this Agreement and Release to revoke this
Agreement and Release.
33. Agreement and Release Voluntary. Gowens acknowledges and agrees that
he has carefully read this Agreement and Release and understands that, except as
expressly reserved herein, it is a release of all claims, known and unknown,
past or present, including all claims under the Age Discrimination in Employment
Act. Gowens further agrees that he has entered into this Agreement and Release
for the above stated consideration. Gowens warrants that he is fully competent
to execute this Agreement and Release which he understands to be contractual.
Gowens further acknowledges that he executes this Agreement and Release of his
own free will, after having a reasonable period of time to review, study, and
deliberate regarding its meaning and effect, and after being advised to consult
an attorney, and without reliance on any representation of any kind or character
not expressly set forth herein. Finally, fully knowing its effect and for the
consideration stated above, Gowens voluntarily executes this Agreement and
Release.
34. Effective Date. The effective date of this Agreement and Release shall
be the earlier of (a) thirty (30) days after the announcement of the
"transactions" which are the subject of the Subscription Agreement dated as of
April 2, 1997, among a Randall's Entity, an affiliate of Kohlberg Kravis Roberts
& Co., and Robert R. Onstead or (b) September 1, 1997; provided however, that
the effective date shall not be before the expiration of seven (7) days after
the date of execution of this Agreement and Release.
35. Death Benefits. In the event of Gowens' death on or after the
effective date of this Agreement and Release, except as provided in this
paragraph 35, all of Randall's obligations to Gowens pursuant to this Agreement
and Release shall expire immediately upon such death and Randall's shall pay
and/or deliver, as applicable, the following death benefits to Gowens' estate on
the later of (i) the Severance Payment Date or (ii) within thirty (30) days
after the date Randall's receives notice of such death:
(a) A death benefit payment equal to the difference between (1)
$900,000 and (2) the sum of (A) any amounts paid out by Randall's pursuant
to this Agreement and Release (other than pursuant to paragraph 7 or as
reimbursements for travel or related expenses or medical or dental
expenses) up to the date such death benefit payment is made and (B) any
amounts forfeited by Gowens under this contract due
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to any breach of this contract by Gowens (other than any breach due to his
death). Such payment shall be net of any applicable withholding.
(b) Provided that the conditions precedent set forth in paragraph 7
of the Restricted Stock Agreement are met, any shares pursuant to the
Restricted Stock Agreement which are deliverable to Gowens pursuant to the
terms of paragraph 5 of this Agreement and Release, shall be delivered to
Gowens' estate.
In the event Gowens' death precedes the cessation of medical and/or dental
benefits provided by Randall's to Gowens pursuant to paragraph 18, any
"qualified beneficiary" (as such term is defined in section 4980B(g)(1) of the
Code) with respect to Gowens shall be entitled to continue medical and/or dental
insurance following the date of Gowens' death for the remaining unexpired
portion of the term of thirty-six (36) months, on the same terms and conditions,
and for the same employee premium (reduced, if applicable, to reflect only such
qualified beneficiary's coverage) as set forth in paragraph 18. Further, any
repurchase obligations under the Repurchase Agreement shall be governed by the
terms of paragraph 5 in the event of Gowens' death after the effective date of
this Agreement and Release.
36. Headings. The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of such
sections.
37. Notices. Any notices required or permitted to be given under this
Agreement and Release shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Randall's to: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Chief Executive Officer
and
Kohlberg Kravis Roberts & Co.
c/o Mr. David Sorkin
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
If to Gowens to: Bobby L. Gowens
3711 Panorama
Missouri City, Texas 77459
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement and Release to
be executed in multiple counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument, this 1st day of April, 1997.
RANDALL'S FOOD MARKETS, INC.
By: /s/ R. Randall Onstead
--------------------------------
Name: R. Randall Onstead
Title: President and CEO
Bobby L. Gowens
/s/ Bobby L. Gowens
------------------------------------
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<PAGE>
NETTIE MAE GOWENS 1986 TRUST
-------------------------------------
By: PAUL W. CARLISLE, TRUSTEE
/s/ Bret Matthew Gowens
-------------------------------------
Bret Matthew Gowens
/s/ Timothy Brooks Gowens
-------------------------------------
Timothy Brooks Gowens
<PAGE>
ACKNOWLEDGMENT
April 1, 1997
TO: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
In connection with the execution and delivery of the Agreement and Release
dated as of the date hereof (the "Agreement") between Mr. Bobby L. Gowens and
Randall's Food Markets, Inc., a Texas corporation ("Randall's"), each of the
undersigned hereby acknowledges that the Agreement shall extinguish all
repurchase obligations and rights of Randall's (and/or any Randall's Entity (as
defined in the Agreement)) and Mr. Gowens under the Repurchase Agreement between
Randall's and Mr. Gowens dated January 15, 1982 (the "Repurchase Agreement");
provided, however, that if the closing of the "transactions" which are the
subject of the Subscription Agreement dated as of the date hereof among
Randall's, RFM Acquisition LLC and Robert R. Onstead does not occur on or before
December 31, 1997, such repurchase obligations and rights shall be revived
effective January 1, 1998, and shall continue thereafter in full force and
effect pursuant to the terms of the Repurchase Agreement.
Very truly yours,
BOBBY L. AND CHERYL A. GOWENS
CHARITABLE REMAINDER TRUST
------------------------------
Name:
Title: Trustee
GALE & BOBBIE SILLS 1986 TRUST
/s/ Paul W. Carlisle
------------------------------
PAUL W. CARLISLE, TRUSTEE
<PAGE>
ACKNOWLEDGMENT
April 1, 1997
TO: Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
In connection with the execution and delivery of the Agreement and Release
dated as of the date hereof (the "Agreement") between Mr. Bobby L. Gowens and
Randall's Food Markets, Inc., a Texas corporation ("Randall's"), each of the
undersigned hereby acknowledges that the Agreement shall extinguish all
repurchase obligations and rights of Randall's (and/or any Randall's Entity (as
defined in the Agreement)) and Mr. Gowens under the Repurchase Agreement between
Randall's and Mr. Gowens dated January 15, 1982 (the "Repurchase Agreement");
provided, however, that if the closing of the "transactions" which are the
subject of the Subscription Agreement dated as of the date hereof among
Randall's, RFM Acquisition LLC and Robert R. Onstead does not occur on or before
December 31, 1997, such repurchase obligations and rights shall be revived
effective January 1, 1998, and shall continue thereafter in full force and
effect pursuant to the terms of the Repurchase Agreement.
Very truly yours,
BOBBY L. AND CHERYL A. GOWENS
CHARITABLE REMAINDER TRUST
/s/ Roy Mooney
------------------------------
Name:
Title: Trustee
GALE & BOBBIE SILLS 1986 TRUST
------------------------------
PAUL W. CARLISLE, TRUSTEE
<PAGE>
NETTIE MAE GOWENS 1986 TRUST
/s/ Paul W. Carlisle
-------------------------------------
By: PAUL W. CARLISLE, TRUSTEE
-------------------------------------
Bret Matthew Gowens
-------------------------------------
Timothy Brooks Gowens
<PAGE>
EXHIBIT 10.9
Execution Copy
REGISTRATION RIGHTS AND REPURCHASE AGREEMENT
Registration Rights and Repurchase Agreement ("Agreement") dated as of
August 24, 1992 among Randall's Management Corporation, Inc., a Texas
corporation ("Randall's"), The Morgan Stanley Leveraged Equity Fund II, L.P., a
Delaware limited partnership ("MSLEF II"), and the other persons listed on the
signature pages hereto (the "Other Selling Shareholders" and together with MSLEF
II, the "Selling Shareholders").
WHEREAS, Randall's and the Selling Shareholders are parties to that
certain Acquisition Agreement ("Acquisition Agreement") dated as of August 11,
1992 pursuant to which, among other things, Randall's is purchasing (the
"Purchase") the shares of common stock, par value $1.00 per share, of Cullum
Companies, Inc. owned by the Selling Shareholders;
WHEREAS, as consideration for the Purchase, among other things, Randall's
is issuing to, and may issue in the future to, the Selling Shareholders shares
of Randall's 8% convertible preferred stock, par value $10 per share (the
"Convertible Preferred Stock"), and shares of Randall's common stock, par value
$0.25 per share;
WHEREAS, as an inducement to enter into the Acquisition Agreement,
Randall's and the Selling Shareholders agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Securities Subject.
(a) Definitions. As used herein, the following terms have the indicated
meanings, unless the context otherwise requires:
"Closing Date" has the meaning set forth in the Acquisition Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.25 per share, of
Randall's.
"Converted Common Stock" means the shares of Common Stock issued pursuant
to the conversion of the Convertible Preferred Stock.
<PAGE>
"Disposition" means any inter vivos sale, transfer, pledge, assignment,
hypothecation, mortgage or other encumbrance, or any other disposition of
Randall's Securities whatsoever, whether voluntary or involuntary.
"Fair Market Value" means for any date the per share value of the Common
Stock as most recently determined on behalf of the trustee of Randall's employee
stock ownership plan (established for the benefit of its salaried employees) or,
if such plan is no longer in existence, the value thereof as determined in good
faith by the Board of Directors of Randall's based on an opinion of an
independent investment banking firm or any other qualified independent
appraiser.
"Holder" means a Selling Shareholder or any transferee thereof permitted
hereby if such transferee has executed a counterpart hereof at the time of the
transfer to such transferee, unless the Common Stock held by such person is
acquired in (i) a public distribution pursuant to a registration statement under
the Securities Act or (ii) transactions exempt from registration under the
Securities Act where securities sold in such transaction may be resold without
subsequent registration under the Securities Act.
"IPO" means an offering of Common Stock that was registered under the
Securities Act pursuant to an effective registration statement in which the
total gross proceeds to Randall's and any selling shareholders (together with
the total gross proceeds to Randall's and any selling shareholders from any
previous offering of Common Stock that was registered under the Securities Act
pursuant to an effective registration statement) were at least $30 million.
"Original Common Stock" means the shares of Common Stock issued by
Randall's to the Selling Shareholders on the Closing Date as part of the
Purchase Consideration (as defined in the Acquisition Agreement).
"Payment Amount" means for any date (i) in the case of Original Common
Stock, the product of the Fair Market Value multiplied by the number of shares
of Original Common Stock to be sold or transferred pursuant to this Agreement,
(ii) in the case of Converted Common Stock, the product of 150% of the Fair
Market Value multiplied by the number of shares of Converted Common Stock to be
sold or transferred pursuant to this Agreement, and (iii) in the case of
Convertible Preferred Stock, the product of $100 (plus any accrued and unpaid
dividends per share of Convertible Preferred Stock) multiplied by the number of
shares of Convertible Preferred Stock to be sold or transferred pursuant to this
Agreement.
"Payment Date" means (i) in the case of Original Common Stock, October 15,
1997 and each subsequent October 15 to and including October 15, 2001 and (ii)
in the case of Converted Common Stock, October 15, 1999 and each subsequent
October 15 to and including October 15, 2008.
"Put Option" means the option of a Holder of Original Common Stock or
Converted Common Stock pursuant to Section 8(a) or 8(b) hereof, respectively, to
sell shares of such Original Common Stock or Converted Common Stock to
Randall's.
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"Registrable Securities" means the shares of Original Common Stock and any
shares of Converted Common Stock.
"Randall's Securities" means the Original Common Stock, the Converted
Common Stock and the Convertible Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement.
(b) Registrable Securities. Any Registrable Security will cease to be a
Registrable Security when (i) a registration statement covering such Registrable
Security has been declared effective by the Commission and such Registrable
Security has been disposed of pursuant to such effective registration statement,
(ii) such Registrable Security is distributed to the public pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, (iii) such
Registrable Security has been otherwise transferred and it may be resold without
subsequent registration under the Securities Act or (iv) such Registrable
Security is no longer held by a Holder.
2. Piggy-Back Registration.
(a) If at any time Randall's proposes to file a registration statement
under the Securities Act with respect to an offering of Common Stock whether or
not for sale for Randall's account (other than a registration statement on Form
S-4 or S-8 (or any substitute form for comparable purposes that may be adopted
by the Commission) or a registration statement filed in connection with an
exchange offer or an offering of securities solely to Randall's existing
security holders), then Randall's shall in each such case give written notice of
such proposed filing to the Holders as soon as practicable (but in no event less
than 20 days before the anticipated filing date), and such notice shall offer
such Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request.
(b) Randall's shall use its reasonable efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included on the same terms and conditions as any similar
securities of Randall's included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters of such offering shall inform Randall's
that because of the size of the offering which the Holders, Randall's and such
other persons intend to make, the success of the offering would be materially
and adversely affected by inclusion of the Registrable Securities requested to
be included, then the amount of securities to be offered for the accounts of
Holders shall be reduced pro rata to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount such managing
underwriter or underwriters have advised Randall's can be sold in such offering;
provided that if Common Stock is being offered for the account of other persons
or entities as well as Randall's, then the proportion
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<PAGE>
by which the amount of Registrable Securities intended to be offered by Holders
is reduced shall not exceed the proportion by which the amount of Common Stock
intended to be offered by such other persons or entities is reduced. Randall's
will bear all Registration Expenses in connection with a piggy-back
registration.
(c) The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the agreements (other than those
regarding indemnification) on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities. Any such Selling Holder of Registrable Securities shall
not be required to make any representations or warranties to or agreements with
the Company other than representations, warranties or agreements regarding such
Selling Holder, such Selling Holder's Registrable Securities and such Selling
Holder's intended method of distribution or as otherwise required by law.
3. Restrictions on Public Sale by Holder of Registrable Securities.
To the extent not inconsistent with applicable law, each Holder whose
securities are included in a registration statement agrees not to effect any
public sale or distribution of the securities being registered or a similar
security of Randall's, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, during the fourteen days prior to, and during the 90-day period
beginning on, the effective date of such registration statement (except pursuant
to such registration), if and to the extent requested by Randall's in the case
of a non-underwritten public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an underwritten public
offering.
4. Registration Procedures.
Whenever the Holders have requested that any Registrable Securities be
included in a registration statement pursuant to Section 2 hereof, Randall's
will use its reasonable best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as promptly as practicable, and in connection with any such
request, Randall's will:
(a) (i) prior to filing a registration statement or prospectus or any
amendments or supplements thereto, furnish to the Selling Holders and one
counsel selected by the Holders of a majority in aggregate number of shares of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, (ii) furnish to each Selling Holder such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such registration statement (including each preliminary prospectus) and such
other documents as such Selling Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Selling
Holder, and (iii) after the filing of the registration statement, promptly
notify each Selling Holder of any stop
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order issued or threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
(b) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Selling Holder reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Selling Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Selling Holder; provided that Randall's
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (b),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(c) use its reasonable best efforts to cause such Registrable Securities
to be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
Randall's to enable the Selling Holder or Selling Holders thereof to consummate
the disposition of such Registrable Securities;
(d) immediately notify each Selling Holder, at any time when a
prospectus relating to the Registrable Securities is required to be delivered
under the Securities Act, of the occurrence of an event known to Randall's
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and promptly make available to each
Selling Holder any such supplement or amendment;
(e) enter into or arrange for the furnishing of customary agreements and
documents (including an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(f) make available for inspection by any Selling Holder, and any
attorney, accountant or other professional retained by any such Selling Holder
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of Randall's or its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause Randall's and its
subsidiaries' officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Each Inspector that actually reviews Records supplied by Randall's or
its subsidiaries that actually include information that Randall's determines to
be confidential ("Confidential Information") shall be required, prior to any
such review, to execute an agreement with Randall's providing that such
Inspector shall not disclose any Confidential Information unless such disclosure
is required by applicable law or legal process. Each Selling Holder agrees that
it will not make any market transaction in securities of Randall's based on such
Confidential Information in violation of applicable securities laws. Each
Selling Holder further agrees
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that it will, upon learning that disclosure of Confidential Information is
sought in a court of competent jurisdiction, give notice to Randall's and allow
Randall's, at its expense, to undertake appropriate action to prevent disclosure
of the Confidential Information. Each Selling Holder also agrees that the due
diligence investigation made by the Inspectors shall be conducted in a manner
which shall not unreasonably disrupt the operations of Randall's or of the work
performed by Randall's officers and employees;
(g) use its reasonable best efforts to obtain (i) an opinion or opinions
of counsel to Randall's and (ii) a comfort letter or comfort letters from
Randall's independent public accountants each in customary form and covering
such matters of the type customarily covered by such opinion and comfort letters
as the managing underwriter (or, if there is no underwriter, a majority in
interest of all Selling Holders) reasonably requests;
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earning statement
covering a period of twelve months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(i) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which the Common Stock is
then listed.
Randall's may require each Selling Holder as to which any registration is
being effected to furnish to Randall's such information regarding the
distribution of such Registrable Securities as Randall's may from time to time
reasonably request in writing and such other information as may be legally
required in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice from Randall's
of the happening of any event of the kind described in Section 4(d) hereof, such
Selling Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(d) hereof, and, if so directed by
Randall's, such Selling Holder will deliver to Randall's (at Randall's' expense)
all copies, other than permanent file copies then in such Selling Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. Each Selling Holder also agrees to notify
Randall's if any event relating to such Selling Holder occurs which would
require the preparation of a supplement or amendment to the prospectus so that
such prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
5. Registration Expenses.
All expenses incident to Randall's performance of or compliance with this
Agreement, including without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), rating
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agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred by it in connection with the listing of the securities to be
registered on each securities exchange on which the Common Stock is then listed,
and fees and disbursements of counsel for Randall's and its independent
certified public accountants, securities acts liability insurance (if Randall's
elects to obtain such insurance), the reasonable fees and expenses of any
special experts retained by Randall's in connection with such registration, fees
and expenses of other persons retained by Randall's, incurred in connection with
each registration hereunder (but not including any underwriting discounts or
commissions attributable to the sale of Registrable Securities), will be borne
by Randall's. Any expenses of counsel for any Selling Holders will be borne by
the Selling Holder or Selling Holders retaining such counsel.
6. Indemnification; Contribution.
(a) Indemnification by Randall's. Randall's agrees to indemnify and hold
harmless each Selling Holder of Registrable Securities, its officers, directors,
partners and agents and each person, if any, who controls such Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages, liabilities and expenses (including
any reasonable legal or other costs of investigation) whatsoever arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to the
Registrable Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to Randall's by such Selling Holder or on such
Selling Holder's behalf expressly for use therein and provided further, that the
indemnity with respect to any preliminary prospectus shall not apply to the
extent that any such loss, claim, damage, liability or expense results from the
fact that a current copy of the prospectus was not sent or given to the person
asserting any such losses, claims, damages, liabilities or expenses at or prior
to the written confirmation of the sale of the Registrable Securities concerned
to such person if it is determined that (i) it was the responsibility of such
Selling Holder, or any underwriter or dealer selected by such Selling Holder, to
provide such person with a current copy of the prospectus and (ii) such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense. Randall's also agrees to indemnify any
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section 6(a)
(as if clause (i) were not contained herein) or such other indemnification
customarily obtained by underwriters at the time of offering.
(b) Conduct of Indemnification Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
any Selling Holder (or its officers, directors, partners or agents) or any
person controlling any such
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Selling Holder in respect of which indemnity may be sought from Randall's,
Randall's shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Selling Holder, and shall assume the payment of
all fees and expenses. Such Selling Holder or any controlling person of such
Selling Holder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Selling Holder or such controlling
person unless (i) Randall's has agreed to pay such fees and expenses or (ii) the
named parties to any such action or proceeding (including any impleaded parties)
include both such Selling Holder or such controlling person and Randall's, and
such Selling Holder or such controlling person shall have been advised by
counsel that there may be one or more legal defenses available to such Selling
Holder or such controlling person which are different from or additional to
those available to Randall's, in which case, if such Selling Holder or such
controlling person notifies Randall's in writing that it elects to employ
separate counsel at the expense of Randall's, Randall's shall not have the right
to assume the defense of such action or proceeding on behalf of such Selling
Holder or such controlling person; it being understood, however, that Randall's
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for such Selling Holder and such
controlling persons, which firm shall be designated in writing by such Selling
Holder, and that all such fees and expenses shall be reimbursed as they are
incurred. Randall's shall not be liable for any settlement of any such action or
proceeding effected without Randall's written consent, but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, Randall's agrees to indemnify and hold harmless such
Selling Holder and such controlling person from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment
Randall's shall not, without the prior written consent of a Selling Holder,
effect any settlement of any pending or threatened proceeding in respect of
which any Selling Holder is or could have been a party and indemnity could have
been sought hereunder by such Selling Holder, unless such settlement includes an
unconditional release of such Selling Holder from all liability on claims that
are the subject matter of such proceeding.
(c) Indemnification by Holders of Registrable Securities. Each Selling
Holder agrees, severally but not jointly, to indemnify and hold harmless
Randall's, its directors and officers who sign the registration statement and
each person, if any, who controls Randall's within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from Randall's to such Selling Holder, but only with
respect to information concerning such Selling Holder furnished in writing by
such Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus; provided
that the indemnity with respect to any preliminary prospectus shall not apply to
the extent that such loss, claim, damage, liability or expense results from the
fact that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that (i) it was the responsibility of Randall's, or
any underwriter
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or dealer selected by Randall's, to provide such person with a current copy of
the prospectus and (ii) such current copy of the prospectus would have cured the
defect giving rise to such loss, claim, damage, liability or expense. In case
any action or proceeding shall be brought against Randall's or its directors or
officers, or any such controlling person, in respect of which indemnity may be
sought against such Selling Holder, such Selling Holder shall have the rights
and duties given to Randall's, and Randall's or its directors or officers or
such controlling person shall have the rights and duties given to such Selling
Holder, by the preceding paragraph. Each Selling Holder also agrees to indemnify
and hold harmless underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of Randall's provided in this Section
6(c) (as if clause (i) were not contained herein).
(d) Contribution. If the indemnification provided for in this Section 6
is unavailable to Randall's, the Selling Holders or the underwriters in respect
of any losses, claims, damages, liabilities or judgments referred to herein,
then each such indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and judgments (i) as
between Randall's and the Selling Holders on the one hand and the underwriters
on the other, in such proportion as is appropriate to reflect the relative
benefits received by Randall's and the Selling Holders on the one hand and the
underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of Randall's and the Selling Holders on the one hand and of the
underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations and (ii) as between Randall's, on
the one hand, and each Selling Holder on the other, in such proportion as is
appropriate to reflect the relative fault of Randall's and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by Randall's
and the Selling Holders on the one hand and the underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by Randall's and the Selling Holders bear to the total underwriting
discounts and commissions received by the underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
Randall's and the Selling Holders on the one hand and of the underwriters on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Randall's
and the Selling Holders or by the underwriters. The relative fault of Randall's
on the one hand and of each Selling Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Randall's and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation (even
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if the underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities underwritten by it and distributed to the public were
offered to the pubic exceeds the amount of any damages which such underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Selling Holder's obligation to contribute
pursuant to this Section 6(d) is several in the proportion that the proceeds of
the offering received by such Selling Holder bears to the total proceeds of the
offering, and not joint.
(e) Indemnification similar to that specified herein (with appropriate
modifications) shall be given by Randall's and each Selling Holder with respect
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
7. Participation in Underwritten Registrations.
No person may participate in any underwritten registration hereunder
unless such person (a) agrees to sell such person's securities on the basis
provided in any underwriting arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement.
8. Put Option.
(a) Original Common Stock. If Required Notice (as defined below) has
been given to Randall's prior to a Payment Date, a Holder of Original Common
Stock shall have the right to elect to sell to Randall's as of such Payment
Date, and Randall's shall be obligated to purchase from such Holder, at a
purchase price equal to the applicable Payment Amount, the number of such
Holder's shares of Original Common Stock specified in the Required Notice.
(b) Converted Common Stock. If Required Notice has been given to
Randall's prior to a Payment Date, a Holder of Converted Common Stock shall have
the non-cumulative right to elect to sell to Randall's as of such Payment Date,
and Randall's
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shall be obligated to purchase from such Holder, at a purchase price equal to
the applicable Payment Amount, up to 10% of all shares of Converted Common Stock
issued to the Holder thereof, provided, that on the final Payment Date, a Holder
of Converted Common Stock shall have the right to sell to Randall's upon such
terms all of such Holder's shares of Converted Common Stock.
(c) Required Notice. Notice of any exercise of the right to elect to
sell to Randall's any Original Common Stock or Converted Common Stock by a
Holder thereof pursuant to Section 8(a) or 8(b) hereof shall be given to
Randall's in accordance with Section 14.01 of the Acquisition Agreement at least
10 but not more than 60 days prior to the applicable Payment Date, and such
notice shall state (i) the name of the Holder of original Common Stock or
Converted Common Stock, as the case may be, (ii) the number of shares of
Original Common Stock or Converted Common Stock, as the case may be, that the
Holder is electing to sell to Randall's and (iii) the address to which a check
for payment shall be sent (such notice being the "Required Notice").
(d) Delivery of Shares and Payment. In order to receive payment for
shares of Original Common Stock or Converted Common Stock, as the case may be,
upon exercise of a Put Option, the Holder thereof shall surrender to Randall's,
at its address set forth pursuant to Section 14.01 of the Acquisition Agreement,
a certificate or certificates representing the applicable shares of Common Stock
to be purchased by Randall's, duly endorsed for transfer to Randall's. On the
applicable Payment Date, or thereafter when Randall's receives the certificates
representing the shares of Common Stock for which the Put Option is being
exercised, as described in the preceding sentence, Randall's shall pay, by
cashiers or certified check, to a Holder who has exercised a Put Option an
amount equal to the Payment Amount; provided that if such payment is in excess
of $1,000,000, at the request of such Holder such payment shall be made by wire
transfer payable in federal or other immediately available funds. Notice of an
intent to exercise a Put Option shall be irrevocable, and, on the next
subsequent Payment Date, the shares of Original Common Stock or Converted Common
Stock, as the case may be, referenced in such notice shall be converted into the
right to receive the applicable Payment Amount.
(e) Determination of Fair Market Value. The Fair Market Value of the
Common Stock as of the end of the immediately preceding fiscal year and the
Payment Amount applicable with respect to any Payment Date shall be determined
no later than the 20th day preceding such Payment Date. Immediately following
such determination, Randall's shall notify each Holder, in accordance with
Section 14.01 of the Acquisition Agreement, of the Payment Amount applicable
with respect to such Payment Date.
(f) Termination of Put Option. The right of a Holder of shares of
Original Common Stock or Converted Common Stock to sell such shares to Randall's
pursuant to this Section 8 shall terminate upon consummation of an IPO.
9. Restrictions on Transfer; Right of First Refusal; Repurchase Option.
(a) General Restrictions. Each Holder agrees that it will not, directly
or indirectly, effect a Disposition of any Randall's Securities (or solicit any
offers to effect a
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Disposition of any Randall's Securities), except (i) in compliance with the
Securities Act and (ii) prior to the consummation of an IPO, either (x) with the
written consent of Randall's or (y) in compliance with the following provisions;
provided that from and after October 15, 1997, the provisions of this Section
9(a)(ii) shall not apply to any Disposition of Randall's Securities by MSLEF II
to any partner or affiliate of MSLEF II if Randall's shall, if it so requests,
have received (1) an opinion of counsel to MSLEF II to the effect that such
Disposition does not violate the Securities Act and (2) a counterpart hereof
executed by such transferee in which such transferee agrees to be bound by all
the terms hereof (including this Section 9):
(A) Any Holder desiring to make a Disposition of any Randall's
Securities shall first make an offer (the "Offer") to sell such Randall's
Securities to Randall's.
(B) The Offer shall be sent by certified or registered mail,
return receipt requested, to Randall's and shall state the number of
shares involved. The date of the Offer shall be the date on which a notice
containing the Offer has been received by Randall's.
(C) Randall's shall have the option for 20 days following the date
of the Offer to purchase not less than all the Randall's Securities
offered. The Holder may withdraw the offer as to the Randall's Securities
at any time prior to the acceptance thereof by Randall's.
(D) The price per share to be paid upon the purchase of the
Randall's Securities under this Section 9(a) shall be the applicable
Payment Amount.
(E) The closing of the transaction pursuant to this Section 9(a)
shall be 30 days from the date of the Offer. The purchase price of the
Randall's Securities being acquired shall be paid by certified or
cashier's check upon the closing; provided that if such payment is in
excess of $1,000,000, at the request of such Holder such payment shall be
made by wire transfer payable in federal or other immediately available
funds.
(F) In order to exercise its option to purchase the Randall's
Securities hereunder, Randall's shall deliver to the Holder a written
notice of intent to purchase such Randall's Securities or send such notice
by certified or registered mail, return receipt requested, properly
stamped and addressed to the address of the Holder.
(G) If Randall's does not (i) exercise its option pursuant to
subparagraph (C) to purchase any Randall's Securities offered for sale by
a Holder in accordance with this Section 9 or (ii) effect a purchase of
any such Randall's Securities in accordance with subparagraph (E), the
Holder shall thereafter be entitled to freely solicit offers to effect a
Disposition or effect a Disposition with respect to such Randall's
Securities until the expiration of 120 days after the date (x) such option
lapses or (y) Randall's fails to effect such purchase, as the case may be.
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(b) Sale Upon Death of a Holder. Upon the death of a Holder, Randall's
shall have the option to purchase all of the decedent's Randall's Securities,
and such deceased Holder's spouse, heirs, legal representative, executor or
administrator shall be obligated to sell such Randall's Securities to Randall's,
at a purchase price equal to the applicable Payment Amount. Such sale shall be
consummated within six months after the date of death of the deceased Holder.
(c) Disposition Upon Termination of Marital Relationship. If the marital
relationship of a Holder is terminated by death or divorce and such Holder does
not succeed to his spouse's community interest in the Randall's Securities, the
Holder shall be required to purchase all of the spouse's interest in the
Randall's Securities, and the spouse or the executor or administrator of the
decedent's estate shall be obligated to sell such Randall's Securities, at a
purchase price equal to the applicable Payment Amount. Such purchase shall be
consummated within 90 days after such death or divorce. Should such Holder fail
to consummate the purchase within such 90 day period, such failure shall
constitute an Offer and the provisions of Section 9(a) hereof shall apply. The
date of the Offer shall be the 91st day after such death or divorce.
(d) Involuntary Disposition. Prior to any involuntary disposition of
Randall's Securities, the Holder who owns such Randall's Securities or their
representative shall send written notice thereof by certified or registered
mail, return receipt requested, disclosing in full to Randall's the nature and
details of such involuntary disposition and Randall's shall have the option to
purchase any such Randall's Securities for 90 days after the receipt of such
written notice, at a purchase price equal to the applicable Payment Amount.
10. Miscellaneous.
(a) Purchase by Designee. If Randall's is required or permitted under
the terms of Section 8 or Section 9 hereof to purchase any shares of Original
Common Stock, Converted Common Stock or Convertible Preferred Stock, Randall's
may, at its option, in lieu of such purchase, arrange for one or more designees
of Randall's to purchase such shares for a purchase price equal to the
applicable Payment Amount, and upon such purchase, any Randall's obligation to
purchase such shares shall be discharged and any Randall's option to purchase
such shares shall be exercised.
(b) Binding Effect. Unless otherwise provided herein, the provisions of
this Agreement shall be binding upon and accrue to the benefit of the parties
hereto and their respective heirs, legal representatives, transferees,
successors and assigns.
(c) Amendment. This Agreement may be amended or terminated only by a
written instrument signed by Randall's and the Holders of a majority of the
shares of Registrable Securities.
(d) Applicable Law. The internal laws of the State of Texas (without
regard to choice of law provisions thereof) shall govern the interpretation,
validity and performance of the terms of this Agreement.
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(e) Notices. All notices provided for herein shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, postage prepaid.
(f) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect.
(g) Spouses. The spouses of the Selling Shareholders are fully aware of,
understand, and fully consent and agree to the provisions of this Agreement and
its binding effect upon any community property interests they may now or
hereafter own, and agree that the termination of their marital relationship with
any Selling Shareholder for any reason shall not have the effect of removing any
Randall's Securities otherwise subject to this Agreement from the coverage
hereof and that their awareness, understanding, consent and agreements are
evidenced by their signing this Agreement. Any Selling Shareholder who marries
or remarries shall be obligated to have his spouse sign this Agreement or an
identical agreement.
(h) Remedies. The parties to this Agreement hereby declare that the
Randall's Securities are unique chattels and each party to this Agreement shall
have all the available remedies for the violation of this Agreement, including,
but not limited to, the equitable remedy of specific performance.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By: /s/ Bob Gowens
-----------------------------------
Title: Executive Vice President
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: Morgan Stanley Leveraged Equity
Fund II, Inc., a general partner
By:
-----------------------------------
Title:
--------------------------------
OTHER SELLING SHAREHOLDERS
--------------------------------------
Jack W. Evans
--------------------------------------
Spouse:
--------------------------------------
Robert B. Cullum, Jr.
--------------------------------------
Spouse:
--------------------------------------
Jack W. Evans, Jr.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
Title:
--------------------------------
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: Morgan Stanley Leveraged Equity
Fund II, Inc., a general partner
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Director
OTHER SELLING SHAREHOLDERS
--------------------------------------
Jack W. Evans
--------------------------------------
Spouse:
--------------------------------------
Robert B. Cullum, Jr.
--------------------------------------
Spouse:
--------------------------------------
Jack W. Evans, Jr.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
Title:
--------------------------------
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: , a general partner
----------------
By:
-----------------------------------
Title:
--------------------------------
OTHER SELLING SHAREHOLDERS
/s/ Jack W. Evans
--------------------------------------
Jack W. Evans
/s/ Imogene S. Evans
--------------------------------------
Spouse:
--------------------------------------
Robert B. Cullum, Jr.
--------------------------------------
Spouse:
--------------------------------------
Jack W. Evans, Jr.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
Title:
--------------------------------
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: , a general partner
----------------
By:
-----------------------------------
Title:
--------------------------------
OTHER SELLING SHAREHOLDERS
--------------------------------------
Jack W. Evans
--------------------------------------
Spouse:
/s/ Robert B. Cullum, Jr.
--------------------------------------
Robert B. Cullum, Jr.
/s/ Elna F. Cullum
--------------------------------------
Spouse:
--------------------------------------
Jack W. Evans, Jr.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
Title:
--------------------------------
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: , a general partner
----------------
By:
-----------------------------------
Title:
--------------------------------
OTHER SELLING SHAREHOLDERS
--------------------------------------
Jack W. Evans
--------------------------------------
Spouse:
--------------------------------------
Robert B. Cullum, Jr.
--------------------------------------
Spouse:
/s/ Jack W. Evans, Jr.
--------------------------------------
Jack W. Evans, Jr.
<PAGE>
/s/ Mary Evans
--------------------------------------
Spouse:
--------------------------------------
Charles G. Cullum
--------------------------------------
Spouse:
--------------------------------------
Houston E. Holmes
--------------------------------------
Spouse:
--------------------------------------
Mrs. Robert B. Cullum
--------------------------------------
James E. Stiles
--------------------------------------
Spouse:
<PAGE>
--------------------------------------
Spouse:
/s/ Charles G. Cullum
--------------------------------------
Charles G. Cullum
/s/ Garland Mac Cullum
--------------------------------------
Spouse:
--------------------------------------
Houston E. Holmes
--------------------------------------
Spouse:
--------------------------------------
Mrs. Robert B. Cullum
--------------------------------------
James E. Stiles
--------------------------------------
Spouse:
<PAGE>
--------------------------------------
Spouse:
--------------------------------------
Charles G. Cullum
--------------------------------------
Spouse:
/s/ Houston E. Holmes, Jr.
--------------------------------------
Houston E. Holmes
/s/ Sally C. Holmes
--------------------------------------
Spouse:
--------------------------------------
Mrs. Robert B. Cullum
--------------------------------------
James E. Stiles
--------------------------------------
Spouse:
<PAGE>
--------------------------------------
Spouse:
--------------------------------------
Charles G. Cullum
--------------------------------------
Spouse:
--------------------------------------
Houston E. Holmes
--------------------------------------
Spouse:
/s/ Mrs. Robert B. Cullum
--------------------------------------
Mrs. Robert B. Cullum
--------------------------------------
James E. Stiles
--------------------------------------
Spouse:
<PAGE>
--------------------------------------
Spouse:
--------------------------------------
Charles G. Cullum
--------------------------------------
Spouse:
--------------------------------------
Houston E. Holmes
--------------------------------------
Spouse:
--------------------------------------
Mrs. Robert B. Cullum
/s/ James E. Stiles
--------------------------------------
James E. Stiles
/s/ Beverley A. Stiles
--------------------------------------
Spouse:
<PAGE>
EXHIBIT 10.10
RANDALL'S MANAGEMENT CORPORATION, INC.
QUALIFIED SHAREHOLDERS AGREEMENT
This Agreement is made this 29th day of March, 1984, by and among
RANDALL'S MANAGEMENT CORPORATION, INC., a Texas corporation (hereinafter
referred to as the "Corporation") and the undersigned officers, Directors and
key employees of the Corporation or its subsidiaries, Randall's Management
Corporation of Nevada, Inc., Randall's Food Markets, Inc., Randall's Properties,
Inc., and Randall's Warehouse Corporation (hereinafter referred to as the
"Qualified Shareholders");
WHEREAS, the Corporation is incorporated under the laws of the State of
Texas, with the following authorized amount of Class B, Class C and Class D of
non-voting common stock, of which the following shares are issued and
outstanding; to-wit:
Authorized Issued
---------- ------
Class B 5,000,000 1,000,000
Class C 5,000,000 1,000,000
Class D 5,000,000 1,000,000
WHEREAS, by unanimous consent of the Board of Directors of the
Corporation, dated October 31, 1983, the Corporation authorized the then present
owners of the Class B, Class C and Class D non-voting common stock of the
Corporation ("Present Shareholders"), to sell to certain officers, directors and
key employees of the Corporation or its subsidiary corporations, as designated
by the Corporation's Board of Directors, shares of their Class B, Class C and
Class D non-voting common stock during the month of January, 1984, in a minimum
quantity of one hundred (100) shares and a maximum quantity of one thousand
(1,000) shares per person and subject to the provisions of this Agreement; and,
WHEREAS, the Qualified Shareholders are the owners of the amount of such
issued and outstanding Stock of the Corporation as follows each name of the
undersigned; and,
EXHIBIT "A"
<PAGE>
WHEREAS, the Corporation and the Qualified Shareholders desire to promote
their mutual interest and the interest of the Corporation by imposing certain
restrictions and obligations on themselves and said shares of the Stock of the
Corporation; and,
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, it is hereby agreed as follows:
1. DEFINITIONS: As used in this Agreement:
a. The term "Stock" shall mean all issued and outstanding shares of
Class B, Class C and Class D common stock of the Corporation acquired from the
Present Shareholders by the Qualified Shareholders as authorized by the Board of
Directors on October 31, 1983, and that are hereafter authorized by the Board of
Directors and acquired by the Qualified Shareholders. Moreover, all references
herein to Stock owned by a Qualified Shareholder includes the community
interest, if any, of the spouse of such Qualified Shareholder in such Stock.
This Agreement shall not cover such shares of the Corporation stock that are
part of a class of shares that is being publicly traded in an established
securities market.
b. The term "Disposition" shall mean any inter vivos transfer,
pledge, assignment, hypothecation, mortgage or other encumbrance, or any other
disposition of Stock whatsoever, whether voluntary or involuntary.
2. INVESTMENT REPRESENTATIONS: In connection with the acquisition of the
Stock by the Qualified Shareholder, each Qualified Shareholder upon executing
this Agreement makes the following representations on which the Corporation and
present Shareholders may rely in aid of exemptions from the registration
requirements of the Securities Act of 1933, as amended ("the Act"):
"a. I am aware that the Stock will not be registered under the Act
on the grounds that the sale and issuance thereof were exempt under Section
4(a). I understand
-2-
<PAGE>
that reliance upon such exemption is predicated in part on the representation,
which is hereby confirmed, that I am acquiring the Stock for my own account, for
investment and without a view to the distribution thereof within the meaning of
such term as used in the Act; and upon the further representation, which is also
confirmed, that I will not take any action which will subject the acquisition or
issuance of the Stock to the registration requirements of the Act. I have been
fully advised with respect to and am familiar with the operations of the
Corporation and have obtained or had an opportunity to obtain all information
regarding its operations, financial condition and other matters as would allow
me to make a fully informed investment decision with respect to the acquisition
of the Stock.
"b. I hereby agree that the certificates representing the Stock may
be inscribed with a legend summarizing and giving notice of the representations
and agreements herein and the conditions upon which the Stock will be issued to
me, and that the Corporation may place a stop transfer order against any
transfer of the Stock to avoid any violation of such representations and
agreements.
"c. I hereby confirm that I have been advised that the Stock must be
held by me indefinitely unless they are subsequently registered under the Act or
any exemption from registration is available. I further confirm my understanding
that the Corporation has no obligation to me so to register the Stock or effect
compliance with Regulation A or any other exemption under the Act; and since the
Corporation is not subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and does
not presently intend to make "publicly available" within the meaning of Release
No. 5223 under the Act, the information referred to in clauses (1) to (14)
inclusive, and clause (16) of paragraph (a)(4) of Rule 15c2-11 under the 1934
Act, it is unlikely that I will
-3-
<PAGE>
be able to make any public resale of the Stock under the provisions and within
the limitations specified in Rule 144 or Rule 237 under the Act. If such sales
under either of such Rules should become applicable, however, and should I then
endeavor to make routine sales of the Stock in reliance thereon, I fully
understand that in making such sales I must strictly comply with the limitations
imposed upon the number of Stock that can be sold and with the other terms and
conditions of such Rules as applicable.
"d. I do hereby further agree that the Stock will not be
transferred, pledged, sold or otherwise disposed of unless I shall have complied
with the provisions of this Agreement.
"e. I understand the nature of the investment being made by me and
the financial risks thereof. I agree to indemnify and hold the Corporation and
the Present Shareholders harmless in the event any loss or damage is sustained
by the Corporation or the Present Shareholders as a result of any violation by
me of the provisions of the foregoing representations."
3. STOCK TRANSFER RESTRICTIONS. Except as herein provided, no Qualified
Shareholder shall make any Disposition of any Stock or offer to sell any Stock
without the written consent of the Corporation, or, in the absence of such
written consent, except pursuant to the provisions hereinafter set forth:
a. Any Qualified Shareholder desiring to make a Disposition of Stock
shall first make an offer (the "Offer") to sell such Stock to the Company and to
the remaining Qualified Stockholders.
b. The Offer shall be sent by certified or registered mail, return
receipt requested, to the Corporation and to the remaining Qualified
Stockholders and shall state the number of shares involved. The date of the
Offer
-4-
<PAGE>
shall be the date on which a notice containing the Offer has been so sent to all
parties entitled to receive it.
c. The Corporation shall have the option for thirty (30) days
following the date of the Offer to purchase not less than all the Stock offered.
The selling Qualified Shareholder may withdraw the offer as to the Stock at any
time prior to the acceptance thereof by the Corporation.
d. If the Corporation does not exercise its option, the remaining
Qualified Shareholders shall have the option, for thirty (30) days following the
expiration of the Corporation's option, to purchase the Stock offered. Each
remaining Qualified Shareholder electing to purchase the Stock pursuant to the
Offer shall have the right to purchase that proportion of the number of shares
of such Stock which the number of shares of Stock owned by such remaining
Qualified Shareholders bears to the total number of shares of Stock owned by all
remaining Qualified Shareholders electing to purchase. The selling Qualified
Shareholder may withdraw the offer as to the Stock at anytime prior to the
acceptance thereof by the remaining Qualified Shareholders.
e. The price per share to be paid upon the purchase of the Stock
under paragraph 3(c) and 3(d) shall be the nearest date (to the date of the
Offer) of the evaluation of the Stock, made by Underwood, Nehaus & Co.,
Incorporated, an investment banking firm in Houston, Texas, or any other
comparable investment banking firm selected by the Corporation.
f. The closing shall be sixty (60) days from the date of the Offer.
The purchase price determined under Paragraph 3(e) of the Stock being acquired
by each purchaser shall be paid by certified or cashier's check upon the
closing. Such check shall be actually delivered to the selling party or sent by
certified or registered mail, return receipt requested, to the address of the
selling party.
g. The Corporation and the remaining Qualified Shareholders shall
exercise their options to purchase the
-5-
<PAGE>
Stock hereunder by actual delivery to the selling party of a written notice of
intent to purchase such Stock or by sending such notice by certified or
registered mail, return receipt requested, properly stamped and addressed to the
address of the selling party. Upon the exercise of an option, the purchaser
shall be obligated to make payment as provided in Paragraph 3(f).
h. In the event that the aforementioned sale of Stock is unable to
be consummated under the aforestated terms, then the selling Qualified
Shareholder desiring to make a Disposition of his Stock may make written notice
to the Corporation that sale of his Stock has not been consummated by the
foregoing Offers and the Corporation shall then be obligated to purchase the
Stock under the terms of sale and purchase price of such Stock as provided in
this Agreement in Section 3 above. If such a sale is made, however, to a
remaining Qualified Stockholder, the transferee shall accept such Stock subject
to all the restrictions, terms and conditions contained in this Agreement. In no
case shall any share be transferable or assignable except to the Corporation or
a remaining Qualified Shareholder, as aforesaid.
4. SALE OF STOCK UPON DEATH OF QUALIFIED SHAREHOLDER.
Upon the death of a Qualified Stockholder, the Corporation shall be
obligated to purchase all of the decedent's Stock, and such deceased Qualified
Shareholder's spouse and executor or administrator shall be obligated to sell
such Stock to the Corporation. Such sale shall be consummated within six (6)
months after the date of death of the deceased Qualified Shareholder. The price
per share at which such Stock shall be purchased shall be an amount of the
purchase price determined as provided in Paragraph 3(e) and payable as provided
in Paragraph 3(f) hereof.
5. DISPOSITION UPON TERMINATION OF MARITAL RELATIONSHIP. If the marital
relationship of a Qualified Shareholder is
-6-
<PAGE>
terminated by death or divorce and such Qualified Shareholder does not succeed
to his spouse's community interest in the Stock, the Qualified Shareholder shall
be required to purchase all of the spouse's interest in the Stock, and the
spouse or the executor or administrator of the decedent's estate shall be
obligated to sell such Stock, at the price per share determined under Paragraph
2(e). Such purchase must be exercised and consummated within ninety (90) days
after such death or divorce. Should such Qualified Shareholder fail to
consummate the purchase within such ninety (90) day period, such failure shall
constitute an Offer and the provisions of Paragraph 3(c) through 3(h) shall
apply. The date of the Offer shall be the 91st day after such death or divorce.
Provided, however, if the surviving spouse is an employee of the Corporation at
the time the marriage is terminated, such spouse may retain the Stock subject to
the provisions of this Agreement.
6. DISPOSITION UPON TERMINATION OF EMPLOYMENT. If a Qualified Shareholder
becomes totally disabled to continue his employment, or if the employment of a
Qualified Shareholder is voluntarily or involuntarily terminated for any reason
other than death, such total disability or termination, for purposes of this
Section 6 only, shall be considered an Offer and, after written notice of the
total disability or termination of employment of such Qualified Shareholder is
sent to or by the Corporation by certified or registered mail, return receipt
requested, the provisions of Paragraphs 3(a) through 3(h) shall apply. The date
such written notice is deposited in the mails shall be the date of the Offer.
7. INVOLUNTARY DISPOSITION. Prior to any involuntary disposition of Stock,
the Qualified Shareholder who owns such Stock or their representative shall send
written notice thereof by certified or registered mail, return
-7-
<PAGE>
receipt requested, disclosing in full to the Corporation and the other Qualified
Shareholders the nature and details of such involuntary disposition and the
Corporation shall have the option to purchase any such Stock for ninety (90)
days after the sending of such written notice. The other Qualified Shareholders
shall have an option for thirty (30) days after the expiration of the
Corporation's option to purchase in the proportions set forth in Paragraph 3(d)
any Stock not purchased by the Corporation. The price per share to be paid upon
exercise of such options shall be an amount equal to the purchase price
determined as provided in Paragraph 3(e) and payable as provided in Paragraph
3(f), and such options shall be exercisable as provided in Paragraph 3(g). In
the event the other Qualified Shareholders do not purchase all of said Stock,
then the Corporation shall purchase all remaining Stock as provided in Paragraph
3(h).
8. ENDORSEMENT ON STOCK CERTIFICATES. The Certificates evidencing shares
of the Stock in the Corporation owned by the Qualified Shareholders shall be
endorsed as follows:
"This certificate is transferable only in accordance with the terms
and provisions of that certain Qualified Shareholders Agreement,
dated _______________________, 198__, between RANDALL'S MANAGEMENT
CORPORATION, INC., the Qualified Shareholders, and their spouses;
that such Shares are subject to an Agreement among the Qualified
Shareholders of the Corporation and that the Corporation will
furnish to the holder of a certificate without charge upon written
request to the Corporation at its principal place of business or
registered office, a copy of such Qualified Stockholders Agreement.
Said Agreement restricts the sale or transfer of the shares of Stock
evidenced by this certificate and imposes certain obligations with
respect to such sale or transfer, to all of which restrictions and
obligations the holder hereof, by acceptance of this certificate,
assents and agrees."
Such certificates shall be endorsed on the front thereof as follows:
"See restrictions on transfer hereof on reverse side."
Upon termination of this Agreement for any reason, the Corporation
will cause to be issued, in exchange for
-8-
<PAGE>
certificates bearing the above legend, new certificates without such
endorsements.
9. NOTICES. In the event a notice or other document is required to be sent
hereunder to the Corporation or to any Qualified Shareholder or spouse of a
Qualified Shareholder, such notice or other document shall be sent by registered
or certified mail, return receipt requested, to the party entitled to receive
such notice or other document at the address reflected below or at such other
address as such party shall request in a written notice sent to the Corporation
and all Qualified Shareholders and spouses of Qualified Shareholders:
Randall's Management Corporation, Inc.
16000 Barker's Point Lane, Suite 200
Houston, Texas 77079
Qualified Shareholder: See address beneath signature
10. MISCELLANEOUS PROVISIONS.
a. This Agreement shall be subject to and governed by the laws of
the State of Texas.
b. Whenever the context requires, the gender of all words used
herein shall include the masculine, feminine and neuter, and the number of all
words shall include the singular and plural.
c. This Agreement shall be binding upon the Corporation, the
Qualified Shareholders, the spouses of the Qualified Shareholders and their
heirs, executors, administrators, successors and assigns. The Qualified
Shareholders by the signing hereof direct their personal representatives to open
their Estates promptly in the courts of proper jurisdiction and to execute,
procure and deliver all documents as shall be required to effectuate this
Agreement.
d. This Agreement may be amended from time to time by an instrument
in writing signed by all those who are parties to this Agreement at the time of
such amendment, such instrument being designated on its face as an "Amendment"
to this Agreement.
-9-
<PAGE>
e. This Agreement shall terminate automatically upon the bankruptcy
or dissolution of the Corporation, upon the occurrence of any event which
reduces the number of Qualified Shareholders to zero or upon the deaths of all
the Qualified Shareholders. This Agreement may also be terminated by an
instrument in writing signed by all those who are parties to this Agreement.
f. Any Qualified Shareholder who sells all of his Stock shall cease
to be a party to this Agreement and shall have no further rights hereunder.
g. The spouses of the Qualified Shareholders are fully aware of,
understand, and fully consent and agree to the provisions of this Agreement and
its binding effect upon any community property interests they may now or
hereafter own, and agree that the termination of their marital relationship with
any Qualified Shareholder for any reason shall not have the effect of removing
any Stock of the Corporation otherwise subject to this Agreement from the
coverage hereof and that their awareness, understanding, consent and agreements
are evidenced by their signing this Agreement. Any Qualified Shareholder who
marries or remarries shall be obligated to have his spouse sign this Agreement
or an identical agreement.
h. This Agreement shall pertain to and cover any and all shares of
Stock which may hereafter be issued to or held by the Qualified Shareholders.
i. The parties to this Agreement hereby declare that the Stock are
unique chattels and each party to this Agreement shall have all the available
remedies for the violation of this Agreement, including, but not limited to the
equitable remedy of specific performance.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
in multiple counterparts, each of
-10-
<PAGE>
which shall be deemed an original, on this the 29th day of March, l984.
RANDALL'S MANAGEMENT
CORPORATION, INC.
By /s/ Bob Gowens
------------------------
SHAREHOLDERS:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------- ---------------------------
Spouse
Address 13887 [ILLEGIBLE]
Houston, Tx 77092
/s/ Sue Frewin /s/ Norman P. Frewin
- ----------------------------- ---------------------------
Spouse
Address 4503 Acidia
Bellaire, Tx 77401
/s/ Mary E. Pesek /s/ Jerome W. Pesek, Jr.
- ----------------------------- ---------------------------
Spouse
Address 17810 Weiss Hill Rd.
Spring, Tx 77379
/s/ Geraline L. Stringer /s/ Walter D. Stringer
- ----------------------------- ---------------------------
Spouse
Address 3619 Blalock
Houston, Texas 77080
/s/ Kathleen D. Sullins /s/ William C. Sullins, Jr.
- ----------------------------- ---------------------------
Spouse
Address 7302 Winklemon
Houston, Tex. 77079
/s/ Norma Jean Parker
- ----------------------------- ---------------------------
Spouse
Address 737 W. 16th
Houston, Texas 77008
-11-
<PAGE>
/s/ Delores D. Fleming /s/ Kenneth R. Fleming
- ----------------------------- ---------------------------
Spouse
Address 430 County Fair
Houston, Texas 77060
/s/ Norman P, Frewin custodian
- ----------------------------- -------------------------------
Spouse for Gregory Frewin
Address
/s/ Priscilla Harris /s/ Willima B. Harris
- ----------------------------- ---------------------------
Spouse
Address 7030 Stone [ILLEGIBLE]
Spring, Texas 77373
/s/ Darlene Lueking /s/ Lloyd Lueking
- ----------------------------- ---------------------------
Spouse
Address Rt 6 Box 6412
Pearland, Texas 77584
/s/ Elizabeth Walding /s/ Wm. E. Walding Jr
- ----------------------------- ---------------------------
Spouse
Address 8203 Ash Valley
Spring, Texas
77379
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------- ---------------------------
Spouse
Address P.O. Box 125
Magnolia, Tx 77355
/s/ Richard M. Stolarski /s/ Betty Stolarski
- ----------------------------- ---------------------------
Spouse
Address 11915 Dorrance
Stafford, Texas 77477
/s/ Louise Adams /s/ John P. Adams
- ----------------------------- ---------------------------
Spouse
Address 15312 Bakrest
Houston, 77070
/s/ Thomas M. Wiggant /s/ Shirley J. Wiggant
- ----------------------------- ---------------------------
Spouse
Address 2630 Saddlehorn
Katy, Tx 77450
-12-
<PAGE>
/s/ Suzanne E. Varner /s/ Lonnie A. Varner
- ----------------------------- ---------------------------
Spouse
Address 110 Moravian Drive
Sealy, Tx 77474
/s/ Rhonda J. Frewin /s/ Walter W. Frewin
- ----------------------------- ---------------------------
Spouse
Address 16707 La Gloria
Houston, Tx 77083
/s/ DW Frye /s/ Nancy Frye
- ----------------------------- ---------------------------
Spouse
Address 12 Gage Ct.
Houston, Tx 77024
/s/ [ILLEGIBLE] /s/ Rosemary Frewin Smith
- ----------------------------- ---------------------------
Spouse
Address 1825 Pine Cone
Katy, Tx 77449
/s/ John French
- ----------------------------- ---------------------------
Spouse
Address 1850 Hilton Head
Missouri City, Tx 77459
/s/ Dolores S. Harpold
- ----------------------------- ---------------------------
Spouse
Address
/s/ John P. Scott
- ----------------------------- ---------------------------
Spouse
Address P.O. Box 354
Willis, Tx 77303
/s/ Lydia G. Horn /s/ William A. Horn
- ----------------------------- ---------------------------
Spouse
Address 23855 Red Oak Dr.
Spring, Texas 77389
/s/ Susan Butler /s/ Craig D. Butler
- ----------------------------- ---------------------------
Spouse
Address 711 Conestoga Ctr
Katy, Tx 77450
-13-
<PAGE>
EXHIBIT 10.11
RANDALL'S MANAGEMENT CORPORATION, INC.
QUALIFIED SHAREHOLDERS AGREEMENT
This Agreement is made this 8th day of April, 1985, by and among RANDALL'S
MANAGEMENT CORPORATION, INC., a Texas corporation (hereinafter referred to as
the "Corporation") and the undersigned officers, Directors and key employees of
the Corporation or its subsidiaries, Randall's Management Corporation of Nevada,
Inc., Randall's Food Markets, Inc., Randall's Properties, Inc., and Randall's
Warehouse Corporation (hereinafter referred to as the "Qualified Shareholders");
WHEREAS, the Corporation is incorporated under the laws of the State of
Texas, with the following authorized amount of Class B, Class C and Class D of
non-voting common stock, of which the following shares are issued and
outstanding; to-wit:
Authorized Issued
---------- ------
Class B 5,000,000 1,000,000
Class C 5,000,000 1,000,000
Class D 5,000,000 1,000,000
WHEREAS, by resolution of the Board of Directors of the Corporation, dated
January 28, 1985, the Corporation authorized the then present owners (excluding
the Qualified Shareholders named in the Qualified Shareholders Agreement dated
March 29, 1984), of the Class B, Class C and Class D non-voting common stock of
the Corporation ("Present Shareholders"), to sell to certain officers, directors
and key employees of the Corporation or its subsidiary corporations, as
designated by the Corporation's Board of Directors, shares of their Class B,
Class C and Class D non-voting common stock during the month of February, 1985,
in a minimum quantity of one hundred (100) shares and a maximum quantity of two
thousand (2,000) shares per person and subject to the provisions of this
Agreement; and,
<PAGE>
WHEREAS, the Qualified Shareholders under the March 29, 1984 Qualified
Shareholders Agreement were designated by the Corporation's Board of Directors
by said resolution of January 28, 1985, as qualified to purchase such shares to
be sold by the present Shareholders and that said March 29, 1984 Agreement
applies to and is enforceable against the Qualified Shareholders and as to any
of such shares sold and purchased by the Qualified Shareholders during February,
1985; and,
WHEREAS, the Qualified Shareholders are the owners of the amount of such
issued and outstanding Stock of the Corporation as follows each name of the
undersigned; and,
WHEREAS, the Corporation and the undersigned Qualified Shareholders desire
to promote their mutual interest and the interest of the Corporation by imposing
certain restrictions and obligations on themselves and said shares of the Stock
of the Corporation; and,
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, it is hereby agreed as follows:
1. DEFINITIONS: As used in this Agreement:
a. The term "Stock" shall mean all issued and outstanding shares of
Class B, Class C and Class D common stock of the Corporation acquired from the
Present Shareholders by the undersigned Qualified Shareholders as authorized by
the Board of Directors on January 28, 1985, and that are hereafter authorized by
the Board of Directors and acquired by the Qualified Shareholders. Moreover, all
references herein to Stock owned by a Qualified Shareholder includes the
community interest, if any, of the spouse of such Qualified Shareholder in such
Stock. This Agreement shall not cover such shares of the Corporation stock that
are part of a class of shares that is being publicly traded in an established
securities market.
-2-
<PAGE>
b. The term "Disposition" shall mean any inter vivos transfer,
pledge, assignment, hypothecation, mortgage or other encumbrance, or any other
disposition of Stock whatsoever, whether voluntary or involuntary.
2. INVESTMENT REPRESENTATIONS: In connection with the acquisition of the
Stock by the undersigned Qualified Shareholder, each Qualified Shareholder upon
executing this Agreement makes the following representations on which the
Corporation and Present Shareholders may rely in aid of exemptions from the
registration requirements of the Securities Act of 1933, as amended ("the Act"):
"a. I am aware that the Stock will not be registered under the Act
on the grounds that the sale and issuance thereof were exempt under Section
4(a). I understand that reliance upon such exemption is predicated in part on
the representation, which is hereby confirmed, that I am acquiring the Stock for
my own account, for investment and without a view to the distribution thereof
within the meaning of such term as used in the Act; and upon the further
representation, which is also confirmed, that I will not take any action which
will subject the acquisition or issuance of the Stock to the registration
requirements of the Act. I have been fully advised with respect to and am
familiar with the operations of the Corporation and have obtained or had an
opportunity to obtain all information regarding its operations, financial
condition and other matters as would allow me to make a fully informed
investment decision with respect to the acquisition of the Stock.
"b. I hereby agree that the certificates representing the Stock may
be inscribed with a legend summarizing and giving notice of the representations
and agreements herein and the conditions upon which the Stock will be issued to
me, and that the Corporation may place a stop transfer order against any
transfer of the Stock to avoid any violation of such representations and
agreements.
-3-
<PAGE>
"c. I hereby confirm that I have been advised that the Stock must be
held by me indefinitely unless they are subsequently registered under the Act or
any exemption from registration is available. I further confirm my understanding
that the Corporation has no obligation to me so to register the Stock or effect
compliance with Regulation A or any other exemption under the Act; and since the
Corporation is not subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and does
not presently intend to make "publicly available" within the meaning of Release
No. 5223 under the Act, the information referred to in clauses (1) to (14)
inclusive, and clause (16) of paragraph (a)(4) of Rule 15c2-11 under the 1934
Act, it is unlikely that I will be able to make any public resale of the Stock
under the provisions and within the limitations specified in Rule 144 or Rule
237 under the Act. If such sales under either of such Rules should become
applicable, however, and should I then endeavor to make routine sales of the
Stock in reliance thereon, I fully understand that in making such sales I must
strictly comply with the limitations imposed upon the number of Stock that can
be sold and with the other terms and conditions of such Rules as applicable.
"d. I do hereby further agree that the Stock will not be
transferred, pledged, sold or otherwise disposed of unless I shall have complied
with the provisions of this Agreement.
"e. I understand the nature of the investment being made by me and
the financial risks thereof. I agree to indemnify and hold the Corporation and
the Present Shareholders harmless in the event any loss or damage is sustained
by the Corporation or the Present Shareholders as a result of any violation by
me of the provisions of the foregoing representations."
-4-
<PAGE>
3. STOCK TRANSFER RESTRICTIONS. Except as herein provided, no Qualified
Shareholder shall make any Disposition of any Stock or offer to sell any Stock
without the written consent of the Corporation, or, in the absence of such
written consent, except pursuant to the provisions hereinafter set forth:
a. Any Qualified Shareholder desiring to make a Disposition of Stock
shall first make an offer (the "Offer") to sell such Stock to the Company and to
the remaining Qualified Shareholders.
b. The Offer shall be sent by certified or registered mail, return
receipt requested, to the Corporation and to the remaining Qualified
Stockholders and shall state the number of shares involved. The date of the
Offer shall be the date on which a notice containing the Offer has been so sent
to all parties entitled to receive it.
c. The Corporation shall have the option for thirty (30) days
following the date of the Offer to purchase not less than all the Stock offered.
The selling Qualified Shareholder may withdraw the offer as to the Stock at any
time prior to the acceptance thereof by the Corporation.
d. If the Corporation does not exercise its option, the remaining
Qualified Shareholders shall have the option, for thirty (30) days following the
expiration of the Corporation's option, to purchase the Stock offered. Each
remaining Qualified Shareholders bears to the total number of shares of Stock
owned by all remaining Qualified Shareholders electing to purchase. The selling
Qualified Shareholder may withdraw the offer as to the Stock at anytime prior to
the acceptance thereof by the remaining Qualified Shareholders.
e. The price per share to be paid upon the purchase of the Stock
under Paragraph 3(c) and 3(d) shall be the nearest date (to the date of the
Offer) of the evaluation of the Stock, made by Underwood, Nehaus & Co.,
Incorporated,
-5-
<PAGE>
an investment banking firm in Houston, Texas, or any other comparable investment
banking firm selected by the Corporation.
f. The closing shall be sixty (60) days from the date of the Offer.
The purchase price determined under Paragraph 3(e) of the Stock being acquired
by each purchaser shall be paid by certified or cashier's check upon the
closing. Such check shall be actually delivered to the selling party or sent by
certified or registered mail, return receipt requested, to the address of the
selling party.
g. The Corporation and the remaining Qualified Shareholders shall
exercise their options to purchase the Stock hereunder by actual delivery to the
selling party of a written notice of intent to purchase such Stock or by sending
such notice by certified or registered mail, return receipt requested, properly
stamped and addressed to the address of the selling party. Upon the exercise of
an option, the purchaser shall be obligated to make payment as provided in
Paragraph 3(f).
h. In the event that the aforementioned sale of Stock is unable to
be consummated under the aforestated terms, then the selling Qualified
Shareholder desiring to make a Disposition of his Stock may make written notice
to the Corporation that sale of his Stock has not been consummated by the
foregoing Offers and the Corporation shall then be obligated to purchase the
Stock under the terms of sale and purchase price of such Stock as provided in
this Agreement in Section 3 above. If such a sale is made, however, to a
remaining Qualified Stockholder, the transferee shall accept such Stock subject
to all the restrictions, terms and conditions contained in this Agreement. In no
case shall any share be transferable or assignable except to the Corporation or
a remaining Qualified Shareholder, as aforesaid.
4. SALE OF STOCK UPON DEATH OF QUALIFIED SHAREHOLDER.
Upon the death of a Qualified Stockholder, the
-6-
<PAGE>
Corporation shall be obligated to purchase all of the decedent's Stock, and such
deceased Qualified Shareholder's spouse and executor or administrator shall be
obligated to sell such Stock to the Corporation. Such sale shall be consummated
within six (6) months after the date of death of the deceased Qualified
Shareholder. The price per share at which such Stock shall be purchased shall be
an amount of the purchase price determined as provided in Paragraph 3(e) and
payable as provided in Paragraph 3(f) hereof.
5. DISPOSITION UPON TERMINATION OF MARITAL RELATIONSHIP. If the marital
relationship of a Qualified Shareholder is terminated by death or divorce and
such Qualified Shareholder does not succeed to his spouse's community interest
in the Stock, the Qualified Shareholder shall be required to purchase all of the
spouse's interest in the Stock, and the spouse or the executor or administrator
of the decedent's estate shall be obligated to sell such Stock, at the price per
share determined under Paragraph 2(e). Such purchase must be exercised and
consummated within ninety (90) days after such death or divorce. Should such
Qualified Shareholder fail to consummate the purchase within such ninety (90)
day period, such failure shall constitute an Offer and the provisions of
Paragraph 3(c) through 3(h) shall apply. The date of the Offer shall be the 91st
day after such death or divorce. Provided, however, if the surviving spouse is
an employee of the Corporation at the time the marriage is terminated, such
spouse may retain the Stock subject to the provisions of this Agreement.
6. DISPOSITION UPON TERMINATION OF EMPLOYMENT. If a Qualified Shareholder
becomes totally disabled to continue his employment, or if the employment of a
Qualified Shareholder is voluntarily or involuntarily terminated for any reason
other than death, such total disability or termination, for purposes of this
Section 6 only, shall be considered an
-7-
<PAGE>
Offer and, after written notice of the total disability or termination of
employment of such Qualified Shareholder is sent to or by the Corporation by
certified or registered mail, return receipt requested, the provisions of
Paragraphs 3(a) through 3(h) shall apply. The date such written notice is
deposited in the mails shall be the date of the Offer.
7. INVOLUNTARY DISPOSITION. Prior to any involuntary disposition of Stock,
the Qualified Shareholder who owns such Stock or their representative shall send
written notice thereof by certified or registered mail, return receipt
requested, disclosing in full to the Corporation and the other Qualified
Shareholders the nature and details of such involuntary disposition and the
Corporation shall have the option to purchase any such Stock for ninety (90)
days after the sending of such written notice. The other Qualified Shareholders
shall have an option for thirty (30) days after the expiration of the
Corporation's option to purchase in the proportions set forth in Paragraph 3(d)
any Stock not purchased by the Corporation. The price per share to be paid upon
exercise of such options shall be an amount equal to the purchase price
determined as provided in Paragraph 3(e) and payable as provided in Paragraph
3(f), and such options shall be exercisable as provided in Paragraph 3(g). In
the event the other Qualified Shareholders do not purchase all of said Stock,
then the Corporation shall purchase all remaining Stock as provided in Paragraph
3(h).
8. ENDORSEMENT ON STOCK CERTIFICATES. The Certificates evidencing shares
of the Stock in the Corporation owned by the Qualified Shareholders shall be
endorsed as follows:
"This certificate is transferable only in accordance with the terms
and provisions of that certain Qualified Shareholders Agreement,
dated _______________, 1985, between RANDALL'S MANAGEMENT
CORPORATION, INC., the Qualified Shareholders, and their spouses;
that such Shares are subject to an Agreement among the Qualified
Shareholders of the Corporation and that the Corporation
-8-
<PAGE>
will furnish to the holder of a certificate without charge upon
written request to the Corporation at its principal place of
business or registered office, a copy of such Qualified Stockholders
Agreement. Said Agreement restricts the sale or transfer of the
shares of Stock evidenced by this certificate and imposes certain
obligations with respect to such sale or transfer, to all of which
restrictions and obligations the holder hereof, by acceptance of
this certificate, assents and agrees."
Such certificates shall be endorsed on the front thereof as follows:
"See restrictions on transfer hereof on reverse side."
Upon termination of this Agreement for any reason, the Corporation
will cause to be issued, in exchange for certificates bearing the above legend,
new certificates without such endorsements.
9. NOTICES. In the event a notice or other document is required to be sent
hereunder to the Corporation or to any Qualified Shareholder or spouse of a
Qualified Shareholder, such notice or other document shall be sent by registered
or certified mail, return receipt requested, to the party entitled to receive
such notice or other document at the address reflected below or at such other
address as such party shall request in a written notice sent to the Corporation
and all Qualified Shareholders and spouses of Qualified Shareholders:
Randall's Management Corporation, Inc.
16000 Barker's Point Lane, Suite 200
Houston, Texas 77079-4094
Qualified Shareholder: See address beneath signature.
10. MISCELLANEOUS PROVISIONS.
a. This Agreement shall be subject to and governed by the laws of
the State of Texas.
b. Whenever the context requires, the gender of all words used
herein shall include the masculine, feminine and neuter, and the number of all
words shall include the singular and plural.
-9-
<PAGE>
c. This Agreement shall be binding upon the Corporation, the
Qualified Shareholders, the spouses of the Qualified Shareholders and their
heirs, executors, administrators, successors and assigns. The Qualified
Shareholders by the signing hereof direct their personal representatives to open
their Estates promptly in the courts of proper jurisdiction and to execute,
procure and deliver all documents as shall be required to effectuate this
Agreement.
d. This Agreement may be amended from time to time by an instrument
in writing signed by all those who are parties to this Agreement at the time of
such amendment, such instrument being designated on its face as an "Amendment"
to this Agreement.
e. This Agreement shall terminate automatically upon the bankruptcy
or dissolution of the Corporation, upon the occurrence of any event which
reduces the number of Qualified Shareholders to zero or upon the deaths of all
the Qualified Shareholders. This Agreement may also be terminated by an
instrument in writing signed by all those who are parties to this Agreement.
f. Any Qualified Shareholder who sells all of his Stock shall cease
to be a party to this Agreement and shall have no further rights hereunder.
g. The spouses of the Qualified Shareholders are fully aware of,
understand, and fully consent and agree to the provisions of this Agreement and
its binding effect upon any community property interests they may now or
hereafter own, and agree that the termination of their marital relationship with
any Qualified Shareholder for any reason shall not have the effect of removing
any Stock of the Corporation otherwise subject to this Agreement from the
coverage hereof and that their awareness, understanding, consent and agreements
are evidenced by their signing this Agreement. Any Qualified Shareholder who
marries or remarries shall be obligated to have his spouse sign this Agreement
or an identical agreement.
-10-
<PAGE>
h. This Agreement shall pertain to and cover any and all shares of
Stock which may hereafter be issued to or held by the Qualified Shareholders.
i. The parties to this Agreement hereby declare that the Stock are
unique chattels and each party to this Agreement shall have all the available
remedies for the violation of this Agreement, including, but not limited to the
equitable remedy of specific performance.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
in multiple counterparts, each of which shall be deemed an original, on this the
8th day of April, 1985.
RANDALL'S MANAGEMENT CORPORATION, INC.
By /s/ Bob Gowens
------------------------
SHAREHOLDERS:
/s/ Charlotte Branch /s/ Kenneth A. Branch
- ----------------------------- -----------------------------
Spouse
Address 2914 Carson
Katy, Texas 77449
/s/ Jana M. Livorsi /s/ Joseph M. Livorsi
- ----------------------------- -----------------------------
Spouse
Address 919 Pebbleshire Dr.
Houston, TX 77062
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------- -----------------------------
Spouse
Address 7822 [ILLEGIBLE]
Spring, TX 77379
-11-
<PAGE>
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------- -----------------------------
Spouse
Address 1818 Centennial Dr.
Houston, Texas 77055
/s/ Neil H. Schilmoeller /s/ Janice R. Schilmoeller
- ----------------------------- -----------------------------
Spouse
Address 402 Commodore Way
Houston, Texas 77079
/s/ Thomas M. Wright
- ----------------------------- -----------------------------
Spouse
Address 2127 Lazybrook
Houston, TX 77708
-12-
<PAGE>
Exhibit 10.12
RANDALLS
CORPORATE INCENTIVE PLAN
Plan Summary
September 1996
<PAGE>
RANDALLS
CORPORATE INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
PURPOSE......................................................... 1
DEFINITIONS..................................................... 1
ADMINISTRATION.................................................. 2
PARTICIPATION/ELIGIBILITY....................................... 3
TIMING OF AWARD PAYMENTS........................................ 3
AWARD DETERMINATION............................................. 3
AWARDS.......................................................... 4
VESTING......................................................... 4
CHANGE OF CONTROL............................................... 4
DURATION OF INCENTIVE PLAN...................................... 4
TERMINATION OF PLAN............................................. 5
MISCELLANEOUS PLAN PROVISIONS................................... 5
EFFECTIVE DATE.................................................. 6
<PAGE>
PURPOSE
- -------
The Board of Directors (the "Board") of Randalls (the "Company") has approved
a Corporate Incentive Plan (the "Plan") to reward executives for enhancing
the value of the Company. The purpose of this Plan is to motivate executives
to think and act like owners. The Plan is intended to reward the Participants
in the Plan for the Company's financial performance which exceeds a threshold
level of performance.
The Plan is an annual plan which coincides with the Fiscal Year of the
Company. Awards made under the Plan are in addition to base salary and base
salary adjustments to maintain market competitiveness.
The Board reserves the right to amend, modify or revoke the Plan at its
discretion, without prior notice to participants, provided however, any
amendments, modifications or revocation shall not be retroactive. No
contractual right to any benefit described herein is intended to be created by
this document or any related action of the Company and none should be
inferred from the descriptions of this Plan.
DEFINITIONS
- -----------
AFTER-TAX NET INCOME - The consolidated after-tax net income, determined in
accordance with Generally Accepted Accounting Principles.
AWARD - Total cash and restricted stock awarded to a Plan Participant due to
the Company's performance and results achieved under the plan.
BASE SALARY - Base Salary of Participants excluding all other forms of
compensation, such as benefits, pension and profit-sharing contributions, or
additional compensation received for performing non-management duties. Base
Salary shall be the actual Base Salary paid out during the Plan Year.
CASH AWARD - The cash portion of the Award.
COMPENSATION COMMITTEE - A committee comprised of directors as appointed by
the Board.
EBITDAR - Earnings before interest, taxes, depreciation, amortization, and
rents.
EXCESS PERFORMANCE - The amount of EBITDAR for the Plan Year before current
year incentives generated under this Plan, adjusted by any
unusual/nonrecurring items, in excess of the Threshold.
INCENTIVE POOL - Represents the Excess Performance (the amount above the
threshold performance level) multiplied by the Incentive Pool Percentage.
INCENTIVE POOL PERCENTAGE - The portion of Excess Performance used to fund
the Annual Incentive Pool.
Page 1
<PAGE>
NEW EXECUTIVE - An executive employee whose employment with the Company
commences after the beginning of the Plan Year.
PARTICIPANT GROUP - For purposes of this plan, the participant groups will be
defined as follows: Top Executive, Support Staff VPs, Merch. Staff VPs,
Distribution Center VPs, Division Pres. & VPs, and District VPs.
PLAN - The Company's Corporate Incentive Plan as summarized in this document
and as amended from time to time by the Compensation Committee.
PLAN PARTICIPANT - Individuals who are chosen by the Compensation Committee
to participate in the Plan for a given Plan Year.
PLAN YEAR - The plan year shall coincide with the Company's fiscal year.
RESTRICTED STOCK - Company stock issued to Participants in the name of the
Participant subject to restrictions on ownership. The restricted stock is
subject to forfeiture in the event vesting does not occur. The Participant
has the right to vote the stock and receive dividends and other distributions
from the date of grant. However, the stock is not transferable prior to
vesting.
RESTRICTED STOCK AWARD - The number of shares of restricted stock to be
issued determined by dividing the portion of the Award to be paid in
restricted stock by the market value as determined at Plan Year end.
THRESHOLD - The minimum financial performance, determined annually by the
Compensation Committee, that must be achieved by the Company before an
incentive pool is created.
UNUSUAL/NONRECURRING ITEMS - Items of income or expense which may be excluded
from EBITDAR. Such items may include, but are not limited to the effect of
changes in accounting principles and gains on the dispositions of assets. It
is intended that these items represent items outside the influence of
management and employees of the Company. The Compensation Committee shall
have the discretion to determine which items shall be defined as
Unusual/Nonrecurring Items.
ADMINISTRATION
- --------------
The Compensation Committee will be responsible for the following as it
relates to the operation of the Plan:
- - Participants to be included in the Plan;
- - Allocation of Incentive Pool;
- - Incentive award levels for each participant;
- - Incentive Pool Percentage; and
- - Threshold
Page 2
<PAGE>
PARTICIPATION/ELIGIBILITY
- -------------------------
On an annual basis, the Compensation Committee shall determine those
positions eligible for participation in the plan for each Plan Year. An
executive (other than a New Executive) who moves into an eligible position
during the Plan Year shall be entitled to participate in the incentive plan
for the portion of the year in which the executive holds the eligible
position.
Participants, whose Employment is terminated due to death, disability, or
retirement on or after attaining age 65, shall be eligible for an Award for
the Plan Year in which such termination occurred. Participants whose
employment is terminated for any other reason during a Plan Year shall not be
entitled to an Award for such Plan Year, unless otherwise determined by the
Compensation Committee in its discretion as exercised on a case-by-case basis
taking into account such factors as it deems relevant. The Compensation
Committee shall determine whether a termination of employment was voluntary,
for cause or for any other reason, in its discretion.
TIMING OF AWARD PAYMENTS
- ------------------------
After the annual financial results have been finalized, the Incentive Pool
generated will be determined and awards will be allocated to Plan
Participants. Awards for the Plan Year will be paid to Plan Participants as
soon as administratively practicable after the end of the Plan Year for which
the Award was made.
AWARD DETERMINATION
- -------------------
The Incentive Pool for each Plan Year shall be calculated by the Compensation
Committee as follows:
EBITDAR before current year incentives generated under this Plan
- - Division/District Incentives
+/- Adjustments for Unusual/Nonrecurring Income or Expense
- - Threshold
- ------------------------------------------
Excess Performance
x Incentive Pool Percentage
- ------------------------------------------
Incentive Pool
==========================================
If no Incentive Pool is generated, then any incentive awarded is
discretionary based on the achievement of individual performance criteria and
other factors as determined by the Compensation Committee.
Page 3
<PAGE>
AWARDS
- ------
The Incentive Pool for each year will be allocated, as determined annually by
the Compensation Committee, first to Participant Groups and second, to
participants within the groups based on relative base salaries and their
respective level of contribution to the Company.
The Incentive Pool allocation will be subject to the limitations as
established by the Compensation Committee for each Participant Group.
The amount of the allocated Incentive Pool actually awarded will be based
upon performance criteria as determined annually by the Compensation
Committee.
All Awards will be paid 60 percent in cash and 40 percent in restricted stock
except for the Division Pres. & VPs and District VPs Participant Groups, who
will receive 100 percent of their Award from the Corporate Incentive Plan in
restricted stock.
No Awards will be made if the Company is not in compliance with loan
covenants or if after-tax net income for the Plan Year is negative.
VESTING
- -------
Restricted stock will vest on the date that is three years from the end of
the Plan Year with respect to which the Participant was awarded the
restricted stock.
Upon death, disability or retirement on or after age 65, all previously
unvested restricted stock shall become fully vested at the date of such
event. Vesting of restricted stock for Participants who terminate voluntarily
or for cause will be determined at the date on which he or she is terminated.
Vesting of restricted stock for Participants who terminate for any other
reason will be determined at the end of the Plan Year in which the
termination occurred. If the date of vesting determination is prior to the
date that is three years from the end of the Plan Year with respect to which
the Participant was awarded the restricted stock, the restricted stock will
be forfeited.
CHANGE OF CONTROL
- -----------------
Upon the occurrence of a Change of Control, the Board may accelerate the
vesting period for each Restricted Stock Award, effective upon a date prior
or subsequent to the effective date of such Change of Control, specified by
the Board.
DURATION OF INCENTIVE PLAN
- --------------------------
The Plan is an integral part of the Company's compensation plan. The Board
reserves the power and the right at any time, and from time to time, to
modify, amend or terminate (in whole or in part) any or all of the provisions
of the Plan; provided, however, that no such modification or amendment shall
be retroactive to reduce or
Page 4
<PAGE>
affect any awards otherwise due and payable under the provisions of the Plan
for any Plan Year during which the Plan was in effect.
TERMINATION OF PLAN
- -------------------
Should the Plan terminate on a date that is prior to the end of a Plan Year,
all calculations made under the Plan will be adjusted to reflect the period
of time the Plan was in effect during the Plan Year.
Should the Company or any subsidiary elect to dissolve, enter into a sale of
its assets, or enter into any reorganization incident to which it is not the
surviving entity, unless the surviving or successor entity shall formerly
agree to assume the Plan, the Plan shall terminate with respect to the
Company or any subsidiary, as the case may be, on the earlier of the date of
closing or the effective date of such transaction.
The full amount of any remaining unpaid in respect of Plan Years ended with
or prior to the date the Plan is terminated shall be paid to each Participant
or Beneficiary, as applicable, as soon as administratively practicable.
MISCELLANEOUS PLAN PROVISIONS
- -----------------------------
- - A Participant's right and interest under the Plan may not be assigned or
transferred except in the event of the Participant's death. Upon the death
of a Participant who was entitled to an Award at the date of his/her death,
such Award (and only such Award) shall become payable, pursuant to the Plan,
to the Participant's beneficiary. Unless otherwise noted, the Participant's
beneficiary will be the same as the designation under the Company's group
life insurance plan.
- - Should a Participant terminate employment (either voluntarily or
involuntarily) for causes other than death, disability or retirement, any
Award that the Participant forfeited as a result of such termination will
not be reallocated to the remaining Participants for any Fiscal Year.
- - New Executives, in eligible positions, who join the Company after the
beginning of a Plan Year will not be eligible to participate in the Plan for
that Plan Year but will be entitled to a cash incentive based on their
individual performance for the period beginning with their employment
through the end of the Plan Year. See Attachment A for New Executive
Incentive Plan.
- - The Company shall deduct all minimum required Federal tax and any
required state tax withholding from the Awards.
- - The administrative expense of the Plan will be borne by the Company.
Page 5
<PAGE>
EFFECTIVE DATE
- --------------
This Plan is effective for the fiscal year beginning June 30, 1996 and shall
continue until terminated.
Page 6
<PAGE>
ATTACHMENT A
Randalls
New Executive Incentive Plan
Summary
The purpose of this document is to provide a summary of the incentive plan
for executives hired after the beginning of a Plan Year.
Participation
Participants in this plan are executives that are hired after the beginning
of a Plan Year and who would have been eligible to participate in the
Randalls Corporate Incentive Plan had they been employed on the first day of
such Plan Year.
Awards
The award for a Plan Year under this plan shall be based upon individual
performance objectives established for the participant as soon as practical
after date of hire. The participant shall be eligible to receive a cash
incentive equal to but not greater than the cash incentive allocated to the
participant group (to which the participant is assigned) under the
Corporate Incentive Plan for the Plan Year. For example, if the new
executive is assigned to the Support Staff VP Group and the incentive
allocated to that group under the Corporate Incentive Plan is 30% of base
salary, the new executive could earn a maximum incentive for the Plan Year
equal to 18% (30% x 60% cash portion) of that participants base salary for
the Plan Year. The amount actually earned could be less depending upon the
new executive's accomplishment of individual performance objectives.
Page 1
<PAGE>
Ex 10.13(a)
RANDALL'S FOOD MARKETS, INC.
KEY EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND CONSTRUCTION........................................ 1
1.1 Definitions................................................ 1
ARTICLE II
ELIGIBILITY AND PARTICIPATION....................................... 4
2.1 Eligibility................................................ 4
2.2 Participation.............................................. 4
ARTICLE III
CONTRIBUTIONS....................................................... 4
3.1 Participant's Basic Contribution........................... 4
3.2 Participant's Bonus Contribution........................... 5
3.3 Participant's Voluntary Contribution....................... 5
3.4 Participant's Discretionary Contribution................... 5
3.5 Voluntary Contribution Limits.............................. 5
ARTICLE IV
INVESTMENT OF FUNDS................................................. 6
4.1 Establishment of Trust.................................... 6
4.2 Stock Fund................................................ 6
4.3 Separate Participant Account.............................. 6
4.4 Statements to Participants................................ 6
4.5 Voting Company Stock...................................... 6
ARTICLE V
DISTRIBUTIONS....................................................... 7
5.1 Severance from Service..................................... 7
5.2 Type of Distribution....................................... 7
5.3 Advance Distribution for Hardship.......................... 7
5.4 Withdrawals................................................ 8
ARTICLE VI
TERMINATION OF EMPLOYMENT........................................... 8
ARTICLE VII
PLAN TERMINATION, AMENDMENT, MODIFICATION OR SUPPLEMENT............. 8
7.1 Termination................................................ 8
7.2 Benefits Upon Termination of Plan By the Employer.......... 9
i
<PAGE>
ARTICLE VIII
OTHER BENEFITS AND AGREEMENTS....................................... 9
ARTICLE IX
RESTRICTIONS ON ALIENATION OF BENEFITS.............................. 9
ARTICLE X
ADMINISTRATION OF THIS PLAN......................................... 9
10.1 Appointment of Committee................................... 9
10.2 Committee Officials........................................ 10
10.3 Committee Action........................................... 10
10.4 Committee Rules and Powers - General. ..................... 10
10.5 Reliance on Certificates, etc. ............................ 10
10.6 Liability of Committees.................................... 10
10.7 Determination of Benefits.................................. 11
10.8 Information to Committee................................... 11
SECTION XI
CLAIM PROCEDURE..................................................... 11
11.1 Filing Original Claim...................................... 11
11.2 Appeal to Committee........................................ 11
SECTION XII
MISCELLANEOUS....................................................... 12
12.1 Reliance Upon Information.................................. 12
12.2 Governing Law.............................................. 12
12.3 Severability............................................... 12
12.4 Headings................................................... 12
12.5 Non-Waiver................................................. 12
12.6 Plan on File............................................... 12
12.7 Notices.................................................... 12
ii
<PAGE>
RANDALL'S FOOD MARKETS, INC.
KEY EMPLOYEE STOCK PURCHASE PLAN
PURPOSE
The purpose of the Randall's Food Markets, Inc. Key Employee Stock Purchase
Plan is to provide specified benefits to a select group of key employees who
contribute materially to the continued growth, development and future business
success of Randall's Food Markets, Inc., a corporation organized and existing
under the laws of the State of Texas (the "Employer"). It is the intention of
the Employer that this Plan and the individual agreements established hereunder
provide a select group of managers and certain highly compensated employees the
opportunity to share in the business success of the Employer.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For purposes of this Plan, the following phrases or
terms shall have the indicated meanings unless otherwise clearly apparent from
the context.
(a) "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time.
(b) "Beneficiary" shall mean the person or persons to whom the
benefits under this Plan are to be paid upon a Participant's death, and
such person shall be the person or persons designated by the Participant to
receive benefits under the Randall's Food Markets, Inc. Salaried Employee
Stock Ownership Plan ("ESOP"); provided however, if a divorce petition is
on file at a court of competent jurisdiction concerning a Participant and
his or her spouse, the Participant may designate a Beneficiary other than
his spouse without obtaining such spouse's consent. In the event no valid
designation of Beneficiary exists at the time of a Participant's death, the
benefit provided for in Section 5.1 shall be payable to the Participant's
estate. This provision enabling each Participant to designate one or more
Beneficiaries shall constitute a nontestamentary payment provision covered
by Section 450 of the Texas Probate Code. Any payment made by the Employer
in good faith and in accordance with the provision of this Plan and a
Participant's Plan Agreement shall fully discharge the Employer from all
further obligations with respect to such payment.
(c) "Board of Directors" shall mean the Board of Directors of
Randall's Food Markets, Inc. unless otherwise indicated or the context
otherwise requires.
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(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
and in effect from time to time.
(e) "Committee" shall mean the Key Employee Stock Purchase Committee
appointed by the Board of Directors to administer and manage the Plan and
the individual Plan Agreements pursuant to Article X hereof.
(f) "Company Stock" shall mean common stock issued by the Employer
(or by a corporation which is a member of the Controlled Group of
Corporations in which the Employer is a member) which is readily tradeable
on an established securities market. If there is no common stock which
meets the foregoing requirement, the term "Company Stock" means common
stock issued by the Employer (or by a corporation which is a member of the
same controlled group) having a combination of voting power and dividend
rights equal to or in excess of: (A) that class of common stock of the
Employer (or of any other such corporation) having the greatest voting
power, and (B) that class of stock of the Employer (or of any other such
corporation) having the greatest dividend rights. Noncallable preferred
stock shall be deemed to be "Company Stock" if such stock is convertible at
any time into stock which constitutes "Company Stock" hereunder and if such
conversion is at a conversion price which (as of the date of the
acquisition by the Trust) is reasonable.
(g) "Compensation" shall mean a Participant's total wages, salaries
and other amounts received from the Employer for personal services actually
rendered, including bonuses, Employer contributions to any welfare or
deferred compensation plan and any deferred benefits otherwise provided to
a Participant, and any stock options or other distributions which receive
special tax treatment. For the purpose of determining the amount of such
compensation, the books and records of the Employer shall be conclusive.
Compensation shall be recognized as of an Employee's effective date of
participation pursuant to Section 2.2.
(h) "Controlled Group of Corporations" shall mean any group of
corporations as set forth in Section 1563(a) of the Code.
(i) "Disability" shall mean a physical or mental condition of a
Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with
the Employer. The disability of a Participant shall be determined by a
licensed physician chosen by the Committee. The determination shall be
applied uniformly to all Participants.
(j) "Effective Date" shall mean March 1, 1992.
(k) "Eligible Employee" shall mean an Employee (i) who is either a
highly compensated Employee or an Employee who is a key manager of the
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operations of a segment of the Employer's business and (ii) who is selected
by the Committee in its sole discretion.
(l) "Employee" shall mean any person who is employed by the Employer
and compensated on a salaried basis, but excludes any person who is
employed as an independent contractor.
(m) "Employer" shall mean Randall's Food Markets, Inc., any of its
subsidiaries and any successors thereto.
(n) "ESOP" shall mean the Randall's Food Markets, Inc. Salaried
Employee Stock Ownership Plan, as amended and restated as of June 25, 1989,
and as amended from time to time.
(o) "ESOP Trustee" shall mean the Trustee as defined in Section 1.48
of the ESOP.
(p) "Participant" shall mean an Eligible Employee who elects to
participate in the Plan through the execution of a Plan Agreement as
provided for in Article III.
(q) "Plan" shall mean the Randall's Food Markets, Inc. Key Employee
Stock Purchase Plan as set forth herein and as it may be amended from time
to time.
(r) "Plan Agreement" shall mean the form of written agreement,
attached hereto as Annex I, which is entered into by and between the
Employer and an Eligible Employee as a condition to participation in the
Plan.
(s) "Plan Year" shall mean the Plan's accounting year of not less
than fifty-two (52) nor more than fifty-three (53) weeks ending on the last
Saturday in June.
(t) "Severance from Service Date" shall mean the first date on which
a Participant terminates his employment, including any terminations of
employment on account of death, Disability and retirement.
(u) "Stock Fund" shall mean the separate fund to be held by the
Trustee and to be derived from a Participant's Basic, Bonus, Voluntary and
Discretionary Contributions made in accordance with Article III hereof.
(v) "Trust" or "Trust Fund" shall mean the trust to be established
pursuant to Section 4.1 hereof.
(w) "Trust Agreement" means the agreement between the Employer and
the Trustee providing for the establishment and maintenance of the Trust
pursuant to Section 4.1 hereof.
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(x) "Trustee" shall mean the trustee of the Trust or any of its
delegatees pursuant to the Trust Agreement.
(y) "Valuation Date" shall mean the last business day of the Plan
Year and such additional dates as the Committee may designate.
1.2 Construction. The masculine gender when used herein shall be deemed
to include the feminine gender, and the singular may include the plural unless
the context clearly indicates to the contrary. The words "hereof", "herein",
"hereunder", and other similar compounds of the word "here" shall mean and refer
to the entire plan and not to any particular provision or section. Wherever the
words "Article" or "Section" are used in this Plan, or a cross-reference to an
"Article" or "Section" is made, the Article or Section referred to shall be an
Article or Section of the Plan unless otherwise specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. In order to be eligible for participation in the Plan,
an Employee must be selected by the Committee which, in its sole and absolute
discretion, shall determine eligibility for participation in accordance with the
purposes of the Plan.
2.2 Participation. An Eligible Employee, having been selected to
participate in this Plan by the Committee, shall, as a condition to
participation, complete and return to the Committee a duly executed Plan
Agreement electing to participate in the Plan and agreeing to the terms and
conditions thereof.
ARTICLE III
CONTRIBUTIONS
3.1 Participant's Basic Contribution. For each Plan Year, if any
contributions made to the ESOP under Section 4.1(a) of the ESOP and any earnings
thereon are required under Section 4.6 of the ESOP to be distributed to an
Eligible Employee, the Eligible Employee may, at his discretion, contribute all
or a part of such required distribution from the ESOP to the Trustee as a
contribution to the Stock Fund. The Eligible Employee shall deliver to the
Trustee an executed Plan Agreement and a check, made payable to, or endorsed
over to, the Randall's Food Markets, Inc. Key Employee Stock Purchase Trust in
an amount not in excess of the distribution made to the Eligible Employee under
Section 4.6 of the ESOP. The contribution under this Section shall hereinafter
be referred to as the Participant's "Basic Contribution." Any Basic
Contributions to the Stock Fund hereunder are subject to all federal or state
income tax or any other related tax of the Participant.
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3.2 Participant's Bonus Contribution. For each Plan Year, any amount
which the Employer determines to pay Eligible Employees as taxable compensation
from its general assets on account of certain contributions to the ESOP under
Section 4.2(a) of the ESOP being unallocable to such Eligible Employee's account
because of a distribution made to the Participant as set forth in Section 3.1
above and Section 4.6 of the ESOP, the Eligible Employee may, at his discretion,
contribute all or a part of such additional taxable compensation paid to the
Eligible Employee by the Employer to the Trustee for and on behalf of such
Eligible Employee as a contribution to the Stock Fund. The Eligible Employee
shall deliver to the Trustee an executed Plan Agreement and a check, made
payable to, or endorsed over to the Randall's Food Markets, Inc. Key Employee
Stock Purchase Trust in an amount not in excess of the taxable compensation paid
the Eligible Employee as described in this Section. The contribution under this
Section shall hereinafter be referred to as the Participant's "Bonus
Contribution." Any Bonus Contributions to the Stock Fund hereunder are subject
to all federal or state income tax or any other related tax of the Participant.
3.3 Participant's Voluntary Contribution. Except as provided in Section
3.5, each Eligible Employee may elect to make contributions to the Trustee as a
contribution to the Stock Fund through authorized payroll period deductions.
All contributions made by a Participant under this Section shall be subject to
all federal or state income tax or any other related tax of the Participant. A
Participant may change his election as to the rate of contributions upward or
downward to be effective as of the first pay period following such change. A
notice of election of change shall be given to the Committee and only one (1)
election change per quarter will be accepted. The contributions under this
Section shall hereinafter be referred to as the Participant's "Voluntary
Contribution."
3.4 Participant's Discretionary Contribution. Each Eligible Employee may,
upon receiving approval from the Committee, contribute shares of Company Stock
previously acquired by the Eligible Employee or cash to the Stock Fund. Any
contribution under this Section shall hereinafter be referred to as the
Participant's "Discretionary Contribution."
3.5 Voluntary Contribution Limits. For each Plan Year, the maximum amount
of Voluntary Contributions a Participant may contribute to the Plan under
Section 3.3 is not to exceed twenty-five percent (25%) of the Participant's
total annual Compensation for calendar year ending in the Plan Year, less (i)
any or all contributions made to the ESOP on behalf of the Participant under
Sections 4.1 of the ESOP, (ii) any or all Basic Contributions made by the
Participant under Section 3.1 above and (iii) all Bonus Contributions made the
Participant under Section 3.2 above.
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ARTICLE IV
INVESTMENT OF FUNDS
4.1 Establishment of Trust. The Employer shall enter into a Trust
Agreement with a Trustee providing for the establishment of an irrevocable
Trust, constituting an express trust under the Texas Trust Code, to which all
contributions and from which all benefits provided under the Plan shall be paid.
Subject to the provisions of this Article IV, the terms of the Trust Agreement
as in effect from time to time shall be determined solely by the Employer and
the Trustee.
4.2 Stock Fund. The Trustee shall maintain one fund which shall be
designated the "Stock Fund". Such fund shall be fully invested in Company
Stock; provided that any funds in the hands of the Trustee pending investment in
Company Stock may be held by the Trustee uninvested or may be invested
temporarily in securities issued or guaranteed by the United States or any
agency or instrumentality thereof or in commercial paper or partial interests
therein. Except for shares of Company Stock which are contributed by a
Participant as an Discretionary Contribution, if any, Company Stock acquired by
the Committee shall be made from existing owners of Company Stock in a similar
manner as the ESOP purchases shares of Company Stock for and on behalf of its
participants.
4.3 Separate Participant Account. Separate accounts shall be maintained
for each Participant reflecting his interest in the Stock Fund attributable to
his contributions (the "Participant Account"). Such account shall reflect on a
pro rata basis gains and losses arising from investments.
4.4 Statements to Participants. As soon as practicable after the end of
each Plan Year, there shall be furnished to each Participant a statement of such
Participant's interest in the Stock Fund as of the last Valuation Date in such
Plan Year.
4.5 Voting Company Stock. The Trustee shall vote all Company Stock held
by it as part of the Plan assets at such time and in such manner as the
Committee shall direct. If the Committee shall fail or refuse to give the
Trustee timely instructions as to how to vote any Company Stock as to which the
Trustee otherwise has the right to vote, the Trustee shall not exercise its
power to vote such Company Stock.
Notwithstanding the foregoing, if the Employer has a "registration-type
class of securities" (as defined in Section 409(e)(4) of the Code), each
Participant shall be entitled to direct the Trustee as to the manner in which
the Company Stock which is entitled to vote and which is allocated to the
Company Stock account of such Participant is to be voted. If the Employer does
not have a registration-type class of securities, each Participant in the Plan
shall be entitled to direct the Trustee as to the manner in which voting
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rights on shares of Company Stock which are allocated to the account of such
Participant are to be exercised with respect to a corporate matter which
involves the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets
of trade or business or such similar transaction as the Committee may
determine.
ARTICLE V
DISTRIBUTIONS
5.1 Severance from Service. As soon as administratively possible after a
Participant's Severance from Service Date, the Committee shall instruct the
Trustee to distribute to the Participant or his Beneficiary (in the case of the
Participant's death) in one entire lump sum, the Participant's interest in the
Trust.
5.2 Type of Distribution. Distribution of a Participant's interest in the
Trust shall be made in cash.
5.3 Advance Distribution for Hardship. The Committee, at its own
discretion and at the request of the Participant, shall direct the Trustee to
distribute to any Participant in any one Plan Year up to 100% of his account in
the Stock Fund valued as of the last Valuation Date the amount necessary to
satisfy the immediate and heavy financial need of the Participant. Withdrawal,
without suspension of participation (as set forth in Section 5.4), under this
Section shall be authorized only if the distribution is on account of:
i) Medical expenses described in Code Section 213(d) incurred
by the Participant, his spouse, or any of his dependents (as defined
in Code Section 152);
ii) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
iii) Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, his spouse, children, or
dependents; or
iv) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
v) Any other events similar to those set forth above which
are extraordinary and unforeseeable and beyond the control of a
Participant or Beneficiary determined by the Committee.
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5.4 Withdrawals. A Participant shall be entitled on only one occasion
during any sixty (60) month period to withdraw all or a portion of his or her
interest in the Trust without his or her participation in the Plan being
suspended. Two withdrawals from the Trust of any amount by a Participant during
any sixty (60) month period shall cause the Participant to be suspended from
participating in the Plan for a twelve (12) month period. Three withdrawals of
any amount from the Trust by the Participant during any sixty (60) month period
shall cause the Participant to be suspended from participating in the Plan for a
thirty-six (36) month period. No more than three (3) withdrawals during a sixty
(60) month period are allowed under the Plan.
ARTICLE VI
TERMINATION OF EMPLOYMENT
Neither this Plan nor a Participant's Plan Agreement, either singularly or
collectively, in any way obligate the Employer to continue the employment of a
Participant with the Employer nor does it either limit the right of the Employer
at any time and for any reason to terminate the Participant's employment.
Termination of a Participant's employment with the Employer for any reason,
whether by action of the Employer or a Participant shall immediately terminate
the Participant's participation in this Plan and his Plan Agreement, and all
further obligations of either party thereunder, except as may be provided in
Article V or VII and the Participant's Plan Agreement. In no event shall this
Plan or a Plan Agreement constitute an employment contract of any nature
whatsoever between the Employer and a Participant.
ARTICLE VII
PLAN TERMINATION, AMENDMENT,
MODIFICATION OR SUPPLEMENT
7.1 Termination. The Employer reserves the right to terminate, amend,
modify or supplement this Plan or any Plan Agreement, wholly or partially, from
time to time. Such right to terminate, amend, modify, or supplement this Plan
or any Plan Agreement shall be exercised for the Employer by the Committee;
provided, however, that:
(a) No action to terminate this Plan or a Plan Agreement shall be
taken except upon written notice to each Participant to be affected
thereby, which notice shall be given not less than 30 days prior to such
action;
(b) The Committee shall take no action to terminate this Plan or a
Plan Agreement with respect to a Participant or his Beneficiary after the
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payment of any benefit in accordance with Article V has commenced but has
not been completed.
7.2 Benefits Upon Termination of Plan By the Employer. In the event that
the Employer terminates the Plan, the Participant shall be entitled to a
distribution of an amount in cash equal to the total Participant's interest in
the Trust.
ARTICLE VIII
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and his Beneficiary hereunder and
under such Participant's Plan Agreement are in addition to any other benefits
available to such Participant under any other plan or plan of the Employer for
its employees, and, except as may be otherwise expressly provided for, this Plan
and the Plan Agreements entered into hereunder shall supplement and shall not
supersede, modify, or amend any other plan or plan of the Employer or a
Participant.
ARTICLE IX
RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Plan or a Plan Agreement shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge
the same shall be void. No right or benefit hereunder or under any Plan
Agreement shall in any manner be liable for or subject to the debts, contracts,
liabilities, or torts of the person entitled to such benefit. If any
Participant or Beneficiary under this Plan or a Plan Agreement should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge any right to a benefit hereunder or under any Plan Agreement, then such
right or benefit shall, in the discretion of the Committee, be suspended, and,
in such event, the Committee may hold or apply the same or any part thereof for
the benefit of such Participant or Beneficiary, his or her spouse, children, or
their dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion may deem proper.
ARTICLE X
ADMINISTRATION OF THIS PLAN
10.1 Appointment of Committee. The general administration of this Plan,
and any Plan Agreements executed hereunder, as well as construction and
interpretation thereof, shall be vested in the Committee, in its sole
discretion, the number and members of which shall be designated and appointed
from time to time by, and shall serve at the pleasure of, the Board of
Directors. Any such member of the Committee may resign by notice in writing
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filed with the secretary of the Committee. Vacancies shall be filled promptly
by the Board of Directors. Except for the initial Committee, each person
appointed a member of the Committee shall signify his acceptance by filing a
written acceptance with the secretary of the Committee.
10.2 Committee Officials. The Board of Directors may designate one of the
members of the Committee as Chairman and may appoint a secretary who need not be
a member of the Committee. The secretary shall keep minutes of the Committee's
proceedings and all data, records, and documents relating to the Committee's
administration of this Plan and any Plan Agreement executed hereunder. The
Committee may appoint from its number such subcommittees with such powers as the
Committee shall determine and may authorize one or more of its members or any
agent to execute or deliver any instrument or make any payment on behalf of the
Committee.
10.3 Committee Action. All resolutions or other actions taken by the
Committee shall be by the vote of a majority of those present at a meeting at
which a majority of the members are present, or in writing by all the members at
the time in office if they act without a meeting.
10.4 Committee Rules and Powers - General. Subject to the provisions of
this Plan, the Committee shall from time to time establish rules, forms, and
procedures for its administration of this Plan, including Plan Agreements.
Except as herein otherwise expressly provided, the Committee shall have the
exclusive right to interpret this Plan and any Plan Agreements, and to decide
any and all matters arising thereunder or in connection with the administration
of this Plan and Plan Agreements, and it shall endeavor to act, whether by
general rules or by particular decisions, so as to not discriminate in favor of
or against any person. Such decisions, actions, and records of the Committee
shall be conclusive and binding upon the Employer and all persons having or
claiming to have any right or interest in or under this Plan.
10.5 Reliance on Certificates, etc. The members of the Committee and the
officers and directors of the Employer shall be entitled to rely on all
certificates and reports made by duly appointed accountants, and on all opinions
given by any duly legal counsel. Such legal counsel may be counsel for the
Employer.
10.6 Liability of Committees. No member of the Committee shall be liable
for any act or omission of any other member of the Committee, or for any act or
omission on his part, excepting only his own willful misconduct. The Employer
shall indemnify and save harmless each member of the Committee against any and
all expenses and liabilities arising out of his membership on the Committee,
excepting only expenses and liabilities arising out of his own willful
misconduct. Expenses against which a member of the Committee shall be
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indemnified hereunder shall include, without limitation, the amount of any
settlement or judgment, costs, counsel fees, and related expenses reasonably
incurred in connection with a claim asserted, or a proceeding brought, or
settlement thereof. The foregoing right of indemnification shall be in addition
to any other rights to which any such member any be entitled as a matter of law.
10.7 Determination of Benefits. In addition to the powers hereinabove
specified, the Committee shall have the power to compute and certify, under this
Plan and any Plan Agreement, the amount and kind of benefits from time to time
payable to Participants and their Beneficiaries, and to authorize all
disbursement for such purposes.
10.8 Information to Committee. To enable the Committee to perform its
functions, the Employer shall supply full and timely information to the
Committee on all matters relating to the compensation of all Participants, their
retirement, death or other cause for termination of employment and such other
pertinent facts as the Committee may require.
SECTION XI
CLAIM PROCEDURE
11.1 Filing Original Claim. Any person who believes he has been wrongfully
denied benefits under the Plan or a Plan Agreement may submit a written claim
for benefits to the Committee. If any portion of the claim for benefits is
denied, the Committee shall give notice stating the reason for the denial, a
reference to the Plan provision or Plan Agreement, regulation, procedure,
determination or other matter on which the denial was based, a description of
any additional information or materials necessary to complete the claims
procedure, and an explanation of this review procedure. This notice shall be
sent to the address stated on the employee's claim within a reasonable period of
time after receipt of claim.
11.2 Appeal to Committee. Any employee, former employee, or beneficiary of
either, who has been denied a benefit under the Plan or Plan Agreement by a
decision of the Committee shall be entitled to request the Committee to give
further consideration to his claim by filing with the Committee a written
request for a review of the decision of denial. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Committee no later than 60 days after receipt
of the written notification of the denial of the claim for benefits. The
Committee shall consider a claim as promptly as practicable and will attempt to
make its decision within 60 days of receipt of the request for review, and no
later than 120 days after the date.
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SECTION XII
MISCELLANEOUS
12.1 Reliance Upon Information. The Board of Directors of the Employer and
the Committee may rely upon any information supplied to them by any officer of
the Employer, the Employer's legal counsel or by the Employer's independent
public accountants in connection with the administration of the Plan and the
related Plan Agreement, and shall not be liable for any decision or action in
reliance thereon.
12.2 Governing Law. The place of administration of the Plan shall be
conclusively deemed to be within the State of Texas; and the validity,
construction, interpretation and effect of the Plan and all rights of any and
all persons having or claiming to have any interest in the Plan shall be
governed by the laws of the State of Texas.
12.3 Severability. All provisions herein are severable and in the event
any one of them shall be held invalid by any court of competent jurisdiction,
the Plan shall be interpreted as if such invalid provision was not contained
herein.
12.4 Headings. The headings of the sections of this Plan are inserted for
convenience only and shall not be deemed to constitute a part of this Plan.
12.5 Non-Waiver. Failure on the part of any party in any one or more
instances to enforce any of its rights which arise in connection with this Plan
or a related Plan Agreement or to insist upon the strict performance of any of
its terms, conditions, or covenants of this Plan shall not be construed as a
waiver or a relinquishment for the future of any such rights, terms, conditions,
or covenants. No waiver of any condition of this Plan or related Plan Agreement
shall be valid unless it is in writing.
12.6 Plan on File. The Employer shall place this Plan on file in the
office of its principal place of business.
12.7 Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Notices
delivered personally shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of three (3) days after mailing.
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Signed this 25th day of March, 1993.
RANDALL'S FOOD MARKETS, INC.
By: Jan Schilmoeller
--------------------
Title: Vice President, Risk Management
--------------------------------------
ATTEST:
Joe Rollins
- ------------
(Secretary)
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2.2 PARTICIPATION
3.1 PARTICIPANTS CONTRIBUTIONS
4.1 ESTABLISHMENT OF TRUST
5.1 SEVERANCE FROM SERVICE
5.4 WITHDRAWALS
3.2 DEFERRED COMP EARNINGS
7.2 BENS UPON TERM BY EMPLOYER
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EXHIBIT 10.13(b)
FIRST AMENDMENT TO THE RANDALLS FOOD MARKETS, INC.
KEY EMPLOYEE STOCK PURCHASE PLAN
W I T N E S S E T H:
WHEREAS, Randalls Food Markets, Inc. (the "Employer") presently maintains
the Randalls Food Markets, Inc. Key Employee Stock Purchase Plan (the
"Plan"); and
WHEREAS, the Employer, pursuant to Section 7.1 of the Plan, has the right
to amend the Plan from time to time subject to certain limitations.
NOW, THEREFORE, in order to make various revisions desired by the
Employer, the Plan is hereby amended in the following manner:
1. Effective as of April 1, 1997, Section 3.1 is hereby amended in its
entirety to read as follows:
3.1 Participant's Basic Contribution. For each Plan Year, if any
contributions made to the ESOP under Section 4.1(a) of the ESOP and any
earnings thereon are required under Section 4.6 of the ESOP to be
distributed to an Eligible Employee, the Eligible Employee may, at his
discretion, contribute all or a part of such required distribution from
the ESOP to the Trustee as a contribution to the Stock Fund. The
Eligible Employee shall deliver to the Trustee an executed Plan Agreement
and a check, made payable to, or endorsed over to, the Randalls Food
Markets, Inc. Key Employee Stock Purchase Trust in an amount not in
excess of the distribution made to the Eligible Employee under Section
4.6 of the ESOP. The contribution under this Section shall hereinafter
be referred to as the Participant's "Basic Contribution." Any Basic
Contributions to the Stock Fund hereunder are subject to all federal or
state income tax or any other related tax of the Participant.
Notwithstanding anything herein to the contrary, effective April 1, 1997,
no further contributions may be made to the Stock Fund pursuant to this
Section.
2. Effective as of April 1, 1997, Section 3.2 is hereby amended in its
entirety to read as follows:
3.2 Participant's Bonus Contribution. For each Plan Year, any
amount which the Employer determines to pay Eligible Employees as
taxable compensation from its general assets on account of certain
contributions to the ESOP under Section 4.2(a) of the ESOP being
unallocable to such Eligible Employee's account because of a
distribution made to the Participant as set forth in Section 3.1 above
and Section 4.6 of the ESOP, the Eligible Employee may, at his
discretion, contribute all or a part of such additional taxable
compensation paid to the Eligible Employee by the Employer to the
Trustee for and on behalf of such Eligible Employee as a contribution to
the Stock Fund. The Eligible Employee shall deliver to the Trustee an
executed Plan Agreement and a check, made payable to, or endorsed over
to the Randalls Food Markets, Inc. Key Employee Stock Purchase Trust in
an amount not in excess of the taxable compensation paid the Eligible
Employee as described in this Section. The contribution under this
<PAGE>
Section shall hereinafter be referred to as the Participant's "Bonus
Contribution." Any Bonus Contributions to the Stock Fund hereunder are
subject to all federal or state income tax or any other related tax of
the Participant. Notwithstanding anything herein to the contrary,
effective April 1, 1997, no further contributions may be made to the
Stock Fund pursuant to this Section.
3. Effective as of April 1, 1997, Section 3.3 is hereby amended in its
entirety to read as follows:
3.3 Participant's Voluntary Contribution. Except as provided in
Section 3.5, each Eligible Employee may elect to make contributions to
the Trustee as a contribution to the Stock Fund through authorized
payroll period deductions. All contributions made by a Participant under
this Section shall be subject to all federal or state income tax or any
other related tax of the Participant. A Participant may change his
election as to the rate of contributions upward or downward to be
effective as of the first pay period following such change. A notice of
election of change shall be given to the Committee and only one (1)
election change per quarter will be accepted. The contributions under
this Section shall hereinafter be referred to as the Participant's
"Voluntary Contribution." Notwithstanding anything herein to the
contrary, effective April 1, 1997, no further contributions may be made
to the Stock Fund pursuant to this Section.
4. Effective as of April 1, 1997, Section 3.4 is hereby amended in its
entirety to read as follows:
3.4 Participant's Discretionary Contribution. Each Eligible
Employee may, upon receiving approval from the Committee, contribute
shares of Company Stock previously acquired by the Eligible Employee or
cash to the Stock Fund. Any contribution under this Section shall
hereinafter be referred to as the Participant's "Discretionary
Contribution." Notwithstanding anything herein to the contrary,
effective April 1, 1997, no further contributions may be made to the
Stock Fund pursuant to this Section.
IN WITNESS WHEREOF, the Employer has executed this First Amendment to
the Randalls Food Markets, Inc. Key Employee Stock Purchase Plan on this
1st day of April, 1997.
RANDALLS FOOD MARKETS, INC.
By: /s/ Jan Schilmoeller
---------------------
Name: Jan Schilmoeller
----------------
Title: Vice President, Risk Management
-------------------------------
<PAGE>
EXHIBIT 10.13(c)
SECOND AMENDMENT TO THE RANDALLS FOOD MARKETS, INC.
KEY EMPLOYEE STOCK PURCHASE PLAN
W I T N E S S E T H:
WHEREAS, Randalls Food Markets, Inc. (the "Employer") presently maintains
the Randalls Food Markets, Inc. Key Employee Stock Purchase Plan (the
"Plan"); and
WHEREAS, the Employer, pursuant to Section 7.1 of the Plan, has the right
to amend the Plan from time to time subject to certain limitations.
NOW, THEREFORE, in order to make various revisions desired by the
Employer, the Plan is hereby amended in the following manner:
Effective as of May 1, 1997, Section 4.5 is hereby amended in its
entirety to read as follows:
4.5 Voting Company Stock. Except as provided hereafter, the Trustee
shall vote all Company Stock held by it as part of the Plan assets at
such time and in such manner as the Committee shall direct. If the
Committee shall fail or refuse to give the Trustee timely instructions as
to how to vote any Company Stock as to which the Trustee has the right to
vote, the Trustee shall not exercise its power to vote such Company Stock.
Notwithstanding the foregoing, if the Employer has a "registration-type
class of securities," each Participant or Beneficiary, if applicable,
shall be entitled to direct the Trustee as to the manner in which shares
of Company Stock which are entitled to vote and which are allocated to
such Participant's (or Beneficiary's, if applicable) account are to be
voted. If the Employer does not have a registration-type class of
securities, each Participant or Beneficiary, if applicable, shall be
entitled to direct the Trustee as to the manner in which shares of
Company Stock allocated to such Participant's (or Beneficiary's, if
applicable) account are to be voted with respect to any corporate matter
which involves the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all
assets of a trade or business, or such similar transaction as the
Committee may determine. For purposes of this Section 4.5, the term
"registration-type class of securities" shall mean (i) a class of
securities required to be registered under Section 12 of the Securities
Exchange Act of 1934 (the "1934 Act") and (ii) a class of securities
which would be required to be so registered except for the exemption from
registration provided in subsection (g)(2)(H) of such Section 12. To the
extent that Participants or Beneficiaries are, in accordance with the
foregoing provisions, entitled to direct the Trustee as to the manner in
which shares of Company Stock are to be voted, such voting rights shall
be exercised in accordance with the following provisions of this Section
4.5.
(a) As soon as practicable before each annual or special
shareholders' meeting of the Employer, the Trustee shall furnish to
<PAGE>
each Participant a copy of the proxy solicitation material sent
generally to shareholders, together with a form requesting
confidential directions on how the shares allocated to such
Participant's account (including fractional shares to 1/1000th of a
share) are to be voted. The materials furnished to the Participants
shall include a notice from the Trustee explaining that (i)
allocated shares of Company Stock will be voted or not voted by the
Trustee in accordance with directions of Participants; (ii)
unallocated shares of Company Stock will be voted at the direction
of the Committee; and (iii) in the event the Participant does not
timely return the form, the allocated shares for which he is
entitled to provide the Trustee with directions will be voted at the
direction of the Committee. The materials shall also include such
information as is reasonably determined by the Trustee to be
necessary to Participants to reach a reasonably informed decision as
to how to vote the shares. The Committee and the Trustee may also
provide Participants with such other material concerning the matters
to be voted as the Trustee or the Committee in its discretion
determine to be appropriate, provided, however, that prior to any
distribution of materials by the Committee, the Trustee shall be
furnished with complete copies of all such materials. The Employer
and the Committee shall cooperate with the Trustee to ensure that
Participants receive the requisite information in a timely manner.
Upon timely receipt of such voting directions, the Trustee (after
combining votes of fractional shares to give effect to the greatest
extent to Participants' directions), shall vote the shares in
accordance with subsections (b) through (e) of this Section 4.5.
(b) With respect to all corporate matters submitted to
shareholders, the Trustee shall vote shares of Company Stock
allocated to the account of any Participant (including fractional
shares to 1/1000th of a share) in accordance with the directions of
such Participant.
(c) If voting directions for shares of Company Stock allocated
to the account of any Participant are not timely received by the
Trustee, such allocated and undirected shares shall be voted as the
Committee shall direct.
(d) The Trustee shall vote shares of Company Stock that are
unallocated to the account of any Participant as the Committee shall
direct.
(e) For purposes of this Section 4.5, with respect to shares of
Company Stock allocated to the account of a deceased Participant, such
Participant's Beneficiary shall be entitled to direct the Trustee how
to vote such shares as if such Beneficiary were the Participant. Such
Beneficiary shall also be treated as the Participant for all other
purposes of this Section 4.5.
2
<PAGE>
2. Effective as of May 1, 1997, Section 4.6 is hereby added to the Plan
to read as follows:
4.6 Tender or Exchange Offer for Company Stock.
(a) In the event an offer shall be received by the Trustee
(including a tender offer for shares of Company Stock subject to
Section 14(d)(1) of the Securities Exchange Act of 1934 (the "1934
Act") or subject to Rule 13e-4 promulgated under the 1934 Act, as
those provisions may from time to time be amended) to purchase or
exchange any shares of Company Stock held by the Trust, the Trustee
shall advise each Participant who has shares of Company Stock
credited to such Participant's account in writing of the terms of
the offer as soon as practicable after its commencement and shall
furnish each Participant with a form by which he may direct the
Trustee confidentially whether or not to tender or exchange shares
allocated to such Participant's account. The materials furnished to
Participants shall include a notice from the Trustee explaining that
(i) allocated shares of Company Stock subject to the offer will be
tendered or exchanged or will not be tendered or exchanged by the
Trustee in accordance with directions of Participants; (ii)
unallocated shares of Company Stock subject to the offer will be
tendered or exchanged or will not be tendered or exchanged by the
Trustee as directed by the Committee; and (iii) in the event the
Participant does not timely return the form, the allocated shares
for which he is entitled to provide the Trustee with directions will
either be tendered or exchanged or not tendered or exchanged as
directed by the Committee. The materials shall also include such
information as is reasonably determined by the Trustee to be
necessary to Participants to reach a reasonably informed decision as
to whether to tender or exchange, including such documents as are
prepared by any person and provided to the shareholders of the
Employer pursuant to the 1934 Act. The Committee and the Trustee
may also provide Participants with such other material concerning
the tender or exchange offer as the Trustee or the Committee in its
discretion determine to be appropriate, provided, however, that
prior to any distribution of materials by the Committee, the Trustee
shall be furnished with complete copies of all such materials. The
Employer and the Committee shall cooperate with the Trustee to
ensure that Participants receive the requisite information in a
timely manner.
(b) The Trustee shall tender or not tender shares or exchange
or not exchange shares of Company Stock allocated to the account of
any Participant (including fractional shares to 1/1000th of a share)
to the extent directed by the Participant.
(c) If tender or exchange directions for shares of Company
Stock allocated to the account of any Participant are not timely
received by the Trustee, such allocated and undirected shares shall
be tendered or exchanged or not tendered or exchanged at the
direction of the Committee.
3
<PAGE>
(d) The Trustee shall tender or exchange or not tender or
exchange the shares of Company Stock that are unallocated to the
account of any Participant at the direction of the Committee.
(e) In the event, under the terms of a tender offer or
otherwise, any shares of Company Stock tendered for sale, exchange
or transfer pursuant to such offer may be withdrawn from such offer,
the Trustee shall, in accordance with the applicable terms and
conditions of subsections (a) through (d) above, and the
responsibilities of the Trustee as set forth in such subsections,
follow such directions which are timely received by the Trustee from
the Participants, respecting the withdrawal of such shares from such
offer.
(f) In the event that an offer for fewer than all of the
shares of Company Stock held by the Trustee shall be received by the
Trustee, shares shall be tendered in accordance with subsections (a)
through (e) of this Section 4.6, and shares sold, exchanged or
transferred pursuant to such tender shall be on a pro-rata basis
based on the total number of shares tendered by the Trustee.
(g) In the event an offer shall be received by the Trustee and
directions shall be solicited from Participants pursuant to
subsections (a)-(f) of this Section 4.6 regarding such offer, and
prior to the termination of such offer, another offer is received by
the Trustee for the securities subject to the first offer, the
Trustee shall treat the offer as a new offer for purposes of
apprising Participants of their rights to direct the Trustee and
shall use its best efforts under the circumstances to solicit
directions from Participants to the Trustee (i) with respect to
securities tendered for sale, exchange or transfer pursuant to the
first offer, whether to withdraw such tender, if possible, and if
withdrawn, whether to tender any securities so withdrawn for sale,
exchange or transfer pursuant to the second offer and (ii) with
respect to securities not tendered for sale, exchange or transfer
pursuant to the first offer, whether to tender or not to tender such
securities for sale, exchange or transfer pursuant to the second
offer. The Trustee shall follow all such directions received in a
timely manner from Participants in the same manner and in the same
proportion as provided in subsections (a)-(f) of this Section 4.6.
In the event a Participant who failed to direct the Trustee so
directs in response to a subsequent offer, the shares with respect
to which the Participant would have been entitled to direct the
Trustee shall once again be subject to that consenting Participant's
direction with respect to the new offer. In the event a Participant
who directed the Trustee with respect to an earlier offer fails to
direct the Trustee in response to a subsequent offer, the
Participant shall be deemed to have refused to direct the Trustee
and the allocated shares he would have been entitled to direct shall
be subject to the direction of the Committee as provided in
subsection (c) of this Section 4.6. With respect to any further
offer for any Company Stock received by the Trustee and subject to
any earlier offer (including successive offers from one or more
existing offerors), the Trustee shall act in the same manner as
described above.
4
<PAGE>
(h) Neither a Participant's instructions to the Trustee to
tender or exchange shares of Company Stock pursuant to this Section
4.6 nor an actual tender or exchange of shares of Company Stock
pursuant to this Section 4.6 shall be deemed a withdrawal or
suspension from the Plan or a forfeiture of any portion of the
Participant's interest in the Plan. Funds received in exchange for
tendered shares shall be credited to the account of the Participant
whose shares were tendered. The Trustee shall invest such funds as
permitted in accordance with the terms of the Plan and the Trust
Agreement.
(i) For purposes of this Section 4.6, with respect to shares
of Company Stock allocated to the account of a deceased Participant,
such Participant's Beneficiary shall be entitled to direct the
Trustee whether or not to tender or exchange such shares as if such
Beneficiary were the Participant. Such Beneficiary shall also be
treated as the Participant for all other purposes of this Section
4.6.
IN WITNESS WHEREOF, the Employer has executed this Second Amendment to the
Randalls Food Markets, Inc. Key Employee Stock Purchase Plan on this 19th day
of May, 1997.
RANDALLS FOOD MARKETS, INC.
By: /s/ Jan Schilmoeller
--------------------
Name: Jan Schilmoeller
----------------
Title: Vice President, Risk Management
-------------------------------
5
<PAGE>
EXHIBIT 10.13(d)
THIRD AMENDMENT TO THE
RANDALLS FOOD MARKETS, INC.
KEY EMPLOYEE STOCK PURCHASE PLAN
W I T N E S S E T H:
WHEREAS, Randalls Food Markets, Inc. (the "Employer") presently maintains
the Randalls Food Markets, Inc. Key Employee Stock Purchase Plan (the "Plan")
which became effective on March 1, 1992; and
WHEREAS, the Employer, pursuant to Section 7.1 of the Plan, has the right
to amend the Plan, from time to time, subject to certain limitations.
NOW, THEREFORE, in order to make various revisions desired by the
Employer, the Plan is hereby amended in the following manner:
1. Effective August 1, 1997, Section 5.2 of the Plan is hereby amended
in its entirety to read as follows:
5.2 Type of Distribution. Distribution of a Participant's interest
in the Trust may be made in cash, Company Stock, or both as determined by
the Committee.
2. Effective as of August 1, 1997, Section 7.2 of the Plan is hereby
amended in its entirety to read as follows:
7.2 Benefits Upon Termination of Plan By the Employer. In the
event that the Employer terminates the Plan, the Participant shall be
entitled to a distribution of an amount in cash, Company Stock or both in
an aggregate amount equal to the total Participant's interest in the
Trust.
IN WITNESS WHEREOF, the Employer has executed this Third Amendment as of
July 29, 1997.
RANDALLS FOOD MARKETS, INC.
By: /s/ Jan Schilmoeller
---------------------------------
"Employer"
<PAGE>
EXHIBIT 10.14
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Agreement") is made and entered into as of
the 20th day of August, 1993, by and among FLEMING FOODS OF TEXAS, INC., a
Nevada corporation (herein referred to as "Fleming") and RANDALL's FOOD
MARKETS, INC., a Texas corporation (herein sometimes referred to as
"Randall's") and TOM THUMB FOOD & DRUGS, INC., a Delaware corporation (herein
sometimes referred to as "Tom Thumb" and together with Randall's herein
sometimes collectively referred to as "Retailer"), with reference to the
following circumstances:
(i) Fleming is engaged in business as a full-line wholesale
supplier of food, grocery and related products to the retail trade in the
State of Texas and elsewhere; and
(ii) Effective as of the date of this Agreement, in accordance with
the Distribution Center Purchase Agreement dated as of the 31st day of July,
1993 (the "Purchase Agreement"), Fleming acquired certain Garland, Texas real
property and improvements (the "Warehouse Property") upon which is located a
distribution center for food, grocery and related products (the "Warehouse");
and
(iii) Randall's is engaged in business as a retailer of food,
grocery and related products and operates those stores described on Exhibit
"A" hereto (the "Randall's Stores") and Tom Thumb, a wholly-owned subsidiary
of Randall's, is engaged in business as a retailer of food, grocery and
related products and operates those stores described on Exhibit "B" hereto
(the "Tom Thumb Stores" and together with the Randall's Stores herein
sometimes collectively referred to as the "Retailer Stores"); and
(iv) Randall's contemplates acquiring and/or developing additional
stores (the "Randall's Additional Stores") and Tom Thumb contemplates
acquiring and/or developing additional stores (the "Tom Thumb Additional
Stores" and together with the Randall's Additional Stores herein sometimes
collectively referred to as the "Retailer Additional Stores") from time to
time during the term of this Agreement and desire that the Retailer Additional
Stores be subject to this Agreement; and
(v) The Tom Thumb Stores are designated herein as the "Category I
Stores," the Randall's Stores are designated herein as the "Category II
Stores" and the Retailer Additional Stores shall be designated Category I
Stores or Category II Stores as provided herein; and
<PAGE>
(vi) Fleming intends (i) to supply the Category I Stores from the
Warehouse, its GMD Dallas distribution center (the "Dallas Facility") and
from its San Antonio, Texas distribution center (the "San Antonio Facility")
and (ii) to supply the Category II Stores from its Houston, Texas
distribution center (the "Houston Facility") and the San Antonio Facility,
all in accordance with this Agreement, the parties recognizing that Fleming
may supply Category I Stores and the Category II Stores from any of its
distribution centers;
(vii) Retailer acknowledges that but for this Agreement Fleming
would not have acquired the Warehouse Property and other assets it purchased
under the Purchase Agreement; and
(viii) Retailer desires to benefit in services, predictability of
supplies and pricing through a long-term supply arrangement with Fleming.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants provided for herein, the parties agree as follows;
1. Supply. Throughout the term of this Agreement, Retailer shall
purchase from Fleming for the Retailer Stores and the Retailer Additional
Stores that Randall's or its affiliates operate and Fleming shall sell to
Retailer food, grocery, dairy, meat, frozen food and related products,
supplies and health and beauty care ("HBC") and general merchandise ("GM")
which Fleming offers for sale to its affiliated retailers (the "Products").
2. Retailer Additional Stores. Upon the development or acquisition by
Retailer of a Retailer Additional Store or Retailer Additional Stores, such
store(s) shall be, upon the completion of construction or acquisition, as the
case may be, (i) supplied by Fleming with Products under this Agreement and
(ii) designated Category I Store(s) unless such store(s) is (are) located
within a radius of 100 miles of the Houston Facility in which event it (they)
shall be designated Category II Store(s); provided, however, any Retailer
Additional Store(s) may be designated Category I Store(s) or Category II
Store(s) regardless of location upon agreement in writing by Fleming and
Retailer.
3. Price and Other Terms of Sale.
(a) The Sell Plan. Except as hereinafter provided, the Products
sold to Retailer pursuant to this Agreement shall be priced, and other terms
of sale shall be established, at levels described in the "Randall's/Tom Thumb
Sell Plan dated June 9, 1993" which has been reviewed with Retailer and is
attached hereto as Exhibit "C," as amended from time to time by Fleming (the
"Sell Plan"), provided such amendments shall be applicable
2
<PAGE>
to all similarly situated customers of Fleming purchasing Products pursuant
to such Sell Plan.
(b) Transportation. Transportation costs from Fleming's Houston
Facility, San Antonio Facility and from the Warehouse or any other
distribution center shall be reflected in the Sell Plan and shall be based on
cost/truckload and not rate/CWT.
(c) Category I Volume Discount Rebate and Category I Supplemental
Fee. Retailer and Fleming agree with respect to the Category I Stores that
supplementary to the payment provisions set forth in the Sell Plan, Fleming
shall rebate to Retailer 1% of the amount of the annual transfers (the
"Category I Annual Transfers") in excess of the amounts set forth in Table I
below (the "Category I Volume Discount Rebate") for each fiscal year of
Retailer which end on the last Saturday in June of the year indicated (the
"Fiscal Year(s)"), which payments shall be made thirty (30) days following
the close of each of Retailer's Fiscal Years during the term of this
Agreement. Retailer and Fleming further agree that Retailer shall pay Fleming
a supplemental fee (the "Category I Supplemental Fee") if the Category I
Annual Transfers do not meet the targeted amounts for each Fiscal Year of
Retailer as set forth in Table I below, such Supplemental Fee to be 1% of the
short fall from the amounts of Category I Annual Transfers set forth in Table
I payable thirty (30) days after the close of Retailer's Fiscal Year during
the Initial Term (as defined in paragraph 5(a) hereof) of this Agreement. The
Category I Annual Transfers shall include and the Category I Volume Discount
Rebate and the Category I Supplemental Fee shall apply as to all Products
delivered to the Category I Stores. During the Initial Term of this Agreement
the sum of the amount of transfers of Products to the Category I Stores shall
be known as the "Category I Transfers."
TABLE I
Retailer
Fiscal Grocery/Frozen/ Category I
Year Meat/Dairy HBC/GM Transfers
- -------- --------------- ------------- ---------------
1994 $ 223,000,000 $ 26,000,000 $ 249,000,000*
1995 241,000,000 28,000,000 269,000,000
1996 261,000,000 31,000,000 292,000,000
1997 281,000,000 33,000,000 314,000,000
1998 303,000,000 37,000,000 340,000,000
1999 326,000,000 39,000,000 365,000,000
2000 351,000,000 42,000,000 393,000,000
2001 372,000,000 45,000,000 417,000,000
--------------- ------------- ---------------
Totals $2,358,000,000 $281,000,000 $2,639,000,000
*The Category I Volume Discount Rebate or the Category I Supplemental Fee,
whichever shall be applicable, shall be determined on a pro rata basis for
the fiscal year ending June 25, 1994.
3
<PAGE>
4. Quantities.
(a) Category I Minimum Purchase Level (Initial Term). During the
Initial Term (as defined in subparagraph 5(a) hereof), subject to the
provisions of subparagraph (e) of this paragraph 4, Retailer shall purchase
for delivery to the Category I Stores during each Fiscal Year of this
Agreement the minimum of quantities of grocery/frozen/meat/dairy and HBC/GM
Products set forth in Table I of paragraph 3(c) from Fleming (the Category I
Minimum Purchase Level"); provided, however, that the Category I Minimum
Purchase Level shall be prorated for the period beginning on the Effective
Date and ending on June 25, 1994; and provided further, however, that
notwithstanding Fleming's intention to supply the Category I Stores from the
Warehouse, the Dallas Facility and the San Antonio Facility, the Category I
Minimum Purchase Level shall be calculated based upon Products delivered to
such stores, regardless of the distribution center from which such Products
are in fact delivered. In addition, during the Initial Term (as defined in
subparagraph 5(a) hereof), subject to the provisions of subparagraph (e) of
this paragraph 4, Retailer shall continue to purchase Products for the
Category II Stores substantially in quantities that Retailer purchased from
Fleming during the twelve months prior to the date of this Agreement.
(b) Category I Minimum Purchase Level. Retailer and Fleming agree
that the Category I Minimum Purchase Level shall be applicable only during
the Initial Term (as defined in subparagraph 5(a) hereof) and shall not be
applicable during the Renewal Terms (as defined in subparagraph 5(b) hereof).
(c) Mix of Products from all of Fleming's Facilities. Retailer
agrees that for the term of this Agreement and during the Renewal Terms it
shall purchase Products for the Category I Stores and the Category II Stores
from Fleming of a mix (calculated in dollars) among grocery, meat, frozen
food, dairy and GM/HBC generally consistent with the mix (calculated in
dollars) of such Products currently being purchased by Randall's from the
Houston Facility as follows: grocery (63%), meat (6%), frozen food (17.5%),
dairy (2.5%) and GM/HBC (11%). Retailer further agrees that as between the GM
and HBC items the mix (calculated in dollars) will be approximately GM (30%)
and HBC (70%).
(d) Quantities of Products. Retailer agrees that for the term of
this Agreement and the Renewal Terms it shall purchase for the Category I
Stores and the Category II Stores (i) all of its frozen food and dry grocery
requirements with the exception of 800 items ("SKUs") and all Topco grocery
merchandise from Fleming, and (ii) all of its GM and HBC products with the
exception of 1,800 SKUs and all Topco nongrocery merchandise from Fleming,
which SKUs will be from time to time identified to Fleming by Retailer. Items
or SKUs not stocked by Fleming may be
4
<PAGE>
added to the numbers of grocery and non-grocery SKUs that Retailer shall not
be required to purchase from Fleming after Fleming shall have been afforded
the right to stock and supply Retailer such SKUs.
(e) Force Majeure. Notwithstanding the provisions of subparagraphs
(a) through (d) above, Retailer shall not be deemed in default of this
Agreement if non-performance is determined to be as the result of "a
condition beyond Retailer's control." The term "a condition beyond Retailer's
control" shall mean a situation existing which is not within the control of
Retailer. Examples include, but are not limited to, labor strikes, government
rationing or other regulations, flood, fuel shortages, earthquake, acts of
God, drought or other weather conditions.
5. Term.
(a) Duration. Unless terminated sooner in accordance with this
Agreement, the term of this Agreement shall commence on the day and year
first above written (the "Effective Date"), and shall extend until June 30,
2001 (the "Initial Term"). This Agreement shall be automatically renewed for
successive terms of one (1) year each (the "Renewal Terms"); provided,
however, either party may terminate this Agreement (i) as of the end of the
Initial Term upon written notice of at least ninety (90) days prior to the
end of the Initial Term or (ii) at any time during the Renewal Terms upon at
least ninety (90) days written notice, provided further, however, in no event
shall the term of this Agreement extend beyond twenty-three (23) years from
June 27, 1993.
(b) Early Termination (Category I Stores). Notwithstanding anything
to the contrary contained in this Agreement, Retailer shall have the right to
terminate this Agreement (with respect to the Category I Stores only) at any
time upon ninety (90) days written notice to Fleming (the "Termination
Notice") and compliance with the following conditions: (i) the payment to
Fleming three (3) days after mailing of such Termination Notice of a fee (the
"Termination Fee") equal to one (1) percent (%) times ($2.639 billion minus
the sum of the Category I Transfers as of the date of the Termination Notice)
and minus the sum of all Category I Supplement Fee payments, if any, and
(ii) the payment to Fleming of all sums due Fleming from Retailer pursuant to
this Agreement including payment for the actual amount of Products purchased
during the ninety (90) days from the Termination Notice to the actual
termination date (the "Ninety Day Period") herein called the "Actual 90 Day
Purchase Amount" and any other sums due Fleming or any of its affiliates with
the exception of Retailer's current (nondelinquent) open account obligation
in respect of the Category II Stores under this Agreement. As soon as
practicable following the termination of
5
<PAGE>
this Agreement as to the Category I Stores, Retailer and Fleming, each acting
in good faith, shall determine the Actual 90 Day Purchase Amount and Fleming
shall reimburse Retailer an amount equal to one (1) percent (%) of the Actual
90 Day Purchase Amount. For example, assuming (i) Retailer elects to
terminate this Agreement as to the Category I Stores as of June 24, 1995 (the
end of Retailer's 1995 fiscal year), (ii) there are no Category I Supplement
Fee payments, (iii) the Category I Transfers have been ordered, delivered and
paid for in accordance with Table I above as of June 24, 1995, and (iv) the
Actual 90 Day Purchase Amount is $65 million, the Termination Fee (giving
effect to the reimbursement) will be $20.56 million (.01 times ((a) $2.121
billion (the remainder of the Category I Annual Transfers as of July 24,
1995) minus (b) $65 million) = $20.56 million) or, assuming Retailer elects
to terminate this Agreement as of March 1, 1997 with $1 billion of Category I
Transfers remaining, $50,000 of Category I Supplemental Fees paid to such
date and the Actual 90 Day Purchase Amount is $75 million, the Termination
Fee (giving effect to the reimbursement) will be $9.20 million (.01 times
($1 billion minus $75 million) minus $50,000 = $9.20 million). All payments
provided for in this paragraph shall be made in cash by wire transfer to an
account designated by Fleming or Retailer as the case may be.
6. Payment. Payment shall be made by Retailer to Fleming in accordance
with the terms and provisions of the Sell Plan.
7. Service Levels. Fleming agrees that absent the occurrence of "a
condition beyond Fleming's control", as hereinafter defined, it will use its
best efforts to obtain and maintain at any time an average service level of
at least ninety-five (95%) for the immediate past 18-week period during the
term of this Agreement. The average service level shall be determined by
comparing the gross dollar purchases of Products shipped to Retailer to the
gross dollar purchases of Products ordered by Retailer. The term "a condition
beyond Fleming's control" shall mean a situation existing which is not within
the control of Fleming relating to the acquisition or distribution of
Products. Examples include, but are not limited to: labor strikes, government
rationing or other regulations, flood, fuel shortages, computer malfunction
or failure, equipment failure, earthquake, acts of God, drought or other
weather conditions. In the event Fleming fails to attain the average service
level of at least ninety-three (93%) for the immediate past 18-week period,
Fleming shall have a period of forty-five (45) days after notice by Retailer
to Fleming in writing of such deficiency in service level to attain an
average service level of at least ninety-five (95%) prior to the failure to
attain the required service level being deemed a default by Fleming hereunder.
6
<PAGE>
8. Default
(a) Default by Retailer. In the event Retailer fails to
perform any of its obligations hereunder in any material respect, then
Retailer shall be in default and Fleming shall have the right to immediately
terminate this Agreement by written notice ("Notice of Termination") and
pursue all other remedies available by reason of such default, including
specific enforcement of the obligations of Retailer, all, however, in
accordance with paragraph 9 below; provided, however, that in the event of a
monetary default, Retailer shall have a period of five (5) days from receipt
of the Notice of Termination from Fleming within which to cure such monetary
default. Other than recovery of actual damages related to a monetary
default, Fleming shall have no right to recover additional damages (whether
characterized as consequential damages, punitive damages or otherwise).
(b) Default by Fleming. In the event Fleming fails to
perform any of its obligations hereunder, them Fleming shall be in default
and Retailer shall have the right to immediately terminate this Agreement by
written notice ("Notice of Termination") and pursue all other remedies
available by reason of such default, including specific enforcement of the
obligations of Fleming, all, however, in accordance with paragraph 9 below;
provided, however, that in the event of a monetary default, Fleming shall
have a period of five (5) days from receipt of the Notice of Termination from
Retailer within which to cure such monetary default. Other than recovery of
actual damages related to a monetary default, Retailer shall have no right to
recover additional damages (whether characterized as consequential damages,
punitive damages or otherwise).
9. Disputes; Arbitration. The parties hereto agree that all
disputes between them relating to this Agreement are to be resolved by
arbitration as provided herein. This agreement to arbitrate shall survive
the rescission or termination of this Agreement. All arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of the American
Arbitration Association except as herein may be provided. The panel used
will be selected from, if available, the "Food Industry Panel" employed by
the American Arbitration Association and the decision of the arbitrators will
be final and binding on all parties. All arbitration will be undertaken in
the city of Dallas, Texas pursuant to the Federal Arbitration Act, where
applicable, and the decision of the arbitrators will be enforceable in any
court of competent jurisdiction.
In any dispute where a party seeks $50,000 or more in damages,
three arbitrators will be employed. All costs attendant to the arbitration,
excluding attorneys' and experts' fees, will be borne equally by the parties.
Each party will bear its own
7
<PAGE>
attorneys' and experts' fees. The arbitrators will not award punitive,
consequential or indirect damages. Each party hereby waives the right to
such damages and agrees to receive only those actual damages directly
resulting from the claim asserted. In resolving all disputes between the
parties, the arbitrators will apply the law of the State of Texas, except as
may be modified by this Agreement. The arbitrators are by this Agreement
directed to conduct the arbitration hearing no later than three (3) months
from the service of the statement of claim and demand for arbitration unless
good cause is shown establishing that the hearing cannot fairly and
practically be so convened.
Except as needed for presentation in lieu of a live appearance,
depositions will not be taken. Parties will be entitled to conduct document
discovery by requesting production of documents. Responses or objections
will be served twenty days after receipt of a request. The arbitrators will
resolve any discovery disputes by such prehearing conferences as may be
needed. All parties agree that the arbitrators and any counsel of record to
the proceeding will have the power of subpoena process as provided by law.
From related transactions in connection with this Agreement, the
parties may be in a debtor/creditor relationship, which may include the
granting of security interests in goods and/or fixtures, or in a relationship
as lessor and lessee. The parties recognize that these kinds of
relationships could give rise to the need by one or more of the parties for
emergency judicial relief to regain possession of goods and/or fixtures, to
prevent the sale or transfer of goods and/or fixtures, to protect real or
personal property from injury or to obtain possession of real estate. The
parties agree that either shall be entitled to pursue such remedies for
emergency or preliminary injunctive relief in any court of competent
jurisdiction, provided that each party agrees that it will consent to the
stay of such judicial proceedings on the merits of both this Agreement and
the related transactions pending arbitration of all underlying claims between
the parties immediately following the issuance of any such emergency or
injunctive relief.
10. Attorneys' Fees and Costs. In the event suit is brought to
enforce any of the terms of this Agreement, the losing party shall pay to the
prevailing party its reasonable attorneys' fees and costs incurred in any
proceeding to enforce the terms of this Agreement.
11. Amendment or Waiver. Except for the Sell Plan as provided in
paragraph 3 hereof, this Agreement shall not be amended, nor shall any of its
terms be deemed to have been waived by either party, unless such amendment or
waiver shall be in writing and signed by the parties hereto.
8
<PAGE>
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
13. Counterparts. This Agreement may be executed in multiple
counterparts, which taken together shall constitute one instrument and each
of which shall be considered an original for all purposes.
14. Time is of the Essence. The parties agree that time is of the
essence under this Agreement.
15. Notices. All communications required or permitted under this
Agreement shall be in writing, and sent to the following addresses or to such
other address requested by the parties by notice as herein provided:
(a) Notices to Fleming:
Fleming Foods of Texas, Inc.
15110 Dallas Parkway, Suite 500
Dallas, Texas 75248
Attention: Mr. James E. Stuard
President
With a copy to:
McAfee & Taft
A Professional Corporation
Tenth Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Attn: John M. Mee, Esq.
(b) Notices to Retailer, Randall's or Tom Thumb:
Randall's Food Market, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Mr. Robert R. Onstead
Chairman and Chief
Executive Officer
9
<PAGE>
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attn: J. David Kirkland, Jr., Esq.
16. Purchase of Store Supplies. Upon the termination of this
Agreement, Retailer shall purchase from Fleming all store supplies which
Fleming has purchased or obtained as supplies for Retailer and which, because
of any special design, label, logo, quantity or other feature cannot be sold
promptly by Fleming to other retailers being served by the Warehouse, the
Houston Facility, the San Antonio Facility, the Dallas Facility or any other
of Fleming's distribution centers which services Retailer during the term of
this Agreement at the same prices being paid for such supplies by Retailer at
the time of termination. Retailer shall pay to Fleming the current price for
such supplies being charged by Fleming to Retailer. Such amount shall be
paid and such supplies shall be delivered by Fleming to Retailer within ten
(10) days after termination of this Agreement. Fleming covenants and agrees
that during the term of this Agreement it will not stock supplies of the type
and kind described in this paragraph 16 in excess of the amount which is
normal and customary except as requested or required by Retailer.
17. Miscellaneous.
(a) Board Authorization. Retailer shall execute and deliver
any and all documents which may reasonably be requested by Fleming in order
to properly document this Agreement, including, but not limited to, certified
resolutions of the Board of Directors of Retailer authorizing the undersigned
officer to enter into this Agreement.
(b) Binding Effect; No Assignment. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto, their respective
successors and assigns. This Agreement shall not be assignable by either
party hereto without the consent of the other party hereto, which consent
shall not be unreasonably withheld.
(c) Exhibits. Any Exhibit attached hereto is made a part
hereof and is fully incorporated herein by reference.
(d) Entire Agreement. This Agreement embodies the entire
understanding of the parties hereto in relation to the purchase of Products
by Retailer from Fleming. There are no representations, promises, warranties,
understandings or agree-
10
<PAGE>
ments, express or implied, oral or otherwise, in relation thereto, except as
expressly referred to or set forth herein. Retailer acknowledges that the
execution and delivery of this Agreement is its free and voluntary act and
deed and except for the provisions contained in recital (vii) above that said
execution and delivery have not been induced by, or done in reliance upon,
any representations, promises, warranties, understandings or agreements made
by Fleming, or its agents, officers, employees or representatives. No
promise, representation, warranty or agreement made subsequent to the
execution and delivery hereof by either party hereto, revocation, partial or
otherwise, or change, amendment, addition, alteration, waiver or modification
of this Agreement or any of the terms hereof shall be enforceable unless the
same be in writing and signed by the parties hereto.
(e) Headings. Headings or captions of the paragraphs in this
Agreement are for convenience of reference only, and in no way define or
limit or describe the intent of this Agreement or any provision of any
paragraph hereof.
(f) Inconsistency with Sell Plan. In the event any of the terms
and conditions of this Agreement are inconsistent with the terms and
conditions of the Sell Plan, the terms and conditions of this Agreement shall
govern and prevail.
(g) Partial Invalidity. In the event that any of the
provisions or portions thereof of this Agreement are held to be unenforceable
or invalid by any court of competent jurisdiction, the validity and
enforceability of the remaining provisions or portions hereof shall not be
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
FLEMING FOODS OF TEXAS, INC.
Date: 8-20-93 By: /s/ James E. Stuard
------------------------- ------------------------------
James E. Stuard, President
"FLEMING"
RANDALL'S FOOD MARKETS, INC.
Date: 8-20-93 By: /s/ [Illegible]
------------------------- ------------------------------
TOM THUMB FOOD & DRUGS, INC.
Date: 8-20-93 By: /s/ [Illegible]
------------------------- ------------------------------
"RETAILER"
11
<PAGE>
EXHIBIT 12
RANDALLS FOOD MARKETS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
EARNINGS
Income before income taxes, minority interest, and
extraordinary loss.................................. $ (55,933) $ 35,754 $ 7,057 $ 163 $ 8,090
Fixed charges......................................... 52,999 53,551 55,791 59,935 66,071
---------- ---------- ---------- ---------- ----------
Income before income taxes, minority interest,
extraordinary loss, and fixed charges............... $ (2,934) $ 89,305 $ 62,848 $ 60,098 $ 74,161
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
FIXED CHARGES
Interest expense...................................... $ 36,828 $ 38,981 $ 43,411 $ 50,442 $ 58,553
One-third net rental expense.......................... 16,171 14,570 12,380 9,493 7,518
---------- ---------- ---------- ---------- ----------
Total Fixed Charges................................... $ 52,999 $ 53,551 $ 55,791 $ 59,935 $ 66,071
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings to fixed charges ratio: Actual............... -- 1.67 1.13 1.00 1.12
Deficiency of earnings to cover fixed charges......... $ 55,933 -- -- -- --
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF RANDALL'S FOOD MARKETS, INC.
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
Randall's Food & Drugs, Inc. Delaware
Randall's Properties, Inc. Delaware
Gooch Packaging Company, Inc. Texas
American Community Stores Texas
Corporation
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Randall's Food Markets,
Inc. on From S-4 of our report dated August 15, 1997, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/__DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
September 10, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Form S-4 Registration Statement of our report dated September 19, 1996, (except
with respect to the matter discussed in the eighth paragraph of Note 5, as to
which the date is June 27, 1997), with respect to the consolidated balance sheet
of Randall's Food Markets, Inc. and subsidiaries as of June 29, 1996; and the
related consolidated statements of operations, redeemable stock and
stockholders' equity and cash flows for the years ended June 29, 1996 and June
24, 1995, and to all references to our firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
September 5, 1997
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
----------------------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Charles E. Bauer
Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-1792
(Name, address and telephone number of agent for service)
RANDALL'S FOOD MARKETS, INC.
(Exact name of obligor as specified in its charter)
Texas 74-213-4840
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3663 Briarpark
Houston, Texas 77042
(713) 268-3500 (Zip Code)
(Address of principal executive offices)
93/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
(Title of Indenture Securities)
<PAGE>
Item 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None
<PAGE>
Item 16. LIST OF EXHIBITS.
EXHIBIT
- -------
T1A(i) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine
Midland Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank required
by Section 321(b) of the Trust Indenture
Act of 1939.
T1A(vii) - Copy of the latest report of condition
of the trustee (June 30, 1997),
published pursuant to law or the
requirement of its supervisory or
examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
* Exhibits previously filed with the Securities and Exchange Commission
with Registration No. 33-53693 and incorporated herein by reference
thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 4th day of September, 1997.
MARINE MIDLAND BANK
By: /s/ Frank J. Godino
---------------------------------
Frank J Godino
Assistant Vice President
<PAGE>
EXHIBIT T1A (VII)
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1999
- --------------------------------------------------------------------------------
This financial information has not been / 1 /
reviewed, or confirmed for accuracy or
relevance, by the Federal Reserve System. Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(950630)
-------------
(RCRI 9999)
<S> <C>
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1997 This report form is to be filed by banks with branches
This report is required by law; 12 U.S.C. and consolidated subsidiaries in U.S. territories and
Section 324 (State member banks); 12 U.S.C. possessions, Edge or Agreement subsidiaries, foreign
Section 1817 (State nonmember banks); and 12 branches, consoli-dated foreign subsidiaries, or
U.S.C. Section 161 (National banks). International Banking Facilities.
- ----------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in
by an authorized officer and the Report of Condition must accordance with Federal regulatory authority
be attested to by not less than two directors (trustees) instructions. NOTE: These instructions may in some cases
for State nonmember banks and three directors for State differ from generally accepted accounting principles.
member and National Banks.
We, the undersigned directors (trustees), attest to the
I, GERALD A. RONNING, EXECUTIVE VP & CONTROLLER correctness of this Report of Condition (including the
---------------------------------------------------- supporting schedules) and declare that it has been
Name and Title of Officer Authorized to Sign Report examined by us and to the best of our knowledge and
belief has been prepared in conformance with the
of the named bank do hereby declare that these Reports of instructions issued by the appropriate Federal regulatory
Condition and Income (including the supporting schedules) authority and is true and correct.
have been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority /s/ James H. Cleave
and are true to the best of my knowledge and believe. ----------------------------
Director (Trustee)
/s/ Gerald A. Ronning
--------------------------------------------------- /s/ Bernard J. Kennedy
Signature of Officer Authorized to Sign Report ----------------------------
Director (Trustee)
7/25/97
--------------------------------------------------- /s/ Malcolm Burnett
Date of Signature ----------------------------
Director (Trustee)
- ----------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS: NATIONAL BANKS: Return the original only in the SPECIAL
RETURN ADDRESS ENVELOPE PROVIDED. If express mail is
STATE MEMBER BANK: Return the original and one copy to used in lieu of the special return address envelope,
the appropriate Federal Reserve District Bank. return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
STATE NONMEMBER BANKS: Return the original only in the
SPECIAL RETURN ADDRESS ENVELOPE PROVIDED. If express
mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o
Quality Data Systems, 2127 Espey Court, Suite 204,
Crofton, MD 21114.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
FDIC Certificate Number / 0 / 0 / 5 / 8 / 9/
--------------------
(RCRI 9030)
<PAGE>
NOTICE
This form is intended to assist institutions with state publication
requirements. It has not been approved by any state banking authorities. Refer
to your appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business June 30, 1997
ASSETS
Thousands of dollars
Cash and balances due from depository
institutions:
Noninterest-bearing balances
currency and coin.................................... $1,044,050
Interest-bearing balances ........................... 2,065,434
Held-to-maturity securities.......................... 0
Available-for-sale securities........................ 3,576,879
Federal funds sold and securities purchased
under agreements to resell........................... 3,311,653
Loans and lease financing receivables:
Loans and leases net of unearned income.............. 20,801,413
LESS: Allowance for loan and lease losses............ 429,338
LESS: Allocated transfer risk reserve................ 0
Loans and lease, net of unearned
income, allowance, and reserve....................... 20,372,075
Trading assets....................................... 982,806
Premises and fixed assets (including
capitalized leases).................................. 221,952
Other real estate owned................................. 8,293
Investments in unconsolidated
subsidiaries and associated companies................... 0
Customers' liability to this bank on
acceptances outstanding................................. 26,490
Intangible assets....................................... 495,034
Other assets............................................ 530,288
Total assets............................................ 32,634,954
LIABILITIES
Deposits:
In domestic offices.................................. 20,705,098
Noninterest-bearing.................................. 4,382,353
<PAGE>
Interest-bearing..................................... 16,322,745
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs.................................. 3,458,100
Noninterest-bearing.................................. 0
Interest-bearing..................................... 3,458,100
Federal funds sold and securities purchased
under agreements to resell............................ 3,784,599
Demand notes issued to the U.S. Treasury................. 300,000
Trading Liabilities...................................... 169,194
Other borrowed money:
With a remaining maturity of one year or less......... 878,716
With a remaining maturity of more than
one year through three years.......................... 133,670
With a remaining maturity of more than
three years........................................... 112,907
Bank's liability on acceptances
executed and outstanding................................. 26,490
Subordinated notes and debentures........................ 497,648
Other liabilities........................................ 336,900
Total liabilities........................................ 30,403,322
Limited-life preferred stock and related surplus......... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus............ 0
Common Stock............................................. 205,000
Surplus.................................................. 1,983,530
Undivided profits and capital reserves................... 38,878
Net unrealized holding gains (losses)
on available-for-sale securities......................... 4,224
Cumulative foreign currency translation
adjustments.............................................. 0
Total equity capital..................................... 2,231,632
Total liabilities, limited-life
preferred stock, and equity capital...................... 32,634,954
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM (Identity specific financial statements) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> JUN-28-1997
<CASH> 23,115
<SECURITIES> 0
<RECEIVABLES> 47,717
<ALLOWANCES> 3,053
<INVENTORY> 164,174
<CURRENT-ASSETS> 262,765
<PP&E> 582,017
<DEPRECIATION> 245,469
<TOTAL-ASSETS> 862,374
<CURRENT-LIABILITIES> 254,344
<BONDS> 276,721
0
0
<COMMON> 7,223
<OTHER-SE> 206,138
<TOTAL-LIABILITY-AND-EQUITY> 862,374
<SALES> 2,344,983
<TOTAL-REVENUES> 2,344,983
<CGS> 1,710,345
<TOTAL-COSTS> 1,710,345
<OTHER-EXPENSES> 653,742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,828
<INCOME-PRETAX> (55,932)
<INCOME-TAX> 15,215
<INCOME-CONTINUING> (40,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 9,798
<CHANGES> 0
<NET-INCOME> (50,515)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
9 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
OF
RANDALL'S FOOD MARKETS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY RANDALL'S FOOD MARKETS, INC.
EXCHANGE AGENT:
MARINE MIDLAND BANK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
Marine Midland Bank (INSURED OR REGISTERED RECOMMENDED)
140 Broadway, Level A Marine Midland Bank
New York, New York 10005-1180 140 Broadway, Level A
Attention: Paulette Shaw New York, New York 10005-1180
Attention: Paulette Shaw
BY OVERNIGHT EXPRESS:
Marine Midland Bank
140 Broadway, Level A
New York, New York 10005-1180
Attention: Paulette Shaw
</TABLE>
BY FACSIMILE:
(212) 658-2292
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 658-5931
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1997
(the "Prospectus") of Randall's Food Markets, Inc. (the "Company"), and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of
its new 9 3/8% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes") for each $1,000 in principal amount of outstanding 9 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes"). The terms of the Exchange Notes
are identical in all material respects (including principal amount, interest
rate and maturity) to the terms of the Old Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Notes are freely
transferable by holders thereof (except as provided herein or in the Prospectus)
and are not subject to any covenant regarding registration under the Securities
Act of 1933, as amended (the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<PAGE>
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
AGGREGATE
NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY OLD NOTES* TENDERED**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates representing
Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer-- Procedures for Tendering Old Notes."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
<PAGE>
If Delivered by Book-Entry Transfer:
Account Number _____________________________________________________________
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON
SIGNING THE LETTER OF TRANSMITTAL:
Name _________________________________________________________________________
(Please Print)
Address ______________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address ______________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name _______________________________________________________________________
Address ____________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as result
of market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Any holder who is an "affiliate" of the Company or who has
an arrangement or understanding with respect to the distribution of the Exchange
Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who
purchased Old Notes from the Company to resell pursuant to Rule 144A under the
Securities Act or any other available exemption under the Securities Act must
comply with the registration and prospectus delivery requirements under the
Securities Act.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company, in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Old Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
the book-entry transfer facility. The undersigned further agrees that acceptance
of any and all validly tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement (as defined
in the Prospectus) and that the Company shall have no further obligations or
liabilities thereunder except as provided in the first paragraph of Section 2 of
said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the Old Notes tendered hereby and, in such event, the Old Notes not exchanged
will be returned to the undersigned at the address shown above. In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth under "The Exchange Offer--Certain Conditions to
the Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes using
the Exchange Offer to participate in a distribution of the Exchange Notes (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") enunciated in its interpretive letter with respect
to Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus requirements
of the Securities Act in connection with a secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of this Letter of
Transmittal. See Instruction 2.
Certificates for all Exchange Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
Dated ___________________ Area Code and Telephone Number ___________________
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. ____________________________________________________
Taxpayer Identification No. ____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Address ________________________________________________________________________
Name of Firm ___________________________________________________________________
Area Code and Telephone No. ____________________________________________________
Dated __________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in the
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other document required by this Letter of Transmittal, to the Exchange
Agent at its address set forth above on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received on
or prior to the Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date, the Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are available
from the Exchange Agent.
<PAGE>
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Old Notes to be withdrawn, (iv) include a statement that such holder
is withdrawing his election to have such Old Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or othewise comply with the book-entry transfer facility
procedure. All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company and such determination will
be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under the caption "Procedures for Tendering Old Notes" in
the Prospectus at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this Letter
of Transmittal as there are different registrations of Old Notes.
<PAGE>
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the OldNotes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exhange (or other
payee) is required to provide a correct taxpayer identification number ("TIN"),
generally the holder's Social Security or federal employer identification
number, and with certain other information, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify that the holder
(or other payee) is not subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the holder (or other payee)
to a $50 penalty imposed by the Internal Revenue Service and 31% federal income
tax backup withholding on payments made in connection with the Exchange Notes.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or
other payee) has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is
not provided by the time any payment is made in connection with the Exchange
Notes, 31% of all such payments will be withheld until a TIN is provided.
<PAGE>
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Randall's Food Markets, Inc., 3663 Briarpark,
Houston, Texas 77042, attention: Secretary (telephone: 713-268-3500).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are
accepted for exchange may be subject to backup withholding unless the holder
provides Marine Midland Bank (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Paying Agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt receipient, the holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Paying Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near futue. If the box in Part 3 is
checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding . Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the Paying
Agent will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: MARINE MIDLAND BANK, AS PAYING AGENT
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN Social Security number(s) or
IN THE BOX AT RIGHT AND CERTIFY Employer Identification
BY SIGNING AND DATING BELOW. Number(s)
PART 2--CERTIFICATION--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be issued
for me), and
FORM W-9 (2) I am not subject to backup withholding because: (a) I am
DEPARTMENT OF THE TREASURY exempt form backup withholding, or (b) I have not been notified
INTERNAL REVENUE SERVICE by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding.
PAYOR'S REQUEST FOR CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if
TAXPAYER IDENTIFICATION you have been notified by the IRS that you are currently subject
NUMBER ("TIN") to backup withholding because of underreporting interest or
dividends on your tax return.
Signature PART 3--Awaiting TIN / /
Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable cash
payments made to me thereafter will be withheld until I provide a taxpayer
identification number.
<TABLE>
<S> <C>
------------------------------------------------ --------------------------------
Signature Date
</TABLE>
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
IN EXCHANGE FOR NEW
9 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
OF
RANDALL'S FOOD MARKETS, INC.
Registered holders of outstanding 9 3/8% Senior Subordinated Notes due 2007
(the "Old Notes") who wish to tender their Old Notes in exchange for a like
principal amount of new 9 3/8% Series B Senior Subordinated Notes due 2007 (the
"Exchange Notes") and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to Marine Midland Bank (the
"Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facisimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer--Procedure for Tendering Old Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
Marine Midland Bank (INSURED OR REGISTERED RECOMMENDED)
140 Broadway, Level A Marine Midland Bank
New York, New York 10005-1180 140 Broadway, Level A
Attention: Paulette Shaw New York, New York 10005-1180
Attention: Paulette Shaw
BY OVERNIGHT EXPRESS:
Marine Midland Bank
140 Broadway, Level A
New York, New York 10005-1180
Attention: Paulette Shaw
</TABLE>
BY FACSIMILE:
(212) 658-2292
(For Eligible Institutions Only)
BY TELEPHONE:
(212) 658-5931
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated , 1997 of Randall's Food Markets, Inc. (the "Prospectus"), receipt
of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS IT CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT
APPEARS ON THE OLD NOTES OF OLD NOTES OF OLD NOTES
NAME OF TENDERING HOLDER (PLEASE PRINT) TENDERED TENDERED
<S> <C> <C> <C>
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at the book-entry transfer facility), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal within three business days after the Expiration Date (as defined in
the Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm:
Address: (Authorized Signature)
Title:
(Zip Code) Name:
Area Code and Telephone No.: (Please type or print)
Date:
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
