<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1997
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MARSH SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
INDIANA 5411 35-0918179
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
9800 CROSSPOINT BOULEVARD
INDIANAPOLIS, INDIANA 46256-3350
(317) 594-2100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
---------------------
P. LAWRENCE BUTT
SENIOR VICE PRESIDENT, COUNSEL AND SECRETARY
MARSH SUPERMARKETS, INC.
9800 CROSSPOINT BOULEVARD
INDIANAPOLIS, INDIANA 46256-3350
(317) 594-2100
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies of all communications to:
JAMES H. CHEEK III
BASS, BERRY & SIMS PLC
FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
(615) 742-6200
---------------------
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 MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 7/8% Senior Subordinated
Notes, Series B.......... $150,000,000 $991.85 $148,777,500(1) $45,084
- ------------------------------------------------------------------------------------------------------------------
Guarantees of 8 7/8% Senior
Subordinated Notes,
Series B................. $150,000,000 (2) (2) None(2)
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</TABLE>
(1) Estimated solely for purposes of calculating the amount of the registration
fee.
(2) No separate consideration will be received for the guarantees of the 8 7/8%
Senior Subordinated Notes, Series B by certain subsidiaries of Marsh
Supermarkets, Inc.
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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS(1)
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD I.R.S.
JURISDICTION OF INDUSTRIAL EMPLOYER
INCORPORATION OR CLASSIFICATION IDENTIFICATION
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
- ---------------------------------------------------- ---------------- ---------------- --------------
<S> <C> <C> <C>
Marsh Drugs, Inc.................................... Indiana 5411 35-1155755
Marsh Village Pantries, Inc......................... Indiana 5411 35-1170909
Mundy Realty, Inc................................... Indiana 5411 35-6018645
Mar Properties, Inc................................. Indiana 5411 35-1298818
Marlease, Inc....................................... Indiana 5411 35-1401218
Marsh International, Inc............................ Indiana 5411 35-1290875
Maraines Greenery, Inc.............................. Indiana 5411 35-1379205
Limited Holdings, Inc............................... Indiana 5411 35-1359122
Convenience Store Distributing Company.............. Ohio 5411 31-0831157
Marsh P.Q., Inc..................................... Indiana 5411 35-1716423
S.C.T., Inc......................................... Indiana 5411 35-1730364
North Marion Development Corporation................ Indiana 5411 35-6017073
Contract Transport, Inc............................. Indiana 5411 35-1845675
Crystal Food Services, LLC.......................... Indiana 5411 35-1912866
Lobill Foods, LLC................................... Indiana 5411 35-1939461
Contract Transport, LLC............................. Indiana 5411 35-2013718
Marsh Supermarkets, LLC............................. Indiana 5411 35-2007924
Village Pantry, LLC................................. Indiana 5411 35-2007923
Marsh Drugs, LLC.................................... Indiana 5411 35-2013717
Trademark Holdings, Inc............................. Delaware 5411 52-2034003
Marsh Clearing House, LLC........................... Indiana 5411 35-2020818
</TABLE>
- ---------------
(1) The address, including zip code, and telephone number, including area code,
of the additional Registrants' principal executive offices is 9800
Crosspoint Boulevard, Indianapolis, Indiana 46256-3350, (317) 594-2100,
except for Trademark Holdings, Inc., whose address and telephone number is
1105 North Market St., Ste. 1300, Wilmington, DE 19801, (302) 429-6964.
2
<PAGE> 3
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.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1997
PRELIMINARY PROSPECTUS
[MARSH LOGO]
OFFER TO EXCHANGE
UP TO $150,000,000 OF
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ANY AND ALL OF THE OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
MARSH SUPERMARKETS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Marsh Supermarkets, Inc., an Indiana corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"), to
exchange an aggregate of up to $150,000,000 principal amount of 8 7/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for an identical face amount of the issued and outstanding 8 7/8% Senior
Subordinated Notes due 2007 (the "144A Notes" and, together with the Exchange
Notes, the "Notes") of the Company from the Holders (as defined herein) thereof
in integral multiples of $1,000. As of the date of this Prospectus, there is
$150,000,000 in aggregate principal amount of the 144A Notes outstanding. The
terms of the Exchange Notes are identical in all material respects to the 144A
Notes, except that the Exchange Notes have been registered under 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
payable on the 144A Notes under certain circumstances relating to the
Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
The Exchange Notes will be obligations of the Company evidencing the same
indebtedness as the 144A Notes, and will be entitled to the benefits of the same
Indenture (as defined herein). See "Exchange Offer."
Interest on the Exchange Notes will be payable semi-annually in arrears on
February 1 and August 1 in each year, commencing February 1, 1998. The Exchange
Notes will mature on August 1, 2007. The Exchange Notes are redeemable at any
time on or after August 1, 2002 at the option of the Company, 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. Upon the occurrence of a
Change of Control (as defined herein), each holder of the Exchange Notes may
require the Company to purchase all or a portion of such holder's Exchange Notes
at a purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of purchase. See "Description
of the Notes."
The Exchange Notes will be unsecured senior subordinated obligations of the
Company and, as such, will be subordinated in right of payment to all existing
and future senior indebtedness of the Company. The Exchange Notes will rank pari
passu in right of payment with all other existing and future senior subordinated
indebtedness, if any, of the Company, and senior in right of payment to all
existing and future subordinated indebtedness, if any, of the Company. The
Exchange Notes will be guaranteed, jointly and severally, on a senior
subordinated basis (the "Guarantees") by all of the Company's subsidiaries
(other than three immaterial subsidiaries) (the "Guarantors" and, together with
the Company, the "Issuers"). The Guarantees will be unsecured senior
subordinated obligations of the Guarantors and will be subordinated to all
existing and future Guarantor Senior Indebtedness (as defined herein). See
"Description of the Exchange Notes -- Ranking." As of June 21, 1997, on a pro
forma basis after giving effect to the offering of the 144A Notes and the
application of the net proceeds therefrom, the Company and the Guarantors would
have had outstanding $215.3 million of aggregate principal amount of
indebtedness, of which $46.6 million would have ranked senior in right of
payment to the Exchange Notes and the Guarantees (all of which would have been
secured) and approximately $19.9 million would have been subordinated in right
of payment to the Exchange Notes and the Guarantees.
(cover page continued on next page)
SEE "RISK FACTORS," BEGINNING ON PAGE 11, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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.
The Date of this Prospectus is , 1997.
<PAGE> 4
The Company will accept for exchange any and all validly tendered 144A
Notes on or prior to the Expiration Date (as defined herein). Tenders of time,
on the Expiration Date; otherwise such tenders are irrevocable. The Exchange
Offer is not conditioned upon any minimum principal amount of 144A Notes being
tendered for exchange. For certain conditions to the Exchange Offer, see "The
Exchange Offer -- Conditions."
The 144A Notes were offered and sold on August 5, 1997 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general the 144A 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. The
Company has agreed to pay the expenses of the Exchange Offer. 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 144A 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 and such Holder does not intend
to participate and has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. In some cases, certain
broker-dealers may be required to deliver a prospectus in connection with the
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 any resale of Exchange Notes
received in exchange for such 144A Notes where such 144A Notes were acquired by
such broker-dealer for its own account as a result of market-making activities
or other trading activities (other than 144A Notes acquired directly from the
Company). The Company has agreed that it will make this Prospectus available to
any broker-dealer for use in connection with any such resale.
Prior to this Exchange Offer, there has been no public market for the 144A
Notes or Exchange Notes. If a market for the Exchange Notes should develop, the
Exchange Notes could trade at a discount from their principal amount. The
Company does not intend to list the Exchange Notes on any securities exchange
nor does the Company intend to apply for quotation of the Exchange Notes on the
NASDAQ National Market or other quotation system. The Initial Purchasers (as
defined herein) have indicated to the Company that they intend to make a market
in the Notes, but are not obligated to do so and such market-making activities
may be discontinued at any time. As a result, no assurance can be given that an
active trading market for the Exchange Notes will develop.
The Exchange Notes issued pursuant to this Exchange Offer will be issued in
the form of Global Exchange Notes (as defined herein), which will be deposited
with, or on behalf of, The Depository Trust Company (the "Depository" or "DTC")
and registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Exchange Notes representing the Exchange Notes will be
shown on, and transfers thereof will be effected through, records maintained by
the DTC and its participants. Notwithstanding the foregoing, 144A Notes held in
certificated form will be exchanged solely for Certificated Exchange Notes (as
defined herein). After the initial issuance of the Global Exchange Notes,
Certificated Exchange Notes will be issued in exchange for the Global Exchange
Notes only on the terms set forth in the Indenture. See "Description of the
Exchange Notes -- Book-Entry, Delivery and Form."
ii
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should be available at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60621 and at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
While any 144A Notes remain outstanding, the Company will make available,
upon request, to any holder and any prospective purchaser of 144A Notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act during
any period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act. Any such request should be directed to the Company at 9800
Crosspoint Boulevard, Indianapolis, Indiana 46256-3350.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended March 29,
1997, as amended by Form 10K/A filed July 15, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended June
21, 1997; and
3. The Company's Current Reports on Form 8-K dated July 18, 1997 and August
5, 1997.
All documents subsequently filed by the registrant pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the consummation of the
Exchange Offer, shall be deemed to be incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM P.
LAWRENCE BUTT, VICE PRESIDENT, COUNSEL AND SECRETARY, MARSH SUPERMARKETS, INC.,
9800 CROSSPOINT BOULEVARD, INDIANAPOLIS, INDIANA 46256-3350, (317) 594-2100. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1997 (DATE FIVE BUSINESS DAYS PRIOR TO THE DATE ON WHICH THE FINAL
INVESTMENT DECISION MUST BE MADE).
iii
<PAGE> 6
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. The following summary information is qualified in its entirety
by reference to, and should be read in conjunction with, the more detailed
information and the Consolidated Financial Statements, including the notes
thereto, of the Company appearing elsewhere in this Prospectus. References
herein to the "Company" refer to Marsh Supermarkets, Inc. and its consolidated
subsidiaries. All references to supermarket market share are made as of July 29,
1997 and are based upon surveys of Indianapolis and the surrounding 13 counties
by Information Resources Inc. All references to fiscal years in this Prospectus
refer to the fiscal year ending on the Saturday closest to April 1 of the year
indicated (e.g., fiscal 1997 refers to the fiscal year ended March 29, 1997).
The Company's fiscal year generally consists of 12-week quarters, except the
second quarter which consists of 16 weeks.
THE COMPANY
The Company is a leading regional retailer and distributor of food products
and services operating in Indiana and western Ohio. The Company operates 89
Marsh(R) and LoBill Foods(R) supermarkets and 182 Village Pantry(R) convenience
stores. Through Convenience Store Distributing Company(R) ("CSDC"), the Company
distributes a broad range of products to its Village Pantry stores and
approximately 1,400 unaffiliated convenience stores in a 10 state area. Through
Crystal Food Services(TM) ("Crystal Food Services"), the Company provides a
broad range of other food services, including catering, concession services,
vending and cafeteria management. During fiscal 1997, the Company had
consolidated sales and other revenues and EBITDA (as defined herein) of $1.5
billion and $52.1 million, respectively.
The Company operates 73 full-service supermarkets under the "Marsh" name
and 16 value-oriented supermarkets under the "LoBill" name. Since commencing
operations in 1931, the Company has developed a modern store base with many
prime locations, strong brand name recognition and a reputation for superior
quality and service. In the Indianapolis area, the Company's supermarkets have a
30% market share. Marsh supermarkets feature an extensive line of traditional
grocery items as well as a broad array of service and specialty departments
including delicatessens, bakeries, prepared foods, prime cut meats, fresh
seafood, floral and video rental. LoBill supermarkets target the price conscious
shopper by emphasizing every day low prices and a value-oriented product mix,
including products sold under the Company's "Marsh" and "Yorktown(R)" labels.
The complementary Marsh and LoBill supermarket formats allow the Company to
maximize its operating flexibility by tailoring stores to the demographics of
individual locations. The Company's Marsh and LoBill supermarkets average
approximately 40,000 and 27,000 square feet, respectively, and during fiscal
1997, had average weekly revenues per store of $232,400 and $113,700,
respectively. During fiscal 1997, supermarket operations accounted for 68.9% of
consolidated sales and other revenues.
Village Pantry stores offer a broad selection of grocery, bakery, dairy and
delicatessen items, including freshly prepared coffee, pastry products,
sandwiches and other food products prepared daily on site. Approximately 57% of
the Company's convenience stores offer petroleum products. Recently, the Company
entered into an agreement with Shell Oil Company to offer Shell brand gasoline
in certain stores. Village Pantry stores currently average approximately 2,800
square feet. However, over the past several years, the Company has focused on
developing larger Village Pantry stores with approximately 4,500 square feet
which offer a broader variety of products prepared daily and sit-down eating
areas. During fiscal 1997, larger Village Pantry stores (in excess of 3,500
square feet) experienced 6.7% growth in average weekly revenues per store
compared to 2.7% growth in smaller Village Pantry stores. Village Pantry
operations accounted for 12.6% of consolidated sales and other revenues in
fiscal 1997.
CSDC(R) distributes over 9,500 products, including tobacco products,
groceries, snack items, housewares and health and beauty care products to
Village Pantry stores and approximately 1,400 unaffiliated convenience stores in
a 10 state area. CSDC distributes products from a 210,000 square foot warehouse
and distribution facility in Richmond, Indiana. The Company believes that the
distribution of products to Village Pantry and unaffiliated stores results in
efficiencies in purchasing and distribution. Crystal Food Services provides
exclusive catering services at 10 banquet facilities located in the Indianapolis
market and special event
1
<PAGE> 7
catering at a number of venues, including the Indianapolis Motor Speedway, the
RCA Tennis Championships, the Horizon Convention Center and the Indiana State
Fairgrounds Event Center. Crystal Food Services also provides concession
services, cafeteria management and vending services. During fiscal 1997, CSDC
and Crystal Food Services accounted for 16.7% and 1.6% of consolidated sales and
other revenues, respectively.
BUSINESS STRENGTHS
The Company believes it is well-positioned to build upon its historical
success by capitalizing on its competitive strengths, including the following:
Leading Market Position. Each of the Company's divisions is a leading
provider of products and services in its market area. The Company operates more
supermarkets in Indianapolis and the surrounding 13 counties than any of its
competitors. The Company's supermarkets have a 30% market share in the
Indianapolis area and have been able to maintain their market share despite the
entry of a substantial competitor and the opening of 28 stores by competitors in
the last two fiscal years. Village Pantry operates the largest number of
convenience stores operated by any chain in the Company's market area. According
to industry sources, CSDC ranks fourteenth nationally among the largest
wholesale distributors of products to convenience stores, and the Company
believes CSDC is one of the leading distributors to convenience stores in its
market area. Crystal Food Services is the largest provider of catering services
in the Indianapolis area.
Diversified Food Service Retailer and Distributor. Since 1931, the Company
has evolved into a diversified retailer and distributor of food products and
services through the strategic development of its convenience store,
distribution and catering businesses. This diversification has enabled the
Company to (i) increase its purchasing power and distribution efficiencies, (ii)
increase the number of higher margin products and services offered in its
supermarkets and convenience stores, such as prepared foods and home meal
replacement items, and (iii) supplement its supermarket revenues.
Reputation for Quality and Customer Service. The Company has established a
reputation as a provider of superior quality and service to its customers,
resulting in strong brand name recognition and customer loyalty. The Company
strives to deliver superior customer service and satisfaction by using targeted
departmental staffing in its full-service specialty departments and by offering
customer service "guarantees" such as opening a new checkout line if more than
three customers are in a single checkout line. The Company has been a leader in
conducting consumer surveys to determine customer tastes and preferences and in
implementing innovations designed to improve customer service. The Company was
the first supermarket chain to scan the UPC code using electronic scanning
checkout systems and, in the 1960's, the Company began accepting credit cards as
a means of payment. All of the Company's supermarkets and convenience stores are
open seven days a week, and most are open 24 hours a day.
Strong Operating Efficiencies due to Geographic Concentration. All of the
Company's supermarkets and convenience stores are located in Indiana and western
Ohio, substantially all of which are located within 150 miles of the Company's
headquarters. The Company believes that the close proximity of its warehouse,
distribution and headquarters facilities to its supermarkets and convenience
stores results in more efficient management supervision of the Company's
operations, increased speed of delivery and lower distribution and
transportation costs. Approximately 80% of food deliveries to the Company's
supermarkets are 80 miles or less. The Company also benefits from advertising
efficiencies as the Indianapolis television market covers approximately 80% of
the Company's stores. All of the stores which the Company expects to open in the
next two fiscal years will be within 150 miles of the Company's headquarters.
Prime Real Estate Locations. The Company's 66 years of operation in the
Indianapolis area have allowed it to establish prime store locations in urban
and suburban areas which the Company believes would be difficult for a
competitor to replicate.
Experienced Management Team. The Company's management has substantial
experience in each of its operating divisions. The Company's President and the
principal operating officers of the Company's supermarket, Village Pantry, CSDC
and Crystal Food Services operations have on average more than 25 years of
experience with the Company. The Company believes that this experience has been
invaluable in
2
<PAGE> 8
successfully implementing the Company's business strategy during a period of
intense competition. The Company's directors and executive officers own
beneficially an aggregate of 21.4% of the Company's Class A Common Stock and
18.6% of the Company's Class B Common Stock.
BUSINESS STRATEGY
The Company's strategic objective is to enhance its position as a leading
regional food service retailer and distributor of food products by (i) expanding
its business through new store openings, margin expansion, new products and
services, and comparable store sales growth and (ii) evaluating acquisition
opportunities.
Development of Larger Stores. The Company believes the development of
larger Marsh supermarkets, which provide customers with a broad array of
services and specialty departments in addition to traditional grocery items,
enhances margins and increases customer traffic and loyalty. The Company has
been a leader in broadening the scope of specialty products and services
provided in its supermarkets, such as prepared foods and home meal replacement
items, which are geared toward the increasing convenience orientation of
customers. The Company expects to devote a greater proportion of new and
remodeled stores to such specialty departments. During fiscal 1998 and 1999, the
Company expects to open three Marsh and two LoBill supermarkets and 15 Village
Pantry stores. The Company expects to focus future development of Marsh
supermarkets on food and drug combination stores of approximately 55,000 to
75,000 square feet, approximately 5,000 square feet of which is devoted to
warehouse-type merchandising of bulk pack merchandise. The Company's development
of Village Pantry stores will continue to focus on larger stores of
approximately 4,500 square feet, which offer sit-down eating areas and a broad
array of higher margin products, including in-store prepared coffee, pastry
products, sandwiches, pizza and broasted chicken.
Complementary and Flexible Supermarket Formats. The Company's
value-oriented LoBill format complements the full-service Marsh format by
enabling the Company to maximize operating flexibility by tailoring stores to
the demographics of individual locations and responding to changing
demographics. The Company's LoBill format provides an alternative to the Marsh
supermarket (i) in certain urban markets where changing demographics have
resulted in more price conscious customers who choose price-oriented food stores
over traditional full-service supermarkets and (ii) in smaller communities that
are better suited for the LoBill format. Moreover, both the Marsh and LoBill
formats are flexible and can be tailored to meet the demands of individual store
sites in their respective communities.
Innovative Marketing Strategies. The Company has been a leader in
developing and implementing marketing strategies specifically targeted to
individual shoppers. For example, in fiscal 1994, the Company introduced a
frequent shopper card program, entitled Fresh I.D.E.A.(R) The Company is the
only major supermarket chain to offer a frequent shopper program in its market
area. The Company has issued over 1.0 million Fresh I.D.E.A. cards which
function as check cashing and video rental cards and automatically provide
electronic coupons. The card also provides the Company with information on the
frequency of use and merchandise selection of the user, enabling the Company to
implement specific marketing strategies aimed at its most valuable and loyal
customers. The Company estimates that over 70% of supermarket sales are
currently derived from holders of Fresh I.D.E.A. cards. Other marketing
strategies adopted by the Company include the "Fresh Express" home delivery
service and the "Chef Fresh" take-out food program which provides freshly
prepared, ready-to-eat meals.
Higher Margin Products and Proprietary Brands. The Company intends to
emphasize and increase sales of products in its specialty departments, such as
prepared foods and home meal replacement items, which typically carry higher
margins than other grocery products. The Company believes that customers are
increasingly convenience oriented and interested in such products, including
seafood, delicatessen and bakery items. The Company is also attempting to
increase sales of proprietary brands, including its "Marsh" and "Yorktown"
brands. Proprietary brands typically carry higher margins than comparable
branded products and also result in increased customer loyalty. Sales of
proprietary brands increased from 8.7% of supermarket sales in fiscal 1996 to
9.5% in fiscal 1997.
Strategic Capital Investments and Acquisitions. The Company intends to
continue to invest significantly in its management information systems,
including a computer-assisted reordering system. The Company
3
<PAGE> 9
anticipates spending approximately $12.5 million in fiscal 1998 on management
information systems. In addition, the Company continually seeks opportunities to
acquire additional stores, small supermarket chains and complementary
businesses, such as the 1995 acquisitions of Martz & Associates Food Services
("Martz") and Crystal Catering of Indiana, Inc. ("Crystal Catering"). Although
the Company enters discussions from time to time with various parties, the
Company has no agreements or understandings with respect to any additional
acquisitions at the present time.
Cost Savings Strategies. During fiscal 1997, the Company implemented a
corporate restructuring pursuant to which the Company's supermarket and Village
Pantry operations were organized as wholly-owned limited liability companies and
their intellectual property was transferred to a passive investment company.
This restructuring is estimated to produce annual pre-tax savings of
approximately $3.0 million commencing in the first quarter of fiscal 1998. The
Company expects to achieve additional cost savings in fiscal 1998 in the areas
of labor management, transportation and check writing and processing.
THE 144A NOTE OFFERING
The 144A Notes............. The 144A Notes were sold by the Company in the 144A
Note Offering on August 5, 1997, and were
subsequently resold to Qualified Institutional
Buyers (as defined herein) pursuant to Rule 144A
under the Securities Act in a manner exempt from
registration under the Securities Act.
Registration Rights
Agreement................ In connection with the 144A Note Offering, the
Company entered into the Registration Rights
Agreement, which grants Holders of the 144A Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
and registration rights, which generally terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... $150,000,000 in aggregate principal amount of
8 7/8% Senior Subordinated Notes due 2007, Series
B.
The Exchange Offer......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of 144A
Notes. As of the date hereof, $150,000,000 in
aggregate principal amount of 144A Notes are
outstanding. The Company will issue the Exchange
Notes to Holders on or promptly after the
Expiration Date. The terms of the Exchange Notes
are substantially identical in all material
respects (including principal amount, interest rate
and maturity) to the terms of the 144A Notes for
which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (other than
as provided herein), and are not subject to any
covenant regarding registration under the
Securities Act. See "The Exchange Offer." Other
than compliance with applicable federal and state
securities laws, including the requirement that the
Registration Statement be declared effective by the
Commission, there are no material federal or state
regulatory requirements to be complied with in
connection with the Exchange Offer.
Interest Payments.......... The Exchange Notes will bear interest from August
5, 1997, the date of issuance of the 144A Notes, or
the most recent interest payment date to which
interest on such 144A Notes has been paid,
whichever is later. Accordingly, Holders of 144A
Notes that are accepted for exchange will not
receive interest on such 144A Notes that is accrued
but unpaid at the
4
<PAGE> 10
time of tender, but such interest will be payable
on the first interest payment date after the
Expiration Date.
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of 144A Notes
being tendered for exchange.
Expiration Date............ 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.
Exchange Date.............. The date of acceptance for exchange of the 144A
Notes will be the first business day following the
Expiration Date.
Withdrawal Rights.......... 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 of Tenders."
Acceptance of 144A Notes
and Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
144A 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 -- Terms of the Exchange
Offer."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
144A Notes................. To tender pursuant to the Exchange Offer, a Holder
must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof, have
the signatures therein guaranteed if required by
instruction 4 of the Letter of Transmittal, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
144A Notes and any other required documentation to
the Exchange Agent (as defined herein) at the
address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering" and
"Plan of Distribution." By executing the Letter of
Transmittal, each Holder will represent to the
Company that, among other things, the Holder or the
person receiving such Exchange Notes, whether or
not such person is the Holder, is acquiring the
Exchange Notes in the ordinary course of business
and that neither the Holder nor any such other
person intends to participate or has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. In lieu of physical delivery of the
certificates representing 144A Notes, tendering
Holders may transfer 144A Notes pursuant to the
procedure for book-entry transfer as set forth
under "The Exchange Offer -- Procedures for
Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose 144A Notes are
registered in the name of a broker, commercial
bank, trust company or other nominee and who wishes
to tender in the Exchange Offer 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
5
<PAGE> 11
such beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering the 144A
Notes, either make appropriate arrangements to
register ownership of the 144A 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."
Guaranteed Delivery
Procedures................. Holders of 144A Notes who wish to tender their 144A
Notes and whose 144A Notes are not immediately
available or who cannot deliver their 144A Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the requirements for
book-entry transfer) prior to the Expiration Date
must tender their 144A Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Federal Income Tax
Consequences............. The issuance of the Exchange Notes to Holders
pursuant to the terms set forth in this Prospectus
will not constitute an exchange for federal income
tax purposes. Consequently, no gain or loss would
be recognized by Holders upon receipt of the
Exchange Notes. See "Certain Federal Income Tax
Consequences of the Exchange Offer."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of 144A Notes pursuant to the Exchange
Offer.
Exchange Agent............. State Street Bank and Trust Company is serving as
exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. See "Exchange Offer --
Exchange Agent."
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the 144A Notes (which they replace) except that (i) the Exchange Notes have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (ii) the holders of Exchange Notes
generally will not be entitled to further registration rights under the
Registration Rights Agreement, which rights generally will be satisfied when the
Exchange Offer is consummated. The Exchange Notes will evidence the same debt as
the 144A Notes and will be entitled to the benefits of the Indenture. See
"Description of the Exchange Notes."
Securities Offered......... $150,000,000 in aggregate principal amount of
8 7/8% Senior Subordinated Notes due 2007, Series
B.
Maturity Date.............. August 1, 2007.
Interest Payment Dates..... February 1 and August 1 of each year, commencing
February 1, 1998.
Optional Redemption........ The Exchange Notes are redeemable for cash at any
time on or after August 1, 2002, at the option of
the Company, 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.
See "Description of the Notes -- Optional
Redemption."
Guarantees................. The Exchange Notes will be guaranteed, jointly and
severally, on a senior subordinated basis, by all
of the Company's subsidiaries (other than
6
<PAGE> 12
three immaterial subsidiaries). See "Description of
the Notes -- Guarantees."
Ranking.................... The Exchange Notes will be unsecured senior
subordinated obligations of the Company and, as
such, will be subordinated in right of payment to
all existing and future Senior Indebtedness of the
Company. The Exchange Notes will rank pari passu in
right of payment with all other existing and future
senior Subordinated Indebtedness, if any, of the
Company, and senior in right of payment to all
existing and future Subordinated Indebtedness, if
any, of the Company. The Guarantees will be
unsecured senior subordinated obligations of the
Guarantors and will be subordinated to all existing
and future Guarantor Senior Indebtedness. As of
June 21, 1997, on a pro forma basis after giving
effect to the offering of the 144A Notes and the
application of the net proceeds therefrom, the
Company and the Guarantors would have had
approximately $215.3 million in aggregate principal
amount of Indebtedness outstanding, of which $46.6
million would have ranked senior in right of
payment to the Exchange Notes and the Guarantees
(all of which would have been secured) and
approximately $19.9 million would have been
subordinated in right of payment to the Exchange
Notes and the Guarantees. See "Description of the
Exchange Notes -- Ranking," "Risk
Factors -- Subordination of the Exchange Notes and
the Guarantees; Asset Encumbrances" and "Risk
Factors -- Dependence Upon Operations of
Subsidiaries; Possible Invalidity of Guarantees;
Potential Release of Guarantees."
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of the Exchange Notes may require the
Company to purchase all or a portion of such
holder's Exchange Notes at a cash purchase price
equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any,
to the date of purchase. See "Description of the
Exchange Notes -- Certain Covenants -- Purchase of
Exchange Notes Upon a Change of Control."
Restrictive Covenants...... The indenture relating to the Exchange Notes (the
"Indenture") will contain certain restrictive
covenants, including, but not limited to, covenants
with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation on
restricted payments; (iii) limitation on
transactions with affiliates; (iv) limitation on
liens; (v) limitation on senior Subordinated
Indebtedness; (vi) limitation on sale of assets;
(vii) limitation on issuances of guarantees by
subsidiaries; (viii) limitation on transfer of
assets to subsidiaries; (ix) limitation on dividend
and other payment restrictions affecting
subsidiaries; (x) limitations on the issuance of
preferred stock of subsidiaries; (xi) restrictions
on mergers, consolidations and the transfer of all
or substantially all of the assets of the Company;
and (xii) limitation on unrestricted subsidiaries.
See "Description of the Exchange Notes -- Certain
Covenants."
Exchange Offer;
Registration Rights........ In the event that any changes in law or the
applicable interpretations of the staff of the
Commission do not permit the Issuers to effect the
Exchange Offer, or if the Exchange Offer
Registration Statement is not declared effective
within 90 days or consummated within 120 days
following the original issue of the Notes, or upon
the request of any of
7
<PAGE> 13
the Initial Purchasers, or if any holder of the
Notes is not permitted by applicable law to
participate in the Exchange Offer or elects to
participate in the Exchange Offer but does not
receive fully tradable Exchange Notes pursuant to
the Exchange Offer, the Issuers will use their best
efforts to cause a shelf registration statement
with respect to the resale of the Notes (the "Shelf
Registration Statement") to become effective within
120 days following the original issue of the Notes
(or within 30 days of the request of any Initial
Purchaser) and to keep the Shelf Registration
Statement effective for up to two years from the
date the Shelf Registration Statement is declared
effective by the Commission.
The interest rate on the Notes is subject to
increase under certain circumstances if the Issuers
are not in compliance with their obligations under
the Registration Rights Agreement. See "Exchange
Offer; Registration Rights."
Lack of Prior Market for
the Exchange Notes......... The Exchange Notes will be new securities for which
there is currently no established trading market.
The Company does not intend to apply for listing of
the Exchange Notes on any national securities
exchange or for quotation of the Exchange Notes on
any automated dealer quotation system. The Company
has been advised by the Initial Purchasers that
they presently intend to make a market in the
Exchange Notes, although they are under no
obligation to do so and may discontinue any market-
making activities at any time without notice.
Accordingly, no assurance can be given as to the
liquidity of the trading market for the Exchange
Notes or that an active public market for the
Exchange Notes will develop. If an active trading
market for the Exchange Notes does not develop, the
market price and liquidity of the Exchange Notes
may be adversely affected. If the Exchange Notes
are traded, they may trade at a discount from their
initial offering price, depending on prevailing
interest rates, the market for similar securities,
the performance of the Company and certain other
factors. See "Risk Factors -- Lack of Prior Market
for the Exchange Notes."
RISK FACTORS
See "Risk Factors," beginning on page 11, for a discussion of certain
factors that should be considered by holders of 144A Notes before deciding to
tender 144A Notes in the Exchange Offer.
8
<PAGE> 14
SUMMARY FINANCIAL AND OPERATING DATA
The following table sets forth certain historical summary financial and
operating data of the Company for the periods ended and as of the dates
indicated. The historical financial data for each of the fiscal years in the
five-year period ended March 29, 1997 have been derived from the Company's
Consolidated Financial Statements. The historical financial data for the twelve
weeks ended June 21, 1997 and June 22, 1996 are derived from the Unaudited
Condensed Consolidated Financial Statements of the Company included elsewhere in
this Prospectus. Such Unaudited Condensed Consolidated Financial Statements, in
the opinion of the Company's management, include all adjustments necessary
(consisting of normal recurring accruals) for a fair presentation of the
financial position and the results of operations of the Company for such periods
and as of such dates. The historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated and Unaudited
Condensed Consolidated Financial Statements and the notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED(A)
----------------------- --------------------------------------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1, APRIL 2, MARCH 27,
1997 1996 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales and other
revenues.............. $ 343,924 $ 335,844 $1,451,730 $1,390,543 $1,303,261 $1,263,191 $1,170,398
Gross profit............ 83,777 81,246 355,144 343,350 313,224 307,851 278,634
Operating profit
(loss)(b)............. 7,138 (8,554) 12,781 27,371 26,082 26,853 25,887
Interest and debt
expense
amortization.......... 3,063 3,014 13,030 13,087 13,292 13,336 10,318
Net income (loss)(c).... 2,899 (7,112) (244) 9,033 8,573 10,467 9,828
BALANCE SHEET DATA:
Working capital......... $ 25,371 $ 19,088 $ 19,254 $ 18,587 $ 26,369 $ 38,450 $ 59,330
Total assets............ 397,395 388,108 395,631 387,294 378,471 375,349 352,511
Current maturities of
long-term
liabilities........... 6,842 7,183 7,097 7,022 7,142 7,246 4,529
Long-term liabilities,
excluding current
maturities............ 149,095 136,939 145,429 135,066 143,102 148,818 155,444
Shareholders' equity.... 117,398 111,356 115,448 118,158 114,314 109,794 101,539
OTHER FINANCIAL DATA:
EBITDA(d)............... $ 12,641 $ 10,457 $ 52,062 $ 54,145 $ 53,964 $ 52,962 $ 50,197
Depreciation and
amortization(e)....... 5,372 10,193 28,903 24,276 24,713 24,416 21,234
Capital expenditures.... 2,577 7,349 33,594 22,736 30,607 44,322 26,221
Ratio of EBITDA to
interest expense...... 4.13x 3.47x 4.00x 4.14x 4.06x 3.97x 4.86x
Ratio of total debt to
EBITDA................ 12.34x 13.78x 2.93x 2.62x 2.78x 2.95x 3.19x
OPERATING DATA:
Supermarkets:
Beginning of period... 88 90 90 88 87 84 80
Opened or acquired.... 1 -- 1 3 1 6 4
Closed................ -- -- 3 1 -- 3 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total at end of
period........... 89 90 88 90 88 87 84
========== ========== ========== ========== ========== ========== ==========
Conversions to LoBill
format................ 1 1 3 4 -- 1 1
Village Pantry stores... 182 181 182 181 181 177 174
Total square feet of
store area:
Supermarkets.......... 3,364,000 3,349,000 3,321,000 3,349,000 3,173,000 3,093,000 2,811,000
Village Pantry
stores.............. 514,000 512,000 514,000 510,000 507,000 487,000 469,000
</TABLE>
- ---------------
(a) Fiscal year operating results include 52 weeks for each year except fiscal
1994, which includes 53 weeks.
9
<PAGE> 15
(b) Reflects a non-cash charge of $7.5 million in the first quarter of fiscal
1997 upon the adoption of Statement of Financial Accounting Standards
("FAS") 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," a $2.4 million charge from the
decision to curtail the accrual of benefits under the Company's qualified
defined benefit pension plan and $2.8 million from reorganization and other
charges.
(c) Reflects an increase in net income of $1.9 million in fiscal 1994 as a
result of an increase of $3.6 million from the adoption of FAS 109,
"Accounting for Income Taxes," partially offset by the recognition of a
$1.7 million (net of tax benefit) accrued benefit obligation as a result of
the adoption of FAS 106, "Employers Accounting for Postretirement Benefits
Other than Pensions."
(d) EBITDA is defined as income (loss) before interest expense, income taxes,
depreciation and amortization, extraordinary items, LIFO provision and
non-recurring charges, including the effects of the adoption of FAS 121,
the curtailment of the accrual of pension benefits and other reorganization
charges. EBITDA should not be considered an alternative measure of the
Company's net income (loss), operating performance, cash flow or liquidity.
It is included herein to provide additional information related to the
Company's ability to service and incur debt.
(e) Includes costs recorded in selling, general and administrative expenses
primarily relating to amortization costs of certain other assets and
excludes debt expense amortization.
10
<PAGE> 16
RISK FACTORS
Holders of 144A Notes should carefully consider the following risk factors
in addition to the other information contained herein before deciding to tender
144A Notes in the Exchange Offer. The risk factors set forth below are generally
applicable to the 144A Notes as well as the Exchange Notes.
SUBSTANTIAL LEVERAGE
The Company has substantial indebtedness and, as a result, significant debt
service obligations. As of June 21, 1997, after giving pro forma effect to the
offering of the 144A Notes and the application of the net proceeds therefrom,
the Company would have had approximately $215.3 million of long-term
indebtedness which would have represented approximately 65.4% of its total
capitalization. See "Capitalization." In addition, the Indenture and the
Company's other debt instruments will allow the Company to incur additional
indebtedness, including secured indebtedness. As of June 21, 1997, after giving
pro forma effect to the offering of the 144A Notes and the application of the
net proceeds therefrom, the Company would have had an aggregate of $70.0 million
available for borrowing under revolving credit facilities between the Company
and each of Harris Trust and Savings Bank (the "Harris Revolving Credit
Agreement") and KeyBank National Association (the "KeyBank Revolving Credit
Agreement" and, together with the Harris Revolving Credit Agreement, the
"Revolving Credit Agreements") and other short-term bank borrowings pursuant to
notes payable to each of Bank One, Dayton NA (the "Bank One Note Payable") and
First Merchants Bank of Muncie (the "First Merchants Note Payable"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company's ability to make
payments with respect to the Notes and to satisfy its other debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the Company's control.
Upon the issuance of the 144A Notes, the Company's interest expense
increased compared to prior years. See "Capitalization." The Company believes,
based on current circumstances, that the Company's cash flow, together with
available borrowings under the Revolving Credit Agreements, will be sufficient
to permit the Company to meet its operating expenses, to pay dividends on its
common stock and to service its debt requirements as they become due for the
foreseeable future. Significant assumptions underlie this belief, including,
among other things, that the Company will succeed in implementing its business
strategy and that there will be no material adverse developments in the
business, liquidity or capital requirements of the Company. If the Company is
unable to service its indebtedness, it will be required to adopt alternative
strategies, which may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all.
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the Company's cash flows from operations
may be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations; (iii)
certain of the Company's indebtedness contains financial and other restrictive
covenants, including those restricting the incurrence of additional
indebtedness, the creation of liens, the payment of dividends, sales of assets
and minimum net worth requirements; (iv) certain of the Company's borrowings are
and will continue to be at variable rates of interest which exposes the Company
to the risk of greater interest rates; and (v) the Company may be more leveraged
than certain of its competitors, which may place the Company at a relative
competitive disadvantage and make the Company more vulnerable to changing
economic conditions. As a result of the Company's current level of indebtedness,
its financial capacity to respond to market conditions, capital needs and other
factors may be limited.
11
<PAGE> 17
SUBORDINATION OF THE EXCHANGE NOTES AND THE GUARANTEES; ASSET ENCUMBRANCES
The payment of principal of, premium, if any, and interest on the Exchange
Notes will be subordinated to the prior payment in full of all existing and
future Senior Indebtedness of the Company, which includes all indebtedness under
the Revolving Credit Agreements. Therefore, in the event of a liquidation,
dissolution, reorganization or any similar proceeding regarding the Company, the
assets of the Company will be available to pay obligations on the Exchange Notes
only after Senior Indebtedness has been paid in full, and there may not be
sufficient assets to pay amounts due on all or any of the Exchange Notes. In
addition, the Company may not pay principal of, premium, if any, interest on or
any other amounts owing in respect of the Exchange Notes, make any deposit
pursuant to defeasance provisions or purchase, redeem or otherwise retire the
Exchange Notes, if any Senior Indebtedness is not paid when due or any other
default on Senior Indebtedness occurs and the maturity of such indebtedness is
accelerated in accordance with its terms unless, in either case, such default
has been cured or waived, any such acceleration has been rescinded or such
indebtedness has been repaid in full. Moreover, under certain circumstances, if
any non-payment default exists with respect to Designated Senior Indebtedness,
the Company may not make any payments on the Notes for a specified time, unless
such default is cured or waived, any acceleration of such indebtedness has been
rescinded or such indebtedness has been repaid in full. See "Description of the
Exchange Notes -- Ranking." As of June 21, 1997, on a pro forma basis after
giving effect to the offering of the 144A Notes and the application of the net
proceeds therefrom, the Company would have had approximately $41.6 million in
aggregate principal amount of Senior Indebtedness outstanding which ranked
senior in right of payment to the Exchange Notes. Under the terms of the
Indenture governing the Exchange Notes, and the Company's other debt
instruments, the Company may incur additional indebtedness, including Senior
Indebtedness or secured indebtedness, in the future. See "Description of the
Exchange Notes -- Certain Covenants."
The Guarantees by the Guarantors will be subordinated to all future
guarantees by the Guarantors of Senior Indebtedness of the Company and any other
Guarantor Senior Indebtedness. As of June 21, 1997, on a pro forma basis after
giving effect to the offering of the 144A Notes and the application of the net
proceeds therefrom, the Guarantors would have had $5.8 million in aggregate
principal amount of Guarantor Senior Indebtedness outstanding ($0.7 million of
which was guaranteed by the Company) which ranked senior in right of payment to
the Guarantees.
The Exchange Notes will not be secured by any of the Company's assets.
Certain of the Company's other indebtedness is secured, to the extent permitted
by law, by certain of the Company's assets, and the terms of the Indenture and
the instruments governing the Company's other indebtedness permit the Company to
incur additional senior secured indebtedness. If the Company becomes insolvent
or is liquidated, or if payment under any of the instruments governing the
Company's secured indebtedness is accelerated, the lenders under such
instruments would be entitled to exercise the remedies available to a secured
lender under applicable law and pursuant to instruments governing such
indebtedness. Accordingly, such lenders will have a prior claim on the Company's
assets securing their indebtedness. In any such events, because the Exchange
Notes will not be secured by any of the Company's assets, it is possible that
there would be no assets remaining from which claims of the holders of the
Exchange Notes could be satisfied or, if any such assets remained, such assets
might be insufficient to satisfy such claims in full. See "Capitalization,"
"Description of the Exchange Notes," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note C of Notes to the Consolidated Financial Statements.
DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES; POSSIBLE INVALIDITY OF GUARANTEES;
POTENTIAL RELEASE OF GUARANTEES
The Exchange Notes are the obligations of the Company. As of the date of
this Prospectus, virtually all of the consolidated assets of the Company were
held by the Guarantors and virtually all of the Company's cash flow and net
income was generated by the Guarantors. Therefore, the Company's ability to make
interest and principal payments when due to holders of the Exchange Notes is
dependent, in part, upon the receipt of sufficient funds from its subsidiaries.
12
<PAGE> 18
The Company's obligations under the Exchange Notes will be guaranteed,
jointly and severally, on a senior subordinated basis by each of the Guarantors,
which consist of all of the Company's subsidiaries (other than three immaterial
subsidiaries). To the extent that a court were to find, pursuant to federal or
state fraudulent transfer laws or otherwise, that (i) a Guarantee was incurred
by a Guarantor with intent to hinder, delay or defraud any present or future
creditor or the Guarantor contemplated insolvency with a design to prefer one or
more creditors to the exclusion in whole or in part of others; or (ii) such
Guarantor did not receive fair consideration or reasonably equivalent value for
issuing its Guarantee and such Guarantor (a) was insolvent, (b) was rendered
insolvent by reason of the issuance of such Guarantee, (c) was engaged or about
to engage in a business or transaction for which the remaining assets of such
Guarantor constituted unreasonably small capital to carry on its business or (d)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, the court could avoid or subordinate such
Guarantee in favor of the Guarantor's other creditors. Among other things, a
legal challenge of a Guarantee on fraudulent conveyance grounds may focus on the
benefits, if any, realized by the Guarantor as a result of the issuance by the
Company of the Exchange Notes. The measure of insolvency of a Guarantor for
purposes of the foregoing will vary depending upon the law of the relevant
jurisdiction. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of the company's debts is greater than all
of the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
mature. There can be no assurance as to what standards a court would apply to
determine whether a Guarantor was solvent at the relevant time. To the extent
any Guarantee were to be avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Exchange Notes would cease to
have any claim in respect of such Guarantor and would be creditors solely of the
Company and any Guarantor whose Guarantee was not avoided or held unenforceable.
In such event, the claims of the holders of the Exchange Notes against the
issuer of an invalid Guarantee would be subject to the prior payment in full of
all liabilities of such Guarantor. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the Exchange Notes relating to any voided Guarantee.
Based upon financial and other information currently available to it, the
Company believes that the Exchange Notes and the Guarantees are being incurred
for proper purposes and in good faith and that the Company and each Guarantor is
solvent and will continue to be solvent after issuing the Exchange Notes or its
Guarantee, as the case may be, will have sufficient capital for carrying on its
business after such issuance and will be able to pay its debts as they mature.
See "Description of the Exchange Notes," "Description of Certain Indebtedness"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Any Guarantee of a Guarantor may be released at any time upon any sale,
exchange or transfer by the Company of the stock of such Guarantor or all or
substantially all of the assets of such Guarantor to a non-affiliate.
SIGNIFICANT COMPETITION
The supermarket and convenience store businesses are highly competitive and
characterized by narrow profit margins. The Company's competitors include
national, regional and local supermarket chains, independent grocery stores,
specialty food stores, warehouse club stores, drug stores, convenience stores,
restaurants and petroleum marketing companies. Certain of the Company's major
competitors have greater financial, distribution and marketing resources than
the Company, and the Company's cash flows from operations could be materially
adversely affected by certain product mix and pricing changes made in response
to competition from existing or new competitors. In addition, there are a number
of supercenters in the Company's market which sell products typically sold by
supermarkets and discount stores. In recent years a substantial competitor has
opened supermarkets in the Company's market and there can be no assurance that
this or other competitors will not open additional stores or that such openings
will not have a material adverse effect upon the Company's business, financial
condition and results of operations. The Company's profitability could be
impacted by the pricing, purchasing, financing, advertising or promotional
decisions made by its competitors.
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The Company's ability to compete may be adversely affected by the amount of
indebtedness outstanding, limitations imposed by its existing debt agreements
and limitations imposed by the Indenture. See "Business -- Competition."
GEOGRAPHIC CONCENTRATION
All of the Company's supermarkets and Village Pantry stores are located in
Indiana and western Ohio, substantially all of which are located within 150
miles of the Indianapolis area. As a result of this geographic concentration,
the Company's growth and operations depend significantly upon economic and other
conditions in this area. If the Indianapolis area or the midwest were to
experience a general economic downturn or other adverse conditions for a
significant period of time, additional significant competitive stores were
opened in the area, or the State of Indiana were to enact legislation harmful to
the Company's business, the ability of the Company to improve or maintain its
cash flows from operations could be materially adversely affected.
DEPENDENCE ON MANAGEMENT
The Company depends on the services of its executive officers for the
management of the Company. The loss or interruption of the continued full-time
services of certain of these executives could have a material adverse effect on
the Company and there can be no assurance that the Company would be able to find
replacements with equivalent skills or experience.
COMPETITIVE LABOR MARKET; INCREASING LABOR COSTS
The Company's continued success depends on its ability to attract and
retain qualified personnel in all areas of its business. The Company competes
with other businesses in its market with respect to attracting and retaining
qualified employees. A tight labor market, increased overtime and a higher
full-time employee ratio have caused the Company's labor costs to increase in
each of the last two fiscal years. The Company expects the tight labor market to
continue. A shortage of qualified employees may require the Company to continue
to enhance its wage and benefits package in order to compete effectively in the
hiring and retention of qualified employees or to hire more expensive temporary
employees. No assurance can be given that the Company's labor costs will not
continue to increase, or that such increases can be recovered through increased
prices charged to customers. Any significant failure of the Company to attract
and retain qualified employees, to control its labor costs, or to recover any
increased labor costs through increased prices charged to customers could have a
material adverse effect on the Company's results of operations.
RISK OF ENVIRONMENTAL LIABILITY
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, disposals or other releases of hazardous materials (together,
"Environmental Laws"). In particular, under applicable Environmental Laws, the
Company may be responsible for remediation of environmental conditions and may
be subject to associated liabilities (including liabilities resulting from
lawsuits brought by private litigants) relating to its stores and the land on
which its stores are situated, regardless of whether the Company leases or owns
the stores or land in question and regardless of whether such environmental
conditions were created by the Company or by a prior owner or tenant. Although
the Company typically conducts a limited environmental review prior to acquiring
or leasing new stores or raw land, there can be no assurance that environmental
conditions relating to prior, existing or future store sites will not have a
material adverse effect on the Company. Although it is difficult to predict
future environmental costs, the Company does not anticipate any material adverse
effect on its operations, financial condition or competitive position as a
result of future costs of environmental compliance. The Company is aware of the
existence of petroleum contamination at 21 Village Pantry locations and has
commenced remediation at each of these sites. The cost of remediation varies
significantly depending on the extent, source and location of the contamination,
geological and hydrological conditions, available reimbursement by state
agencies and other factors but is not anticipated to be material to the
Company's business,
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<PAGE> 20
financial condition or results of operations. See "Business -- Regulatory
Matters" and Note A of Notes to Consolidated Financial Statements.
SALE OF CIGARETTES AND OTHER TOBACCO PRODUCTS
During fiscal 1997, the sale of cigarettes and other tobacco products
accounted for approximately 16.2% of the Company's consolidated sales and other
revenues. In June 1997, a group of state attorneys general reached a tentative
agreement with a group of cigarette manufacturers which may affect the sale and
distribution of cigarettes and other tobacco products and may ban advertising of
tobacco products. This agreement is currently being reviewed by the President
and Congress, among others. The Company is unable to determine what effect, if
any, this settlement or any amended version thereof, or any national or state
legislation, may have upon the demand for or the Company's ability to sell
cigarettes and other tobacco products, or upon the Company's business, financial
condition or results of operations. Any substantial reduction in the use of
cigarettes or other tobacco products could have a material adverse effect on the
Company. In addition, the Company is a defendant in certain litigation involving
allegations that, with respect to its sales of cigarettes, the Company is liable
for the negligent sale of cigarettes and on the basis of strict liability and
warranty theories. The Company believes that the outcome of such litigation will
not be material to its business, financial condition or results of operation.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture governing the terms of the Exchange Notes contains certain
covenants limiting, subject to certain exceptions, the incurrence of additional
indebtedness, the payment of dividends, the redemption of capital stock, the
making of certain investments, the issuance of preferred stock of subsidiaries,
the creation of liens and other restrictions affecting the Company's
subsidiaries, the issuance of guarantees, transactions with affiliates, asset
sales and certain mergers and consolidations. A breach of any of these covenants
could result in an event of default under the Indenture. In addition, the
Revolving Credit Agreements and the instruments governing the Company's other
indebtedness (the "Other Indebtedness") contain other restrictive covenants and
require the Company to satisfy certain financial tests. The Company's ability to
comply with such covenants and to satisfy such financial tests may be affected
by events beyond its control. A breach of any of these covenants could result in
an event of default under the Revolving Credit Agreements or Other Indebtedness.
In the event of a default under the Revolving Credit Agreements, the lenders
thereunder could elect to declare all amounts borrowed, together with accrued
interest, to be immediately due and payable, and the lenders under the Revolving
Credit Agreements could terminate all commitments thereunder. In addition, a
default under the Revolving Credit Agreements or Other Indebtedness could
constitute a cross-default under the Indenture and any instruments governing the
Other Indebtedness, and a default under the Indenture could constitute a
cross-default under the Revolving Credit Agreements and any Other Indebtedness.
See "Description of the Exchange Notes -- Certain Covenants" and "Description of
Certain Indebtedness."
POTENTIAL FAILURE TO MAKE PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Exchange
Notes may require the Company to purchase all or a portion of such holder's
Exchange Notes at 101% of the principal amount of the Exchange Notes, together
with accrued and unpaid interest, if any, to the date of purchase. In such
circumstances, the Company may be required to (i) repay all or a portion of the
outstanding principal of, and pay any accrued interest on, its Senior
Indebtedness, including indebtedness under the Revolving Credit Agreements or
(ii) obtain any requisite consent from its lenders to permit the purchase. If
the Company is unable to repay all of such indebtedness or is unable to obtain
the necessary consents, the Company may be unable to offer to purchase the
Exchange Notes, which will constitute an Event of Default under the Indenture.
There can be no assurance that the Company will have sufficient funds available
at the time of any Change of Control to make any debt payment (including
purchases of Exchange Notes) as described above or that the Company will be able
to refinance its outstanding indebtedness in order to permit it to repurchase
the Exchange Notes or, if such refinancing were to occur, that such financing
will be on terms favorable to the Company. See "Description of the Exchange
Notes -- Certain Covenants -- Purchase of Exchange Notes Upon a Change of
Control."
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<PAGE> 21
The events that constitute a Change of Control under the Indenture may also
be events of default under the Revolving Credit Agreements or other Senior
Indebtedness of the Company. Such events may permit the holders under such debt
instruments to reduce the borrowing base thereunder or accelerate the debt and,
if the debt is not paid, to enforce security interests on, or commence
litigation that could ultimately result in a sale of, certain assets of the
Company, thereby limiting the Company's ability to purchase the Exchange Notes
and receive the special benefit of the offer to purchase provisions to the
holders of the Exchange Notes.
LACK OF PRIOR MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the 144A Notes. The
144A Notes were offered and sold in August 1997 to "Qualified Institutional
Buyers" (as defined in Rule 144A under the Securities Act) and certain other
qualified buyers and are eligible for trading in the Private Offering, Resales
and Trading through Automated Linkages ("PORTAL") market.
The Exchange Notes will constitute a new class of securities with no
established trading market. Although the Exchange Notes will generally be
permitted to be resold or otherwise transferred by nonaffiliates of the Company
without compliance with the registration requirements under the Securities Act,
the Company does not intend to apply for a listing of the Exchange Notes on any
securities exchange or to arrange for the Exchange Notes to be quoted on the
NASDAQ National Market or other quotation system. As a result, 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.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes for 144A Notes pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of such 144A
Notes, a properly completed, duly executed Letter of Transmittal and all other
required documents. Therefore, Holders desiring to tender their 144A Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of 144A Notes for exchange. Any 144A
Notes that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
the registration rights under the Registration Rights Agreement generally will
terminate. In addition, any Holder who tenders pursuant to the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale. Each broker-dealer that receives
Exchange Notes for its own account in exchange for 144A Notes, where such 144A
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 "The
Exchange Offer."
RESTRICTIONS ON TRANSFER
The 144A Notes were offered and sold by the Company in a private offering
exempt from registration pursuant to the Securities Act and have been resold
pursuant to Rule 144A and other exemptions under the Securities Act. As a
result, the 144A Notes may not be reoffered or resold by purchasers except
pursuant to an effective registration statement under the Securities Act, or
pursuant to an applicable exemption from such registration, and the 144A Notes
are legended to restrict transfer as aforesaid. Each Holder (other than any
Holder who is an affiliate or promoter of the Company) who duly exchanges 144A
Notes for Exchange Notes in the Exchange Offer will receive Exchange Notes that
are freely transferable under the Securities Act.
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<PAGE> 22
Holders who participate in the Exchange Offer should be aware, however, that if
they accept the Exchange Offer for the purpose of engaging in a distribution,
the Exchange Notes may not be publicly reoffered or resold without complying
with the registration and prospectus delivery requirements of the Securities
Act. As a result, each Holder accepting the Exchange Offer will be deemed to
have represented, by its acceptance of the Exchange Offer, that it acquired the
Exchange Notes in the ordinary course of business and that it is not engaged in,
and does not intend to engage in, a distribution of the Exchange Notes. If
existing Commission interpretations permitting free transferability of the
Exchange Notes following the Exchange Offer are changed prior to consummation of
the Exchange Offer, the Company will use its best efforts to register the 144A
Notes for resale under the Securities Act. See "Prospectus Summary -- The
Exchange Offer" and "Exchange Offer; Registration Rights."
The 144A Notes currently may be sold pursuant to the restrictions set forth
in Rule 144A under the Securities Act or pursuant to another available exemption
under the Securities Act without registration under the Securities Act. To the
extent that 144A Notes are tendered and accepted in the Exchange Offer, the
trading market for the untendered and tendered but unaccepted 144A Notes could
be adversely affected.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements, including statements
regarding, among other items, (i) anticipated trends in the Company's business,
(ii) future expenditures for capital projects, (iii) the Company's business
strategies, including its intention to open new stores and (iv) the Company's
attempts to reduce costs. When used in this Prospectus, the words "estimate,"
"expect," "project" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from those projected. These forward-looking statements
speak only as of the date hereof. The Company undertakes no obligation to update
or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. 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 and difficult to
predict; therefore, undue reliance should not be placed upon such estimates.
There can be no assurance that the savings or other benefits anticipated in
these forward-looking statements will be achieved.
The following important factors, among others, in addition to the
information described under Risk Factors, could cause the Company not to achieve
benefits contemplated herein or otherwise cause the Company's results of
operations to be adversely affected in future periods: (i) continued or
increased competitive pressures from existing competitors and new entrants,
including price-cutting strategies; (ii) unanticipated costs related to the
growth and operating strategy; (iii) loss or retirement of key members of
management; (iv) inability to negotiate favorable terms with suppliers or to
improve working capital management; (v) increases in interest rates or the
Company's cost of borrowing or a default under any material debt agreements;
(vi) inability to develop new stores in advantageous locations or to convert
successfully existing stores; (vii) prolonged labor disruption; (viii)
deterioration in general or regional economic conditions; (ix) adverse state or
federal legislation or regulation that increases the costs of compliance, or
adverse findings by a regulator with respect to existing operations; (x) loss of
customers as a result of the conversion of store formats; (xi) adverse
determinations in connection with pending or future litigation or other material
claims and judgments against the Company; (xii) inability to achieve future
sales levels or other operating results that support the cost savings; and
(xiii) the unavailability of funds for capital expenditures.
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<PAGE> 23
THE EXCHANGE OFFER
The following discussion sets forth or summarizes what the Company believes
are the material terms of the Exchange Offer, including those set forth in the
Letters of Transmittal distributed with this Prospectus. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and are incorporated
by reference herein.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of 144A Notes pursuant to the Purchase
Agreement, dated July 29, 1997 (the "Purchase Agreement"), between the Company
and the Initial Purchasers, the Initial Purchasers became entitled to the
benefits of the Registration Rights Agreement, dated as of August 5, 1997,
between the Company and the Initial Purchasers (the "Registration Rights
Agreement").
Under the Registration Rights Agreement, the Company must use its best
efforts to (a) file a registration statement in connection with a registered
exchange offer within 30 days after August 5, 1997, the date the 144A Notes were
issued (the "Issue Date"), (b) use reasonable best efforts to cause such
registration statement to become effective under the Securities Act within 90
days of the Issue Date, (c) use reasonable best efforts to keep such
registration statement effective until the closing of the Exchange Offer and (d)
cause such registered exchange offer to be consummated within 120 days after the
Issue Date. Within the applicable time periods, the Company will endeavor to
register under the Securities Act all of the Exchange Notes pursuant to a
registration statement under which the Company will offer each Holder of 144A
Notes the opportunity to exchange any and all of the outstanding 144A Notes held
by such Holder for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of 144A Notes tendered for exchange by such Holder.
Subject to limited exceptions, the Exchange Offer being made hereby, if
commenced and consummated within such applicable time periods, will satisfy
those requirements under the Registration Rights Agreement. In such event, the
144A Notes would remain outstanding and would continue to accrue interest, but
would not retain any rights under the Registration Rights Agreement. Holders of
144A Notes seeking liquidity in their investment would have to the securities
laws, including the Securities Act. A copy of the Registration Rights Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The term "Holder" with respect to the Exchange Offer means
any person in whose name the 144A 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.
Because the Exchange Offer is for any and all 144A Notes, the principal
amount of 144A Notes tendered and exchanged in the Exchange Offer will reduce
the principal amount of 144A Notes outstanding. Following the consummation of
the Exchange Offer, Holders who did not tender their 144A Notes generally will
not have any further registration rights under the Registration Rights
Agreement, and such 144A Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for such 144A
Notes could be adversely affected. The 144A Notes are currently eligible for
sale 144A Notes will elect to exchange such 144A Notes for Exchange Notes due to
the absence of restrictions on the resale of Exchange Notes under the Securities
Act, the Company anticipates that the liquidity of the market for any 144A Notes
remaining after the consummation of the Exchange Offer may be substantially
limited. See "Exchange Offer; Registration Rights."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all 144A
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding 144A
Notes accepted in the Exchange Offer. Holders may tender some or all of their
144A Notes pursuant to the Exchange Offer.
The form and terms of the Exchange Notes are the same as the form and terms
of the 144A Notes except that (i) the Exchange Notes have been registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof and (ii) the holders of Exchange Notes generally will not be entitled to
certain
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<PAGE> 24
rights under the Registration Rights Agreement, which rights generally will
terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the 144A Notes and will be entitled to the benefits of
the Indenture.
Holders of 144A Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
The Company shall be deemed to have accepted validly tendered 144A Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of 144A Notes for the purposes of receiving the Exchange Notes from the Company
and delivering Exchange Notes to such Holders.
If any tendered 144A Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted 144A Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders of 144A Notes who tender pursuant to the Exchange Offer will 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 144A
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer shall remain open for acceptance for a period of not
less than 30 days after notice is mailed to Holders (the "Exchange Period"). The
Expiration Date will be 5:00 p.m., New York City time, on , 1997,
unless the Company, in its sole discretion, extends the Exchange Offer, in which
case the Expiration Date will be the latest business day to which the Exchange
Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record Holders an announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Such announcement may state that the Company is extending the Exchange Offer for
a specified period of time.
The Company reserves the right (i) to delay accepting any 144A Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept 144A
Notes not previously accepted if any of the conditions set forth under
"-- Conditions" shall have occurred and shall not have been waived by the
Company, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the Holders of such
amendment and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the amendment and the
manner of disclosure to Holders, if the Exchange Offer would otherwise expire
during such five to ten business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes is payable semi-annually on February 1 and
August 1 of each year at the rate of 8 7/8% per annum. The Exchange Notes will
bear interest from August 5, 1997, the date of issuance of the 144A Notes, or
the most recent interest payment date to which interest on such 144A Notes has
been paid, whichever is later. Accordingly, Holders of 144A Notes that are
accepted for exchange will not receive interest that is accrued but unpaid on
the 144A Notes at the time of tender, but such interest will be payable in
respect of the Exchange Notes delivered in exchange for such 144A Notes on the
first interest payment date after the Expiration Date.
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<PAGE> 25
PROCEDURES FOR TENDERING
Only a Holder of 144A Notes may tender such 144A Notes pursuant to the
Exchange Offer. To tender pursuant to the Exchange Offer, a Holder must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by instruction 4 of the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile, together with the 144A Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Delivery of the 144A Notes may be made by book-entry transfer in accordance with
the procedures described below. Confirmation of such book-entry transfer must be
received by the Exchange Agent prior to the Expiration Date.
The tender by a Holder of 144A Notes and the acceptance thereof by the
Company will constitute an agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF 144A NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR 144A NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT SUCH TENDER FOR SUCH HOLDERS.
Any beneficial holder whose 144A Notes are registered in the name of such
holder's 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 his behalf. If such beneficial holder wishes
to tender on such beneficial holder's behalf, such beneficial holder must, prior
to completing and executing the Letter of Transmittal and delivering his 144A
Notes, either make appropriate arrangements to register ownership of the 144A
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the 144A Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any 144A Notes listed therein, such 144A Notes must be
endorsed or accompanied by appropriate bond powers and a proxy which authorizes
such person to tender the 144A Notes on behalf of the registered holder, in each
case signed as the name of the registered holder or holders appears on the 144A
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any 144A Notes or bond powers 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,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the 144A Notes at the DTC for the purpose of facilitating the
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<PAGE> 26
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the DTC may make book-entry delivery of the
144A Notes by causing the DTC to transfer such 144A Notes into the Exchange
Agent's account with respect to the 144A Notes in accordance with the DTC's
procedures for such transfer. Although delivery of the 144A Notes may be
effected through book entry transfer into the Exchange Agent's account at the
DTC, a Letter of Transmittal properly completed and duly executed 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. Delivery of documents to the DTC does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered 144A Notes and withdrawal of the tendered 144A
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all 144A Notes not properly tendered or any 144A Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular 144A Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including, the instructions
in the Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of 144A Notes
must be cured within such 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 defects or irregularities with respect to tenders of 144A Notes,
nor shall any of them incur any liability for failure to give such notification.
Tenders of 144A Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any 144A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such Holder by the Exchange Agent to the tendering Holders of 144A Notes, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their 144A Notes and (i) whose 144A Notes are
not immediately available, or (ii) who cannot deliver their 144A Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent (or
comply with the procedures for book-entry transfer) prior to the Expiration
Date, may effect a tender if:
a. the tender is made through an Eligible Institution;
b. prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the 144A Notes, the
certificate or registration number or numbers of such 144A Notes and the
principal amount of 144A Notes tendered, stating that the tender is being
made thereby, and guaranteeing that, within five business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the 144A Notes to be tendered in
proper form for transfer (or a confirmation of book-entry transfer of such
144A Notes into the Exchange Agent's account at the Depository) and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
c. such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered 144A Notes in proper form for transfer (or a confirmation of
book-entry transfer of such 144A Notes into the Exchange Agent's account at
the Depository) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
21
<PAGE> 27
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of 144A Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of 144A Notes pursuant to the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at the address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the 144A Notes to be withdrawn (the
"Depositor"), (ii) identify the 144A Notes to be withdrawn (including the
certificate or registration number(s) and principal amount of such 144A Notes,
or, in the case of notes transferred by book-entry transfer, the name and number
of the account at the DTC to be credited), (iii) be signed by the Depositor in
the same manner as the original signature on the Letter of Transmittal by which
such 144A Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee (as
defined herein) with respect to the 144A Notes register the transfer of such
144A Notes into the name of the Depositor withdrawing the tender, (iv) specify
the name in which any such 144A Notes are to be registered, if different from
that of the Depositor and (v) include a statement that such Holder is
withdrawing such Holder's election to have such 144A Notes exchanged. All
questions as to the validity, form and eligibility (including time of receipt)
of such withdrawal notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any 144A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the 144A Notes so withdrawn are validly retendered. Any 144A Notes which have
been tendered but which are not accepted for payment will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn 144A Notes may be retendered by following one of the procedures
described under "-- Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or to exchange Exchange Notes for, any 144A
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such 144A Notes, if:
(i) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(ii) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any 144A
Notes and return all tendered 144A Notes to the tendering Holders, (ii) extend
the Exchange Offer and retain all 144A Notes tendered prior to the expiration of
the Exchange Offer subject, however, to the rights of Holders to withdraw such
144A Notes (see "-- Withdrawals of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
144A Notes which have not been withdrawn. If such waiver constitutes a material
change to the Exchange Offer, the Company will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
Holders, and, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, the Company will extend the Exchange Offer
for a period of five to ten business days if the Exchange Offer would otherwise
expire during such five to ten business-day period.
22
<PAGE> 28
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<C> <C> <C>
By Mail By Facsimile Transmission: By Hand or Overnight Courier:
(registered or certified mail (617) 664-5395
recommended): State Street Bank and
Trust Company
State Street Bank and Corporate Trust Department,
Trust Company To Confirm by Telephone 4th floor
Corporate Trust Department or for Information Call: Two International Place
P.O. Box 778 (617) 664-5587 Boston, MA 02110
Boston, MA 02102-0078
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone or in person by officers and regular employees of
the Company, and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the Trustee, filing fees, blue sky fees and printing and
distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of 144A Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or 144A Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the 144A Notes
tendered, or if tendered 144A 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 144A 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 same carrying value as the 144A
Notes, which is the aggregate principal amount of the 144A Notes, as reflected
in the Company's accounting records on the date of exchange. Accordingly, no
gain or loss for accounting purposes will be recognized in connection with the
Exchange Offer. The cost of the Exchange Offer will be deferred and amortized
over the term of the Exchange Notes.
RESALE OF THE EXCHANGE NOTES
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer by any holder of such
Exchange Notes (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 of the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes acquired pursuant to the Exchange Offer are
obtained in the ordinary course of such holder's business, and
23
<PAGE> 29
such holder does not intend to participate, and has no arrangement or
understanding to participate in the distribution of such Exchange Notes. Any
holder who tenders pursuant to the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) or
Morgan Stanley & Co., Incorporated (available June 5, 1991) or similar
interpretive letters, but rather must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. In addition, any such resale transaction should be
covered by an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K of the Securities
Act.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for 144A Notes, where such 144A Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Company has agreed to make available a prospectus meeting the requirements of
the Securities Act to any such broker-dealer for use in connection with any
resale of any Exchange Notes acquired in the Exchange Offer. A broker-dealer
which 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).
By tendering pursuant to the Exchange Offer, each Holder will represent to
the Company, among other things, (i) the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of its business, (ii)
neither the holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
(iii) the holder and any such other person acknowledge that if they participate
in the Exchange Offer for the purpose of distributing the Exchange Notes (a)
they must, in the absence of an exemption therefrom, comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on the
no-action letters referenced above and (b) failure to comply with such
requirements in such instance could result in such holder incurring liability
under the Securities Act for which such holder is not indemnified by the
Company. Further, by tendering in the Exchange Offer, each holder that may be
deemed an "affiliate" (as defined in Rule 405 of the Securities Act), of the
Company will represent to the Company that such holder understands and
acknowledges that the Exchange Notes may not be offered for resale, resold, or
otherwise transferred by that Holder without registration under the Securities
Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the Commission with respect to
resales of the Exchange Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
Holders of 144A Notes who do not tender their 144A Notes generally will not have
any further registration rights under the Registration Rights Agreement or
otherwise. Accordingly, any Holder that does not exchange such Holder's 144A
Notes for Exchange Notes will continue to hold the untendered 144A Notes and
will be entitled to all the rights and limitations applicable thereto under the
Indenture, except to the extent that such rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result of the Exchange
Offer.
The 144A Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such 144A Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) pursuant to an effective registration statement under the Securities Act,
(iii) so long as the 144A Notes are eligible for resale pursuant to Rule 144A
under the Securities Act, to a Qualified Institutional Buyer in a transaction
meeting the requirements of Rule 144A, (iv) outside the United States to a
foreign person pursuant to the exemption from the registration requirements of
the Securities Act provided
24
<PAGE> 30
by Regulation S thereunder, (v) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an
Accredited Investor in a transaction exempt from the registration requirements
of the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States or other applicable jurisdiction. See
"Risk Factors -- Restrictions on Transfer."
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders are urged to consult their
financial and tax advisors in making their own decision on what action to take.
The Company may in the future seek to acquire untendered 144A Notes, to the
extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plans to acquire any 144A Notes that are not tendered in the Exchange
Offer or to file a registration statement to permit resales of any untendered
144A Notes.
In any state where the Exchange Offer does not fall under a statutory
exemption to the blue sky rules, the Company has filed the appropriate
registrations and notices, and has made the appropriate requests, to permit the
Exchange Offer to be made in such state.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Department regulations (the "Regulations") and existing administrative
interpretations and court decisions. There can be no assurance that the Internal
Revenue Service (the "IRS") will not take a contrary view, and no ruling from
the IRS has been or will be sought. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conditions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to Holders.
Certain Holders of the 144A Notes (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) may be subject
to special rules not discussed below. Each Holder of a 144A Note should consult
his, her or its own tax advisor as to the particular tax consequences of
exchanging such Holder's 144A Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
The issuance of the Exchange Notes to Holders of the 144A Notes pursuant to
the terms set forth in this Prospectus will not constitute an exchange for
United States federal income tax purposes because such exchange does not
represent a significant modification of the debt instruments. Consequently, no
gain or loss would be recognized by Holders of the 144A Notes upon receipt of
the Exchange Notes, and ownership of the Exchange Notes will be considered a
continuation of ownership of the 144A Notes. For purposes of determining gain or
loss upon the subsequent sale or exchange of the Exchange Notes, a Holder's
basis in the Exchange Notes should be the same as such Holder's basis in the
144A Notes exchanged therefor. A Holder's holding period for the Exchange Notes
should include the Holder's holding period for the 144A Notes exchanged
therefor. The issue price, original issue discount inclusion and other tax
characteristics of the Exchange Notes should be identical to the issue price,
original issue discount inclusion and other tax characteristics of the 144A
Notes exchanged therefor.
See also "Description of Certain Federal Income Tax Consequences of an
Investment in the Exchange Note."
25
<PAGE> 31
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes
pursuant to the Exchange Offer. The net proceeds to the Company from the
offering of the 144A Notes were approximately $144.1 million. The Company used
the net proceeds from the offering of the 144A Notes were (i) to repay
approximately $60.9 million in principal amount of senior unsecured
indebtedness, including $35.0 million in principal amount of 8.54% senior notes
(the "8.54% Senior Notes"), $10.9 million in principal amount of 8.13% senior
notes (the "8.13% Senior Notes") and $15.0 million in principal amount of 9.48%
senior notes (the "9.48% Senior Notes" and, together with the 8.54% Senior Notes
and the 8.13% Senior Notes, the "Senior Notes"), and related prepayment fees;
(ii) to repay all borrowings outstanding under its revolving credit agreements;
(iii) to repay all borrowings outstanding under notes payable to banks; and (iv)
for general corporate purposes, including capital expenditures. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Description of Certain Indebtedness." The
amounts repaid under the Revolving Credit Agreements and notes payable to banks
may be reborrowed. Pending application of the net proceeds, the Company intends
to invest the net proceeds in short-term, interest-bearing securities.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
21, 1997 (i) on an actual basis and (ii) as adjusted to give effect to the
offering of the 144A Notes and the application of the net proceeds therefrom.
See "Use of Proceeds" and the Company's Consolidated Financial Statements and
the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 21, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks(a)................................... $9,500 $ --
======== ========
Long-term liabilities, including current portion(b):
Revolving credit agreements(c)............................ $26,000 $ --
10.05% notes.............................................. 18,709 18,709
9.05% notes............................................... 19,449 19,449
Mortgage notes............................................ 874 874
Capital lease obligations................................. 4,869 4,869
Economic development bond................................. 1,957 1,957
8.54% Senior Notes........................................ 35,000 --
8.13% Senior Notes........................................ 10,909 --
9.48% Senior Notes........................................ 17,500 --
144A Notes, net of debt discount of $1,222................ -- 148,778
7% convertible subordinated debentures due 2003........... 19,909 19,909
Other..................................................... 761 761
-------- --------
Total long-term liabilities.......................... 155,937 215,306
Shareholders' equity(d)..................................... 117,398 114,006
-------- --------
Total capitalization................................. $273,335 $329,312
======== ========
</TABLE>
- ---------------
(a) The Company has $20.0 million in available credit under notes payable to
banks. The Company used a portion of the net proceeds of the offering of the
144A Notes to repay the notes payable to banks but such amounts may be
reborrowed from time to time.
(b) For information regarding the Company's long-term liabilities, see Note C of
Notes to Consolidated Financial Statements.
(c) The Company has $30.0 million in available credit under the Harris Revolving
Credit Agreement and $20.0 million in available credit under the KeyBank
Revolving Credit Agreement. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations -- Liquidity and Capital
Resources" and "Description of Certain Indebtedness."
(d) Reflects approximately $3.4 million of estimated prepayment fees incurred in
connection with the repayment of the Senior Notes and the write-off of
deferred financing costs related thereto, net of tax benefits.
26
<PAGE> 32
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data presented below for each
of the fiscal years in the five-year period ended March 29, 1997 have been
derived from the Company's Consolidated Financial Statements, which have been
audited by Ernst & Young LLP, independent auditors. The selected consolidated
financial data for the twelve weeks ended June 21, 1997 and June 22, 1996 are
derived from the Unaudited Condensed Consolidated Financial Statements of the
Company included elsewhere in this Prospectus. Such Unaudited Condensed
Consolidated Financial Statements, in the opinion of the Company's management,
include all adjustments necessary (consisting of normal recurring accruals) for
the fair presentation of the financial position and results of operations of the
Company for such periods and as of such dates. Selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Consolidated and
Unaudited Condensed Consolidated Financial Statements of the Company and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED(A)
----------------------- --------------------------------------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1, APRIL 2, MARCH 27,
1997 1996 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales and other
revenues................ $ 343,924 $ 335,844 $1,451,730 $1,390,543 $1,303,261 $1,263,191 $1,170,398
Cost of merchandise sold,
including warehousing
and transportation...... 260,147 254,598 1,096,586 1,047,193 990,037 955,340 891,764
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit.............. 83,777 81,246 355,144 343,350 313,224 307,851 278,634
Selling, general and
administrative.......... 72,263 80,736 318,634 297,022 268,666 262,792 236,244
Depreciation and
amortization............ 4,376 9,064 23,729 18,957 18,476 18,206 16,503
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit
(loss)(b)............... 7,138 (8,554) 12,781 27,371 26,082 26,853 25,887
Interest and debt expense
amortization............ 3,063 3,014 13,030 13,087 13,292 13,336 10,318
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes and
cumulative effect of
changes in accounting
principles.............. 4,075 (11,568) (249) 14,284 12,790 13,517 15,569
Income taxes (credit)..... 1,176 (4,456) (5) 5,251 4,217 4,991 5,741
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
changes in accounting
principles.............. 2,899 (7,112) (244) 9,033 8,573 8,526 9,828
Cumulative effect of
changes in accounting
principles.............. -- -- -- -- -- 1,941 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)(c)...... $2,899 $(7,112) $(244) $9,033 $8,573 $10,467 $9,828
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital........... $25,371 $19,088 $19,254 $18,587 $26,369 $38,450 $59,330
Total assets.............. 397,395 388,108 395,631 387,294 378,471 375,349 352,511
Current maturities of
long-term liabilities... 6,842 7,183 7,097 7,022 7,142 7,246 4,529
Long-term liabilities,
excluding current
maturities.............. 149,095 136,939 145,429 135,066 143,102 148,818 155,444
Shareholders' equity...... 117,398 111,356 115,448 118,158 114,314 109,794 101,539
</TABLE>
27
<PAGE> 33
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED(A)
----------------------- --------------------------------------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1, APRIL 2, MARCH 27,
1997 1996 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(d)................. $12,641 $10,457 $52,062 $54,145 $53,964 $52,962 $50,197
Depreciation and
amortization(e)......... 5,372 10,193 28,903 24,276 24,713 24,416 21,234
Capital expenditures...... 2,577 7,349 33,594 22,736 30,607 44,322 26,221
Ratio of EBITDA to
interest expense........ 4.13x 3.47x 4.00x 4.14x 4.06x 3.97x 4.86x
Ratio of total debt to
EBITDA.................. 12.34x 13.78x 2.93x 2.62x 2.78x 2.95x 3.19x
Ratio of earnings to fixed
charges(f).............. 1.88x .78x 1.60x 1.82x 1.77x 1.77x 2.06x
</TABLE>
- ---------------
(a) Fiscal year operating results include 52 weeks for each year except fiscal
1994, which includes 53 weeks.
(b) Reflects a non-cash charge of $7.5 million in the first quarter of fiscal
1997 upon the adoption of FAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," a $2.4
million charge from the decision to curtail the accrual of benefits under
the Company's qualified defined benefit pension plan and $2.8 million from
reorganization and other charges.
(c) Reflects an increase in net income of $1.9 million in fiscal 1994 as a
result of an increase of $3.6 million from the adoption of FAS 109,
"Accounting for Income Taxes," partially offset by the recognition of a $1.7
million (net of tax benefit) accrued benefit obligation as a result of the
adoption of FAS 106, "Employers Accounting for Postretirement Benefits Other
than Pensions."
(d) EBITDA is defined as income (loss) before interest expense, income taxes,
depreciation and amortization, extraordinary items, LIFO provision and
non-recurring charges, including the effects of the adoption of FAS 121, the
curtailment of the accrual of pension benefits and other reorganization
charges. EBITDA should not be considered an alternative measure of the
Company's net income (loss), operating performance, cash flow or liquidity.
It is included herein to provide additional information related to the
Company's ability to service and incur debt.
(e) Includes costs recorded in selling, general and administrative expenses
primarily relating to amortization of certain other assets and excludes debt
expense amortization.
(f) For purposes of computing the ratios, earnings represent income (loss)
before income taxes, the cumulative effect of accounting changes plus fixed
charges. Fixed charges represent interest expense and that portion of rent
expense under all lease commitments deemed to represent an appropriate
interest factor.
28
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Results of operations for interim periods do not necessarily reflect the
results that may be expected for the fiscal year ending March 28, 1998.
The following table sets forth certain income statement components,
expressed as a percentage of sales and other revenues:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED
---------------------- ----------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1,
1997 1996 1997 1996 1995
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Supermarkets...................... 68.1% 69.0% 68.9% 70.6% 71.8%
Village Pantry stores............. 12.3 13.1 12.6 12.5 13.1
CSDC.............................. 17.7 16.3 16.7 15.4 14.8
Other............................. 1.9 1.6 1.8 1.5 0.3
----- ----- ----- ----- -----
Sales and other revenues.......... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Gross profit...................... 24.4% 24.2% 24.5% 24.7% 24.0%
Selling, general and
administrative.................. 21.0 24.0 21.9 21.4 20.6
Depreciation and amortization..... 1.3 2.7 1.6 1.4 1.4
Operating profit (loss)........... 2.1 (2.5) 0.9 2.0 2.0
</TABLE>
SALES AND OTHER REVENUES
Consolidated sales and other revenues of $343.9 million increased $8.1
million, or 2.4%, in the first quarter of fiscal 1998 ended June 21, 1997 from
the first quarter of fiscal 1997 ended June 22, 1996. The first quarter of
fiscal 1997 included the Easter holiday. The first quarter of fiscal 1998 did
not include the Easter holiday which negatively impacted sales and other
revenues during the quarter. Supermarket revenues increased $2.0 million,
convenience wholesale (CSDC) revenues increased $800,000, while Village Pantry
revenues decreased $1.6 million. Retail sales (excluding fuel sales) increased
0.7% for the quarter. Sales in comparable supermarkets and convenience stores
(including replacement stores and format conversions) increased 0.2% from the
first quarter of fiscal 1997.
Consolidated sales and other revenues of $1,451.7 million increased $61.2
million, or 4.4%, in fiscal 1997 from fiscal 1996. Consolidated sales and other
revenues for fiscal 1997 include gains from sales of real estate of $1.8
million, compared to $2.8 million from sales of real estate in fiscal 1996.
Approximately $20.1 million of the increase was from supermarkets, $9.5 million
from Village Pantry, $28.6 million from CSDC and $4.9 million from Crystal Food
Services. Retail sales (excluding fuel sales) increased 2.3%. Sales in
comparable stores (including replacement supermarkets and convenience stores and
format conversions) in fiscal 1997 increased 0.8% from fiscal 1996. Low rates of
food price inflation and competitive activity constrained comparable stores
sales growth. The revenue increase in supermarkets was due principally to new
stores opened since July 1995. The increase in Village Pantry revenues was
primarily in stores open both full years. The increase in CSDC resulted from the
addition of new customers and volume increases from existing customers. At the
end of fiscal 1997, CSDC served over 1,400 nonrelated stores, compared to 1,360
at the end of fiscal 1996. The increase in Crystal Food Services sales and other
revenues is attributable to the addition of two major venues and five lesser
venues, as well as increases at existing service sites.
In fiscal 1996, revenues increased $87.3 million, or 6.7%, from fiscal
1995. The supermarket, Village Pantry, CSDC and Crystal Food Services operations
increased revenues compared to fiscal 1995 by $45.5 million, $3.6 million, $22.0
million and $14.5 million, respectively. The revenue increases in supermarkets
and Village Pantry were due principally to stores opened in fiscal 1996. CSDC
sales increased due to new customers and volume increases from existing
customers. The increase in food service sales and other revenues
29
<PAGE> 35
was attributable to the acquisitions of Crystal Catering in January 1995, and
Martz in May 1995. Excluding fuel sales, retail sales in comparable stores
improved 1.1% in fiscal 1996 from fiscal 1995.
Comparable store sales in the fourth quarter of fiscal 1997 improved 2.1%
over the same quarter of fiscal 1996, the best quarterly performance of this
measure in three years. With the pace of new competitive openings slowing, the
Company believes that current marketing and merchandising programs are
positioned to achieve improvement in the comparable store sales trend.
GROSS PROFIT
Gross profit is calculated net of warehousing, transportation and
promotional expenses. In the first quarter of fiscal 1998, gross profit of $83.8
million increased $2.5 million, or 3.1%, from the prior year quarter. As a
percentage of revenues, gross profit increased 0.2% to 24.4%. The increase, as a
percent of revenues, was primarily attributable to a higher margin rate in
Crystal Food Services combined with lower warehouse and delivery costs (as a
percent of revenues). Supermarkets and Village Pantry showed improved margin
rates, while CSDC's margin rate declined.
In fiscal 1997, gross profit was $355.1 million, an increase of $11.8
million, or 3.4%, compared to fiscal 1996. The increase was attributable to
improvements of $7.6 million in supermarkets, $1.4 million in Village Pantry,
$287,000 in CSDC and $3.6 million in Crystal Food Services. Expressed as a
percentage of revenues, consolidated gross profit was 24.5% in fiscal 1997, a
decrease of 0.2% from 24.7% in fiscal 1996. The decrease was primarily due to
increases in fuel sales by Village Pantry and wholesale sales of CSDC, which
have gross profit margins significantly lower than the average of the Company's
other operations. Supermarket and Crystal Food Services margin percent to sales
improved in fiscal 1997, while Village Pantry and CSDC margin percent to sales
declined slightly, due to higher sales of fuel and cigarettes, respectively, at
margin rates lower than food products.
In fiscal 1996, consolidated gross profit increased $30.1 million, or 9.6%,
from the previous year. Expressed as a percentage of revenues, consolidated
gross profit was 24.7% in 1996 and 24.0% in fiscal 1995. The 0.7% improvement
was primarily attributable to a five-fold increase in sales of Crystal Food
Services, related to the aforementioned acquisitions, which have gross profit
margins significantly higher than the average of the Company's other operations.
The Crystal Food Services increase was accompanied by improvements in
supermarket and CSDC margins. Gains in these margins more than offset a decline
in Village Pantry, resulting from a disproportionate increase in fuel sales,
which have a lower margin rate than food products, accompanied by decreased fuel
margins in the second half of fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $72.3 million in the
first quarter of fiscal 1998, a decrease of $8.5 million from the first quarter
of fiscal 1997. As a percentage of revenues, selling, general and administrative
expenses decreased to 21.0% from 24.0% in the comparable quarter of 1997. The
decrease was due to specific expenses reduced in the first quarter of 1998,
combined with first quarter fiscal 1997 charges not normally recurring. First
quarter 1998 store operating costs increased $1.3 million, but were more than
offset by a decline of $1.4 million in advertising outlays, a $0.9 million
decrease in casualty and workers compensation losses, and a $0.8 million
reduction in state gross receipts tax. The first quarter 1997 charges not
normally recurring included $2.6 million in FAS 121 charges related to future
lease obligations and write-down of land values for impaired stores, $2.4
million from the decision to curtail the accrual of benefits under the Company's
qualified defined benefit pension plan, $1.3 million for reorganization expenses
primarily related to personnel expense for recruiting and relocation as well as
expenses related to internal management, and $1.5 million primarily related to
adjustments in merchandising allowances and payments to employees in lieu of
wage increases. Wage expense in stores open both quarters, excluding supermarket
conversions to the LoBill format, decreased 1.3% from the first quarter of
fiscal 1997. The Company implemented labor productivity changes in the current
year aimed at reducing recent increases in wage costs, while continuing to
maintain high customer service levels.
30
<PAGE> 36
Selling, general and administrative expenses in fiscal 1997, compared to
fiscal 1996, increased $21.6 million, or 7.3%, to $318.6 million. Expressed as a
percentage of revenues, selling, general and administrative expenses increased
0.5% to 21.9% in fiscal 1997, from 21.4% in fiscal 1996. This compared to a 0.8%
increase in fiscal 1996 from fiscal 1995. The increased expenses were primarily
attributable to increases of $17.1 million in supermarkets, $1.9 million in
Village Pantry and $3.2 million in Crystal Food Services. The increase in
supermarket expenses was primarily attributable to selling expenses in stores
opened since July 1995 and charges not normally recurring, including: $2.6
million of FAS 121 charges related to future lease obligations and the
write-down of land values for stores impaired due to competitive openings since
May 1994; $2.4 million from the decision to curtail the accrual of benefits
under the Company's qualified defined benefit pension plan; $1.3 million for
reorganization expenses primarily related to personnel expenses for recruiting
and relocation, as well as expenses related to internal management; and $1.5
million primarily related to adjustments in merchandising allowances and
payments to employees in lieu of wage increases. The reorganization expenses
were designed to make the Company more merchandising focused and to improve
further the Company's prepared foods programs.
Wages in identical stores increased 2.1% in fiscal 1997 from fiscal 1996,
following a 1.6% increase in fiscal 1996 from fiscal 1995. A tight labor market
resulted in a shift to more full-time employees, wage increases and increased
overtime. Retailers generally offset wage increases with higher gross margin
rates, higher same store sales, and productivity gains. The Company expects a
tight labor market to continue, but implemented labor productivity changes in
fiscal 1997 aimed at reducing the recent increases in wage costs, while
continuing to maintain high customer service levels. The Company also expects
improvements in gross margin rates and same store sales, further offsetting wage
cost increases.
Selling, general and administrative expenses in fiscal 1996, compared to
fiscal 1995, increased $28.4 million, or 10.6%, to $297.0 million. The increased
expenses were primarily attributable to increases of $18.0 million in
supermarkets, $2.0 million in Village Pantry and $8.9 million in Crystal Food
Services. The increase in supermarkets resulted primarily from increases in
occupancy expenses related to stores opened during fiscal 1995 and fiscal 1996,
retail wages and related expenses, and advertising and promotional expenses.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense for the first quarter of fiscal 1998
was $4.4 million, compared to $9.1 million in 1997 that included $4.9 million in
FAS 121 charges primarily related to the write-down of eight supermarkets and 12
convenience stores. As a percentage of revenues, depreciation and amortization
expense was 1.3% for the first quarter of fiscal 1998, compared to 2.7% for the
first quarter of fiscal 1997.
Depreciation and amortization expense increased $4.8 million from fiscal
1996 to $23.7 million in fiscal 1997, and included $4.9 million in FAS 121
charges primarily related to the adjustment of building and equipment carrying
costs of eight supermarkets and 12 convenience stores.
Depreciation and amortization expense for fiscal 1996 increased $481,000
from fiscal 1995 due primarily to opening new stores. Expressed as a percentage
of revenues, depreciation and amortization expense was 1.6% for fiscal 1997,
compared to 1.4% for both fiscal 1996 and fiscal 1995.
OPERATING PROFIT
Operating profit was $7.1 million, or 2.1% of revenues, for the first
quarter of fiscal 1998 compared to an operating loss of $8.6 million in the
first quarter of fiscal 1997. The $2.5 million improvement in gross profit,
combined with lower selling, general and administrative expenses in the first
quarter of fiscal 1998 and the previously discussed 1997 charges not normally
recurring reflected in selling, general and administrative expenses, and
depreciation and amortization, accounted for the operating profit improvement.
Operating profit (earnings from continuing operations before interest and
taxes) was $12.8 million, or 0.9%, of consolidated revenues for fiscal 1997,
compared to $27.4 million, or 2.0%, in fiscal 1996. The gross profit increase of
$11.8 million was more than offset by increases of $21.6 million in selling,
general and administrative expenses and $4.8 million in depreciation and
amortization expense. Selling, general and
31
<PAGE> 37
administrative expenses were impacted by the FAS 121 and other charges not
normally recurring, as previously discussed.
As a percentage of revenues, operating profit was 2.0% in fiscal 1996 and
fiscal 1995. Operating profit increased 4.9% in fiscal 1996 from fiscal 1995 as
improved gross profit exceeded increases in operating expenses.
After the end of fiscal 1997, the Company restructured its retail operating
units to compete more effectively in the capital markets. The Company believes
that the restructuring will reduce certain expenses approximately $3.0 million
annually.
INTEREST EXPENSE
Interest expense in the first quarter of fiscal 1998 was $3.1 million,
compared to $3.0 million in the first quarter of fiscal 1997. The increase
resulted from slightly higher debt principal balances in the current year
quarter. Interest expense was $13.0 million in fiscal 1997, compared to $13.1
million in fiscal 1996. Lower interest costs were essentially offset by a lower
level of capitalized construction interest. Interest expense in fiscal 1996
decreased $205,000 as a result of lower debt principal amounts and an increased
level of capitalized construction interest.
INCOME TAXES
For the quarter ended June 21, 1997, the effective income tax rate was
28.9% compared to 38.5% for the prior year quarter. The first quarter fiscal
1998 effective rate is based on the overall expected rate for fiscal 1998, and
is lower than the statutory rate due to contributions, tax credits and an
anticipated state tax loss carryback resulting from restructuring the Company's
supermarket and Village Pantry operations. The effective income tax rate for
fiscal 1997 is not meaningful; the effective income tax rate was 36.8% in fiscal
1996 and 33.0% in fiscal 1995. Income tax expense (credit) was ($5,000) in
fiscal 1997, $5.3 million in fiscal 1996 and $4.2 million in fiscal 1995. The
fiscal 1997 decrease in tax expense was essentially due to lower pre-tax
earnings. The fiscal 1996 effective rate increase resulted from a dramatic
decrease in Targeted Jobs Tax Credits and a decreased level of charitable
donations as compared to fiscal 1995. The benefit of Targeted Jobs Tax Credits
was significantly less in fiscal 1996, since the credit expired for employees
hired after December 31, 1994.
NET INCOME (LOSS)
Net income for the quarter ended June 21, 1997 was $2.9 million, or 0.8% of
revenue, compared to a net loss of $7.1 million, or (negative) 2.1% of revenue,
for the twelve weeks ended June 22, 1996. Net loss for fiscal 1997 was $244,000,
compared to net income of $9.0 million, or 0.6% of revenues, for fiscal 1996.
Supermarket and Village Pantry net income declined as a result of the FAS 121
charges and other charges not normally recurring taken in fiscal 1997. Net
income improved in Crystal Food Services, but declined slightly in CSDC for
fiscal 1997.
Net income for fiscal 1996 of $9.0 million improved from $8.6 million in
fiscal 1995. Fiscal 1996 benefited from the sale of surplus real estate and
marketable securities and a favorable LIFO adjustment. Supermarket and Village
Pantry earnings were lower than the prior fiscal year, while CSDC and Crystal
Food Services earnings increased.
OTHER
In the retail food industry, changes in product cost generally result in
higher or lower retail prices with gross margin percentages remaining relatively
stable. Periods of very moderate food price inflation or price deflation tend to
affect operating results adversely since revenues are reduced while inflationary
increases continue in certain expense categories. Through the use of the LIFO
inventory costing method, current costs are reflected in the cost of merchandise
sold.
32
<PAGE> 38
CAPITAL EXPENDITURES
Capital expenditures and major capital projects completed during the
historical periods indicated consisted of:
<TABLE>
<CAPTION>
TWELVE WEEKS
ENDING FISCAL YEAR ENDED
-------------------- --------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1,
1997 1996 1997 1996 1995
-------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Capital expenditures (in millions)........ $2.6 $7.3 $33.6 $22.7 $30.6
Supermarkets:
New/acquired stores..................... 1 0 1 3 1
Closed stores........................... 0 0 3 1 0
Major remodels/expansions............... 1 1 3 4 0
Convenience stores:
New/acquired stores..................... 0 1 3 1 5
Closed stores........................... 0 1 2 1 1
</TABLE>
All years include land acquisitions for future store development.
During the first quarter of fiscal 1998, the following stores were opened,
remodeled or were under construction:
<TABLE>
<CAPTION>
TYPE CATEGORY SQUARE FEET LOCATION STATUS
- ---- -------- ----------- -------- ------
<S> <C> <C> <C> <C>
Supermarket Remodel 75,000 Westfield, IN Under construction
Supermarket Remodel 80,000 Fishers, IN Under construction
LoBill New 42,000 Hamilton, OH Open
LoBill Conversion 23,000 Connersville, IN Open
</TABLE>
For fiscal 1998, the Company plans to open one LoBill supermarket and five
new convenience stores and acquire several sites for future development.
Additionally, the Company plans to upgrade supermarket front-end systems and
scale equipment, and implement new generation inventory procurement/distribution
software. Also, in fiscal 1998, additional Village Pantry stores will offer
Shell brand gasoline with Shell Oil Company providing the capital for upgrading
existing fuel operations at these stores. The cost to the Company of these
projects and other capital commitments is estimated to be approximately $25
million.
During fiscal 1997, the Company opened the following stores:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
TYPE CATEGORY FEET LOCATION OPENED
- ---- ----------- ----------- ------------------ --------------
<S> <C> <C> <C> <C>
Supermarket Replacement 65,000 Muncie, IN Nov. 8, 1996
LoBill Conversion 32,000 Indianapolis, IN Apr. 1, 1996
LoBill Conversion 22,000 Portland, IN Jul. 26, 1996
LoBill Conversion 17,000 Union City, OH Jul. 26, 1996
Convenience New 4,500 Cambridge City, IN Jun. 13, 1996
Convenience New 4,500 Albany, IN Jul. 11, 1996
Convenience New 4,500 Frankfort, IN Oct. 25, 1996
</TABLE>
33
<PAGE> 39
During fiscal 1996, the Company opened the following stores:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
TYPE CATEGORY FEET LOCATION OPENED
- ---- ----------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
Superstore New 81,000 Lafayette, IN Jul. 25, 1995
Supermarket Replacement 60,000 Muncie, IN Aug. 3, 1995
Supermarket New 57,000 Indianapolis, IN Nov. 3, 1995
LoBill Conversion 26,000 Anderson, IN Apr. 6, 1995
LoBill Conversion 27,000 Muncie, IN Apr. 6, 1995
LoBill Conversion 39,000 Anderson, IN May 1, 1995
LoBill Conversion 22,000 Indianapolis, IN Sep. 26, 1995
Convenience New 4,600 Muncie, IN Jun. 29, 1995
</TABLE>
In addition to these projects, the Company increased the perishable
warehouse facility square footage in Yorktown, Indiana to 191,000 square feet
from 124,000 square feet and constructed a central kitchen in an existing
storeroom in Noblesville, Indiana. In fiscal 1996, the Company purchased the
assets of Martz for $1.0 million in cash and the issuance of 43,416 shares of
Class B Common Stock. In fiscal 1995, the Company purchased the assets of
Crystal Catering, the largest caterer in Indianapolis, and its affiliated
companies for $4.8 million. An additional $900,000 of purchase price is
contingent upon the cumulative performance of Crystal Food Services for 1996
through 1998.
The Company's plans with respect to store construction, expansion,
conversion and remodeling may be revised in light of changing conditions, such
as competitive influences, its ability to negotiate successfully site
acquisitions or leases, zoning limitations and other governmental regulations.
The timing of projects is subject to normal construction and other delays. It is
possible that projects described above may not commence, others may be added,
and a portion of planned expenditures with respect to projects commenced during
the current fiscal year may carry over to the subsequent fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $0.5 million for the first
quarter of fiscal 1998, compared to $4.5 million net cash provided by operating
activities for the first quarter of fiscal 1997. The significant changes in
working capital were a $2.7 million decrease in cash and equivalents, a $6.2
million increase in inventory and a $2.9 million decrease in accrued
liabilities. The decrease in cash and the increase in inventory were due to
replenishment of warehouse stock levels depleted prior to fiscal 1997 year end,
and the decrease in accrued liabilities resulted primarily from the payment of
real and personal property taxes, annual store management incentive payments and
vacation wages.
Net cash provided by operating activities during fiscal 1997 was $30.4
million. This was a $3.3 million, or 12.2%, increase from the $27.1 million
reported for fiscal 1996. The most significant changes in working capital were a
$1.8 million increase in accounts receivable, a $1.5 million decrease in
inventory and a $5.9 million increase in accounts payable and accrued expenses.
The increase in accounts receivable was largely attributable to increased sales
by CSDC to credit customers. The inventory decrease was attributable to reduced
carrying levels of cigarettes. The increase in accounts payable and accrued
expenses was attributable to increases in accrued wages and fringe benefits,
merchandising promotional costs, workers compensation reserves and other accrued
expenses.
Net cash used for investing activities during fiscal 1997 was $33.2
million, an $8.1 million increase over fiscal 1996. For fiscal 1997, investing
activities consisted of $29.8 million in expenditures for acquisition of
property, equipment and land for expansion, net of dispositions, and $3.4
million in other investing activities (primarily acquisition of rental video
tapes to be amortized over two years). The Company's capital requirements are
traditionally financed through internally generated funds, long-term borrowings
and lease financings, including capital and operating leases. The Company
anticipates continued access to such financing sources.
34
<PAGE> 40
The Company has historically paid quarterly dividends on its outstanding
shares of Common Stock. Dividend payments totaled approximately $0.9 million
during the first quarter of fiscal 1998 and approximately $3.7 million during
each of fiscal 1997, 1996 and 1995. The Indenture governing the Notes and the
Revolving Credit Agreements generally permits the Company to pay dividends,
subject to certain limitations. The Company has historically funded its payments
of dividends through internally generated cash flow.
In fiscal 1994 the board of directors of the Company authorized a stock
repurchase program in which the Company was authorized to acquire from time to
time in the open market or private purchases up to $2.0 million of the Company's
common stock at up to $14.00 per share. In fiscal 1995 this program was
increased to up to $4.0 million of the Company common stock. As of June 21,
1997, the Company had repurchased approximately $2.1 million of the Company's
common stock.
The Company generally does not engage in derivatives activity or purchase
interest rate or currency hedge agreements. However, there can be no assurance
that the Company will not do so in the future or as to the materiality of any
such activity.
The Company is subject to various federal, state and local environmental
laws and regulations in the jurisdictions in which it operates. Although it is
difficult to predict future environmental costs, the Company does not anticipate
any material adverse effect as a result of future costs of environmental
compliance. The Company is aware of the existence of petroleum contamination at
21 Village Pantry locations and has commenced remediation at each of these
sites. The cost of remediation is not expected to be material to the Company's
results of operations. See "Risk Factors -- Risk of Environmental Liability."
At June 21, 1997, the Company's long-term debt and capital lease
obligations excluding current maturities amounted to $149.1 million, compared to
$136.9 million at June 22, 1996. Of the total long-term debt and capital lease
obligations at June 21, 1997, 82% were at fixed rates of interest averaging
8.7%, and 18% were at fluctuating rates averaging 6.1%. At June 22, 1996, fixed
rate obligations comprised 94% of long-term debt and capital lease obligations
were at an average interest rate of 8.8%; the remaining 6% were at fluctuating
rates averaging 6.1%.
The Company used a portion of the net proceeds from the offering of the
144A Notes to repay $63.4 million in principal amount of the Senior Notes and
related prepayment fees. See "Use of Proceeds" and "Description of Certain
Indebtedness." In connection with the offering of the 144A Notes, the Company
entered into the Harris Revolving Credit Agreement which provides $30.0 million
of financing and amended the $20.0 million KeyBank Revolving Credit Agreement.
In addition, the Company has $20.0 million of available borrowings under notes
payable to banks. At June 21, 1997, $26.0 million was outstanding under the
Revolving Credit Agreements and $9.5 million was outstanding under notes payable
to banks.
The Company expects to continue to have significant liquidity requirements.
In addition to working capital needs and capital expenditures, the Company will
have increased cash requirements for debt service. The Company believes that the
remaining net proceeds from the offering of the 144A Notes, borrowings under the
Revolving Credit Agreements and notes payable to banks, cash flows from
operating activities and lease financings will be adequate to meet the Company's
working capital needs, planned capital expenditures and debt service obligations
for the foreseeable future. As the Company's debt matures, the Company may need
to refinance such debt. There can be no assurance that such debt will be
refinanced, or, if so, whether it will be refinanced on terms favorable to the
Company.
35
<PAGE> 41
QUARTERLY RESULTS AND SEASONALITY
Set forth below is certain summary information with respect to the
Company's operations for the most recent nine fiscal quarters. Historically, the
Company's supermarket sales are subject to some seasonal fluctuation, typical to
its industry. Traditionally, higher sales occur during the third quarter holiday
season, and lower sales occur in the warm weather months of the second quarter.
Convenience store sales traditionally peak in the summer months. Each of the
fiscal quarters consists of 12 weeks, except for the second quarter which
consists of 16 weeks.
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------------------------------------- -----------------------------------------
FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
----------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other
revenues............... $343,924 $328,671 $338,116 $449,099 $335,844 $316,022 $329,275 $425,781 $319,465
Gross profit............. 83,777 82,565 82,153 109,180 81,246 79,884 79,685 105,037 78,744
Operating profit
(loss)................. 7,138 6,931 6,301 8,103 (8,554)(a) 6,005 6,027 7,367 7,972
Interest and debt expense
amortization........... 3,063 3,200 2,992 3,824 3,014 3,084 3,099 3,854 3,050
Net income (loss)........ 2,899 2,123 2,006 2,739 (7,112) 1,854 1,813 2,231 3,135
</TABLE>
- ---------------
(a) Reflects a pre-tax charge to earnings of $7.5 million in the first quarter
of fiscal 1997 upon the adoption of FAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," a $2.4
million charge from the decision to curtail the accrual of benefits under
the Company's qualified defined benefit pension plan and $2.8 million from
reorganization and other non-recurring charges.
ACCOUNTING PRONOUNCEMENTS
The Company adopted FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," in the first quarter of
fiscal 1997. The statement establishes accounting standards for recognizing and
measuring the impairment of long-lived assets, and requires the carrying amount
of any impaired assets be reduced to fair value. The adoption of this standard
resulted in a charge to earnings of $4.6 million, net of tax, in the first
quarter of fiscal 1997, and is more fully discussed in Note A of Notes to the
Consolidated Financial Statements. The Company expects prospective earnings to
improve approximately $900,000 annually ($565,000 after tax, or $.06 per fully
diluted share) as a result of adopting FAS 121.
In October 1995, FAS 123, "Accounting for Stock Based Compensation" was
issued. This statement defines a fair value based method of accounting for stock
and stock options issued to compensate employees and others. However, FAS 123
allows companies to continue using existing methods for recognizing the expense
of these plans if they provide pro forma disclosures in the financial statements
and earnings per share using the fair value method prescribed in the statement.
The Company intends to follow the current accounting approach and the prescribed
disclosures are included in Note H of Notes to Consolidated Financial
Statements. FAS 123 had no impact on the Company's fiscal 1997 consolidated
financial position or results of operations.
In February 1997, FAS 128, "Earnings per Share" was issued, which is
required to be adopted for both interim and annual financial statements ending
after December 15, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of FAS 128 on
the calculation of both primary and fully diluted earnings per share for fiscal
years 1997 and 1996 is not expected to be material.
36
<PAGE> 42
BUSINESS
GENERAL
The Company is a leading regional retailer and distributor of food products
and services operating in Indiana and western Ohio. The Company operates 89
Marsh and LoBill supermarkets and 182 Village Pantry convenience stores. Through
CSDC, the Company distributes a broad range of products to its Village Pantry
stores and approximately 1,400 unaffiliated convenience stores in a 10 state
area. Through Crystal Food Services, the Company provides a broad range of other
food services, including catering, concession services, vending and cafeteria
management. During fiscal 1997, the Company had consolidated sales and other
revenues and EBITDA of $1.5 billion and $52.1 million, respectively.
The Company operates 73 full-service supermarkets under the "Marsh" name
and 16 value-oriented supermarkets under the "LoBill" name. Since commencing
operations in 1931, the Company has developed a modern store base with many
prime locations, strong brand name recognition and a reputation for superior
quality and service. In the Indianapolis area, the Company's supermarkets have a
30% market share. Marsh supermarkets feature an extensive line of traditional
grocery items as well as a broad array of service and specialty departments
including delicatessens, bakeries, prepared foods, prime cut meats, fresh
seafood, floral and video rental. LoBill supermarkets target the price conscious
shopper by emphasizing every day low prices and a value-oriented product mix,
including products sold under the Company's "Marsh" and "Yorktown" labels. The
complementary Marsh and LoBill supermarket formats allow the Company to maximize
its operating flexibility by tailoring stores to the demographics of individual
locations. The Company's Marsh and LoBill supermarkets average approximately
40,000 and 27,000 square feet, respectively, and during fiscal 1997, had average
weekly revenues per store of $232,400 and $113,700, respectively. During fiscal
1997, supermarket operations accounted for 68.9% of consolidated sales and other
revenues.
Village Pantry stores offer a broad selection of grocery, bakery, dairy and
delicatessen items, including freshly prepared coffee, pastry products,
sandwiches and other food products prepared daily on site. Approximately 57% of
the Company's convenience stores offer petroleum products. Recently, the Company
entered into an agreement with Shell Oil Company to offer Shell brand gasoline
in certain stores. Village Pantry stores currently average approximately 2,800
square feet. However, over the past several years, the Company has focused on
developing larger Village Pantry stores with approximately 4,500 square feet
which offer a broader variety of products prepared daily and sit-down eating
areas. During fiscal 1997, larger Village Pantry stores (in excess of 3,500
square feet) experienced 6.7% growth in average weekly revenues per store
compared to 2.7% growth in smaller Village Pantry stores. Village Pantry
operations accounted for 12.6% of consolidated sales and other revenues in
fiscal 1997.
CSDC distributes over 9,500 products, including tobacco products,
groceries, snack items, housewares and health and beauty care products to
Village Pantry stores and approximately 1,400 unaffiliated convenience stores in
a 10 state area. CSDC distributes products from a 210,000 square foot warehouse
and distribution facility in Richmond, Indiana. The Company believes that the
distribution of products to Village Pantry and unaffiliated stores results in
efficiencies in purchasing and distribution. Crystal Food Services provides
exclusive catering services at 10 banquet facilities located in the Indianapolis
market and special event catering at a number of venues, including the
Indianapolis Motor Speedway, the RCA Tennis Championships, the Horizon
Convention Center and the Indiana State Fairgrounds Event Center. Crystal Food
Services also provides concession services, cafeteria management and vending
services. During fiscal 1997, CSDC and Crystal Food Services accounted for 16.7%
and 1.6% of consolidated sales and other revenues, respectively.
BUSINESS STRENGTHS
The Company believes it is well-positioned to build upon its historical
success by capitalizing on its competitive strengths, including the following:
Leading Market Position. Each of the Company's divisions is a leading
provider of products and services in its market area. The Company operates more
supermarkets in Indianapolis and the surrounding 13 counties than any of its
competitors. The Company's supermarkets have a 30% market share in the
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<PAGE> 43
Indianapolis area and have been able to maintain their market share despite the
entry of a substantial competitor and the opening of 28 stores by competitors in
the last two fiscal years. Village Pantry operates the largest number of
convenience stores operated by any chain in the Company's market area. According
to industry sources, CSDC ranks fourteenth nationally among the largest
wholesale distributors of products to convenience stores, and the Company
believes CSDC is one of the leading distributors to convenience stores in its
market area. Crystal Food Services is the largest provider of catering services
in the Indianapolis area.
Diversified Food Service Retailer and Distributor. Since 1931, the Company
has evolved into a diversified retailer and distributor of food products and
services through the strategic development of its convenience store,
distribution and catering businesses. This diversification has enabled the
Company to (i) increase its purchasing power and distribution efficiencies, (ii)
increase the number of higher margin products and services offered in its
supermarkets and convenience stores, such as prepared foods and home meal
replacement items, and (iii) supplement its supermarket revenues.
Reputation for Quality and Customer Service. The Company has established a
reputation as a provider of superior quality and service to its customers,
resulting in strong brand name recognition and customer loyalty. The Company
strives to deliver superior customer service and satisfaction by using targeted
departmental staffing in its full-service specialty departments and by offering
customer service "guarantees" such as opening a new checkout line if more than
three customers are in a single checkout line. The Company has been a leader in
conducting consumer surveys to determine customer tastes and preferences and in
implementing innovations designed to improve customer service. The Company was
the first supermarket chain to scan the UPC code using electronic scanning
checkout systems and, in the 1960's, the Company began accepting credit cards as
a means of payment. All of the Company's supermarkets and convenience stores are
open seven days a week, and most are open 24 hours a day.
Strong Operating Efficiencies due to Geographic Concentration. All of the
Company's supermarkets and convenience stores are located in Indiana and western
Ohio, substantially all of which are located within 150 miles of the Company's
headquarters. The Company believes that the close proximity of its warehouse,
distribution and headquarters facilities to its supermarkets and convenience
stores results in more efficient management supervision of the Company's
operations, increased speed of delivery and lower distribution and
transportation costs. Approximately 80% of food deliveries to the Company's
supermarkets are 80 miles or less. The Company also benefits from advertising
efficiencies as the Indianapolis television market covers approximately 80% of
the Company's stores. All of the stores which the Company expects to open in the
next two fiscal years will be within 150 miles of the Company's headquarters.
Prime Real Estate Locations. The Company's 66 years of operation in the
Indianapolis area have allowed it to establish prime store locations in urban
and suburban areas which the Company believes would be difficult for a
competitor to replicate.
Experienced Management Team. The Company's management has substantial
experience in each of its operating divisions. The Company's President and the
principal operating officers of the Company's supermarket, Village Pantry, CSDC
and Crystal Food Services operations have on average more than 25 years of
experience with the Company. The Company believes that this experience has been
invaluable in successfully implementing the Company's business strategy during a
period of intense competition. The Company's directors and executive officers
own beneficially an aggregate of 21.4% of the Company's Class A Common Stock and
18.6% of the Company's Class B Common Stock.
BUSINESS STRATEGY
The Company's strategic objective is to enhance its position as a leading
regional food service retailer and distributor of food products by (i) expanding
its business through new store openings, margin expansion, new products and
services, and comparable store sales growth, and (ii) evaluating acquisition
opportunities.
Development of Larger Stores. The Company believes the development of
larger Marsh supermarkets, which provide customers with a broad array of
services and specialty departments in addition to traditional grocery items,
enhances margins and increases customer traffic and loyalty. The Company has
been a leader in
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<PAGE> 44
broadening the scope of specialty products and services provided in its
supermarkets, such as prepared foods and home meal replacement items, which are
geared toward the increasing convenience orientation of customers. The Company
expects to devote a greater proportion of new and remodeled stores to such
specialty departments. During fiscal 1998 and 1999, the Company expects to open
three Marsh and two LoBill supermarkets and 15 Village Pantry stores. The
Company expects to focus future development of Marsh supermarkets on food and
drug combination stores of approximately 55,000 to 75,000 square feet,
approximately 5,000 square feet of which is devoted to warehouse-type
merchandising of bulk pack merchandise. The Company's development of Village
Pantry stores will continue to focus on larger stores of approximately 4,500
square feet, which offer sit-down eating areas and a broad array of higher
margin products, including in-store prepared coffee, pastry products,
sandwiches, pizza and broasted chicken.
Complementary and Flexible Supermarket Formats. The Company's
value-oriented LoBill format complements the full-service Marsh format by
enabling the Company to maximize operating flexibility by tailoring stores to
the demographics of individual locations and responding to changing
demographics. The Company's LoBill format provides an alternative to the Marsh
supermarket (i) in certain urban markets where changing demographics have
resulted in more price conscious customers who choose price-oriented food stores
over traditional full-service supermarkets and (ii) in smaller communities that
are better suited for the LoBill format. Moreover, both the Marsh and LoBill
formats are flexible and can be tailored to meet the demands of individual store
sites in their respective communities.
Innovative Marketing Strategies. The Company has been a leader in
developing and implementing marketing strategies specifically targeted to
individual shoppers. For example, in fiscal 1994, the Company introduced Fresh
I.D.E.A. The Company is the only major supermarket chain to offer a frequent
shopper program in its market area. The Company has issued over 1.0 million
Fresh I.D.E.A. cards which function as check cashing and video rental cards and
automatically provide electronic coupons. The card also provides the Company
with information on the frequency of use and merchandise selection of the user,
enabling the Company to implement specific marketing strategies aimed at its
most valuable and loyal customers. The Company estimates that over 70% of
supermarket sales are currently derived from holders of Fresh I.D.E.A. cards.
Other marketing strategies adopted by the Company include the "Fresh Express"
home delivery service and the "Chef Fresh" take-out food program which provides
freshly prepared, ready-to-eat meals.
Higher Margin Products and Proprietary Brands. The Company intends to
emphasize and increase sales of products in its specialty departments, such as
prepared foods and home meal replacement items, which typically carry higher
margins than other grocery products. The Company believes that customers are
increasingly convenience oriented and interested in such products, including
seafood, delicatessen and bakery items. The Company is also attempting to
increase sales of proprietary brands, including its "Marsh" and "Yorktown"
brands. Proprietary brands typically carry higher margins than comparable
branded products and also result in increased customer loyalty. Sales of
proprietary brands increased from 8.7% of supermarket sales in fiscal 1996 to
9.5% in fiscal 1997.
Strategic Capital Investments and Acquisitions. The Company intends to
continue to invest significantly in its management information systems,
including a computer-assisted reordering system. The Company anticipates
spending approximately $12.5 million in fiscal 1998 on management information
systems. In addition, the Company continually seeks opportunities to acquire
additional stores, small supermarket chains and complementary businesses, such
as the 1995 acquisitions of Martz and Crystal Catering. Although the Company
enters discussions from time to time with various parties, the Company has no
agreements or understandings with respect to any additional acquisitions at the
present time.
Cost Savings Strategies. During fiscal 1997, the Company implemented a
corporate restructuring pursuant to which the Company's supermarket and Village
Pantry operations were organized as wholly-owned limited liability companies and
their intellectual property was transferred to a passive investment company.
This restructuring is estimated to produce annual pre-tax savings of
approximately $3.0 million commencing in the first quarter of fiscal 1998. The
Company expects to achieve additional cost savings in fiscal 1998 in the areas
of labor management, transportation and check writing and processing.
39
<PAGE> 45
THE INDIANAPOLIS MARKET
Indianapolis, located in central Indiana, is the 12th largest city in the
United States with a population of more than 800,000 and the 31st largest
metropolitan area in the United States with a population of more than 1.4
million, based on 1995 U.S. Census Bureau data. From 1990 through 1996, the
population of the metropolitan Indianapolis area increased by 8.8% according to
the U.S. Census Bureau.
Indianapolis has been and continues to be an economical place to live, with
living costs consistently near or below the national average, according to the
Indianapolis Chamber of Commerce (the "Chamber of Commerce"). According to the
Chamber of Commerce, median home prices in the Indianapolis housing market have
risen steadily in the last five years but remain low compared to other growing
metropolitan areas. Between 1990 and 1994 per capita income in Indiana increased
20.6% and in 1994 Indianapolis' per capita personal income ranked 50th among
metropolitan areas in the United States. Indianapolis' employment grew 5% from
1994 to 1996 with the addition of over 38,000 jobs. Based on Indiana state
government statistics, the estimated unemployment rate in the Indianapolis
metropolitan area as of March 1997 was 2.7% as compared to a national average of
5.5%.
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<PAGE> 46
RETAIL STORE OPERATIONS
The table below sets forth certain financial and statistical information
with respect to the Company's retail store operations for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(A)
--------------------------------------------------------------
MARCH 29, MARCH 30, APRIL 1, APRIL 2, MARCH 27,
1997 1996 1995 1994 1993
--------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUPERMARKETS:
Sales and other revenues........ $1,001,165 $981,105 $935,614 $922,640 $862,322
Number of stores:
Beginning of period........... 90 88 87 84 80
Opened or acquired............ 1 3 1 6 4
Closed........................ 3 1 -- 3 --
---------- ---------- ---------- ---------- ----------
Total at end of
period.............. 88 90 88 87 84
========== ========== ========== ========== ==========
Conversions to LoBill
format..................... 3 4 -- 1 1
Total square feet of store
area(b)....................... 3,321,000 3,349,000 3,173,000 3,093,000 2,811,000
Average square feet per
store(b)...................... 37,740 37,210 36,060 35,550 33,460
Average revenues per store(c)... $11,258 $11,030 $10,705 $10,870 $10,522
Average revenues per square foot
of store area(d).............. 302 301 301 316 320
VILLAGE PANTRY STORES:
Sales and other revenues:
Grocery and food service...... $123,201 $117,493 $115,243 $110,111 $104,160
Gasoline...................... 60,207 56,465 55,118 50,641 49,124
---------- ---------- ---------- ---------- ----------
Total................. $183,408 $173,958 $170,361 $160,752 $153,284
========== ========== ========== ========== ==========
Number of stores:
Beginning of period........... 181 181 177 174 173
Opened or acquired............ 3 1 5 5 3
Closed........................ 2 1 1 2 2
---------- ---------- ---------- ---------- ----------
Total at end of
period.............. 182 181 181 177 174
========== ========== ========== ========== ==========
Total square feet of store
area(b)....................... 514,000 510,000 507,000 487,000 469,000
Average square feet per
store(b)...................... 2,820 2,820 2,800 2,750 2,700
Average revenues per
store(c)(e)................... $679 $648 $646 $626 $603
Average revenues per square foot
of store area(d)(e)........... 241 230 233 229 225
</TABLE>
- ---------------
(a) Fiscal year operating results include 52 weeks for each year except fiscal
1994, which includes 53 weeks.
(b) At end of period.
(c) Sales and other revenues for the period divided by the average number of
stores operated during the period.
(d) Sales and other revenues for the period divided by the average number of
square feet of store area operated during the period.
(e) Excludes gasoline sales.
SUPERMARKETS
The Company operates 73 full-service supermarkets under the "Marsh" name
and 16 low price, value-oriented supermarkets under the "LoBill" name. Of the
Company's 89 supermarkets, 75 are located in central Indiana and 14 are located
in western Ohio. The Company operates 36 stores in the Indianapolis market area,
41
<PAGE> 47
its primary market. The remaining supermarkets operate in 35 other communities.
Sales from supermarket operations accounted for 68.9% of consolidated sales and
other revenues in fiscal 1997.
Complementary and Flexible Supermarket Formats
Marsh supermarkets, which include both full-service conventional and food
and drug combination formats, are complemented by the value-oriented LoBill
format. The Company believes this dual format strategy allows the Company to
maximize its operating flexibility by tailoring stores to the demographics of
individual store locations and responding to changing demographics.
- Marsh. Marsh supermarkets feature an extensive line of traditional
grocery items as well as a broad array of service and specialty
departments such as delicatessens, bakeries, prepared foods, prime cut
meats, fresh seafood, floral and video rental. Sixty stores are open 24
hours a day and 13 are open until midnight, with the remainder having
various other schedules. Twenty-three of the Marsh supermarkets are food
and drug combination stores, each of which has an in-store pharmacy. All
stores are open seven days a week.
The Company has an ongoing development program of constructing larger
Marsh stores and remodeling, enlarging and replacing existing
supermarkets. The Company has expanded its large supermarket store format
with new generation superstores in excess of 75,000 square feet, and the
modern conventional supermarket format ranges from approximately 55,000 to
65,000 square feet. The Company currently operates five superstores and 10
other modern conventional supermarkets. The Company's superstores and
modern conventional supermarkets feature a European market concept with
more than one-third of each store dedicated to fresh, high quality
perishable products, emphasizing delicatessens, bakeries, prepared foods
and produce. In addition to the services typically provided in the
Company's supermarkets and modern conventional supermarkets, the five
Marsh superstores also include prepared foods, organic food selections (4
stores), party stores (3), on-premises shoe repair, dry cleaners (3) and
up to approximately 5,000 square feet devoted to the warehouse-type
merchandising of bulk club pack merchandise.
- LoBill. The Company's value-oriented LoBill format provides an
alternative to the large, full service Marsh supermarket. The LoBill
format emphasizes every day low prices and a value-oriented product mix,
including products sold under the Company's "Marsh" and "Yorktown" labels.
The Company has an ongoing development program to acquire additional
LoBill stores and to convert selected Marsh supermarkets to the LoBill
format. The LoBill format has enabled the Company to increase its market
share by (i) attracting price-conscious shoppers and (ii) expanding into
smaller communities that can be better served by the LoBill format.
Merchandising
The Company's merchandising goals are to (i) attract and retain new
customers, (ii) become the primary source for its customers' weekly grocery
needs and (iii) capture a greater portion of its customers supermarket spending.
In order to achieve these goals, the Company emphasizes superior customer
service, high quality merchandise and convenient one-stop shopping at
competitive prices.
- Superior Customer Service. The Company attempts to deliver superior
customer service and satisfaction by using targeted departmental staffing
in its full-service specialty departments and by offering customer service
"guarantees" such as opening a new checkout line if more than three
customers are in a single checkout line. Moreover, the Company continually
seeks to monitor and respond to customer tastes and preferences and build
customer loyalty through a variety of means, including the Fresh I.D.E.A.
program.
- High Quality Merchandise. The Company believes providing high quality
merchandise is an important factor in maintaining and expanding its
customer base. The Company's supermarkets feature nationally advertised
and distributed merchandise and private label products, including the
"Marsh" and "Yorktown" brands. In recent years, the Company has devoted a
greater proportion of new and
42
<PAGE> 48
remodeled stores to fresh, high quality perishables, such as produce,
delicatessen items, baked goods, prepared foods and seafood. The Company
believes fresh produce is an important customer draw; therefore, it
focuses on buying premium quality produce worldwide.
- Convenient One-Stop Shopping at Competitive Prices. The Company offers
convenient, high quality, ready-to-eat meals as take-home items in 46
stores under the "Chef Fresh" program prepared in the Company's central
kitchen. The geographic concentration of the Company's supermarkets
enables it to deliver fresh items to stores quickly and frequently.
Service and specialty departments included in the Company's 89
supermarkets include delicatessens (88 stores), hot prepared foods (60),
bakeries (88), prime cut service meat (58), fresh service seafood (59),
floral shops (58), imported cheese shops (50), wines and beer (83), salad
bars (37), video rental (72), cosmetic counters (16), dry cleaners (3) and
shoe repair (18). To combat increasing competition from other retail
formats, such as wholesale clubs, 54 of the Company's supermarkets also
include warehouse-type sections offering large size and multi-pack
products typically featured by wholesale clubs, priced competitively with
club prices. In addition, banks or savings institutions operate branch
facilities in 36 of the Company's stores, and 33 stores offer ATM
machines. Home delivery of orders placed by customers via telephone or fax
is offered in the Indianapolis metropolitan area.
Store Development
The Company believes its current locations include many prime store sites
in developed urban and suburban areas which would be difficult to replicate. In
addition, the Company believes its experience and knowledge of its market area
give the Company a competitive advantage in selecting additional sites.
The Company's supermarkets range in size from 15,000 to 81,500 square feet
and average approximately 37,800 square feet. The Company has an ongoing
development program of constructing larger Marsh supermarkets and remodeling,
enlarging and replacing existing supermarkets. Future development will continue
to focus on a food and drug combination store format of approximately 55,000 to
65,000 square feet, with superstores in excess of 75,000 square feet in select
locations. The Company believes a larger store format enables it to offer a
wider variety of products and expanded service and specialty departments,
thereby strengthening its competitive position. The following table summarizes
the number of stores by square footage:
<TABLE>
<CAPTION>
NUMBER
SQUARE FEET OF STORES
- ----------- ---------
<S> <C>
More than 70,000............................................ 5
50,000 - 70,000............................................. 10
40,000 - 49,999............................................. 8
30,000 - 39,999............................................. 34
20,000 - 29,999............................................. 29
Less than 20,000............................................ 3
--
89
==
</TABLE>
Advertising and Promotion
The Company advertises through various media, including circulars,
newspapers, radio and television. Printed circulars are used extensively on a
weekly basis to advertise featured items. The focus of the Company's television
campaign is to promote an image of quality and service rather than specific
products and prices. The Indianapolis television market covers approximately 80%
of the Company's stores. Promotional activities include free grocery and other
programs designed to encourage repeat shoppers. The Fresh I.D.E.A. card
functions as a check cashing card and video rental card and automatically
provides electronic coupons. The card also provides management with information
on the frequency of use and merchandise selection of the user, enabling the
Company to implement specific marketing strategies aimed at its most valuable
and loyal customers. The Company estimates that over 70% of supermarket sales
are currently derived from holders of Fresh I.D.E.A. cards. Further, customers
may select a VISA co-branded credit card option for their Fresh I.D.E.A. card,
and earn rebates on all credit card purchases, regardless of the merchant, which
are funded by the VISA credit card issuer.
43
<PAGE> 49
VILLAGE PANTRY
The Company operates 182 convenience stores under the Village Pantry trade
name. These self-service stores offer a broad selection of grocery, bakery,
dairy and delicatessen items including freshly prepared food products. Carry-out
cold beer, a high-volume item typically found in convenience stores in other
states, may be sold only by package liquor stores and taverns in Indiana. All
but nine of the Company's convenience stores are open 24 hours a day; the
remaining stores close between 11:00 p.m. and midnight. All stores are open
seven days a week.
Village Pantry stores offer fresh pastry products and sandwiches prepared
daily in the stores. The Company has added higher margin food and beverage
products in its Village Pantry, such as store-prepared pizza (40 stores),
broasted chicken (44), self-service fountain drinks and sit-down eating areas
(62). The Company has entered into an agreement with Taco Bell in three stores,
two of which include drive-through service, to extend the fast food variety
available to customers. The Company has also entered into an agreement with
Shell Oil Company to offer Shell brand gasoline initially in the Kokomo, Indiana
market area. Under the agreement, the Company receives a fixed fee and a
commission for fuel sales above a base level and does not have capital invested
in the fuel inventory or dispensing equipment. The Company also features
drive-through car washes at two store locations.
The Company has an ongoing program of remodeling, upgrading and replacing
existing Village Pantry stores with particular emphasis on developing locations
that will yield a high volume of gasoline sales. New stores generally average
3,700 to 4,500 square feet, compared to 1,800 to 2,500 square feet for older
stores. The larger size accommodates additional product offerings as well as
larger sit-down eating areas. In constructing new stores and remodeling and
expanding existing stores, the Company tailors the format of each store to its
market. The Company emphasizes food service in markets which it believes are
less susceptible to intense competition from major fast food operators, such as
smaller towns and high density neighborhoods. Village Pantry accounted for
approximately 12.6% of consolidated sales and other revenues in fiscal 1997.
CONVENIENCE STORE DISTRIBUTING COMPANY
CSDC serves the Company's Village Pantry stores and approximately 1,400
unaffiliated stores in a 10 state area. CSDC distributes a wide range of
products typically sold in convenience stores, including cigarette and other
tobacco products, groceries, snacks items, housewares and health and beauty care
products. Also, CSDC supplies cigarette and tobacco products to the Company's
supermarkets. Customers have the opportunity to order most product lines in
single units. In addition to distributing products to its customers, CSDC is
able to assist its customers in the areas of inventory management, pricing and
ordering. CSDC owns a 210,000 square foot warehouse and distribution facility in
Richmond, Indiana, which the Company estimates is operating at 75% of capacity.
CSDC utilizes its own trucks and drivers for its transportation needs. The CSDC
sales and marketing staff of approximately 43 employees services existing
customers and actively solicits new customers. CSDC accounted for approximately
16.7% of consolidated sales and other revenues in fiscal 1997.
CRYSTAL FOOD SERVICES
Crystal Food Services offers a broad range of food services including
banquet hall catering, special events catering, concession services, vending and
cafeteria management. The Company began its food service operations in 1993 by
starting ALLtimate Catering and expanded such operations in 1995 with the
acquisitions of Crystal Catering and Martz. The Company believes the union of
these operations created a unique range of services, products and facilities
compared to those offered by competitors in its market area. The Company intends
to expand Crystal Food Services through the solicitation of new customers and
possible acquisition of businesses that will complement existing operations.
Crystal Food Services' banquet hall facilities include the Crystal Yacht
Club, the Marott, the Indiana Roof Ballroom, the Murat Shrine Centre and the
Victorian Manor Schnull-Rausch House. The Company provides special event
catering at the Indianapolis Motor Speedway, Conner Prairie Museum, Indianapolis
Museum of Art, the Eiteljorg Western Museum of Art, the Horizon Convention
Center and the RCA Tennis
44
<PAGE> 50
Championships. Crystal Food Services furnishes concession services at the
Indianapolis Zoo, Conner Prairie Museum and the Indiana State Fairgrounds Event
Center. Furthermore, Crystal Food Services provides cafeteria management to 10
major employers and vending services to approximately 100 clients throughout the
greater Indianapolis area. Crystal Food Services also provides meals at the
child development centers in Indianapolis for the Company and for Eli Lilly &
Company.
SUPPLY AND DISTRIBUTION
The Company supplies its supermarkets from three Company-operated
distribution facilities. Dry grocery and frozen food products are distributed
from a 409,000 square foot leased facility in Indianapolis. Produce and meat
products are distributed from a 191,000 square foot perishable products
Company-owned facility in Yorktown, Indiana. Non-food products are distributed
from 180,000 square feet of a 388,000 square foot Company-owned warehouse in
Yorktown. In addition, the Company leases a 172,000 square foot warehouse in
Indianapolis for storage of forward purchases of merchandise and seasonal items.
Additional outside warehouse space is leased as needed to meet seasonal demand.
In the Company's modern distribution centers, merchandise is controlled
through an on-line computerized buying and inventory control system. In fiscal
1997, the perishable products facility was expanded by approximately 67,000
square feet to allow for future growth of all perishable commodities. The
Company believes its distribution centers are adequate for its needs for the
foreseeable future without major additional capital investment. The Company
estimates the balance of its supermarket distribution centers currently operate
at approximately 75% of capacity. Approximately 80% of the delivery trips from
distribution centers to the Company's supermarkets are 80 miles or less.
The Company also operates a commissary and central kitchen to produce
products sold through the delicatessen departments of its supermarkets and
convenience stores and to third parties through CSDC. The Company believes the
commissary and central kitchen (i) supplement its supermarket, convenience
store, distribution and catering businesses, (ii) provide the Company with a
competitive advantage over other supermarkets in the home meal replacement
market and (iii) offer its business additional synergies including prepared
foods knowledge and expertise, increased product flexibility and variety, as
well as certain efficiencies and economies of scale.
The Company utilizes centralized direct purchasing and distribution
functions. The Company believes direct purchasing from major producers and
growers reduces merchandise cost by (i) minimizing purchases from wholesalers
and distributors and (ii) taking advantage of volume buying and forward purchase
opportunities. Furthermore, the Company believes its centralized distribution
function (i) permits stores to offer consistently fresh products, (ii) reduces
in-store stockroom space and (iii) increases square footage available for retail
selling. In addition, distributors of national and regional brands deliver some
products, principally bakery, dairy and beverage items, and snack foods directly
to the Company's supermarkets and convenience stores.
The Company's supermarket transportation function is performed by Ruan
Transportation Management Systems ("Ruan"), an unaffiliated transportation
management and equipment leasing company. This service is provided under a
contract originally entered into in 1987 which is automatically renewed for
successive one year terms unless canceled by Ruan or the Company at least 60
days prior to the anniversary date, subject to early cancellation in stages
under certain conditions. Under the arrangement, Ruan employs the drivers,
dispatchers and maintenance personnel who perform the Company's distribution
function. A subsidiary of the Company leases most of its tractor/trailer fleet
from Ruan under long-term, full service leases.
MANAGEMENT INFORMATION SYSTEMS
All of the Company's supermarkets are equipped with electronic scanning
checkout systems to minimize item pricing, provide more efficient and accurate
checkout line operation and provide product movement data for merchandising
decisions and other purposes. The checkout systems are integrated with the
Company's Fresh I.D.E.A. card program to provide customer specific data to
facilitate individualized marketing programs. Point-of-sale electronic funds
transfer and credit card systems are in place in each of the
45
<PAGE> 51
supermarkets. Through the use of a bank debit card, a customer can authorize the
immediate transfer of funds from their account to the Company at the point of
purchase.
The Company utilizes in-store micro-computers in the supermarkets to
automate various tasks, such as electronic messaging, processing the receiving
and billing of vendor direct-store-delivered ("DSD") merchandise, processing of
video rentals, processing pharmacy records in the 23 food and drug combination
stores and time keeping for payroll processing. All convenience stores are
equipped with micro-computers for electronic transmission of accounting and
merchandising data to headquarters, electronic messaging and processing DSD
merchandise receiving and billing.
The Company's business strategy includes modifications of the Company's
management information systems. The Company plans to replace the current
products management systems (which control the acquisition, warehousing and
transportation of product from the vendor through the warehouse to the store)
with new systems the Company believes will better facilitate supply chain
management. The Company believes these changes will result in lower operational
cost and enhanced margins through lower inventory levels, more precise pricing
on a store by store basis, lower warehouse and transportation expenses and
improved merchandising on a store by store basis. The Company plans to implement
a product data warehouse that it believes will enable category managers and
marketers to access and analyze more effectively the historical relationships
between stores, vendors, product and customers. Also, the Company plans to
install standardized point of sale systems in its supermarkets, including a wide
area network for data communications, expanded e-mail capabilities and "Marsh
TV" which will be one-way video, two-way audio to all Marsh supermarkets.
PROPERTIES
The following table summarizes the per unit and aggregate size of the
retail facilities operated by the Company, together with an indication of the
age of the total square footage operated, and includes stores converted or
remodeled in the respective period.
<TABLE>
<CAPTION>
PER
FOOTAGE STORE 0-5 6-10 OVER
OPERATED AVERAGE YEARS YEARS 10 YEARS
--------- ------- ----- ----- --------
<S> <C> <C> <C> <C> <C>
Supermarkets.......................................... 3,364,000 37,800 37% 29% 34%
Convenience stores.................................... 514,000 2,800 17 34 49
---------
3,878,000
=========
</TABLE>
Owned and leased retail facilities are summarized as follows:
<TABLE>
<CAPTION>
CONVENIENCE
SUPERMARKETS STORES
------------ -----------
<S> <C> <C>
Owned....................................................... 34 129
Leased:
Fixed rentals only........................................ 26 28
Fixed plus contingent rentals............................. 29 25
-- ---
Total leased...................................... 55 53
-- ---
Total owned and leased............................ 89 182
== ===
Lease expirations:
Within five years......................................... 33 46
Five to ten years......................................... 16 6
Beyond ten years.......................................... 6 1
-- ---
55 53
== ===
</TABLE>
Most of the Company's leased facilities have one to four renewal options
for periods of two to five years. The majority of leases provide for payment of
property taxes, maintenance and insurance by the Company. In
46
<PAGE> 52
addition, the Company is obligated under leases for 13 closed stores, of which
10 were subleased at June 21, 1997. One supermarket (considered owned for
purposes of the foregoing analysis) is leased under an equity lease arrangement
pursuant to which ownership is transferred to the Company at the expiration of
the lease.
The non-perishable grocery products warehouse in Indianapolis is leased
with an initial lease term expiring in 2000 and options available through 2014.
The facility, constructed in 1969, is located on a 44 acre site and has a total
of 409,000 square feet, of which 382,000 are utilized for grocery warehousing
operations. The remainder consists of a floral design center and office space.
A 191,000 square foot refrigerated perishable products handling facility in
Yorktown, Indiana, serves as the distribution center for meat, produce and
delicatessen items. The facility was completed in 1981 and financed by an
economic development bond lease. Ownership was transferred to the Company in
1996. The facility was expanded and updated in fiscal 1997.
The Company owns an additional 388,000 square foot facility in Yorktown.
Approximately 180,000 square feet of this facility is used as a distribution
center for non-food products, approximately 21,000 square feet is used by the
retail maintenance department and an additional 55,000 square feet of warehouse
space is leased to third parties. The portion of this facility formerly utilized
for corporate offices currently is vacant.
The Company leases a 172,000 square foot warehouse in Indianapolis for
storage of forward purchases of merchandise and seasonal items as well as
housing the Company's product reclamation center.
The 160,000 square foot corporate headquarters in Indianapolis is owned by
the Company. This facility was completed and occupied in May 1991.
CSDC owns a 210,000 square foot warehouse and distribution facility in
Richmond, Indiana.
COMPETITION
The retail food industry is highly competitive. The Company believes
competitive factors include location, ease of ingress and egress to stores,
price, product variety, store cleanliness, quality perishable products, service
and minimal out-of-stock conditions. The Company endeavors to concentrate its
efforts on all of these factors with special emphasis on maintaining high
quality store conditions, high quality perishable products, expanded service and
specialty departments and competitive pricing. See "Risk Factors -- Significant
Competition."
The Company's supermarkets are subject to competition from local, regional
and national supermarket chains, independent supermarkets and other retail
formats, including restaurants, discount stores and wholesale clubs. The number
of competitors and degree of competition experienced by the Company's
supermarkets vary by location, with the Indianapolis metropolitan market
generally being subject to more price competition than smaller markets. A
significant number of stores have been opened in the Company's market in recent
years which has further increased the degree of competition. The principal
supermarket chain competitors are The Kroger Co., Super Valu Food Stores, Inc.,
operating in the Indianapolis market through its "Cub Foods" stores, and Meijer,
Inc.
Major competitors for the Company's Village Pantry stores are petroleum
marketing companies which have converted or expanded gasoline locations to
include convenience food operations. National convenience store chains do not
have a significant presence in the Company's marketing area. The Company
believes the principal competitive factors for convenience stores is location,
and it actively pursues the acquisition of attractive sites for replacing
existing stores and future development of new stores. Also, in fiscal 1998,
additional Village Pantry stores will offer Shell brand gasoline with Shell Oil
Company providing the capital for upgrading existing fuel operations at these
stores.
The Company believes the primary competitive factors in CSDC's wholesale
distribution business are pricing, timeliness and accuracy of deliveries. CSDC's
major competitors are McLane Company, Inc. and several regional wholesale
distributors.
47
<PAGE> 53
EMPLOYEES
At June 21, 1997 the Company had approximately 12,800 employees,
approximately 7,440 of which were employed on a part-time basis. All employees
are non-union, except approximately 200 supermarket distribution facility
employees who are unionized under two three-year collective bargaining
agreements which extend to May 2001. The Company considers its employee
relations to be good.
REGULATORY MATTERS
As a retailer of alcoholic beverages, gasoline and tobacco products, the
Company is subject to federal and state statutes, ordinances and regulations
concerning the storage and sale of these products. The Company is aware of the
existence of petroleum contamination at 21 Village Pantry locations and has
commenced remediation at each of these sites. The cost of remediation varies
significantly depending on the extent, source and location of the contamination,
geological and hydrological conditions and other factors but is not anticipated
to be material to the Company's financial condition or results of operations.
See "Risk Factors -- Risk of Environmental Liability," "Risk Factors -- Sale of
Cigarettes and Other Tobacco Products" and Note A of Notes to Consolidated
Financial Statements.
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to litigation, including
litigation concerning the sale of cigarettes by the Company. See "Risk
Factors -- Sale of Cigarettes and Other Tobacco Products." At the current time,
the Company believes that there are no pending legal proceedings to which the
Company or any of its subsidiaries is a party which are material to its
business, financial position or results of operations.
48
<PAGE> 54
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
WITH
NAME AGE POSITION COMPANY SINCE
- ---- --- ---------------------------------------- -------------
<S> <C> <C> <C>
Don E. Marsh(a)(b).................. 59 Chairman of the Board of Directors, 1959
President and Chief Executive Officer
Frank J. Bryja...................... 55 President and Chief Operating Officer, 1965
Supermarket Division
P. Lawrence Butt.................... 55 Senior Vice President, Counsel and 1977
Secretary
Douglas W. Dougherty................ 54 Senior Vice President, Chief Financial 1994
Officer and Treasurer
C. Alan Marsh(a).................... 55 Vice Chairman of the Board of Directors, 1965
Senior Vice President -- Corporate
Development
William L. Marsh.................... 53 Senior Vice President, Property 1974
Management and Director
Ronald R. Walicki................... 59 President and Chief Operating Officer, 1965
Village Pantry Division
Theodore R. Varner.................. 61 President and Chief Operating Officer, 1977
Convenience Store Distributing Company
Division
Jack J. Bayt........................ 40 President and Chief Operating Officer, 1995
Crystal Food Services Division
Mark A. Varner...................... 47 Corporate Controller 1971
J. Michael Blakley(c)............... 56 Director 1996
Charles R. Clark(a)................. 63 Director 1978
Stephen M. Huse(a)(b)(c)............ 54 Director 1985
Garnet R. Marsh..................... 86 Director 1977
James K. Risk, III(c)............... 55 Director 1986
K. Clay Smith(a)(b)................. 59 Director 1989
</TABLE>
- ---------------
(a) Member of Audit Committee
(b) Member of Executive Committee
(c) Member of Salary Committee
Don E. Marsh has held his current position as President and Chief Executive
Officer of the Company for more than the past five years. In May 1991 he was
elected Chairman of the Board of Directors, on which he has served as a member
since 1959. He has been employed by the Company in various supervisory and
executive capacities since 1961. Mr. Marsh is a director of Indiana Energy
Incorporated, a gas utility company, National City Bank, Indiana, and Nash Finch
Company, a Minneapolis, Minnesota based supermarket chain.
Frank J. Bryja has been President and Chief Operating Officer, Supermarket
Division since August 1996. Prior to that time he served as Vice
President -- Merchandising for more than five years.
P. Lawrence Butt has held his current position as Senior Vice President,
Counsel and Secretary since August 1997. For more than the past five years prior
thereto, Mr. Butt served as Vice President, Counsel and Secretary. He has been
employed by the Company in various executive capacities since 1977.
Douglas W. Dougherty has held his current position as Senior Vice
President, Chief Financial Officer and Treasurer since August 1997. Prior to
that time, Mr. Dougherty served as Vice President, Chief Financial
49
<PAGE> 55
Officer and Treasurer since March 1994 and in senior financial executive
positions with Hartmarx, Inc., from 1990 to 1994.
C. Alan Marsh has held his current position as Vice Chairman of the Board
and Senior Vice President -- Corporate Development since February 1992. For more
than five years prior thereto, Mr. Marsh served as President and Chief Operating
Officer of Marsh Village Pantries, Inc. He has been a director since 1968 and
has been employed by the Company in various supervisory and executive capacities
since 1965.
William L. Marsh has held his current position as Senior Vice President,
Property Management of the Company since August 1997. For more than the past
five years prior thereto Mr. Marsh served as Vice President -- General Manager,
Property Management. In May 1991, he was elected a director of the Company. He
has been employed by the Company in various supervisory and executive capacities
since 1974.
Ronald R. Walicki has held his current position as President and Chief
Operating Officer, Village Pantry Division since August 1996. From February 1994
until such time, Mr. Walicki served as President and Chief Operating Officer,
Supermarket Division. From February 1992 to February 1994, Mr. Walicki served as
President and Chief Operating Officer of Marsh Village Pantries, Inc. Mr.
Walicki has been employed by the Company in various supervisory and management
positions since 1965.
Theodore R. Varner has been President and Chief Operating Officer of the
Convenience Store Distributing Company division since August 1, 1993. Prior to
such time, Mr. Varner served as the General Manager of CSDC. Mr. Varner has been
employed with the Company in various supervisory and executive capacities since
1977.
Jack J. Bayt has been President and Chief Operating Officer -- Crystal Food
Services Division since January 1995. For more than five years prior to its
acquisition in January 1995 by the Company, Mr. Bayt served as President and
Chief Executive Officer of Crystal Catering of Indiana, Inc.
Mark A. Varner has held his current position as Corporate Controller since
1990.
J. Michael Blakley is the Chairman of the Board and Chief Executive Officer
of The Blakley Corporation and has been a director of the Company since 1996.
Charles R. Clark is a partner with the law firm of Beasley Gilkison
Retherford Buckles & Clark in Muncie, Indiana, and has been a director of the
Company since 1978.
Stephen M. Huse is the President and Chief Executive Officer of Huse Food
Group, Incorporated, a retail restaurant management company in Bloomington,
Indiana. Mr. Huse is a director of KeyBank, Indianapolis, Indiana and Signature
Inn, Inc., and has been a director of the Company since 1985.
Garnet R. Marsh is the widow of Ermal W. Marsh, founder of the Company, and
has been a director of the Company since 1977.
James K. Risk, III is the President and Chief Executive Officer of Kirby
Risk Corporation, a wholesale electrical equipment distributor in Lafayette,
Indiana. Mr. Risk is a director of Bindley-Western Industries, Inc., a wholesale
pharmaceutical distributor, and Lafayette Life Insurance Company and has been a
director of the Company since 1986.
K. Clay Smith is the President and Chief Executive Officer of Underwood
Machinery Transport Company, Inc. in Indianapolis, Indiana. Mr. Smith is a
director of Bindley-Western Industries, Inc. and has been a director of the
Company since 1989.
Don E. Marsh, C. Alan Marsh and William L. Marsh are brothers, and are the
sons of Garnet R. Marsh. Theodore R. Varner is the uncle of Mark A. Varner.
50
<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
or distributed by the Company for services in all capacities for fiscal years
ended April 1, 1995, March 30, 1996, and March 29, 1997 to the Chief Executive
Officer and each of the other four most highly compensated executive officers of
the Company whose compensation exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------- --------------------
SECURITIES ALL OTHER
FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) COMPENSATION($)(B) OPTIONS SARS(#) (C)(D)($)
- --------------------------- ------ --------- ----------- ------------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Don E. Marsh............... 1997 $550,000 $110,000 $10,425 Class B -- $29,858
Director; Chairman of 1996 550,000 20,000 10,425 Class A 75,000 26,214
the Board, President 1995 525,000 75,000 8,529 Class B 24,000 23,992
and Chief Executive
Officer
C. Alan Marsh.............. 1997 288,846 -- 5,309 Class B -- 15,797
Director; Vice 1996 275,000 25,000 5,309 Class A 15,000 15,348
Chairman of the Board 1995 253,846 25,000 5,042 Class B 12,000 16,242
and Senior Vice
President -- Corporate
Development
Ronald R. Walicki.......... 1997 257,692 50,000 6,678 Class B -- 19,430
President and Chief 1996 250,000 50,000 6,678 Class A 20,000 19,398
Operating Officer, 1995 250,000 22,115 6,343 Class B 11,500 19,427
Village Pantry Division
David M. Redden............ 1997 250,000 35,000 2,767 Class B -- 9,267
Senior Vice 1996 250,000 50,000 2,767 Class A 20,000 8,942
President -- 1995 250,000 -- 2,628 Class B 10,500 9,086
Human Resources
William L. Marsh........... 1997 243,846 -- 2,794 Class B -- 7,601
Director, 1996 230,000 -- 2,794 Class A 15,000 7,601
Senior Vice President, 1995 210,000 -- 2,283 Class B 7,500 44,434
Property Management
</TABLE>
- ---------------
(a) Cash bonuses authorized by the Salary Committee.
(b) Represents reimbursement for income taxes on premiums paid under Executive
Life Insurance Plan.
(c) Perquisites or other personal benefits, securities or property received did
not exceed the lesser of $50,000 or 10% of salary and bonus, except for W.
L. Marsh, who received in fiscal year 1995 property valued at $32,012 upon
expiration of a vehicle lease.
(d) Includes for fiscal year 1997: (i) Executive Life Insurance Plan premiums of
$16,034, $8,166, $10,272, $4,256 and $4,298, respectively; (ii) Supplemental
Long-Term Disability Plan premiums of $10,180, $5,503, $6,816, $2,376 and
$3,303, respectively; and (iii) contributions to the Company's 401(k) plan
in the amount of $3,644, $2,128, $2,342 and $2,635 for D. E. Marsh, C. A.
Marsh, R. R. Walicki and D. M. Redden, respectively.
51
<PAGE> 57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. C. Alan Marsh owns a 17.5% interest in McWheel Properties, LLC, a
limited liability company to which the Company paid $779,588 in fiscal 1997 and
$418,537 in fiscal 1996 in connection with the lease of a supermarket facility
in Muncie, Indiana, upon terms the Company believes were no less favorable than
the Company could have obtained from unaffiliated third parties. In fiscal 1995,
Mr. Marsh owned 50.0% of the equity securities of Jorjess, Inc., a bakery that
supplied the Company with $152,736 of products in the ordinary course of
business and upon terms the Company believes were no less favorable than the
Company could have obtained from unaffiliated third parties.
Mr. J. Michael Blakley is a director of the Company and member of the
Salary Committee and Chairman of the Board and Chief Executive Officer of The
Blakley Corporation, a full service flooring company, which, as a subcontractor
of the general contractor which constructed a supermarket facility, indirectly
supplied $241,838 in fiscal 1997 and $328,227 in fiscal 1996 of flooring
material to the Company in the ordinary course of business and upon terms the
Company believes were no less favorable than it could have obtained for
unaffiliated third parties. The Blakley Corporation also supplied directly to
the Company $2,424 in fiscal 1997 and $12,135 in fiscal 1996 of flooring
materials in the ordinary course of business and upon terms which the Company
believes were no less favorable than the Company could have obtained from
unaffiliated third parties.
Mr. Charles R. Clark is a director of the Company and partner in the law
firm Beasley Gilkison Retherford Buckles & Clark, which the Company has retained
and intends to continue to retain.
Mr. James K. Risk, III is a director of the Company and a member of the
Salary Committee, and President and Chief Executive Officer of Kirby Risk
Corporation, a wholesale electrical equipment distributor from which the Company
purchased $265,970 in fiscal 1997, $287,541 in fiscal 1996 and $331,328 in
fiscal 1995 of electrical supplies in the ordinary course of business and upon
terms the Company believes were no less favorable than it could have obtained
from unaffiliated third parties.
Mr. Stephen M. Huse is a director of the Company and a director of KeyBank.
In May 1997 the Company entered into the KeyBank Revolving Credit Agreement, a
$20.0 million facility. A portion of the proceeds of the Offering will be used
to repay the outstanding balance under such agreement unless it is terminated
and repaid prior to the closing of the Offering. In fiscal 1995 Mr. Huse
purchased 0.76 acres of real estate from a subsidiary of the Company at the
appraised value of $455,864.
Mr. Don E. Marsh is the Company's Chairman of the Board, President and
Chief Executive Officer, and is also a director of National City Bank. National
City Bank is the issuer of the Company's VISA co-branded credit card.
In fiscal 1995, the Company purchased Crystal Catering from Mr. Jack J.
Bayt. Mr. Bayt subsequently became an executive officer of the Company in charge
of the Company's catering division.
The Salary Committee authorized the Company to make loans to Mr. Don E.
Marsh and to certain other optionees under the 1980 Marsh Stock Plan to fund the
exercise of options granted thereunder which would have expired May 31, 1993.
The loans bear interest at the rate of 6.0% per annum and are due May 28, 1998.
The largest aggregate amount of indebtedness outstanding and owed by Mr. Marsh
to the Company was $275,046 during fiscal 1997, $261,669 during fiscal 1996 and
$248,292 during fiscal 1995.
52
<PAGE> 58
PRINCIPAL SHAREHOLDERS
Listed in the following table are the number of shares owned as of June 2,
1997 by each director, the Named Executive Officers, all directors and officers
of the Company as a group and beneficial owners of more than 5% of the Class A
Common Stock or the Class B Common Stock (based solely on a review by the
Company of filings made with the Commission).
<TABLE>
<CAPTION>
NUMBER AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNERSHIP OUTSTANDING(A)
-------------------- -----------------
NAME CLASS A CLASS B CLASS A CLASS B
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
J. Michael Blakley.................................. 200 1,000 * *
Jack E. Buckles..................................... 2,125 4,625(b) * *
Charles R. Clark.................................... 375 2,500(c) * *
Stephen M. Huse..................................... 589 2,374(c) * *
C. Alan Marsh....................................... 228,563(d) 191,679(d) 5.9% 4.2%
Don E. Marsh........................................ 369,074(e) 386,277(e) 9.6% 8.5%
Garnet R. Marsh..................................... 269,262(f) 303,498(f) 7.0% 6.7%
William L. Marsh.................................... 346,467(g) 282,238(g) 9.0% 6.2%
James K. Risk, III.................................. 225 2,225(c) * *
K. Clay Smith....................................... 500 4,000(b) * *
Ronald R. Walicki................................... 32,396(h) 49,868(h) * 1.1%
David M. Redden..................................... 22,146(i) 35,365(i) * *
All directors and executive officers as a group (17
persons).......................................... 823,416(j) 845,113(j) 21.4% 18.6%
Great American Insurance Company,
c/o American Financial Corporation
One East Fourth Street
Cincinnati, Ohio.................................... 729,844(k) -- 18.9% --
</TABLE>
- ---------------
(a)Percentages less than 1% of the outstanding shares of either class of Common
Stock are indicated by *.
(b) Includes options to acquire 3,000 shares of Class B Common Stock which are
currently exercisable. Mr. Buckles resigned from the Board of Directors
effective August 5, 1997.
(c) Includes options to acquire 1,500 shares of Class B Common Stock which are
currently exercisable.
(d) Includes 1,576 shares of Class A Common Stock and 796 shares of Class B
Common Stock with respect to which C. Alan Marsh is trustee, and 113,343
shares owned by one of the trusts described in Note (f) below with respect
to which C. Alan Marsh is a co-trustee. Also includes options to acquire
24,275 shares of Class A Common Stock and 45,425 shares of Class B Common
Stock which are currently exercisable.
(e) Includes 5,466 shares of Class A common Stock and 4,108 shares of Class B
Common Stock owned by members of immediate family, 9,878 shares of Class A
Common Stock and 5,120 shares of Class B Common Stock with respect to which
Don E. Marsh is trustee, and 113,343 shares owned by one of the trusts
described in Note (f) below with respect to which Don E. Marsh is a co-
trustee. Also includes options to acquire 54,000 shares of Class A Common
Stock and 82,250 shares of Class B Common Stock which are currently
exercisable.
(f) Includes 253,743 shares owned by two trusts of which Garnet R. Marsh is
either the life tenant or income beneficiary. Don E. Marsh, C. Alan Marsh
and William L. Marsh each has a one-third remainder interest in each of the
foregoing trusts, subject to the life estate of Garnet R. Marsh, and share
voting and investment powers with respect to 113,343 shares in one of such
trusts with Garnet R. Marsh as co-trustees. William L. Marsh is a co-trustee
of the other trust. Also includes options to acquire 3,000 shares of Class B
Common Stock which are currently exercisable.
(g) Includes 1,979 shares of Class A Common Stock and 1,116 shares of Class B
Common Stock owned by members of immediate family and 253,743 shares owned
by the trusts described in Note (f) above with respect to which William L.
Marsh is a co-trustee. Also includes options to acquire 15,475 shares of
Class A Common Stock and 26,950 shares of Class B Common Stock which are
currently exercisable.
(h) Includes options to acquire 22,350 shares of Class A Common Stock and 39,875
shares of Class B Common Stock which are currently exercisable.
(i) Includes options to acquire 13,325 shares of Class A Common Stock and 27,800
shares of Class B Common Stock which are currently exercisable.
(j) Includes options to acquire 156,450 shares of Class A Common Stock and
266,425 shares of Class B Common Stock which are currently exercisable.
(k) As reflected in Schedule 13D, dated March 18, 1983, as amended by Amendment
No. 1 thereto, dated March 23, 1983, Amendment No. 2 thereto, dated July 30,
1986, Amendment No. 3 thereto, dated November 1, 1991, Amendment No. 4
thereto, dated January 14, 1992, and Amendment No. 5 thereto, dated April
12, 1995, and in a Form 4, dated November 8, 1996, filed by American
Financial Corporation and Carl H. Lindner.
53
<PAGE> 59
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the instruments governing certain indebtedness of
the Company after giving effect to the offering of the 144A Notes does not
purport to be complete and is qualified in its entirety by reference to the
agreements governing such indebtedness, certain of which have been filed by the
Company with the Commission. Capitalized terms used herein are defined as in
their respective agreement, unless the context requires otherwise.
THE REVOLVING CREDIT AGREEMENTS
Harris Revolving Credit Agreement. The Company has entered into an
agreement, dated July 25, 1997, with Harris Trust and Savings Bank for a
three-year, $30.0 million revolving line of credit. The line of credit is
guaranteed by Crystal Food Services, LLC, Village Pantry, LLC, LoBill Foods,
LLC, Marsh Supermarkets, LLC, CSDC and Trademark Holdings, Inc. Interest is
calculated at either a base rate (the greater of the Prime commercial rate or
the Fed Funds rate plus 0.5%) or a LIBOR Rate and may be adjusted depending on
the Company's Funded Debt Ratio. Up to $10 million of the borrowings may be in
the form of letters of credit. The Company must pay a Commitment Fee on the
unused portion of the facility ranging from 0.15% to 0.25%.
The Harris Revolving Credit Agreement contains numerous restrictive
covenants, subject to certain exceptions, including covenants with respect to
the following matters: (i) the Company must maintain Net Working Capital of at
least $8.0 million; (ii) the Company's ratio of EBITDAR to Fixed Charges on the
last day of each quarter may not be less than 1.15 to 1; (iii) the Company's
Tangible Net Worth must be at least $95.0 million plus 50% of its Net Income;
(iv) the Company may not allow its Funded Debt to EBITDA ratio to exceed 6.0 to
1; (v) the Company and each Guarantor may not consolidate or merge into another
Person; (vi) the Company and each Guarantor may not enter transactions with
Affiliates except in the ordinary course of business upon fair and reasonable
terms; (vii) the Company and each Guarantor may not permit to exist any liens on
any of their property other than certain specified permitted liens; (viii) the
Company and each Guarantor may not make any investments or loans or advances, or
acquire as an entirety the Property or business of any other Person, other than
investments in certain CD's, investments in wholly-owned Subsidiaries, travel
advances to officers and employees, U.S. obligations, existing investments, up
to $5.0 million in loans and advances to employees, and acquisitions in a line
of business related to the Company's business; (ix) the Company and each
Guarantor may not sell or transfer any material part of its Property (10% or
more of the lesser of the book or fair value of the Property of the Company or
Guarantor); (x) the Company may not pay dividends or purchase any of its capital
stock, unless the amount does not exceed $3.0 million plus 75% of Consolidated
Net Earnings after March 29, 1997; and (xi) the Company and each Guarantor may
not enter into sale and leaseback transactions involving Property with Fair
Market Value over 15% of the consolidated assets of the Company.
The Harris Revolving Credit Agreement includes standard events of default,
including events related to payment defaults, covenant defaults, cross defaults
on $5.0 million of other indebtedness, false representations and warranties,
judgments in excess of $5.0 million, certain bankruptcy events and Changes of
Control.
KeyBank Revolving Credit Agreement. In May 1997, Marsh Supermarkets, Inc.
and Marsh Supermarkets, LLC entered into a $20.0 million credit agreement with
KeyBank National Association. The agreement was amended on July 25, 1997.
Interest under the KeyBank Revolving Credit Agreement accrues at either a Prime
Rate, or an Eurodollar Rate plus 0.5%. The Company pays a commitment fee of
0.25% on unused amounts. Tranche A loans under the KeyBank Revolving Credit
Agreement mature on May 22, 1998, unless extended by the bank, and Tranche B
loans mature on May 22, 2000, unless extended by the bank. Prime Rate loans may
be prepaid at any time. This indebtedness was incurred for working capital
purposes. As of June 21, 1997, $8.0 in principal amount was outstanding under
the KeyBank Revolving Credit Agreement.
The KeyBank Revolving Credit Agreement, as amended, contains numerous
restrictive covenants, subject to certain exceptions, including covenants with
respect to the following matters: (i) the Borrowers' consolidated working
capital may not be less than $8.0 million; (ii) the Borrowers must maintain a
Consolidated Tangible Net Worth of at least (a) $95 million plus (b) 50% of the
Consolidated Net Income of
54
<PAGE> 60
Borrowers after March 29, 1997; (iii) the Borrowers must maintain a Fixed Charge
Coverage Ratio of at least 1.15 to 1.0 (calculated as of October 11, 1997 and
each fiscal quarter thereafter); (iv) the Borrowers' total Funded Debt to
EBITDAR must not be greater than 6.0 to 1.0 (commencing October 11, 1997); (v)
the Company may not make Restricted Payments or Restricted Investments, if (a)
an Event of Default has occurred or would occur, (b) the Borrowers may not incur
$1 of additional Funded Debt or (c) the aggregate amount of Restricted Payments
would exceed the sum of $3.0 million, plus 75% of Consolidated Net Earnings,
plus the net proceeds from the issue or sale of shares or convertible debt; (vi)
the Borrowers and their Affiliates may not make Restricted Investments; (vii)
the Borrowers and Restricted Affiliates may not incur Funded Debt, except (a)
Funded Debt of Borrowers, if the Consolidated Funded Debt does not exceed 60% of
the Borrowers' Consolidated Net Tangible Assets, or (b) Funded Debt of
Restricted Affiliates, if the Funded Debt of Restricted Affiliates plus the
Secured Funded Debt of the Company does not exceed 15% of Consolidated Net
Tangible Assets; (viii) the Company and its Restricted Affiliates may not suffer
to exist any liens, with certain exceptions; (ix) the Borrowers may not enter
mergers or consolidations unless the Company is the surviving entity and no
Event of Default occurred or will occur as a result thereof; (x) the Borrowers
and Affiliates may not engage in acquisitions if an Event of Default would be
caused under the KeyBank Revolving Credit Agreement; (xi) the Borrowers and
Affiliates may not sell or dispose of assets other than in the ordinary course
of business if such assets constitute more than 10% of the assets of the
Borrowers and their Affiliates; (xii) the Borrowers and Affiliates may not enter
operating leases if (a) the term is for more than three years and (b) the leases
require payment of rentals in excess of $3.5 million plus 2% of the Company's
net sales; and (xiii) the Borrowers may not enter contracts for the purchase of
goods if the contracts require payment regardless of the delivery of services.
The KeyBank Revolving Credit Agreement also includes certain events of
default, including events of default with respect to principal or interest
payment defaults; cross default on $1.0 million or more of debt; covenant
defaults for 30 days or more; false or misleading representations; failure to
make certain ERISA payments of more than $10.0 million; certain bankruptcy
events involving the Borrowers or Affiliates; or $1.0 million judgments against
either of the Borrowers or an Affiliate.
SECURED NOTES
In June 1989, the Company sold $8.1 million of 10.05% Secured Notes, Series
A and, in December 1989, the Company sold $14.6 million of 10.05% Secured Notes,
Series B (collectively, the "10.05% notes"). The 10.05% notes are payable in
monthly installments (principal and interest) of $220,000 through 2009. The
10.05% notes are secured by mortgages on certain real estate owned by the
Company. The Company can prepay the 10.05% notes beginning in December 1997 with
payment of a Make-Whole Premium. The 10.05% notes contain certain events of
default. Upon a change in control the Company must offer to repurchase these
notes and pay a Make-Whole Premium. This indebtedness was incurred for working
capital purposes. As of June 21, 1997, the outstanding balance of the 10.05%
notes was $18.7 million.
In August 1990, the Company sold $11.5 million of 9.05% Secured Notes,
Series A and, in March 1991, $11.5 million of 9.05% Secured Notes, Series B (the
"9.05% notes") secured by mortgages on certain real estate owned by the Company.
The 9.05% notes are payable in quarterly installments (principal and interest)
of $625,000 through 2011. The Company can prepay the 9.05% notes beginning in
March 1999 with payment of a Make-Whole Premium. In addition, between August
2000 and August 2001 either the Company or the lenders may initiate an interest
rate negotiation or require immediate repayment of these notes at par without a
premium. Any interest rate adjustment must be acceptable to each holder of the
9.05% notes. If the parties adjust the interest rates, they may not exercise
their right to require immediate repayment of these notes. The 9.05% notes
contain standard events of default. Upon a change in control the Company must
offer to repurchase these notes and pay a Make-Whole Premium. This indebtedness
was incurred for working capital purposes. As of June 21, 1997, the outstanding
balance of the 9.05% notes was $19.4 million.
In April 1979, the Company entered into a Lease Agreement with the City of
Greenwood, Indiana in connection with the issuance by Greenwood of $2.5 million
of mortgage notes (the "Mortgage notes"). Rent payments under this lease equal
principal and interest payments payable by Greenwood under the Mortgage notes.
Principal amortization commenced at $65,000 in 1981 (at an interest rate of
6.0%) and increased
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annually to $165,000 (at an interest rate of 7%) in 1996, $175,000 (at an
interest rate of 7%) in 1997, $190,000 (at an interest rate of 7.125%) in 1998,
$200,000 (at an interest rate of 7.125%) in 1999 and $215,000 (at an interest
rate of 7.125%) in 2000. The lease terminates on April 1, 2000. Principal is
payable every April 1 and interest is payable every April 1 and October 1. The
Company may purchase the property covered by the lease within 180 days after
termination of the lease at a price equal to an amount necessary to retire the
bonds in full. The Mortgage notes are redeemable on any interest payment date
with payment of a premium. This indebtedness was incurred for working capital
purposes. As of June 21, 1997, the outstanding balance on the Mortgage notes was
$0.9 million.
ECONOMIC DEVELOPMENT BOND
In December 1986, the Company borrowed $2.9 million from the City of
Franklin, Indiana, who raised the funds by issuing an economic development bond
(the "Economic development bond"). The loan is secured by certain real estate
owned by the Company in Franklin, Indiana. The Economic development bond bears
interest at a rate of 8.25%, and is due in monthly installments of $25,000
(principal and interest) through January 1, 2007. The Company can prepay the
loan beginning at February 1, 1997 at 105% of the principal amount outstanding
(declining to 101% by February 1, 2005). As of June 21, 1997, the outstanding
balance on the Economic development bond was $2.0 million.
CONVERTIBLE SUBORDINATED DEBENTURES
In February 1993, the Company sold $20.0 million of 7% convertible
subordinated debentures due 2003 pursuant to a public offering registered with
the Commission. The 7% convertible subordinated debentures due 2003 mature on
February 15, 2003 and are convertible at the option of the holder into shares of
the Company's Class B Common Stock at a conversion price of $15.50 per share
subject to adjustment in certain events. The Company may, with at least 30 days
notice, redeem the debentures, in whole or in part, at redemption prices
commencing at 103.5% of the principal amount in 1996 and declining to par on
February 15, 2003, together with accrued interest. The 7% convertible
subordinated debentures due 2003 tendered by the personal representative or
surviving co-owner of a deceased holder of debentures will be redeemed by the
Company within 60 days at a price equal to the principal amount thereof together
with accrued and unpaid interest thereon to the date of purchase, up to an
annual maximum of $100,000 per debenture holder, subject to a maximum of $1.0
million principal amount during each calendar year until maturity. After 35
business days following the occurrence of a change in control of the Company,
the holders of the 7% convertible subordinated debentures due 2003 can require
the Company to purchase the debentures at the principal amount thereof together
with accrued and unpaid interest thereon to the date of purchase. The debentures
are subordinate to all present and future senior indebtedness of the Company.
The debentures include standard events of default. As of June 21, 1997, the
outstanding balance of the 7% convertible subordinated debentures due 2003 was
$19.9 million.
NOTES PAYABLE TO BANKS
The Company has commitments for short term (less than 365 days) borrowings
in the amount of $15.0 million under the Bank One Note Payable and in the amount
of $5.0 million under the First Merchants Note Payable. Each of such notes is
renewable annually at the option of the respective bank. The interest on these
notes payable to banks is negotiated at the time of borrowing thereunder and is
generally based on the then prevailing Federal Funds rate. These commitments for
credit were obtained to provide the Company with alternatives with respect to
short term borrowings for cash management. As of June 21, 1997, $9.5 million in
aggregate principal amount was outstanding under the Bank One Note Payable and
under the First Merchants Note Payable. See Note C of Notes to Consolidated
Financial Statements.
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DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes offered hereby will be issued and the 144A Notes were
issued under an Indenture dated August 5, 1997 (the "Indenture") among the
Company, the Guarantors and State Street Bank and Trust Company, as trustee (the
"Trustee"). References to "(Section )" mean the applicable Section of the
Indenture.
Upon the effectiveness of the Registration Statement of which this
Prospectus forms a part, the Indenture will be subject to and governed by the
Trust Indenture Act. The following summaries of the material provisions of the
Indenture do not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, are qualified in their entirety by reference to
all of the provisions of the Indenture and those terms made a part of the
Indenture by reference to the Trust Indenture Act. A copy of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, and is incorporated by reference herein. For definitions of certain
capitalized terms used in the following summary, see "-- Certain Definitions" or
"Exchange Offer; Registration Rights."
GENERAL
The Exchange Notes will mature on August 1, 2007, will be limited to
$150,000,000 aggregate principal amount, and will be unsecured senior
subordinated obligations of the Company. Each Exchange Note will bear interest
at the rate set forth on the cover page hereof from August 5, 1997 or from the
most recent interest payment date to which interest has been paid, payable
semiannually in arrears on February 1 and August 1 in each year, commencing
February 1, 1998, to the Person in whose name the Note (or any predecessor Note)
is registered at the close of business on the January 15 or July 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. (Sections 202, 301 and 313)
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes will be exchangeable and transferable, at the
office or agency of the Company in the City of New York maintained for such
purposes (which initially will be a corporate trust office of the Trustee);
provided, however, that payment of interest may be made at the option of the
Company by check or wire transfer mailed to the Person entitled thereto as shown
on the security register. (Sections 301, 305 and 1002) The Exchange Notes will
be issued only in fully registered form without coupons, in denominations of
$1,000 and any integral multiple thereof. (Section 302) No service charge will
be made for any registration of transfer, exchange or redemption of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Section 305)
Settlement for the Exchange Notes will be made in same day funds. All
payments of principal and interest will be made by the Company in same day
funds. The Exchange Notes will trade in the Same-Day Funds Settlement System of
The Depository Trust Company (the "Depositary" or "DTC") until maturity, and
secondary market trading activity for the Exchange Notes will therefore settle
in same day funds.
GUARANTEES
Payment of the Exchange Notes is guaranteed by the Guarantors, jointly and
severally, on a senior subordinated basis. The Guarantors are comprised of Marsh
Supermarkets, LLC, Crystal Food Services, LLC, Village Pantry, LLC, Convenience
Store Distributing Company, Contract Transport, Inc., Contract Transport, LLC,
Trademark Holdings, Inc., Marsh Drugs, Inc., Marsh Drugs, LLC, Limited Holdings,
Inc., Marsh Village Pantries, Inc., Mundy Realty, Inc., LoBill Foods, LLC, Mar
Properties, Inc., North Marion Development Corp., Marlease, Inc., Marsh Clearing
House, LLC, Marsh International, Inc., S.C.T., Inc., Marsh P.Q., Inc. and
Maraines Greenery, Inc. Three subsidiaries of the Company (C.E. Publishers,
Inc., Walnut Hill Associates and Decatur Plaza Associates) are not Guarantors.
(Section 205)
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OPTIONAL REDEMPTION
(a) The Notes will be subject to redemption at any time on or after August
1, 2002, at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple
thereof at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning August 1 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002...................................................... 104.438%
2003...................................................... 102.958%
2004...................................................... 101.479%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
(b) If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable. (Sections 203, 1101,
1105 and 1107)
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
RANKING
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinated, as set forth in the Indenture, in right of payment to the
prior payment in full of all Senior Indebtedness. The Notes will be senior
subordinated indebtedness of the Company ranking pari passu with all other
existing and future senior subordinated indebtedness of the Company and senior
to all existing and future Subordinated Indebtedness of the Company. (Sections
1301 and 1302)
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from representatives of holders of any Designated Senior Indebtedness
(collectively, a "Senior Representative") of written notice of such default, no
payment (other than payments previously made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company or any Subsidiary of any kind or
character (excluding certain permitted equity interests or subordinated
securities) may be made on account of the principal of, premium, if any, or
interest on, the Notes, or on account of the purchase, redemption, defeasance or
other acquisition of or in respect of, the Notes unless and until such default
shall have been cured or waived or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full, after which the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated immediately (a "Non-payment Default")
and after the receipt by the Trustee and the Company from a Senior
Representative of written notice of such Non-payment Default, no payment (other
than payments previously made pursuant to the provisions described under
"-- Defeasance or Covenant Defeasance of Indenture") or distribution of any
assets of the Company of any kind or character (excluding certain permitted
equity interests or subordinated securities) may be made by the Company or any
Subsidiary on account of the principal of, premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of, or in respect of, the Notes for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of
the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of (i) the 179th
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day after such commencement, (ii) the date on which such Non-payment Default
(and all Non-payment Defaults as to which notice is also given after such
Payment Blockage Period is initiated) is cured, waived or ceases to exist or on
which such Designated Senior Indebtedness is discharged or paid in full or (iii)
the date on which such Payment Blockage Period (and all Non-payment Defaults as
to which notice is given after such Payment Blockage Period is initiated) shall
have been terminated by written notice to the Company or the Trustee from the
Senior Representative initiating such Payment Blockage Period, after which, in
the case of each of clauses (i), (ii) and (iii), the Company will promptly
resume making any and all required payments in respect of the Notes, including
any missed payments. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Company or the Trustee of the
notice initiating such Payment Blockage Period (such 179-day period referred to
as the "Initial Period"). Any number of notices of Non-payment Defaults may be
given during the Initial Period provided that during any period of 365
consecutive days only one Payment Blockage Period, during which payment of
principal of, premium, if any, or interest on, the Notes may not be made, may
commence and the duration of such period may not exceed 179 days. No Non-payment
Default with respect to any Designated Senior Indebtedness that existed or was
continuing on the date of the commencement of any Payment Blockage Period will
be, or can be, made the basis for the commencement of a second Payment Blockage
Period, whether or not within a period of 365 consecutive days, unless such
default has been cured or waived for a period of not less than 90 consecutive
days. (Section 1303)
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "-- Events of Default."
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to the
Company or its assets, or any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or any
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution (excluding
distributions of certain permitted equity interests or subordinated securities)
is made on account of the principal of, premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of, or in respect of, the Notes (other than payments previously made pursuant to
the provisions described under "-- Defeasance or Covenant Defeasance of
Indenture"). (Section 1302)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and
the Company may be unable to meet its obligations fully with respect to the
Notes.
"Senior Indebtedness" under the Indenture means the principal of, premium,
if any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy law
whether or not allowable as a claim in such proceeding) and all other monetary
obligations on any Indebtedness of the Company (other than as otherwise provided
in this definition), whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed, and whether at any time owing, actually
or contingently, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Notes, (ii)
Indebtedness that is by its terms subordinate or junior in right of payment to
any Indebtedness of the Company, (iii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11 of the United
States Code, is without recourse to the Company, (iv) Indebtedness which is
represented by Redeemable Capital Stock, (v) any liability for foreign, federal,
state, local or other tax owed or owing by the Company to the extent such
liability constitutes Indebtedness, (vi) Indebtedness of the Company to a
Subsidiary or any other Affiliate of the
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Company or any of such Affiliate's subsidiaries and (vii) that portion of any
Indebtedness which at the time of issuance is issued in violation of the
Indenture.
"Designated Senior Indebtedness" under the Indenture means any Senior
Indebtedness which at the time of determination has an aggregate principal
amount outstanding of at least $10.0 million and is specifically designated in
the instrument evidencing such Senior Indebtedness or the agreement under which
such Senior Indebtedness arises as "Designated Senior Indebtedness" by the
Company.
As of June 21, 1997, on a pro forma basis after giving effect to the
offering of the 144A Notes and the application of the estimated net proceeds
therefrom, the Company would have had approximately $41.6 million in aggregate
principal amount of Senior Indebtedness (all of which would have been secured),
no Pari Passu Indebtedness and approximately $19.9 million in aggregate
principal amount of Subordinated Indebtedness. In addition, as of June 21, 1997,
on a pro forma basis after giving effect to the Offering and the application of
the estimated net proceeds therefrom, the Guarantors would have had $5.8 million
in aggregate principal amount of Guarantor Senior Indebtedness ($0.7 million of
which was guaranteed by the Company).
The Indenture will limit, but not prohibit, the incurrence by the Company
and its Restricted Subsidiaries of additional Indebtedness, and the Indenture
will prohibit the incurrence by the Company of Indebtedness that is subordinated
in right of payment to any Senior Indebtedness of the Company and senior in
right of payment to the Notes.
Each Guarantee of a Guarantor will be an unsecured senior subordinated
obligation of such Guarantor, ranking pari passu with, or senior in right of
payment to, all other existing and future Indebtedness of such Guarantor that is
expressly subordinated to Guarantor Senior Indebtedness. The Indebtedness
evidenced by the Guarantees will be subordinated to Guarantor Senior
Indebtedness to the same extent as the Notes are subordinated to Senior
Indebtedness and during any period when payment on the Notes is blocked by
Designated Senior Indebtedness, payment on the Guarantees is similarly blocked.
(Section 1416)
"Guarantor Senior Indebtedness" is defined as the principal of, premium, if
any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to any Guarantee.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(i) Indebtedness evidenced by the Guarantees, (ii) Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of any Guarantor,
(iii) Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code, is without recourse to
any Guarantor, (iv) Indebtedness which is represented by Redeemable Capital
Stock, (v) any liability for foreign, federal, state, local or other taxes owed
or owing by any Guarantor to the extent such liability constitutes Indebtedness,
(vi) Indebtedness of any Guarantor to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's subsidiaries, (vii) Indebtedness evidenced by
any guarantee of any Subordinated Indebtedness or Pari Passu Indebtedness and
(viii) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
of its Restricted Subsidiaries to, create, issue, incur, assume, guarantee or
otherwise in any manner become directly or indirectly liable for the payment of
or otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness), unless such
Indebtedness is incurred by the Company or a Guarantor or constitutes Acquired
Indebtedness of a Restricted Subsidiary (which is not a Guarantor) and, in each
case, the Company's Consolidated Fixed Charge Coverage Ratio for the four full
fiscal quarters for which financial statements are available immediately
preceding the incurrence of such Indebtedness taken as one period (and after
giving pro forma effect to (i) the incurrence of such Indebtedness
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and (if applicable) the application of the net proceeds therefrom, including the
refinancing of other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, on the first day of such applicable
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company and its Restricted Subsidiaries since the first day of such
applicable period as if such Indebtedness was incurred, repaid or retired at the
beginning of such applicable period (except that, in making such computation,
the amount of Indebtedness under any revolving credit facility shall be computed
based upon the average daily balance of such Indebtedness during such applicable
period); (iii) in the case of Acquired Indebtedness or any acquisition occurring
at the time of the incurrence of such Indebtedness, the related acquisition,
assuming such acquisition had been consummated on the first day of such
applicable period; and (iv) any acquisition or disposition by the Company and
its Restricted Subsidiaries of any company or any business or any assets out of
the ordinary course of business, whether by merger, stock purchase or sale or
asset purchase or sale, or any related repayment of Indebtedness, in each case
since the first day of such applicable period, assuming such acquisition or
disposition had been consummated on the first day of such applicable period) is
at least equal to or greater than 2.00 to 1. (Section 1008)
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Guarantor under revolving
credit facilities or bank term loans in an aggregate principal amount at
any one time outstanding not to exceed $70.0 million;
(ii) Indebtedness of the Company pursuant to the Notes and
Indebtedness of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture or available under contracts on
the date of the Indenture and listed on a schedule thereto;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness for borrowed money of the Company owing to a
Subsidiary is made pursuant to an intercompany note in the form attached to
the Indenture and is subordinated in accordance with provisions set forth
in the Indenture; provided, further, that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to a Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company not permitted by this clause
(iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that any
such Indebtedness for borrowed money is made pursuant to an intercompany
note in the form attached to the Indenture; provided, further, that (a) any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than the Company or a Wholly Owned Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by the obligor not permitted by
this clause (v), and (b) any transaction pursuant to which any Wholly Owned
Restricted Subsidiary, which has Indebtedness owing to the Company or any
other Wholly Owned Restricted Subsidiary, ceases to be a Wholly Owned
Restricted Subsidiary shall be deemed to be the incurrence of Indebtedness
by such Wholly Owned Restricted Subsidiary that is not permitted by this
clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance with
the provisions of "-- Certain Covenants -- Limitation on Issuances of
Guarantees of Indebtedness;"
(vii) obligations of the Company entered into in the ordinary course
of business (a) pursuant to Interest Rate Agreements designed to protect
the Company or any Restricted Subsidiary against fluctuations in interest
rates in respect of Indebtedness of the Company or any Restricted
Subsidiary as long as such obligations do not exceed the aggregate
principal amount of such Indebtedness then outstanding, (b) under any
Currency Hedging Arrangements, which if related to Indebtedness do not
increase the amount of such Indebtedness other than as a result of foreign
exchange fluctuations, or (c) under any Commodity Price Protection
Agreements, which if related to Indebtedness do not increase the amount of
such Indebtedness other than as a result of foreign exchange fluctuations;
(viii) Indebtedness of the Company or any Guarantor represented by
Capital Lease Obligations or Purchase Money Obligations or other
Indebtedness incurred or assumed in connection with the acquisition or
development of real or personal, movable or immovable, property in each
case incurred for
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the purpose of financing or refinancing all or any part of the purchase
price or cost of construction or improvement of property used in the
business of the Company or such Guarantor, in an aggregate principal amount
pursuant to this clause (viii) not to exceed $10.0 million per year;
provided, that the aggregate amount of Indebtedness outstanding pursuant to
this clause (viii) at any one time shall not exceed 3% of the Consolidated
Net Sales of the Company in the most recent fiscal year for which audited
financial statements are available; provided, further, that the principal
amount of any Indebtedness permitted under this clause (viii) did not in
each case at the time of incurrence exceed the Fair Market Value, as
determined by the Company or such Guarantor in good faith, of the acquired
or constructed asset or improvement so financed;
(ix) letters of credit to support workers compensation obligations and
bankers acceptances and performance bonds, surety bonds and performance
guarantees, of the Company or any Guarantor, in each case, in the ordinary
course of business consistent with past practice;
(x) Guarantees by the Company of Indebtedness of any Guarantor
permitted by the terms of the Indenture;
(xi) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (I) the stated amount of
any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company or a Restricted Subsidiary incurred in connection with such
refinancing and (A) in the case of any refinancing of Indebtedness that is
Subordinated Indebtedness, such new Indebtedness is made subordinated to
the Notes at least to the same extent as the Indebtedness being refinanced
and (B) in the case of Pari Passu Indebtedness or Subordinated
Indebtedness, as the case may be, such refinancing does not reduce the
Average Life to Stated Maturity or the Stated Maturity of such
Indebtedness; and
(xii) Indebtedness of the Company or any Guarantor in addition to that
described in clauses (i) through (xi) above, and any renewals, extensions,
substitutions, refinancings or replacements of such Indebtedness, so long
as the aggregate principal amount of all such Indebtedness shall not exceed
$25.0 million outstanding at any one time in the aggregate.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable solely in its shares of Qualified Capital Stock or
in options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, the Company's Capital Stock or any Capital Stock of
any Affiliate of the Company (other than Capital Stock of any Wholly Owned
Restricted Subsidiary) or options, warrants or other rights to acquire such
Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Restricted Subsidiary to any Person (other than (a) to the Company
or any of its Wholly Owned Restricted Subsidiaries or (b) to all holders of
Capital Stock of such Restricted Subsidiary on a pro rata basis); or
(v) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such
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Restricted Payment, if other than cash, as determined by the board of directors
of the Company, whose determination shall be conclusive and evidenced by a board
resolution), unless (1) immediately before and immediately after giving effect
to such Restricted Payment on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing and such Restricted Payment shall not be
an event which is, or after notice or lapse of time or both, would be, an "event
of default" under the terms of any Indebtedness of the Company or its Restricted
Subsidiaries; (2) immediately before and immediately after giving effect to such
Restricted Payment on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
described under "-- Limitation on Indebtedness;" and (3) after giving effect to
the proposed Restricted Payment, the aggregate amount of all such Restricted
Payments declared or made after the date of the Indenture, does not exceed the
sum of:
(A) $10.0 million;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the
first day of the fiscal quarter beginning after the date of the Indenture
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Restricted Subsidiaries) of Qualified Capital Stock of the Company or
any options, warrants or rights to purchase such Qualified Capital Stock of
the Company (except, in each case, to the extent such proceeds are used to
purchase, redeem or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below in clause (ii) or (iii) of paragraph (b)
below);
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options, warrants or rights to purchase Qualified Capital
Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the conversion or exchange, if any, of debt
securities or Redeemable Capital Stock of the Company or its Subsidiaries
into or for Qualified Capital Stock of the Company plus, to the extent such
debt securities or Redeemable Capital Stock were issued prior to or after
the date of the Indenture, the aggregate of Net Cash Proceeds from their
original issuance; and
(F) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date of the Indenture, an
amount equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case, less
the cost of disposition of such Investment.
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(vii) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (each of clauses
(i) through (iv) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement of
any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issue and sale for cash (other than to a
Restricted Subsidiary) of, other shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(C) of
paragraph (a) of this Section;
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(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or in an amount not in excess of the Net Cash
Proceeds of, a substantially concurrent issuance and sale for cash (other
than to any Restricted Subsidiary of the Company) of any Qualified Capital
Stock of the Company, provided that the Net Cash Proceeds from the issuance
of such shares of Qualified Capital Stock are excluded from clause (3)(C)
of paragraph (a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the substantially concurrent issuance of new Subordinated
Indebtedness of the Company, provided that any such new Subordinated
Indebtedness (1) shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount
as of the date of determination), plus the lesser of (I) the stated amount
of any premium or other payment required to be paid in connection with such
a refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing; (2) has an
Average Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Notes; (3) has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Notes; and (4) is expressly subordinated
in right of payment to the Notes at least to the same extent as the
Subordinated Indebtedness to be refinanced;
(v) the repurchase of any Subordinated Indebtedness of the Company or
any Guarantor at a purchase price not greater than 101% of the principal
amount of such Subordinated Indebtedness in the event of a Change of
Control (as defined below) pursuant to a provision similar to the
"-- Purchase of Notes upon Change of Control" covenant; provided that prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant and has repurchased all Notes
validly tendered for payment in connection with such Change of Control
Offer;
(vi) the repurchase of any Subordinated Indebtedness of the Company or
any Guarantor, at a purchase price not greater than 100% of the principal
amount of such Indebtedness in the event of an Asset Sale pursuant to a
provision similar to the "-- Limitation on Sale of Assets" covenant;
provided that prior to such repurchase the Company has made an Offer to
purchase the Notes as provided in such covenant and has repurchased all
Notes validly tendered for payment in connection with such Offer; and
(vii) the payment of dividends on the Company's Common Stock of up to
$1.0 million per quarter in the aggregate. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than the Company or a Wholly
Owned Restricted Subsidiary) unless such transaction or series of related
transactions is entered into in good faith and in writing and (a) such
transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that would be available in
a comparable transaction in arm's-length dealings with an unrelated third party,
(b) with respect to any transaction or series of related transactions involving
aggregate value in excess of $5 million, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or series of related
transactions complies with clause (a) above and (c) with respect to any
transaction or series of related transactions involving aggregate payments in
excess of $10 million, either (i) such transaction or series of related
transactions has been approved by a majority of the Disinterested Directors of
the Company, or in the event there is only one Disinterested Director, by such
Disinterested Director, or (ii) the Company delivers to the Trustee a written
opinion of an investment banking firm of national standing or other recognized
independent expert with experience appraising the terms and conditions of the
type of transaction or series of related transactions for which an opinion is
required stating that the transaction or series of related
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transactions is fair to the Company or such Restricted Subsidiary from a
financial point of view; provided, however, that this provision shall not apply
to (i) any transaction with an officer or director of the Company entered into
in the ordinary course of business (including compensation and employee benefit
arrangements with any officer, director or employee of the Company, including
under any stock option or stock incentive plans), (ii) the payment of dividends
otherwise permitted by the terms of the Indenture, (iii) indemnification
agreements for the benefit of officers, directors and employees, and (iv)
transactions and arrangements pursuant to any contract in effect on the date of
the Indenture and listed on a schedule to the Indenture, as the same may be
amended or modified from time to time so long as any amendment or modification
is no less favorable to the Company or its Restricted Subsidiary, as the case
may be, than such contract or agreement as in effect on the date of the
Indenture. (Section 1010)
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur or affirm any
Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary) upon any property or assets
(including any intercompany notes) of the Company or any Subsidiary owned on the
date of the Indenture or acquired after the date of the Indenture, or any income
or profits therefrom, unless the Notes are directly secured equally and ratably
with (or, in the case of Subordinated Indebtedness, prior or senior thereto,
with the same relative priority as the Notes shall have with respect to such
Subordinated Indebtedness) the obligation or liability secured by such Lien
except for Liens (A) securing any Indebtedness which become Indebtedness
pursuant to a transaction permitted under "--Consolidation, Merger, Sale of
Assets" or securing Acquired Indebtedness which, in each case, were created
prior to (and not created in connection with, or in contemplation of) the
incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect thereto by
any Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of "--Limitation on Indebtedness" or (B) securing any Indebtedness
incurred in connection with any refinancing, renewal, substitution or
replacement of any such Indebtedness described in clause (A), so long as the
aggregate principal amount of Indebtedness represented thereby is not increased
by such refinancing by an amount greater than the lesser of (i) the stated
amount of any premium or other payment required to be paid in connection with
such a refinancing pursuant to the terms of the Indebtedness being refinanced or
(ii) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing, provided, however, that in
the case of clauses (A) and (B), any such Lien only extends to the assets that
were subject to such Lien securing such Indebtedness prior to the related
acquisition by the Company or its Restricted Subsidiaries. (Section 1011)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise in any manner become directly or indirectly
liable for or with respect to or otherwise permit to exist any Indebtedness that
is subordinate in right of payment to any Indebtedness of the Company or such
Guarantor, as the case may be, unless such Indebtedness is also pari passu with
the Notes or the Guarantee of such Guarantor or subordinate in right of payment
to the Notes or such Guarantee at least to the same extent as the Notes or such
Guarantee are subordinate in right of payment to Senior Indebtedness or Senior
Indebtedness of such Guarantor, as the case may be. (Section 1012)
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, consummate an
Asset Sale unless (i) at least 80% of the consideration from such Asset Sale is
received in cash and (ii) the Company or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets subject to such Asset Sale (as determined by the board of
directors of the Company and evidenced in a board resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness outstanding
as required by the terms thereof, or the Company determines not to apply such
Net Cash Proceeds to the permanent repayment of the Senior Indebtedness, or if
no such Indebtedness under the Senior Indebtedness is outstanding then, the
Company or a Subsidiary may, within 365 days of such Asset Sale, invest the Net
Cash Proceeds in capital expenditures, properties and other
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assets or inventories that (as determined by the board of directors of the
Company) replace the properties and assets that were the subject of the Asset
Sale or in properties and assets that will be used in the businesses of the
Company or its Subsidiaries existing on the date of the Indenture or in
businesses reasonably related thereto; provided that the properties or assets
that replace the properties and assets that are subject to such Asset Sale in
the case of a sale of a store or stores shall be deemed to have been applied to
the extent of any capital expenditures made to acquire or construct a
replacement store in the general vicinity of the store or stores sold within 180
days preceding the date of such Asset Sale. The amount of such Net Cash Proceeds
not used or invested as set forth in this paragraph constitutes "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5.0 million or
more, the Company will apply the Excess Proceeds to the repayment of the Notes
and any other Pari Passu Indebtedness outstanding with similar provisions
requiring the Company to make an offer to purchase such Indebtedness with the
proceeds from any Asset Sale as follows: (A) the Company will make an offer to
purchase (an "Offer") from all holders of the Notes in accordance with the
procedures set forth in the Indenture in the maximum principal amount (expressed
as a multiple of $1,000) of Notes that may be purchased out of an amount (the
"Note Amount") equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of the
Notes, and the denominator of which is the sum of the outstanding principal
amount of the Notes and such Pari Passu Indebtedness (subject to proration in
the event such amount is less than the aggregate Offered Price (as defined
herein) of all Notes tendered) and (B) to the extent required by such Pari Passu
Indebtedness to permanently reduce the principal amount of such Pari Passu
Indebtedness, the Company will make an offer to purchase or otherwise repurchase
or redeem Pari Passu Indebtedness (a "Pari Passu Offer") in an amount (the "Pari
Passu Debt Amount") equal to the excess of the Excess Proceeds over the Note
Amount; provided that in no event will the Company be required to make a Pari
Passu Offer in a Pari Passu Debt Amount exceeding the principal amount of such
Pari Passu Indebtedness plus the amount of any premium required to be paid to
repurchase such Pari Passu Indebtedness. The offer price for the Notes will be
payable in cash in an amount equal to 100% of the principal amount of the Notes
plus accrued and unpaid interest, if any, to the date (the "Offer Date") such
Offer is consummated (the "Offered Price"), in accordance with the procedures
set forth in the Indenture. To the extent that the aggregate Offered Price of
the Notes tendered pursuant to the Offer is less than the Note Amount relating
thereto or the aggregate amount of Pari Passu Indebtedness that is purchased in
a Pari Passu Offer is less than the Pari Passu Debt Amount, the Company may use
any remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and Pari Passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon the completion of the purchase
of all the Notes tendered pursuant to an Offer and the completion of a Pari
Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
(d) When the aggregate amount of Excess Proceeds exceeds $5.0 million, such
Excess Proceeds will, prior to any purchase of Notes described in paragraph (c)
above, be set aside by the Company in a separate account pending (i) deposit
with the depository or a paying agent of the amount required to purchase the
Notes tendered in an Offer or Pari Passu Indebtedness tendered in a Pari Passu
Offer, (ii) delivery by the Company of the Offered Price to the holders of the
Notes tendered in an Offer or Pari Passu Indebtedness tendered in a Pari Passu
Offer and (iii) application, as set forth above, of Excess Proceeds in the
business of the Company and its Subsidiaries for general corporate purposes.
Such Excess Proceeds may be invested in Temporary Cash Investments, provided
that the maturity date of any such investment made after the amount of Excess
Proceeds exceeds $5.0 million shall not be later than the Offer Date. The
Company shall be entitled to any interest or dividends accrued, earned or paid
on such Temporary Cash Investments; provided that the Company shall not withdraw
such interest from the separate account if an Event of Default has occurred and
is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Notes and the Pari Passu Indebtedness shall be purchased by the
Company, at the option of the holders thereof, in whole or in part in integral
multiples of $1,000, on a date that is not earlier than 45 days and not later
than 60 days
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from the date the notice of the Offer is given to holders, or such later date as
may be necessary for the Company to comply with the requirements under the
Exchange Act.
(f) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer. (Section 1013)
Limitation on Issuances of Guarantees of Indebtedness. (a) The Company
will not permit any Restricted Subsidiary, other than the Guarantors, directly
or indirectly, to secure the payment of any Senior Indebtedness of the Company
and the Company will not, and will not permit any Restricted Subsidiary to,
pledge any intercompany notes representing obligations of any Restricted
Subsidiary (other than the Guarantors) to secure the payment of any Senior
Indebtedness unless in each case 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, which guarantee
shall be on the same terms as the guarantee of the Senior Indebtedness (if a
guarantee of Senior Indebtedness is granted by any such Restricted Subsidiary)
except that the guarantee of the Notes need not be secured and shall be
subordinated to the claims against such Restricted Subsidiary in respect of
Senior Indebtedness to the same extent as the Notes are subordinated to Senior
Indebtedness of the Company under the Indenture.
(b) The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of the Notes, on the same terms as the guarantee of
such Indebtedness except that (A) such guarantee need not be secured unless
required pursuant to "-- Limitation on Liens," (B) if such Indebtedness is by
its terms Senior Indebtedness, any such assumption, guarantee or other liability
of such Restricted Subsidiary with respect to such Indebtedness shall be senior
to such Restricted Subsidiary's Guarantee of the Notes to the same extent as
such Senior Indebtedness is senior to the Notes and (C) if such Indebtedness is
by its terms expressly subordinated to the Notes any such assumption, guarantee
or other liability of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated to such Restricted Subsidiary's Guarantee of
the Notes at least to the same extent as such Indebtedness is subordinated to
the Notes.
(c) Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it (and all Liens securing the
same) 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 transaction is in compliance
with the terms of the Indenture and such Restricted Subsidiary is released from
all guarantees, if any, by it of other Indebtedness of the Company or any
Restricted Subsidiaries or (ii) (with respect to any Guarantees created after
the date of the Indenture) the release by the holders of the Indebtedness of the
Company described in clauses (a) and (b) above of their security interest or
their guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness), at a time when (A)
no other Indebtedness of the Company has been secured or guaranteed by such
Restricted Subsidiary, as the case may be, or (B) the holders of all such other
Indebtedness which is secured or guaranteed by such Restricted Subsidiary also
release their security interest in, or guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness). (Section 1014)
Restriction on Transfer of Assets. The Company and the Guarantors will not
sell, convey, transfer or otherwise dispose of its assets or property to any of
its Restricted Subsidiaries, except for sales, conveyances, transfers or other
dispositions (a) made in the ordinary course of business or (b) to any
Restricted Subsidiary if such Subsidiary is a Guarantor or simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
Guarantee of the payment of the Notes by such Restricted Subsidiary on a senior
subordinated basis. For purposes of this provision any sale, conveyance,
transfer, lease or other disposition of property or assets having a Fair Market
Value in excess of (a) $5.0 million for any sale, conveyance, transfer or
disposition or series of related sales, conveyances, transfers, leases or
dispositions and (b) $10.0 million in
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the aggregate for all such sales, conveyances, transfers, leases or dispositions
in any fiscal year of the Company shall not be considered "in the ordinary
course of business." (Section 1015).
Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Company purchase such holder's Notes in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Purchase Date"), pursuant to the offer described below (the
"Change of Control Offer") and in accordance with the other procedures set forth
in the Indenture.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes, by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things: the purchase price and
the purchase date which shall be fixed by the Company on a business day no
earlier than 30 days nor later than 60 days from the date such notice is mailed,
or such later date as is necessary to comply with requirements under the
Exchange Act; that any Note not tendered will continue to accrue interest; that,
unless the Company defaults in the payment of the purchase price, any Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and certain other
procedures that a holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. See "-- Ranking." The
failure of the Company to make or consummate the Change of Control Offer or pay
the Change of Control Purchase Price when due will give the Trustee and the
holders of the Notes the rights described under "Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the holders of the Notes elected to exercise their rights under the
Indenture and the Company elected to contest such election, there could be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a "Change of Control," certain of the
Company's long-term indebtedness may also contain an event of default upon a
"Change of Control" as defined therein which obligates the Company to repay
amounts outstanding under such indebtedness upon an acceleration of the
indebtedness issued thereunder. See "Description of Other Indebtedness."
The provisions of the Indenture will not afford holders of Notes the right
to require the Company to repurchase the Notes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its Affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the Company
by management or its Affiliates) involving the Company that may adversely affect
holders of the Notes, if such transaction is not a transaction defined as a
Change of Control. A transaction involving the Company's management or its
Affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control if it is the type of transaction specified by such
definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer. (Section 1016)
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit (a) any Restricted Subsidiary of the Company to issue, sell or
transfer any Preferred Stock, except for (i) Preferred
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Stock issued or sold to, held by or transferred to the Company or a Wholly Owned
Restricted Subsidiary, and (ii) Preferred Stock issued by a Person prior to the
time (A) such Person becomes a Restricted Subsidiary, (B) such Person merges
with or into a Restricted Subsidiary or (C) a Subsidiary merges with or into
such Person; provided that such Preferred Stock was not issued or incurred by
such Person in anticipation of the type of transaction contemplated by subclause
(A), (B) or (C) or (b) any Person (other than the Company or a Wholly Owned
Restricted Subsidiary) to acquire Preferred Stock of any Restricted Subsidiary
from the Company or any Wholly Owned Restricted Subsidiary except, (a) in the
case of clause (A) or (B), upon the acquisition of all the outstanding Capital
Stock of such Restricted Subsidiary in accordance with the terms of the
Indenture. Notwithstanding the above, the Company will not permit Marsh
Supermarkets, LLC to issue, sell or transfer any Capital Stock, except for
Capital Stock issued or sold to, held by or transferred to the Company or a
Wholly Owned Restricted Subsidiary, and will not permit any Person (other than
the Company or a Wholly Owned Restricted Subsidiary) to acquire any Capital
Stock of Marsh Supermarkets, LLC from the Company or any Wholly Owned Restricted
Subsidiary. (Section 1017)
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distribution on its
Capital Stock, (ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (iii) make any Investment in the Company or any other
Restricted Subsidiary or (iv) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary, except for: (a) any agreement in
effect on the date of the Indenture; (b) any encumbrance or restriction, with
respect to a Subsidiary that is not a Restricted Subsidiary of the Company on
the date of the Indenture, in existence at the time such Person becomes a
Restricted Subsidiary of the Company and not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary; and (c) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (a) and (b), or in this clause (c),
provided that the terms and conditions of any such encumbrances or restrictions
are no more restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced. (Section 1018)
Limitations on Unrestricted Subsidiaries. The Company will not make, and
will not permit its Restricted Subsidiaries to make, any Investment in
Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such
Investments would exceed the amount of Restricted Payments then permitted to be
made pursuant to the "-- Limitation on Restricted Payments" covenant. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant (i) will be treated as a Restricted Payment in calculating the amount
of Restricted Payments made by the Company and (ii) may be made in cash or
property. (Section 1019)
Provision of Financial Statements. The Indenture provides that, whether or
not the Company or any Guarantor is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company and such Guarantor will, to the extent permitted under
the Exchange Act, file with the Commission the annual reports, quarterly reports
and other documents which the Company and such Guarantor would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) if
the Company and such Guarantor were so subject, such documents to be filed with
the Commission on or prior to the date (the "Required Filing Date") by which the
Company and such Guarantor would have been required so to file such documents if
the Company and such Guarantor were so subject. The Company and such Guarantor
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company and such Guarantor would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company and such
Guarantor were subject to either of such Sections and (y) if filing such
documents by the Company and such Guarantor with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to
any prospective holder at the Company's and such Guarantor's cost. If any
Guarantor's or other
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Subsidiaries' financial statements would be required to be included in the
financial statements filed or delivered pursuant hereto if the Company were
subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall include
such Guarantor's or other Subsidiaries' financial statements in any filing or
delivery pursuant hereto. (Section 1020)
Additional Covenants. The Indenture also contains covenants with respect
to the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis to any other Person or group of affiliated Persons, unless at the time and
after giving effect thereto (i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis (the "Surviving Entity") will be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture,
as the case may be, and the Notes and the Indenture will remain in full force
and effect as so supplemented; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Restricted Subsidiaries which becomes the obligation of the Company or any of
its Restricted Subsidiaries as a result of such transaction as having been
incurred at the time of such transaction), no Default or Event of Default will
have occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not previously
an obligation of the Company or any of its Restricted Subsidiaries which becomes
the obligation of the Company or any of its Subsidiaries as a result of such
transaction as having been incurred at the time of such transaction), the
Consolidated Net Worth of the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately before and immediately after giving effect to such transaction
on a pro forma basis (on the assumption that the transaction occurred on the
first day of the four-quarter period for which financial statements are
available ending immediately prior to the consummation of such transaction with
the appropriate adjustments with respect to the transaction being included in
such pro forma calculation), the Company (or the Surviving Entity if the Company
is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of "-- Certain Covenants -- Limitation on Indebtedness"; (v) at the time of the
transaction each Guarantor, if any, unless it is the other party to the
transactions described above, will have by supplemental indenture confirmed that
its Guarantees shall apply to such Person's obligations under the Indenture and
the Notes; (vi) at the time of the transaction if any of the property or assets
of the Company or any of its Restricted Subsidiaries would thereupon become
subject to any Lien, the provisions of "-- Certain Covenants -- Limitation on
Liens" are complied with; and (vii) at the time of the transaction the Company
or the Surviving Entity will have delivered, or caused to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease
or other transaction and the supplemental indenture in respect thereof comply
with
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the Indenture and that all conditions precedent therein provided for relating to
such transaction have been complied with. (Section 801)
Each Guarantor shall not, and the Company will not permit a Guarantor to,
in a single transaction or through a series of related transactions, consolidate
with or merge with or into any other Person (other than the Company or any
Restricted Subsidiary) or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets to any Person
or group of affiliated Persons (other than the Company or any Restricted
Subsidiary), or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Guarantor and its Subsidiaries on a Consolidated
basis to any other Person or group of affiliated Persons (other than the Company
or any Guarantor), unless at the time and after giving effect thereto (i) either
(a) the Guarantor will be the continuing corporation or (b) the Person (if other
than the Guarantor) formed by such consolidation or into which such Guarantor is
merged or the Person which acquires by sale, assignment, conveyance, transfer,
lease or disposition all or substantially all of the properties and assets of
the Guarantor and its Subsidiaries on a Consolidated basis (the "Surviving
Guarantor Entity") will be a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia and such Person expressly assumes, by a supplemental
indenture, in a form satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantee of the Notes and the Indenture and such Guarantee
will remain in full force and effect; (ii) immediately before and immediately
after giving effect to such transaction on a pro forma basis, no Default or
Event of Default will have occurred and be continuing; and (iii) at the time of
the transaction such Guarantor or the Surviving Guarantor Entity will have
delivered, or caused to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each to the effect that such consolidation, merger, transfer, sale,
assignment, conveyance, transfer, lease or other transaction and the
supplemental indenture in respect thereof comply with the Indenture and that all
conditions precedent therein provided for relating to such transaction have been
complied with. (Section 801)
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the two immediately preceding paragraphs
in which the Company or any Guarantor, as the case may be, is not the continuing
corporation, the successor Person formed or remaining shall succeed to, and be
substituted for, and may exercise every right and power of, the Company, and the
Company or any Guarantor, as the case may be, would be discharged from all
obligations and covenants under the Indenture and the Notes or its Guarantee, as
the case may be. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any
Note when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, if any, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company or any Guarantor under the
Indenture or any Guarantee (other than a default in the performance, or
breach, of a covenant or agreement which is specifically dealt with in
clause (i) or (ii) or in clause (b), (c) or (d) of this clause (iii)) and
such default or breach shall continue for a period of 30 days after written
notice has been given, by certified mail, (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes; (b) there shall be a
default in the performance or breach of the provisions described in
"-- Consolidation, Merger, Sale of Assets"; (c) the Company shall have
failed to make or consummate an Offer in accordance with the provisions of
"-- Certain Covenants -- Limitation on Sale of Assets"; or (d) the Company
shall have failed to make or consummate a Change of Control Offer in
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accordance with the provisions of "-- Certain Covenants -- Purchase of
Notes Upon a Change of Control";
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Restricted Subsidiary then has outstanding Indebtedness in excess of $5.0
million, individually or in the aggregate, and either (a) such default
results from the failure to pay such Indebtedness at its final maturity or
(b) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness;
(v) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or any Unrestricted
Subsidiary which has guaranteed the Notes or the Company not to be, in full
force and effect and enforceable in accordance with its terms except to the
extent contemplated by the Indenture and any such Guarantee;
(vi) one or more judgments, orders or decrees for the payment of money
in excess of $5.0 million (in excess of the coverage under applicable
insurance policies after giving effect to any deductibles as to which
judgment, order or decree the insurer has agreed in writing that it is
liable), either individually or in the aggregate, shall be rendered against
the Company, any Guarantor or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
(vii) any holder or holders of at least $10.0 million in aggregate
principal amount of Indebtedness of the Company, any Guarantor or any
Restricted Subsidiary after a default under such Indebtedness shall notify
the Trustee of the intended sale or disposition of any assets of the
Company, any Guarantor or any Subsidiary that have been pledged to or for
the benefit of such holder or holders to secure such Indebtedness or shall
commence proceedings, or take any action (including by way of set-off), to
retain in satisfaction of such Indebtedness or to collect on, seize,
dispose of or apply in satisfaction of Indebtedness, assets of the Company,
any Guarantor or any Restricted Subsidiary (including funds on deposit or
held pursuant to lock-box and other similar arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Significant Restricted Subsidiary in an involuntary
case or proceeding under any applicable Bankruptcy Law or (b) a decree or
order adjudging the Company, any Guarantor or any Significant Restricted
Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company, any Guarantor or
any Significant Restricted Subsidiary under any applicable federal or state
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company, any Guarantor or
any Significant Restricted Subsidiary or of any substantial part of their
respective properties, or ordering the winding up or liquidation of their
respective affairs, and any such decree or order for relief shall continue
to be in effect, or any such other decree or order shall be unstayed and in
effect, for a period of 60 consecutive days; or
(ix) (a) the Company, any Guarantor or any Significant Restricted
Subsidiary commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt
or insolvent, (b) the Company, any Guarantor or any Significant Restricted
Subsidiary consents to the entry of a decree or order for relief in respect
of the Company, such Guarantor or such Significant Restricted Subsidiary in
an involuntary case or proceeding under any applicable Bankruptcy Law or to
the commencement of any bankruptcy or insolvency case or proceeding against
it, (c) the Company, any Guarantor or any Significant Restricted Subsidiary
files a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, (d) the Company, any Guarantor
or any Significant Restricted Subsidiary (I) consents to the filing of such
petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company, any Guarantor or such Significant Restricted Subsidiary or
of any substantial part of their respective properties, (II) makes an
assignment for the benefit of creditors or (III) admits in writing its
inability to pay its debts generally as they become due or (e) the Company,
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any Guarantor or any Significant Restricted Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (ix). (Section
501)
If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph with respect to the Company and any Significant
Restricted Subsidiary) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare all unpaid principal of, premium, if any,
and accrued interest on all Notes to be due and payable, by a notice in writing
to the Company (and to the Trustee if given by the holders of the Notes) and
upon any such declaration, such principal, premium, if any, and interest shall
become due and payable immediately. If an Event of Default specified in clause
(viii) or (ix) of the prior paragraph occurs with respect to the Company and any
Significant Restricted Subsidiary and is continuing, then all the Notes shall
ipso facto become and be due and payable immediately in an amount equal to the
principal amount of the Notes, together with accrued and unpaid interest, if
any, to the date the Notes become due and payable, without any declaration or
other act on the part of the Trustee or any holder. Thereupon, the Trustee may,
at its discretion, proceed to protect and enforce the rights of the holders of
Notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes
then outstanding, (iii) the principal of and premium, if any, on any Notes then
outstanding which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Notes and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Notes; and (b) all Events of Default, other than the
non-payment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture. (Section 502)
The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all outstanding Notes
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Note or in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each Note affected
by such modification or amendment. (Section 513)
The Company is also required to notify the Trustee within five business
days of the occurrence of any Default. (Section 1021) The Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal quarter and not more than 120 days after the end of each fiscal
year, a written statement as to compliance with the Indenture, including whether
or not any Default has occurred. (Section 1021) The Trustee is under no
obligation to exercise any of the rights or powers vested in it by the Indenture
at the request or direction of any of the holders of the Notes unless such
holders offer to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which might be incurred thereby.
(Section 603)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such defeasance
means that the Company, any such Guarantor and any other obligor under
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the Indenture shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, except for (i) the rights of
holders of such outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of 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 (iv) the 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 any 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 an Event of Default with respect to the Notes. In the event covenant
defeasance occurs, certain events (not including non-payment, bankruptcy and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the Notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm, to pay and discharge the principal of, premium, if any, and interest on
the outstanding Notes on the Stated Maturity (or on any date after August 1,
2002 (such date being referred to as the "Defeasance Redemption Date"), if at or
prior to electing either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the outstanding
Notes on the Defeasance Redemption Date); (ii) in the case of defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel in
the United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
independent counsel in the United States shall confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred; (iii) in the case of covenant
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income 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 (other than a Default or Event of Default under this
Indenture resulting from the borrowing of funds to be applied to such deposit)
shall have occurred and be continuing on the date of such deposit or insofar as
clauses (viii) or (ix) under the first paragraph under "-- Events of Default"
are concerned, at any time during the period ending on the 91st day after the
date of deposit; (v) such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest as defined in the Indenture
and for purposes of the Trust Indenture Act with respect to any securities of
the Company or any Guarantor; (vi) such defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a Default under, the
Indenture or any other material agreement or instrument to which the Company,
any Guarantor or any Subsidiary is a party or by which it is bound; (vii) such
defeasance or covenant defeasance shall not result in the trust arising from
such deposit constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; (viii) the
Company will have delivered to the Trustee an opinion of independent counsel in
the United States to the effect that after the 91st day 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; (ix) 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 preferring the holders of the Notes or any Guarantee over the other creditors
of the Company or any Guarantor with the intent of defeating, hindering,
delaying or defrauding creditors of the Company, any Guarantor or others; (x) no
event or condition shall exist that would prevent the Company
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from making payments of the principal of, premium, if any, and interest on the
Notes on the date of such deposit or at any time ending on the 91st day after
the date of such deposit; and (xi) the Company will have delivered to the
Trustee an officers' certificate and an opinion of independent counsel, each
stating that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes as expressly provided for in the Indenture) as to all outstanding Notes
under the Indenture when (a) either (i) all such Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid or Notes whose payment has been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust as provided for in the Indenture) have been delivered to the
Trustee for cancellation or (ii) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year, or (z) are to be called
for redemption within one year under arrangements satisfactory to the applicable
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 has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust an
amount in United States dollars sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, including principal of, premium, if any, and accrued interest at
such Maturity, Stated Maturity or redemption date; (b) the Company or any
Guarantor has paid or caused to be paid all other sums payable under the
Indenture by the Company and any Guarantor; and (c) the Company has delivered to
the Trustee an officers' certificate and an opinion of independent counsel each
stating that (i) all conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied with and (ii)
such satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument to which the Company, any Guarantor or any Subsidiary is a party or
by which the Company, any Guarantor or any Subsidiary is bound. (Section 1201)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority of aggregate principal amount of the Notes then outstanding;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change the
Stated Maturity of the principal of, or any installment of interest on, or
change to an earlier date any redemption date of, or waive a default in the
payment of the principal or interest on any such Note or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal of any
such Note or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the redemption
date); (ii) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in accordance
with "-- Certain Covenants -- Limitation on Sale of Assets" or the obligation of
the Company to make and consummate a Change of Control Offer in the event of a
Change of Control in accordance with "-- Certain Covenants -- Purchase of Notes
Upon a Change of Control," including, in each case, amending, changing or
modifying any definitions relating thereto; (iii) reduce the percentage in
principal amount of such outstanding Notes, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders is
required for any waiver or compliance with certain provisions of the Indenture;
(iv) modify any of the provisions relating to supplemental indentures requiring
the consent of holders or relating to the waiver of past defaults or relating to
the waiver of certain covenants, except to increase the percentage of such
outstanding Notes required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each such Note affected thereby; (v) except as otherwise permitted
under "Consolidation, Merger, Sale of Assets," consent to the assignment or
transfer by
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the Company or any Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture
relating to the subordination of the Notes or any Guarantee thereof in any
manner adverse to the holders of the Notes or any such Guarantee. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor, any other obligor under the Notes and the
Trustee may modify or amend the Indenture: (a) to evidence the succession of
another Person to the Company or a Guarantor, and the assumption by any such
successor of the covenants of the Company or such Guarantor in the Indenture and
in the Notes and in any Guarantee in accordance with "-- Consolidation, Merger,
Sale of Assets;" (b) to add to the covenants of the Company, any Guarantor or
any other obligor upon the Notes for the benefit of the holders of the Notes or
to surrender any right or power conferred upon the Company or any Guarantor or
any other obligor upon the Notes, as applicable, in the Indenture, in the Notes
or in any Guarantee; (c) to cure any ambiguity, or to correct or supplement any
provision in the Indenture, the Notes or any Guarantee which may be defective or
inconsistent with any other provision in the Indenture, the Notes or any
Guarantee or make any other provisions with respect to matters or questions
arising under the Indenture, the Notes or any Guarantee; provided that, in each
case, such provisions shall not adversely affect the interest of the holders of
the Notes; (d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act; (e) to add a Guarantor under the Indenture; (f) to evidence and provide the
acceptance of the appointment of successor Trustee under the Indenture; or (g)
to mortgage, pledge, hypothecate or grant a security interest in favor of the
Trustee for the benefit of the holders of the Notes as additional security for
the payment and performance of the Company's and any Guarantor's obligations
under the Indenture, in any property, or assets, including any of which are
required to be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted to the Trustee pursuant to the Indenture or
otherwise. (Section 901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(iii) any other Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of: (i) any Capital
Stock of any
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Subsidiary; (ii) all or substantially all of the properties and assets of any
division or line of business of the Company or its Subsidiaries; or (iii) any
other properties or assets of the Company or any Subsidiary other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any transfer of properties and assets (a) that is
governed by the provisions described under "Consolidation, Merger, Sale of
Assets," (b) that is by the Company to any Guarantor, or by any Subsidiary to
the Company or any Wholly Owned Restricted Subsidiary in accordance with the
terms of the Indenture, (c) that is of obsolete equipment in the ordinary course
of business or (d) the Fair Market Value of which in the aggregate does not
exceed $3,000,000. For the purposes of this Indenture, with respect to Asset
Sales involving the sale of stores, the term "cash" as used in clause (i) under
"Certain Covenants -- Limitation on Sale of Assets" shall include interest
bearing notes with a maturity of three years or less which are secured by the
store or stores which are the subject of the Asset Sale.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state 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.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests whether now outstanding or issued after
the date of the Indenture.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total outstanding Voting Stock of the Company; provided that the
Permitted Holders beneficially own (as so defined) a lesser percentage of such
Voting Stock than such other "person" or "group"; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the board of directors of the Company (together with any new directors whose
election to such board or whose nomination for election by the stockholders of
the Company was approved by a vote of 66- 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), cease for any
reason to constitute a majority of such board of directors then in office; (iii)
the Company consolidates with or merges with or into any Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates with or merges into or with the Company in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is changed into or exchanged for cash, securities or other property,
other than any such transaction where the outstanding Voting Stock of the
Company is not changed or exchanged at all (except to the extent necessary to
reflect a change in the jurisdiction of incorporation of the Company or where
(A) the outstanding Voting Stock of the Company is changed into or exchanged for
(x) Voting Stock of the surviving corporation which is not Redeemable Capital
Stock or (y) cash, securities and other property (other than Capital Stock of
the surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment as described under "-- Certain Covenants -- Limitation on
Restricted Payments" (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described under "-- Certain
Covenants -- Limitation on Restricted Payments") and (B) no "person" or "group",
other than Permitted Holders, owns immediately after such transaction, directly
or indirectly, more than the greater
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of (i) 35% of the total outstanding Voting Stock of the surviving corporation
and (ii) the percentage of the outstanding Voting Stock of the surviving
corporation owned, directly or indirectly, by Permitted Holders immediately
after such transaction; or (iv) the Company is liquidated or dissolved or adopts
a plan of liquidation or dissolution other than in a transaction which complies
with the provisions described under "-- Consolidation, Merger, Sale of Assets."
"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 the 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.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value of which is dependent upon, fluctuations
in commodity prices.
"Common Stock" means the common stock, no par value per share, of the
Company.
"Company" means Marsh Supermarkets, Inc., a corporation incorporated under
the laws of Indiana, until a successor Person shall have become such pursuant to
the applicable provisions of the Indenture, and thereafter "Company" shall mean
such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of such Person and its Restricted Subsidiaries on a Consolidated
basis, all determined in accordance with GAAP to (b) the sum of Consolidated
Interest Expense for such period and cash and non-cash dividends paid on any
Preferred Stock of such Person during such period; provided that (i) in making
such computation, the Consolidated Interest Expense attributable to interest on
any Indebtedness computed on a pro forma basis and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of such Person, a fixed or floating rate of interest,
shall be computed by applying at the option of such Person either the fixed or
floating rate and (ii) in making such computation, the Consolidated Interest
Expense of such Person attributable to 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.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net costs
associated with Interest Rate Agreements, Currency Hedging Arrangements and
Commodity Price Protection Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period and (ii) all capitalized interest of such Person
and its Restricted Subsidiaries plus (c) the interest expense under any
Guaranteed Debt of such Person and any Subsidiary to the extent not included
under clause (a)(iv) above, plus (d) the aggregate amount for such period of
dividends on any Redeemable Capital Stock or Preferred Stock of the Company and
its Restricted Subsidiaries, in each case as determined on a Consolidated basis
in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication, (i) all extraordinary gains or losses, net of
taxes (less all fees and expenses
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relating thereto), (ii) the portion of net income (or loss) of such Person and
its Restricted Subsidiaries on a Consolidated basis allocable to minority
interests in unconsolidated Persons to the extent that cash dividends or
distributions have not actually been received by such Person or one of its
Consolidated Restricted Subsidiaries, (iii) net income (or loss) of any Person
combined with such Person or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan, (v) net gains (or losses), net of taxes (less all
fees and expenses relating thereto), in respect of dispositions of assets other
than in the ordinary course of business, (vi) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by 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, (vii)
any restoration to income of any contingency reserve, net of taxes, except to
the extent provision for such reserve was made out of income accrued at any time
following the date of the Indenture, (viii) any gain, net of taxes, arising from
the acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness of such Person, (ix) the net loss or gain resulting from any
prepayment or redemption premiums incurred with respect to Indebtedness repaid
with the proceeds of the issuance of the Notes in accordance with the section
entitled "Use of Proceeds" in the Offering Memorandum relating to the sale of
the Notes or (x) the net non-cash compensation expense in connection with the
issuance of any employee stock options.
"Consolidated Net Sales" of any Person means, for any period, the
Consolidated net sales of such Person and its Restricted Subsidiaries as
determined in accordance with GAAP.
"Consolidated Net Worth" of any Person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock) of such
Person and its Restricted Subsidiaries, as of such date, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Restricted Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-cash charge which requires
an accrual or reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its Restricted Subsidiaries would normally
be consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Gasoline Joint Venture" means any joint venture to which the Company or
any Restricted Subsidiary is a party with a gasoline supplier in connection with
the construction, acquisition, renovation and operation of convenience stores or
car washes which are not owned or operated by the Company or any Restricted
Subsidiary as of the date of the Indenture.
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"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's Indenture
Obligations pursuant to a guarantee given in accordance with the Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means the Subsidiaries listed as guarantors in the Indenture
and any other Subsidiary which is a guarantor of the Notes, including any Person
that is required after the date of the Indenture to execute a guarantee of the
Notes pursuant to the "Limitations on Liens" covenant or the "Limitation on
Issuance of Guarantees of Indebtedness" covenant until a successor replaces such
party pursuant to the applicable provisions of the Indenture and, thereafter,
shall mean such successor; provided, that for purposes hereof the term
"Guarantor" shall not include any Unrestricted Subsidiary unless specifically
provided otherwise.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements, Currency
Hedging Agreements or Commodity Price Protection Agreements of such Person, (v)
all Capital Lease Obligations of such Person, (vi) all Indebtedness referred to
in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock issued by
such Person valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends, and (ix) any amendment,
supplement, modification, deferral, renewal, extension, refunding or refinancing
of any liability of the types referred to in clauses (i) through (viii) above.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes including any Guarantor, to pay
principal of, premium, if any, and interest when
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due and payable, and all other amounts due or to become due under or in
connection with the Indenture, the Notes and the performance of all other
obligations to the Trustee and the holders under the Indenture and the Notes,
according to the respective terms thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory
or otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Notes, the date on which
the principal of the Notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control Offer in respect of a Change of Control, call
for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof (without duplication in respect of all Asset Sales) in the
form of cash or Temporary Cash Investments including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or Temporary Cash Investments (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary) net of (i) brokerage commissions and other
reasonable fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Subsidiary, as the case may be, as
a reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee and (b) with respect to any issuance or sale of Capital Stock or
options, warrants or rights to purchase Capital Stock, or debt securities or
Capital Stock that have been converted into or exchanged for Capital Stock as
referred to under "-- Certain Covenants -- Limitation on Restricted Payments,"
the proceeds of such issuance or sale in the form of cash or Temporary Cash
Investments including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed of for, cash or
Temporary Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted Subsidiary), net
of attorney's fees, accountant's fees and brokerage, consultation, underwriting
and other fees and expenses actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Pari Passu Indebtedness" means (a) any Indebtedness of the Company which
ranks pari passu in right of payment to the Notes and (b) with respect to any
Guarantor, Indebtedness which ranks pari passu in right of payment to such
Guarantor.
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"Permitted Holders" means (i) Garnet Marsh, Don E. Marsh, C. Alan Marsh,
William L. Marsh or any of their spouses, issues or other member of the
immediate family of such persons (collectively, the "Marsh Family"), (ii) trusts
created for the benefit of any member of the Marsh Family, (iii) entities
controlled by any of the Marsh Family and (iv) in the event of the death of any
members of the Marsh family, the heirs or testamentary legatees of such member
of the Marsh Family.
"Permitted Investment" means (i) Investments in any Wholly Owned Restricted
Subsidiary or any Person which, as a result of such Investment, (a) becomes a
Wholly Owned Restricted Subsidiary or (b) is merged or consolidated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary; (ii)
Indebtedness of the Company or a Restricted Subsidiary described under clauses
(iv), (v), (vi) and (vii) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments in any of the Notes; (v)
Investments acquired by the Company or any Restricted Subsidiary in connection
with an Asset Sale permitted under "-- Certain Covenants -- Limitation on Sale
of Assets" to the extent such Investments are non-cash proceeds as permitted
under such covenant; (vi) Investments in existence on the date of the Indenture;
(vii) guarantees of Indebtedness of a Wholly Owned Restricted Subsidiary given
by the Company or another Wholly Owned Restricted Subsidiary and guarantees of
Indebtedness of the Company given by any Restricted Subsidiary, in each case, in
accordance with the terms of the Indenture; (viii) loans to (a) executive
officers of the Company in the ordinary course of business not to exceed $1.0
million in the aggregate, (b) employees (other than executive officers) of the
Company in the ordinary course of business not to exceed $1.0 million in the
aggregate and (c) employees (including executive officers) of the Company in
respect of loans to employees to enable such employees to pay the exercise price
for options on the Company's common stock, which loans are secured by such
common stock, not to exceed $3.0 million in the aggregate; (ix) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and worker's compensation, performance and other similar deposits; (x)
Investments represented by accounts receivable created or acquired in the
ordinary course of business; (xi) loans or advances to vendors in the ordinary
course of business in an amount not to exceed $1.0 million at any one time;
(xii) Investments in Gasoline Joint Ventures, provided that after giving effect
to any such Investment on a pro forma basis the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of "Certain Covenants -- Limitation on Indebtedness"; and (xiii) any other
Investments in the aggregate amount of $5.0 million at any one time outstanding.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and its Restricted Subsidiaries
and any additions and accessions thereto, which are purchased by the Company or
any Restricted Subsidiary at any time after the Notes are issued; provided that
(i) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 180 days after
the purchase or substantial completion of the construction of such assets and
shall at all times be confined solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom except that, in
the case of land upon which a supermarket, convenience store or banquet facility
is constructed, such Purchase Money Security Agreement may be entered into
within two years after the purchase of such land if the Purchase Money Security
Agreement is entered into within 180 days after the substantial completion of
such supermarket, convenience store or banquet facility, (ii) at no time shall
the aggregate principal amount of the outstanding Indebtedness secured thereby
be increased, except in connection with the purchase of additions and accession
thereto and except in respect of fees and other obligations in respect of such
Indebtedness and (iii) (A) the aggregate outstanding principal amount of
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Indebtedness secured thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Purchase Money Security
Agreement is entered into exceed 100% of the purchase price to the Company and
its Restricted Subsidiaries of the assets subject thereto or (B) the
Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Restricted Subsidiary" means any Person, a majority of the equity
ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by the Company or by one or more other Restricted Subsidiaries, or
by the Company and one or more other Restricted Subsidiaries; provided that any
Unrestricted Subsidiary shall not be deemed a Restricted Subsidiary under the
Notes.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Significant Restricted Subsidiary" means, at any particular time, any
Restricted Subsidiary that, together with the Subsidiaries of such Restricted
Subsidiary (i) for the most recent fiscal year of the Company accounted for more
than 10% of the Consolidated revenues of the Company and its Subsidiaries or
(ii) at the end of such fiscal year, was the owner (beneficial or otherwise) of
more than 10% of the Consolidated assets of the Company and its Restricted
Subsidiaries, all as calculated in accordance with GAAP and shown on the
Consolidated financial statements of the Company and its Restricted
Subsidiaries.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be.
"Subsidiary" means any Restricted Subsidiary or Unrestricted Subsidiary.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, or any money market mutual fund registered under the
Investment Company Act of 1940, the principal of which is invested solely in
such Indebtedness, (ii) any certificate of deposit, maturing not more than one
year after the date of acquisition, issued by, or time deposit of, a commercial
banking institution that is a member of the Federal Reserve System and that has
combined capital and surplus and undivided profits of not less than $500
million, whose debt has a rating, at the time as of which any investment therein
is made, of "P-1" (or higher) according to Moody's Investors Service, Inc.
("Moody's") or any successor rating agency or "A-1" (or higher) according to
Standard & Poor's Corporation ("S&P") or any successor rating agency, (iii)
commercial paper, maturing not more than one year after the date of acquisition,
issued by a corporation (other than an Affiliate or Subsidiary of the Company)
organized and existing under the laws of the United States of America with a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P and (iv) any
money market deposit accounts issued or offered by a domestic commercial bank
having capital and surplus in excess of $500 million; provided that the short
term debt of such commercial bank has a rating, at the time of Investment, of
"P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, or
any successor statute.
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"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be 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 newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the
following conditions apply: (a) neither the Company nor any of its Restricted
Subsidiaries provides credit support for Indebtedness of such Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness), (b) such Unrestricted Subsidiary is not liable, directly or
indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, provided that an Unrestricted Subsidiary may provide a Guarantee
for the Notes, (c) any Investment in such Unrestricted Subsidiary made as a
result of designating such Subsidiary an Unrestricted Subsidiary shall not
violate the provisions of the "-- Certain Covenants -- Limitation on
Unrestricted Subsidiaries" covenant and such Unrestricted Subsidiary is not
party to any agreement, contract, arrangement or understanding at such time with
the Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
the Company or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company or, in the event
such condition is not satisfied, the value of such agreement, contract,
arrangement or understanding to such Unrestricted Subsidiary shall be deemed a
Restricted Payment; and (d) such Unrestricted Subsidiary does not own any
Capital Stock in any Restricted Subsidiary of the Company which is not
simultaneously being designated an Unrestricted Subsidiary. Any such designation
by the Board of Directors of the Company shall be evidenced to the Trustee by
filing with the Trustee a board resolution giving effect to such designation and
an officers' certificate certifying that such designation complies with the
foregoing conditions and shall be deemed a Restricted Payment on the date of
designation in an amount equal to the greater of (1) the net book value of such
Investment or (2) the fair market value of such Investment as determined in good
faith by the Company's Board of Directors. The Board of Directors of the Company
may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided
that (i) immediately after giving effect to such designation, the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the restrictions under the "-- Certain Covenants -- Limitation on
Indebtedness" covenant and (ii) all Indebtedness of such Unrestricted Subsidiary
shall be deemed to be incurred on the date such Unrestricted Subsidiary becomes
a Restricted Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company
nor any Restricted Subsidiary is directly or indirectly liable (by virtue of the
Company or any such Restricted Subsidiary being the primary obligor on,
guarantor of, or otherwise liable in any respect to, such Indebtedness), except
Guaranteed Debt of the Company or any Restricted Subsidiary to any Affiliate, in
which case (unless the incurrence of such Guaranteed Debt resulted in a
Restricted Payment at the time of incurrence) the Company shall be deemed to
have made a Restricted Payment equal to the principal amount of any such
Indebtedness to the extent guaranteed at the time such Affiliate is designated
an Unrestricted Subsidiary and (ii) which, upon the occurrence of a default with
respect thereto, does not result in, or permit any holder of any Indebtedness of
the Company or any Restricted Subsidiary to declare, a default on such
Indebtedness of the Company or any Subsidiary or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity; provided that
notwithstanding the foregoing any Unrestricted Subsidiary may Guarantee the
Notes.
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which is owned by the Company or another Wholly Owned
Restricted Subsidiary.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. Except as described in the next paragraph, the Exchange Notes
initially will be represented by a single, permanent global
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Exchange Note, in definitive, fully registered form without interest coupons
(the "Global Exchange Note") and will be deposited with the Trustee as custodian
for DTC and registered in the name of Cede & Co. or such other nominee as DTC
may designate. The Global Exchange Note (and any Exchange Notes issued in
exchange therefor) will be subject to certain restrictions on transfer set forth
therein and in the Indenture and will bear the respective legends regarding such
restrictions.
Holders of Exchange Notes who elect to take physical delivery of their
certificates instead of holding their interest through the Global Exchange Note
(collectively referred to herein as the "Non-Global Holders") will be issued in
registered form a certificated Exchange Note ("Certificated Exchange Note").
Upon the transfer of any Certificated Exchange Note initially issued to a
Non-Global Holder, such Certificated Exchange Note will, unless the transferee
requests otherwise or the Global Exchange Note has previously been exchanged in
whole for Certificated Exchange Notes, be exchanged for an interest in the
Global Exchange Note.
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
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its 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").
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 DTC. Ownership of beneficial
interests in the Global Exchange Note will be limited to persons who have
accounts with DTC ("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). QIBs may hold their interests in the Global
Exchange Note directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
So long as DTC or its nominee is the registered owner or holder of the
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole record owner or holder of the Exchange Notes represented by
such Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owners of an interest in the Global Exchange Note will be
able to transfer that interest except in accordance with DTC's applicable
procedures in addition to those provided for under the Indenture.
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. Neither the Company, the Trustee, nor 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 interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of, premium, if any, or interest in respect of the Global Exchange
Note will credit participants' accounts with payments in amounts proportionate
to their respective beneficial ownership interests in the principal amount of
such 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 such Global Exchange Note held through such participants will be
governed by standing instructions and customary practices, 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.
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Transfer between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of
Certificated Exchange Notes for any reason, including to sell Notes to persons
in states which require such delivery of such Notes or to pledge such Notes,
such holder must transfer its interest in the Global Exchange Note, in
accordance with the normal procedures of DTC and the procedures set forth in the
Indenture.
DTC has advised the Company that DTC 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 Default under the Indenture,
DTC will exchange the Global Exchange Note for Certificated Exchange Notes,
which it will distribute to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Note among participants of DTC, 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.
Subject to certain conditions, any person having a beneficial interest in
the Global Exchange Note may, upon request to the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Certificated Exchange
Notes. Upon any such issuance, the Trustee is required to register such
Certificated Exchange Notes in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). In addition, 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, the Company will issue Certificated Exchange Notes in exchange for the
Global Exchange Note.
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DESCRIPTION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE EXCHANGE NOTES
The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of the 144A Notes or
the Exchange Notes by a United States Holder (as defined below). This summary
deals only with United States Holders that will hold the 144A Notes or the
Exchange Notes as capital assets. The discussion does not cover all aspects of
federal taxation that may be relevant to, or the actual tax effect that any of
the matters described herein will have on, the acquisition, ownership or
disposition of the 144A Notes or the Exchange Notes by particular investors, and
does not address state, local, foreign or other tax laws. In particular, this
summary does not discuss all of the tax considerations that may be relevant to
certain types of investors subject to special treatment under the federal income
tax laws (such as banks, insurance companies, investors liable for the
alternative minimum tax, individual retirement accounts and other tax-deferred
accounts, tax-exempt organizations, dealers in securities or currencies,
investors that will hold the 144A Notes or the Exchange Notes as part of
straddles, hedging transactions or conversion transactions for federal tax
purposes or investors whose functional currency is not United States Dollars).
Furthermore, the discussion below is based on provisions of the Code, and
regulations, rulings, and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
U.S. federal income tax consequences different from those discussed below.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF EXCHANGE NOTES
SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISORS CONCERNING THE US. FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR INTERNATIONAL TAXING
JURISDICTION.
As used herein, the term "United States Holder" means a beneficial owner of
the 144A Notes or the Exchange Notes that is (i) a citizen or resident of the
United States for United States federal income tax purposes, (ii) a corporation
created or organized under the laws of the United States or any State thereof,
(iii) a person or entity that is otherwise subject to United States federal
income tax on a net income basis in respect of income derived from the 144A
Notes or the Exchange Notes, or (iv) a partnership to the extent the interest
therein is owned by a person who is described in clause (i), (ii) or (iii) of
this paragraph.
INTEREST
Interest (including any additional interest paid because of failure to
satisfy the requirements of the Registration Rights Agreement ("Additional
Interest")) paid on a 144A Note or an Exchange Note will be taxable to a United
States Holder as ordinary income at the time it is received or accrued,
depending on the holder's method of accounting for tax purposes.
PURCHASE, SALE, EXCHANGE, RETIREMENT AND REDEMPTION OF THE EXCHANGE NOTES
In general (with certain exceptions described below), a United States
Holder's tax basis in an Exchange Note will equal the price paid for the 144A
Notes for which such Exchange Note was exchanged pursuant to the Exchange Offer.
A United States Holder generally will recognize gain or loss on the sale,
exchange, retirement, redemption or other disposition of a 144A Note or an
Exchange Note (or portion thereof) equal to the difference between the amount
realized on such disposition and the United States Holder's tax basis in the
144A Note or the Exchange Note (or portion thereof). Except to the extent
attributable to accrued but unpaid interest, gain or loss recognized on such
disposition of a 144A Note or an Exchange Note will be capital gain or loss and
will be mid-term capital gain or loss if such 144A Note or Exchange Note were
held for more than one year but not more than 18 months and will be long-term
capital gain or loss if such 144A Note or Exchange Note was held for more than
18 months. Any such gain will generally be United States source gain.
BOND PREMIUM
If a United States Holder acquires an Exchange Note or has acquired a 144A
Note, in each case, for an amount more than its redemption price, the Holder may
elect to amortize such bond premium on a yield to maturity basis. Once made,
such an election applies to all bonds (other than bonds the interest on which is
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excludable from gross income) held by the United States Holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the United States Holder, unless the IRS consents to a revocation of the
election. The basis of an Exchange Note will be reduced by any amortizable bond
premium taken as a deduction.
MARKET DISCOUNT
The purchase of an Exchange Note or the purchase of a 144A Note other than
at original issue may be affected by the market discount provisions of the Code.
These rules generally provide that, subject to a statutorily defined de minimis
exception, if a United States Holder purchases an Exchange Note (or purchased a
144A Note) at a "market discount," as defined below, and thereafter recognizes
gain upon a disposition of the Exchange Note (including dispositions by gift or
redemption), the lesser of such gain (or appreciation, in the case of a gift) or
the portion of the market discount that has accrued ("accrued market discount")
while the Exchange Note (and its predecessor 144A Note, if any) was held by such
United States Holder will be treated as ordinary interest income at the time of
disposition rather than as capital gain. For an Exchange Note or a 144A Note,
"market discount" is the excess of the stated redemption price at maturity over
the tax basis immediately after its acquisition by a United States Holder.
Market discount generally will accrue ratably during the period from the date of
acquisition to the maturity date of the Exchange Note, unless the United States
Holder elects to accrue such discount on the basis of the constant yield method.
Such an election applies only to the Exchange Note with respect to which it is
made and is irrevocable.
In lieu of including the accrued market discount in income at the time of
disposition, a United States Holder of an Exchange Note acquired at a market
discount (or acquired in exchange for a 144A Note acquired at a market discount)
may elect to include the accrued market discount in income currently either
ratably or using the constant yield method. Once made, such an election applies
to all other obligations that the United States Holder purchases at a market
discount during the taxable year for which the election is made and in all
subsequent taxable years of the United States Holder, unless the IRS consents to
a revocation of the election. If an election is made to include accrued market
discount in income currently, the basis of an Exchange Note (or, where
applicable, a predecessor 144A Note) in the hands of the United States Holder
will be increased by the accrued market discount thereon as it is includible in
income. A United States Holder of a market discount Exchange Note who does not
elect to include market discount in income currently generally will be required
to defer deductions for interest on borrowings allocable to such Exchange Note,
if any, in an amount not exceeding the accrued market discount on such Exchange
Note until the maturity or disposition of such Exchange Note.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest (including any Additional Interest) and principal on,
and the proceeds of sale or other disposition of the 144A Notes or the Exchange
Notes payable to a United States Holder may be subject to information reporting
requirements and backup withholding at a rate of 31% will apply to such payments
if the United States Holder fails to provide an accurate taxpayer identification
number or to report all interest and dividends required to be shown on its
federal income tax returns. Certain United States Holders (including, among
others, corporations) are not subject to backup withholding. United States
Holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
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EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuers entered into a Registration Rights Agreement with the Initial
Purchasers pursuant to which the Issuers agreed, for the benefit of the holders
of the 144A Notes, at the Issuers' cost, to use their best efforts (i) to file
with the Commission the Exchange Offer Registration Statement with respect to
the Exchange Offer for the Exchange Notes within 30 days after the date of
original issue of the Notes, (ii) to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 90 days of
the date of original issue of the Notes, (iii) to keep the Exchange Offer
Registration Statement effective until the closing of the Exchange Offer, and
(iv) to cause the Exchange Offer to be consummated within 120 days of the
original issue date of the Notes. Promptly after the Exchange Offer Registration
Statement has been declared effective, the Issuers will offer the Exchange Notes
in exchange for surrender of the 144A Notes. The Issuers will keep the Exchange
Offer open for not less than 30 days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of the 144A
Notes. For each 144A Note validly tendered to the Issuers pursuant to the
Exchange Offer and not withdrawn by the holder thereof, the holder of such 144A
Note will receive an Exchange Note having a principal amount equal to that of
the tendered 144A Note. Interest on each Exchange Note will accrue from the last
interest payment date on which interest was paid on the tendered 144A Note in
exchange therefor or, if no interest has been paid on such 144A Note, from the
date of the original issue of the 144A Note.
Based on an interpretation of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Issuers believe that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of 144A Notes who is an "affiliate" of the Issuers or who intends
to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (i) will not be able to rely on the interpretation by the staff
of the Commission set forth in the above referenced no-action letters, (ii) will
not be able to tender 144A 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 Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the 144A Notes who wishes to exchange 144A Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including that (i) it is neither an affiliate of the Issuers
nor a broker-dealer tendering 144A Notes acquired directly from the Issuers for
their own account, (ii) any Exchange Notes to be received by it were acquired in
the ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
In addition, in connection with any resales of the Exchange Notes, any
broker-dealer (a "Participating Broker-Dealer") who acquired the 144A Notes for
its own account as a result of market-making activities 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
144A Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Issuers are required to
allow Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use the prospectus contained in the Exchange
Offer Registration Statement in connection with the resale of such Exchange
Notes.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Issuers to effect the Exchange
Offer, or if for any other reason the Exchange Offer Registration Statement is
not declared effective within 90 days of the date of original issue of the 144A
Notes or the Exchange Offer is not consummated within 120 days of the date of
original issue of the 144A Notes, or upon the request of any of the Initial
Purchasers, or if a holder of the 144A Notes is not permitted by applicable law
to participate in the Exchange Offer or elects to participate in the Exchange
Offer but does not receive fully tradable Exchange Notes pursuant to the
Exchange Offer, the Issuers will, in lieu of effecting the registration of the
Exchange Notes pursuant to the Exchange Offer Registration Statement and at the
Issuers' cost, (a) as promptly as practicable, file with the Commission the
Shelf Registration Statement covering resales of the
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144A Notes, (b) use their best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act by the 120th day after the
original issue of the 144A Notes and (c) use their best efforts to keep
effective the Shelf Registration Statement for a period of two years after its
effective date (or for such shorter period that will terminate when all of the
144A Notes covered by the Shelf Registration Statement have been sold pursuant
thereto or cease to be outstanding). The Issuers will, in the event of the
filing of a Shelf Registration Statement, provide to each such holder of the
144A Notes copies of the prospectus which is part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
144A Notes has become effective and take certain other actions as are required
to permit it unrestricted resales of the 144A Notes. A holder of 144A Notes who
sells such 144A Notes pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver the 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 which are applicable to such a holder (including certain
indemnification obligations).
In the event that (i) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 30th calendar day following the
date of original issue of the 144A Notes, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 90th calendar day
following the date of original issue of the 144A Notes or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement is not declared
effective, in either case, on or prior to the 120th day following the date of
original issue of the 144A Notes (each such event referred to in clauses (a)
through (c) above, a "Registration Default"), the interest rate borne by the
144A Notes shall be increased by one-quarter of one percent per annum upon the
occurrence of each Registration Default, which rate (as increased as aforesaid)
will increase by one quarter of one percent each 90-day period that such
additional interest continues to accrue under any such circumstance, with an
aggregate maximum increase in the interest rate equal to one percent (1%) per
annum. Following the cure of all Registration Defaults the accrual of additional
interest will cease and the interest rate will revert to the original rate.
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 reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part, and is incorporated herein by reference.
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PLAN OF DISTRIBUTION
Each Participating 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 Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for 144A Notes where such 144A Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that it will make this Prospectus, as amended or supplemented, available
to any Participating Broker-Dealer for use in connection with any such resale
and Participating Broker-Dealers shall be authorized to deliver this Prospectus
in connection with the sale or transfer of the Exchange Notes. 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 sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
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 market prices prevailing 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 Participating Broker-Dealer that
resells the Exchange Notes that were received by it for its own account pursuant
to the Exchange Offer. 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 Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement of this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal. See "The Exchange
Offer."
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Bass, Berry &
Sims PLC, 2700 First American Center, Nashville, Tennessee 37238. Bass, Berry &
Sims PLC will rely as to all matters of Indiana law and the general partnership
law of the State of Ohio upon the opinion of P. Lawrence Butt, Senior Vice
President, Counsel and Secretary of the Company.
EXPERTS
The consolidated financial statements of Marsh Supermarkets, Inc. and
subsidiaries at March 29, 1997 and March 30, 1996, and for each of the three
years in the period ended March 29, 1997, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
91
<PAGE> 97
MARSH SUPERMARKETS, INC.
INDEX TO CONSOLIDATED AND UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors.............................. F-2
Consolidated Statements of Income for the Three Years Ended
March 29, 1997............................................ F-3
Consolidated Balance Sheets as of March 30, 1996 and March
29, 1997.................................................. F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Three Years Ended March 29, 1997.................. F-5
Consolidated Statements of Cash Flows for the Three Years
Ended March 29, 1997...................................... F-6
Notes to Consolidated Financial Statements.................. F-7
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statements of Income for the Twelve
Weeks Ended June 21, 1997 and June 22, 1996............... F-21
Condensed Consolidated Balance Sheets as of June 21, 1997,
March 29, 1997 and June 22, 1996.......................... F-22
Condensed Consolidated Statements of Cash Flows for the
Twelve Weeks Ended June 21, 1997 and June 22, 1996........ F-23
Notes to Condensed Consolidated Financial Statements........ F-24
</TABLE>
F-1
<PAGE> 98
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Marsh Supermarkets, Inc.
We have audited the accompanying consolidated balance sheets of Marsh
Supermarkets, Inc. and subsidiaries as of March 29, 1997 and March 30, 1996, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended March 29, 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 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 opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Marsh
Supermarkets, Inc. and subsidiaries at March 29, 1997 and March 30, 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended March 29, 1997, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
May 15, 1997
F-2
<PAGE> 99
MARSH SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
MARCH 29, MARCH 30, APRIL 1,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales and other revenues................................... $1,451,730 $1,390,543 $1,303,261
Cost of merchandise sold, including warehousing and
transportation........................................... 1,096,586 1,047,193 990,037
---------- ---------- ----------
Gross profit............................................... 355,144 343,350 313,224
Selling, general and administrative........................ 318,634 297,022 268,666
Depreciation and amortization.............................. 23,729 18,957 18,476
---------- ---------- ----------
Operating profit........................................... 12,781 27,371 26,082
Interest and debt expense amortization -- Note C........... 13,030 13,087 13,292
---------- ---------- ----------
Income (loss) before income taxes.......................... (249) 14,284 12,790
Income taxes (credit) -- Note G............................ (5) 5,251 4,217
---------- ---------- ----------
Net Income (Loss)................................ $ (244) $ 9,033 $ 8,573
========== ========== ==========
Earnings (Loss) Per Share:
Primary.................................................. $ (.03) $ 1.07 $ 1.02
========== ========== ==========
Fully diluted............................................ $ (.03) $ 1.02 .98
========== ========== ==========
Dividends Per Share........................................ $ .44 $ .44 $ .44
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 100
MARSH SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 29, MARCH 30,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents...................................... $ 12,529 $ 12,822
Accounts receivable, less allowances of $848 in 1997, and
$970 in 1996............................................ 25,634 23,790
Inventories -- Note B..................................... 88,262 89,746
Prepaid expenses.......................................... 5,362 4,764
Recoverable income taxes.................................. 941 361
Deferred income taxes -- Note G........................... 650 1,510
-------- --------
Total Current Assets............................... 133,378 132,993
Property and Equipment -- Note C
Land...................................................... 48,565 44,311
Buildings................................................. 144,201 134,107
Fixtures and equipment.................................... 103,220 100,469
Leasehold improvements.................................... 47,910 46,670
Construction in progress.................................. 2,430 5,912
Property under capital leases............................. 9,214 13,014
-------- --------
355,540 344,483
Allowances for depreciation and amortization.............. 122,859 114,552
-------- --------
Total Property and Equipment....................... 232,681 229,931
Other assets................................................ 29,572 24,370
-------- --------
$395,631 $387,294
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to banks.................................... $ 10,755 $ 15,000
Accounts payable.......................................... 54,132 54,629
Employee compensation and other liabilities............... 11,957 10,329
State and local taxes..................................... 10,786 10,579
Other accounts payable and accrued expenses............... 18,474 15,923
Dividends payable......................................... 923 924
Current maturities of long-term liabilities............... 7,097 7,022
-------- --------
Total Current Liabilities.......................... 114,124 114,406
Long-term Liabilities
Long-term debt -- Note C.................................. 141,264 129,854
Capital lease obligations -- Note D....................... 4,165 5,212
-------- --------
Total Long-Term Liabilities........................ 145,429 135,066
Deferred Items
Income taxes -- Note G.................................... 7,865 9,700
Other..................................................... 12,765 9,964
-------- --------
Total Deferred Items............................... 20,630 19,664
Shareholders' Equity -- Notes C and H
Series A Junior Participating Cumulative Preferred Stock:
Authorized: 5,000,000 shares; Issued: None
Class A Common Stock, no par value: Authorized: 15,000,000
shares; Issued: 4,695,253............................... 8,552 8,552
Class B Common Stock, no par value: Authorized: 15,000,000
shares; Issued: 5,265,158............................... 16,232 16,232
Retained earnings......................................... 98,474 102,414
Cost of Common Stock in treasury
Class A: 1997 -- 844,662; 1996 -- 844,555 shares........ (3,977) (3,976)
Class B: 1997 -- 720,586; 1996 -- 720,303 shares........ (3,511) (3,500)
Additional minimum pension liability...................... -- (1,258)
Notes receivable -- stock options......................... (322) (306)
-------- --------
Total Shareholders' Equity......................... 115,448 118,158
-------- --------
$395,631 $387,294
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 101
MARSH SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B COST OF
COMMON COMMON RETAINED STOCK IN
STOCK STOCK EARNINGS TREASURY OTHER TOTAL
------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 2, 1994................. $8,552 $15,461 $92,204 $(6,070) $ (353) $109,794
Net income............................. 8,573 8,573
Cash dividends declared................ (3,699) (3,699)
Issuance of shares -- Crystal Catering
acquisition......................... 513 415 928
Repurchase of 125,425 shares........... (1,323) (1,323)
Other.................................. 41 41
------ ------- ------- ------- ------- --------
Balance at April 1, 1995................. 8,552 15,974 97,078 (6,978) (312) 114,314
Net income............................. 9,033 9,033
Cash dividends declared................ (3,696) (3,696)
Issuance of shares -- Martz &
Associates acquisition.............. 258 198 456
Repurchase of 62,250 shares............ (696) (696)
Additional minimum pension liability... (1,258) (1,258)
Other.................................. (1) 6 5
------ ------- ------- ------- ------- --------
Balance at March 30, 1996................ 8,552 16,232 102,414 (7,476) (1,564) 118,158
Net loss............................... (244) (244)
Cash dividends declared................ (3,694) (3,694)
Restricted stock grant of 500 shares... (2) 2 --
Repurchase of 2,390 shares............. (28) (28)
Exercise of stock options -- 1,500
shares.............................. 14 14
Minimum pension liability reversal..... 1,258 1,258
Other.................................. (16) (16)
------ ------- ------- ------- ------- --------
Balance at March 29, 1997................ $8,552 $16,232 $98,474 $(7,488) $ (322) $115,448
====== ======= ======= ======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 102
MARSH SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 29, MARCH 30, APRIL 1,
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Operating Activities
Net income (loss)......................................... $ (244) $ 9,033 $ 8,573
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 23,729 18,957 18,476
Amortization of other assets........................... 5,343 5,488 6,408
Increase (decrease) in deferred income taxes........... (1,724) 219 (1,464)
Changes in operating assets and liabilities:
Accounts receivable.................................. (1,844) (5,673) (2,097)
Inventories.......................................... 1,484 (7,338) 4,358
Prepaid expenses and recoverable income taxes........ (1,178) 916 919
Accounts payable and accrued expenses................ 5,895 5,148 414
Other operating activities............................. (1,069) 346 (388)
-------- ------- -------
Net Cash Provided by Operating Activities......... 30,392 27,096 35,199
Investing Activities
Acquisition of property, equipment and land held for
expansion.............................................. (33,594) (22,736) (30,607)
Disposition of property, equipment and land held for
expansion.............................................. 3,827 2,045 2,835
Other investing activities, principally acquisition of
rental video tapes..................................... (3,400) (4,397) (6,803)
-------- ------- -------
Net Cash Used for Investing Activities............ (33,167) (25,088) (34,575)
Financing Activities
Proceeds (repayments) of short-term borrowings............ (4,245) 8,000 3,000
Proceeds of long-term borrowings.......................... 47,580 68,200 10,000
Payments of long-term debt and capital lease
obligations............................................ (37,141) (76,357) (17,345)
Purchase of Class A and Class B Common Stock for
treasury............................................... (28) (696) (1,323)
Cash dividends paid....................................... (3,697) (3,699) (3,702)
Other financing activities................................ 13 -- --
-------- ------- -------
Net Cash Provided by (Used for) Financing
Activities...................................... 2,482 (4,552) (9,370)
Net Decrease in Cash and Equivalents........................ (293) (2,544) (8,746)
Cash and equivalents at beginning of year................... 12,822 15,366 24,112
-------- ------- -------
Cash and Equivalents at End of Year......................... $ 12,529 $12,822 $15,366
======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 103
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS OR AS OTHERWISE NOTED)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed in preparation of the consolidated
financial statements are:
FISCAL YEAR
The Company's fiscal year ends on Saturday of the thirteenth week of each
calendar year. All references herein to "1997", "1996" and "1995" relate to the
fiscal years ended March 29, 1997, March 30, 1996 and April 1, 1995,
respectively.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Marsh
Supermarkets, Inc. and all majority-owned subsidiaries ("the Company").
Investments in partnerships are accounted for by the equity method. Significant
inter-company accounts and transactions have been eliminated. The Company is
principally involved in a single significant business segment, the distribution
and retail sale of food and related products through supermarkets, convenience
stores and food services.
USE OF ESTIMATES
Preparation of the consolidated financial statements 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. The more significant estimates include allowances
for doubtful accounts, provisions for self-insurance losses and income taxes.
Actual results could differ from those estimates.
CASH AND EQUIVALENTS
Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased. The carrying amount approximates fair value
of these assets.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out ("LIFO") method for the principal components of
inventories, and by the first-in, first-out ("FIFO") method for the remainder
(see Note B).
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, including a provision for
capitalized interest. For financial reporting purposes, depreciation is computed
by the straight-line method over the estimated useful lives of the assets. For
income tax purposes, accelerated methods and statutory lives are used to compute
depreciation.
CAPITALIZED LEASE PROPERTY
Capitalized lease assets are amortized using the straight-line method over
the term of the lease or in accordance with practices established for similar
owned assets if ownership transfers to the Company at the end of the lease term.
Amortization is included with depreciation expense.
EXCISE TAXES
Sales and cost of merchandise sold include state and federal excise taxes
on tobacco, gasoline and alcohol products of approximately $97 million, $91
million and $86 million in 1997, 1996 and 1995, respectively.
F-7
<PAGE> 104
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Advertising communication costs are expensed in the period incurred and
production costs are expensed the first time the advertising is distributed.
Advertising expenses in the amounts of $16.0 million, $16.6 million, and $13.8
million were recorded for 1997, 1996 and 1995, respectively.
COSTS OF OPENING STORES
Non-capital expenditures associated with opening new stores are expensed as
incurred.
EARNINGS PER SHARE
Earnings per share are presented on a "primary" and "fully diluted" basis.
"Primary" shares are based on the weighted average number of shares of common
stock outstanding and the shares equivalent effect of dilutive stock options.
"Fully diluted" shares consider the dilutive effect of stock options and the
conversion of convertible debentures.
INCOME TAXES
Deferred tax assets and liabilities result from differences between
financial reporting and tax basis of assets and liabilities, measured using
enacted tax rates and laws expected to be in effect when the differences
reverse.
ACCOUNTING CHANGES
Accounting for the Impairment of Long-Lived Assets
The Company adopted FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," in the first quarter of
1997. The Statement establishes accounting standards for recognizing and
measuring impairment of long-lived assets, and requires reducing the carrying
amount of any impaired assets to fair value. Adoption of FAS 121 resulted in a
charge to earnings of $4.6 million, net of tax, primarily related to the
adjustment of building and equipment carrying costs and leases of eight
supermarkets and twelve convenience stores. The Company estimated fair value
based on its experience in the acquisition and disposal of similar assets. The
charge is reflected in income as follows: $2.6 million ($1.6 million net of tax)
in selling, general and administrative expenses, and $4.9 million ($3.0 million
net of tax) in depreciation and amortization. The Company expects prospective
earnings to improve approximately $900,000 annually ($565,000 after tax, or $.06
per fully diluted share) as a result of adopting FAS 121. Prior to the adoption
of FAS 121, the Company reviewed assets at the marketing area level, while FAS
121 prescribes identifying the impairment of assets at the lowest level where
cash flows can be measured, and accordingly, upon adoption, the Company
evaluated possible impairment store-by-store.
Measurement of expected future cash flows is highly subjective, and the
long-term effects of thirty-three competitive openings since 1994 were not
immediately measurable, but required some passage of time before sales levels at
the affected stores could be determined. The Company continues to evaluate other
locations where the long-term effects of competitive openings have not been
fully determined.
Accounting for Stock Based Compensation
In October 1995, FAS 123 "Accounting for Stock Based Compensation" was
issued. The Statement prescribes accounting and reporting standards for all
stock-based compensation plans. FAS 123 allows companies to continue using
existing methods for recognizing the expense of those plans and provide pro
forma disclosures in the financial statements and earnings per share using the
fair value method prescribed in the statement.
F-8
<PAGE> 105
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
128, "Earnings per Share," which is required to be adopted for interim and
annual financial statements ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of FAS 128 on the calculation of primary and fully
diluted earnings per share for 1997 and 1996 is not expected to be material.
ENVIRONMENTAL LIABILITIES
The Company recognizes environmental liabilities when environmental
assessments indicate remedial efforts are required and the costs can be
reasonably estimated. Estimates of liability are based on all currently known
facts, prior remediation experience, existing technology, and presently enacted
federal and state statutes, ordinances and regulations concerning the storage
and dispensing of petroleum products. These estimated liabilities are subject to
revision in future periods as actual costs and new information becomes known.
The liabilities are recorded in the balance sheet at their undiscounted amounts,
and do not consider any potential recovery the Company may receive from either
the Indiana Underground Storage Tank Excess Liability fund, which reimburses
owners and operators of underground storage tanks ("USTs") for a portion of the
costs incurred in connection with the remediation of soil and groundwater
contamination, or from third parties that may be responsible for all or part of
the contamination.
Current environmental laws and regulations require the removal or
abandonment of USTs at 20 village Pantry locations prior to December 1998.
Earlier removal or abandonment is required in the event any UST fails any leak
detection test, which the Company performs at least annually. All USTs at these
locations passed the most recent leak detection tests in calendar 1996, which
results were consistent with data from the Company's established petroleum
product inventory control program.
The Company is aware of the existence of petroleum contamination at
twenty-one Village Pantry locations and has commenced remediation at each of
these sites. The cost of remediation varies significantly depending on the
extent, source and location of the contamination, geological and hydrological
conditions and other factors. The cost to remove or abandon the remaining USTs
and to remediate known contamination at those locations has been estimated at
approximately $849,000. The Company has charged this amount to earnings.
The Company currently estimates the maximum aggregate cost remaining to be
incurred in connection with compliance with existing environmental laws and
regulations applicable to owners and operators of USTs will not exceed
approximately $1.1 million through December 1998.
RECLASSIFICATIONS
Certain items in the 1996 and 1995 consolidated financial statements were
reclassified to conform with the presentation used in 1997.
F-9
<PAGE> 106
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- INVENTORIES
Inventories valued by the LIFO method represented approximately 76% and 78%
of consolidated inventories at March 29, 1997 and March 30, 1996, respectively.
Current inventory cost exceeded the carrying amount of LIFO inventories by $17.6
million at March 29, 1997, and $18.2 million at March 30, 1996.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
NOTE C -- DEBT ARRANGEMENTS
Long-term debt consisted of the following:
Notes payable to insurance companies:
8.54% Senior Notes, unsecured............................. $ 35,000 $ 35,000
8.13% Senior Notes, unsecured............................. 10,909 12,273
9.48% Senior Notes, unsecured............................. 17,500 20,000
10.05% notes.............................................. 18,897 19,603
9.05% notes............................................... 19,630 20,313
7% convertible subordinated debentures...................... 19,909 20,000
Economic development bond................................... 1,979 2,107
6.4% (average rate) mortgage notes, due in installments
through 1999.............................................. 2,873 3,394
Revolving credit agreements................................. 20,000 2,220
Other....................................................... 809 1,119
Less current maturities..................................... (6,242) (6,175)
-------- --------
$141,264 $129,854
======== ========
</TABLE>
The 8.54% notes are payable in installments of $3.5 million due each
December 31 from 1998 to 2007.
The 8.13% notes are payable in installments of $1.4 million due each
December 31 through 2004.
The 9.48% notes are payable in installments of $2.5 million due each June
30 through 2003.
The 10.05% notes are payable in monthly installments (principal and
interest) of $220,000 through 2009.
The 9.05% notes are payable in quarterly installments (principal and
interest) of $625,000 through 2011. In 2000, the Company or lender may initiate
an interest rate renegotiation or require retirement of the notes.
The 7% convertible subordinated debentures mature February 15, 2003. They
are convertible, at the holder's option at any time, into Class B Common Stock
at a conversion price of $15.50 per share. They are redeemable, at the Company's
option, at declining prices which started at 103.5% of the principal amount in
1996. The debentures are subordinate to all present and future senior
indebtedness.
The economic development bond bears interest at 8.25%, and is due in
monthly installments of $25,000 (principal and interest) through 2006.
Land and buildings with a net carrying amount of approximately $45 million
are pledged as collateral to the 10.05% notes, the 9.05% notes, the economic
development bond and the mortgage notes.
The Company guarantees a $1.5 million portion of two mortgages for a 25%
owned, unconsolidated subsidiary.
As of March 29, 1997 and March 30, 1996, the carrying amounts of long-term
debt, including current maturities, were $147.5 million and $136.0 million,
respectively. The estimated fair value, determined using a discounted cash flow
method and estimated current incremental borrowing rates for similar types of
borrowings, exceeds the carrying amount by $4.3 million, as of March 29, 1997,
and $7.8 million as of March 30, 1996.
F-10
<PAGE> 107
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
The fair value of each obligation is:
Notes payable to insurance companies:
8.54% Senior Notes, unsecured............................. $ 37,461 $ 37,896
8.13% Senior Notes, unsecured............................. 10,979 12,527
9.48% Senior Notes, unsecured............................. 18,543 21,531
10.05% notes.............................................. 20,636 21,932
9.05% notes............................................... 20,227 21,422
7% convertible subordinated debentures...................... 18,137 19,730
Economic development bond................................... 2,240 2,239
6.4% (average rate) mortgage notes, due in installments
through 1999.............................................. 2,873 3,400
Revolving credit agreements................................. 20,000 2,220
Other....................................................... 734 980
Less current maturities..................................... (6,242) (6,175)
-------- --------
$145,588 $137,702
======== ========
</TABLE>
Several of the loan agreements require maintenance of minimum working
capital and limit cash dividends, repurchases of common stock, future
indebtedness, lease obligations, investments, and disposition of assets. Under
the most restrictive covenant, retained earnings available for payment of
dividends was approximately $19 million at March 29, 1997.
The Company's revolving credit agreements permit borrowings up to $40
million. On August 1 of each year, either the Company or the banks may elect not
to renew the arrangements, in which event revolving credit borrowings would
convert to term loans payable in twenty quarterly installments, on the following
July 31. Interest is based on various money market rates selected by the Company
at the time of borrowing. The Company pays a commitment fee of 1/4% on unused
amounts.
The Company has commitments from various banks for short-term borrowings of
up to $20 million at rates at or below the prime rates of the committed banks,
of which $11 million, at an average rate of 6.2%, was utilized at March 29,
1997. This compares to $15 million at an average rate of 5.8%, utilized at March
30, 1996.
Aggregate principal payments of long-term debt outstanding at March 29,
1997 for the succeeding five years and thereafter are:
<TABLE>
<S> <C>
1998........................................................ $ 6,242
1999........................................................ 9,927
2000........................................................ 10,013
2001........................................................ 9,997
2002........................................................ 10,215
Thereafter.................................................. 101,112
</TABLE>
F-11
<PAGE> 108
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest expense consisted of:
Long-term debt............................... $12,141 $12,016 $12,059
Capital lease obligations.................... 641 991 1,214
Other........................................ 248 80 19
------- ------- -------
Total interest expense............... $13,030 $13,087 $13,292
======= ======= =======
Interest capitalized........................... $ 528 $ 714 $ 555
======= ======= =======
Cash payments for interest..................... $13,511 $13,632 $13,690
======= ======= =======
</TABLE>
The senior note agreements preclude the Company from becoming obligated, as
a lessee, under any operating lease having an original term greater than three
years, unless at the time the lease is entered into, consolidated income
available for fixed charges, as defined by the agreement, exceeds 150% of the
current four year average of fixed charges in three of the four most recently
completed years. As of March 29, 1997; two of the four most recently completed
years had consolidated income available for fixed charges in excess of 150% of
fixed charges. Accordingly, the Company will not be able to enter into any lease
with a term of more than three years in 1998.
NOTE D -- LEASES
Of the Company's 270 retail stores, 113 are commercial lease agreements
providing for initial terms generally from 15 to 20 years with options to extend
the initial terms up to an additional 20 years.
In addition, one supermarket is leased under an equity lease arrangement
where ownership transfers to the Company at lease expiration. The net carrying
amount at March 29, 1997, included in capitalized lease property, was $627,000.
The Company also leases a portion of its transportation and store equipment for
periods of from three to eight years plus renewal and purchase options.
Capitalized lease property consisted of store facilities having a net
carrying cost of $3.1 million at March 29, 1997, and $3.8 million at March 30,
1996.
Future minimum lease payments for capital and operating leases with terms
in excess of one year, and the present value of capital lease obligations, at
March 29, 1997, were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998........................................................ $1,181 $16,887
1999........................................................ 1,141 15,390
2000........................................................ 1,264 14,272
2001........................................................ 639 10,617
2002........................................................ 621 8,189
Later years................................................. 2,899 21,315
------ -------
7,745 $86,670
=======
Less:
Estimated executory costs................................. 60
Amounts representing interest............................. 2,665
------
Present value of net minimum lease payments................. $5,020
======
</TABLE>
F-12
<PAGE> 109
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum annual lease payments will be reduced by $5.7 million from future
sublease rentals due over the term of the subleases.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Rental expense consisted of:
Minimum rentals..................................... $21,719 $22,017 $19,991
Contingent rentals.................................. 151 147 139
Sublease rental income.............................. (1,715) (2,217) (2,023)
------- ------- -------
$20,155 $19,947 $18,107
======= ======= =======
</TABLE>
NOTE E -- RETIREMENT PLANS
Historically, the Company has operated a qualified defined benefit plan
covering the majority of its non-union employees and an unfunded supplemental
retirement plan that covers eligible corporate officers, as designated by the
Board of Directors. The benefit formula, under the qualified plan, is based upon
years of service and the highest consecutive four years of earnings during the
last ten years worked. The benefits under both plans are similar; however, the
supplemental plan takes into consideration compensation in excess of amounts
that can be recognized under the qualified plan.
On December 31, 1996, the Company froze benefit accruals under its
qualified defined benefit plan and announced the creation of a new discretionary
profit-sharing plan. As a result of freezing the pension plan, the Company
recorded a pre-tax net pension curtailment loss of $2.4 million in the first
quarter of 1997, in addition to the $1.8 million net pension expense reported
for 1997.
The Company's funding policy with regard to the qualified defined benefit
plan is consistent with federal laws and regulations. The Company contributed
$2.2 million and $1.9 million to the qualified defined benefit plan in 1997 and
1996, respectively. Plan assets consist principally of listed stocks, corporate
and government notes and bonds, and 92,675 shares each of Class A and Class B
Common Stock of the Company. At March 29, 1997, the Company's Common Stock in
the qualified defined benefit plan had a market value of $2.4 million. The
supplemental plan is unfunded. The actuarial present value of the projected
benefit obligation under the supplemental plan was $4.9 million and $3.5 million
at March 29, 1997 and March 30, 1996, respectively.
F-13
<PAGE> 110
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the plans and amounts recognized in the consolidated
balance sheets were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Actuarial present value of obligations:
Vested benefits........................................... $38,962 $35,357
Nonvested benefits........................................ 2,083 3,508
------- -------
Accumulated benefit obligation.............................. 41,045 38,865
Effect of projected salary increases........................ 2,016 7,832
------- -------
Projected benefit obligation................................ 43,061 46,697
Plan assets at fair value................................... 38,649 34,570
------- -------
Funded status..................................... (4,412) (12,127)
Unrecognized net loss (gain) from past experience different
from that assumed......................................... (637) 12,614
Unrecognized net obligation (asset) at adoption............. 89 (1,938)
Unrecognized prior service (benefit) cost................... 1,238 (518)
Additional minimum liability................................ -- (2,007)
------- -------
Accrued pension cost...................................... $(3,722) $(3,976)
======= =======
</TABLE>
The components of net pension expense included:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost of benefits earned....................... $ 1,510 $ 1,784 $ 1,921
Interest on projected benefit obligation.............. 3,267 3,154 2,867
Actual return on plan assets.......................... (3,590) (5,161) (1,436)
Net amortization and deferral......................... 606 2,703 (1,026)
------- ------- -------
Net pension expense................................... $ 1,793 $ 2,480 $ 2,326
======= ======= =======
</TABLE>
The following actuarial assumptions were used to compute net pension
expense and funded status of the plans:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 8.00% 7.65% 8.30%
Rate of increase in compensation............................ 3.50 3.50 3.50
Expected long-term rate of return on assets................. 9.00 9.00 10.00
</TABLE>
The 0.35% change in discount rate decreased the projected benefit
obligation at March 29, 1997 by approximately $4.0 million.
The Company participates in a multi-employer plan that provides defined
benefits to its union employees. Company expense for this plan (in thousands)
amounted to $671, $648, and $583 in 1997, 1996 and 1995, respectively.
The Company provides two defined contribution savings plans. These plans
allow 401(k) contributions covering employees who work a minimum of 1,000 hours
per year, are age 21 or older and elect to participate. The plans provide
additional financial security during retirement by offering employees an
incentive to make tax advantaged contributions to a savings plan. Company
expense for these plans (in millions) was $1.3, $1.3, and $1.1 in 1997, 1996 and
1995, respectively.
F-14
<PAGE> 111
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- POSTRETIREMENT HEALTH BENEFITS
The Company provides certain postretirement health care benefits for its
non-union retirees and their eligible spouses. The plans are contributory with
retiree contributions adjusted annually and certain other cost sharing features,
such as deductibles and coinsurance. Eligibility for these benefits is generally
limited to retirees, who are at least age 55 and less than age 65, with ten or
more years of vested service. Optional spousal coverage continues for the lesser
of five years after retirement or until the spouse reaches age 65. Benefits
generally cease after reaching age 65, at which time the retiree or spouse is
generally eligible for Medicare.
The amounts recognized in the consolidated balance sheet for the Company's
contributory defined benefit postretirement plans were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated participants benefit obligation:
Current retirees.......................................... $ 534 $ 548
Fully eligible active plan participants................... 915 787
Other active plan participants............................ 810 919
------ ------
Total benefit obligation.......................... 2,259 2,254
Unrecognized gain........................................... 1,144 986
------ ------
Accrued postretirement benefit cost......................... $3,403 $3,240
====== ======
Net postretirement benefit expense includes:
Service cost of benefits earned during the year........... $ 215 $ 185
Interest cost on projected benefit obligation............. 161 167
Net amortization and deferral............................. (73) (68)
------ ------
$ 303 $ 284
====== ======
</TABLE>
For measurement purposes, the weighted average discount rate used in
determining the accumulated postretirement benefit obligation and related
expense was 8.00% and 7.65% for 1997 and 1996, respectively. The Company's
assumed healthcare cost trend rate is 11% for 1998, decreasing gradually to 6%
by 2012, and thereafter. If these trend rates increased by one percentage point
each year, the accumulated postretirement benefit obligation and expense would
have increased by approximately 9%.
F-15
<PAGE> 112
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- INCOME TAXES
The following are components of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Deferred tax assets:
Compensation and benefit accruals......................... $ 3,406 $ 3,856
Self insurance reserves................................... 2,593 2,156
Investment in partnerships................................ 863 614
Provision for doubtful accounts........................... 332 362
Contribution carryforward................................. 471 209
EPA remediation reserves.................................. 314 284
Other..................................................... 777 165
------- --------
Total deferred tax assets......................... 8,756 7,646
Deferred tax liabilities:
Property and equipment, including leased property......... (12,330) (14,034)
Prepaid employee benefits................................. (254) (544)
Inventory................................................. (3,023) (1,065)
Other..................................................... (363) (193)
------- --------
Total deferred tax liabilities.................... (15,970) (15,836)
------- --------
Net deferred tax liability.................................. $(7,214) $ (8,190)
======= ========
</TABLE>
Income tax expense (credit) consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current -- Federal......................................... $ 526 $4,209 $4,023
State.......................................... 445 887 964
Deferred -- Federal......................................... (849) 158 (725)
State........................................... (127) (3) (45)
------ ------ ------
$ (5) $5,251 $4,217
====== ====== ======
Cash Payments............................................... $1,807 $5,428 $5,947
====== ====== ======
</TABLE>
A reconciliation of income tax expense (credit) is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------ ------
<S> <C> <C> <C>
Federal statutory tax rate.................................. $ (96) $4,999 $4,477
State and local, net of federal tax benefit................. 206 575 597
New jobs and other tax credits.............................. (37) (125) (366)
Contributions............................................... (274) (304) (501)
Non deductible expenditures................................. 114 81 25
Other....................................................... 82 25 (15)
----- ------ ------
Total income tax expense (credit)................. $ (5) $5,251 $4,217
===== ====== ======
</TABLE>
NOTE H -- SHAREHOLDERS' EQUITY AND EMPLOYEE STOCK PLANS
COMMON STOCK
Class A Common Stock has one vote per share; Class B Common Stock is
non-voting except with respect to certain matters affecting the rights and
preferences of that class. Each class is entitled to equal per share
F-16
<PAGE> 113
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
dividends and consideration in any merger, consolidation or liquidation of the
Company. A person who, subsequent to May 15, 1991, acquires 10% or more of
outstanding Class A Common Stock without acquiring a like percentage of Class B
Common Stock must make a public tender offer to acquire additional Class B
Common Stock. Failure to do so results in suspension of the voting rights of the
Class A Common Stock held by such person.
STOCK OPTION PLANS AND SHARES RESERVED
The 1991 Employee Stock Incentive Plan (as amended in May 1995) reserves
750,000 shares of common stock, in any combination of Class A and Class B, for
the grant of stock options, stock appreciation rights, restricted stock,
deferred stock, stock purchase rights and/or other stock-based awards. Grants
made under this plan represent non-qualified options. Substantially all grants
were at market value at date of grant. They become exercisable pro-rata over a
four year period beginning one year from date of grant and expire 10 years from
date of grant.
Grants made prior to 1992 were under the 1987 Stock Option Plan at prices
equal to 85% of market value at date of grant. They are exercisable pro-rata
over a four year period and expire 10 years from date of grant. The 1987 plan
authorized 375,000 shares for grants of options; no further grants may be made
under the 1987 Plan.
At the 1992 Annual Meeting, shareholders approved the 1992 Stock Option
Plan for Outside Directors under which 50,000 shares of Class B Common Stock
were reserved for the grant of stock options and restricted stock to
non-employee directors. Options were granted at fair market value at date of
grant. The options become exercisable and restrictions lapse in equal
installments, on the date of each of the two Annual Meetings following the date
of grant and expire 10 years from date of grant. Additionally, 3,500 shares of
restricted stock have been issued.
A summary of the Company's stock option activity follows (price is weighted
average exercise price; options are in thousands):
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------- -----------------
PRICE OPTIONS PRICE OPTIONS
------ ------- ------ -------
<S> <C> <C> <C> <C>
Outstanding at April 2, 1994.................... $12.73 168 $13.13 344
Granted....................................... -- -- 9.51 133
Forfeited..................................... 13.38 (5) 12.64 (19)
--- ---
Outstanding at April 1, 1995.................... 12.71 163 12.10 458
Granted....................................... 13.50 355 12.25 5
--- ---
Outstanding at March 30, 1996................... 13.26 518 12.10 463
Granted....................................... 13.50 10 10.50 4
Exercised..................................... -- -- 9.50 (2)
Forfeited..................................... 12.86 (33) 12.73 (53)
--- ---
Outstanding at March 29, 1997................... $13.28 495 $12.01 412
=== ===
</TABLE>
F-17
<PAGE> 114
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Related stock option information is as follows (options are in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Exercisable at the end of the year
Class A shares............................................ 227 163 163
Class B shares............................................ 345 361 287
Weighted average exercise price
Class A shares............................................ $13.03 $12.71 $12.71
Class B shares............................................ 12.47 12.79 13.07
Weighted average fair value of options granted during the
year
Class A shares............................................ $13.50 $13.50 $ --
Class B shares............................................ 10.50 12.25 9.51
</TABLE>
At March 29, 1997, the range of option exercise prices for Class A shares
was $10.63 to $13.81 and for Class B shares was $9.50 to $15.50, and the
weighted-average remaining contractual life of those options for Class A and
Class B shares was 6.8 years and 4.7 years, respectively.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FAS
123, "Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value of these options was estimated using a Black-Scholes option pricing
model with the following assumptions for 1997; a risk-free interest rate of
6.8%; dividend yield of 3.3%, a volatility factor of the expected market price
of the Company's common stock of .26; and a weighted-average expected life of
the option of nine years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair market estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Had compensation cost for the Company's stock option grants been determined
based on the fair market value consistent with the method of FAS 123, the
Company's net earnings would have been reduced by $201,000 and $79,000 for 1997
and 1996, respectively. Both primary and fully diluted earnings per share would
have been reduced $.02 in 1997 and $.01 in 1996.
The Company presently holds notes receivable totaling $322,000 from four
employees of the Company. The notes arose when the Company loaned the employees
money to exercise stock options under an expired 1980 plan. The notes bear
interest at 6% per annum, are due on May 28, 1998, and are collateralized by the
shares. The amount of the receivable is shown on the balance sheet as a
reduction of equity.
As of March 29, 1997, a total of 1,290,323 shares of Class B Common Stock
is reserved for conversion of debentures, 135,300 shares in any combination of
Class A and Class B are reserved for future awards under the 1991 Plan, and
28,500 shares of Class B are reserved under the Stock Option Plan for Outside
Directors.
F-18
<PAGE> 115
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHANGES IN SHARES OUTSTANDING
Changes in shares issued and treasury shares during the three years ended
March 29, 1997, were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
--------- ---------
<S> <C> <C>
Issued shares:
Balance at April 1, 1995, March 30, 1996 and March 29,
1997................................................... 4,695,253 5,265,158
Treasury shares:
Balance at April 2, 1994.................................. 762,655 755,754
Acquisition of shares.................................. 54,875 70,550
Issuance of shares -- Crystal Catering acquisition..... -- (97,810)
--------- ---------
Balance at April 1, 1995.................................. 817,530 728,494
Acquisition of shares.................................. 27,025 35,225
Issuance of shares -- Martz & Associates acquisition... -- (43,416)
--------- ---------
Balance at March 30, 1996................................. 844,555 720,303
Acquisition of shares.................................. 107 2,283
Stock options exercised................................ -- (1,500)
Restricted stock grant................................. -- (500)
--------- ---------
Balance at March 29, 1997................................... 844,662 720,586
--------- ---------
Net outstanding at March 29, 1997........................... 3,850,591 4,544,572
========= =========
</TABLE>
SHAREHOLDER RIGHTS PLAN
Under the 1989 Shareholder Rights Plan, preferred stock purchase rights
("Rights") were distributed as a dividend at the rate of one Right for each
common share held. Each Right entitles a shareholder to buy one one-hundredth of
a share of Series A Junior Participating Cumulative Preferred Stock of the
Company at an exercise price of $65. The Rights will be exercisable only if a
person or group acquires beneficial ownership of 20% or more of either class of
the Company's common stock or commences a tender or exchange offer upon
consummation of which such person or group would beneficially own 20% or more of
either class of the Company's common stock. If any person becomes the beneficial
owner of 20% or more of either class of the Company's common stock, or if a 20%
or more shareholder engages in certain self-dealing transactions or a merger
transaction with the Company in which the Company is the surviving corporation
and its common shares are not changed or converted, then each Right not owned by
such person or related parties will entitle its holder to purchase, at the
Right's then-current exercise price, shares of common stock (or, in certain
circumstances as determined by the Board, cash, property or other securities of
the Company) having a value of twice the Right's exercise price. In addition, if
the Company is involved in a merger or other business combination transaction
with another person in which its common stock is changed or converted, or sells
50% or more of its assets or earning power to another person, each Right will
entitle its holder to purchase, at the Right's then-current exercise price,
common shares of such other person having a value of twice the Right's exercise
price. The Company will generally be entitled to redeem the rights at $.01 per
Right, at any time until the 15th day following public announcement that a 20%
position has been acquired. The Rights expire on July 31, 1999.
NOTE I -- ACQUISITIONS
On January 1, 1995, the Company purchased the assets of the Crystal
Catering and affiliated companies, the largest caterer in Indianapolis. The
purchase price of $4.8 million included; (i) $2.4 million cash, (ii) a $1.4
million note payable to Crystal, and (iii) issuance of 97,810 shares of Class B
Common Stock, valued at
F-19
<PAGE> 116
MARSH SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$1.0 million. An additional $900,000 adjustment is contingent on the cumulative
performance of Crystal Food Services in achieving specified profitability levels
for 1996, 1997 and 1998. In the event the contingent payment is earned, it will
be treated as a purchase price adjustment and recorded when earned. Goodwill,
resulting from this acquisition in the amount of $4.0 million, is being
amortized using the straight-line method over a twenty year life.
On May 1, 1995, the Company purchased the assets of Martz & Associates Food
Services, Inc., an Indianapolis vending and cafeteria management services firm.
The purchase price included $1.0 million cash and 43,416 shares of Class B
Common Stock; valued at $456,000. Goodwill, resulting from this acquisition in
the amount of $568,000, is being amortized using the straight-line method over a
twenty year life.
F-20
<PAGE> 117
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 WEEKS ENDED
-------------------
JUNE 21, JUNE 22,
1997 1996
-------- --------
<S> <C> <C>
Sales and other revenues.................................... $343,924 $335,844
Cost of merchandise sold, including warehousing and
transportation............................................ 260,147 254,598
-------- --------
Gross profit................................................ 83,777 81,246
Selling, general and administrative......................... 72,263 80,736
Depreciation and amortization............................... 4,376 9,064
-------- --------
Operating profit (loss)..................................... 7,138 (8,554)
Interest and debt expense amortization...................... 3,063 3,014
-------- --------
Income (loss) before income taxes........................... 4,075 (11,568)
Income taxes (credit)....................................... 1,176 (4,456)
-------- --------
Net Income (Loss)................................. $ 2,899 $ (7,112)
======== ========
Earnings (Loss) Per Share:
Primary................................................... $ .34 $ (.85)
======== ========
Fully diluted............................................. $ .32 $ (.85)
======== ========
Dividends Per Share......................................... $ .11 $ .11
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-21
<PAGE> 118
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 21, MARCH 29, JUNE 22,
1997 1997 1996
----------- --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 9,802 $ 12,529 $ 11,453
Accounts receivable....................................... 25,104 25,634 26,118
Inventories, less LIFO reserve; June 21, 1997 -- $17,652;
March 29, 1997 -- $17,592; June 22, 1996 -- $18,453.... 94,456 88,262 89,861
Prepaid expenses.......................................... 5,217 5,362 4,217
Recoverable income taxes.................................. 745 941 3,677
Deferred income taxes..................................... 710 650 1,748
-------- -------- --------
Total current assets.............................. 136,034 133,378 137,074
Property and equipment, less allowances for depreciation.... 230,783 232,681 229,112
Other assets................................................ 30,578 29,572 21,922
-------- -------- --------
$397,395 $395,631 $388,108
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank..................................... $ 9,500 $ 10,755 $ 15,000
Accounts payable.......................................... 55,075 54,132 54,800
Accrued liabilities....................................... 39,246 42,140 41,003
Current maturities of long-term liabilities............... 6,842 7,097 7,183
-------- -------- --------
Total current liabilities......................... 110,663 114,124 117,986
Long-term liabilities:
Long-term debt............................................ 145,064 141,264 132,036
Capital lease obligations................................. 4,031 4,165 4,903
-------- -------- --------
Total long-term liabilities....................... 149,095 145,429 136,939
Deferred items:
Income taxes........................................... 7,616 7,865 9,581
Other.................................................. 12,623 12,765 12,246
-------- -------- --------
Total deferred items.............................. 20,239 20,630 21,827
Shareholders' Equity:
Common stock, Classes A and B............................. 24,784 24,784 24,784
Retained earnings......................................... 100,451 98,474 94,379
Cost of common stock in treasury.......................... (7,511) (7,488) (7,497)
Notes receivable -- stock options......................... (326) (322) (310)
-------- -------- --------
Total shareholders' equity........................ 117,398 115,448 111,356
-------- -------- --------
$397,395 $395,631 $388,108
======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-22
<PAGE> 119
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 WEEKS ENDED
-------------------
JUNE 21, JUNE 22,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 2,899 $ (7,112)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 4,376 9,064
Amortization of other assets.............................. 1,131 1,159
Changes in operating assets and liabilities............... (7,583) (895)
Other..................................................... (1,351) 2,331
------- --------
Net cash provided by (used for) operating activities........ (528) 4,547
INVESTING ACTIVITIES
Net acquisition of property, equipment and land............. (2,420) (6,737)
Other investing activities.................................. (1,009) (269)
------- --------
Net cash used for investing activities...................... (3,429) (7,006)
FINANCING ACTIVITIES
Payments of short-term borrowing, net....................... (1,255) --
Proceeds of long-term borrowing............................. 8,000 13,780
Payments of long-term debt and capital leases............... (4,589) (11,745)
Purchase of shares for treasury............................. (23) (21)
Cash dividends paid......................................... (922) (924)
Other financing activities.................................. 19 --
------- --------
Net cash provided by financing activities................... 1,230 1,090
Net decrease in cash and equivalents........................ (2,727) (1,369)
Cash and equivalents at beginning of period................. 12,529 12,822
------- --------
Cash and equivalents at end of period....................... $ 9,802 $ 11,453
======= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-23
<PAGE> 120
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS OR AS OTHERWISE NOTED)
JUNE 21, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Marsh Supermarkets, Inc. and subsidiaries were prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all the information and footnotes necessary for
a fair presentation of financial position, results of operations, and cash flows
in conformity with generally accepted accounting principles. This report should
be read in conjunction with the Company's Consolidated Financial Statements for
the year ended March 29, 1997. The balance sheet at March 29, 1997, has been
derived from the audited financial statements at that date.
The Company's fiscal year ends on Saturday of the thirteenth week of each
calendar year. All references to "1998" and "1997" relate to the fiscal years
ending March 28, 1998 and March 29, 1997, respectively.
The condensed consolidated financial statements for the twelve week periods
ended June 21, 1997 and June 22, 1996, respectively, were not audited by
independent auditors. Preparation of the financial statements requires
management to make estimates that affect the reported amounts of assets,
liabilities, revenues and expenses for the reporting periods. In the opinion of
management, the statements reflect all adjustments (consisting of normal
recurring accruals) considered necessary to present fairly, on a condensed
basis, the financial position, results of operations and cash flows for the
periods presented.
Operating results for the twelve week period ended June 21, 1997 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending March 28, 1998.
NOTE B -- COMMON STOCK
Class A Common Stock and Class B Common Stock each have 15 million shares
authorized. On June 21, 1997, March 29, 1997 and June 22, 1996, there were
3,849,297, 3,850,698 and 3,850,698 shares of Class A Common Stock outstanding
and 4,544,232, 4,544,855 and 4,543,212 shares of Class B Common Stock
outstanding, respectively.
In June 1995, the Company authorized an increase in its previously
announced stock repurchase plan from $2 million to $4 million. Through June 21,
1997, the Company repurchased 191,721 shares at a cost of $2.1 million. The
Company expects to purchase the remaining shares, from time to time in the open
market, at prices under $14 per share. The total number of shares affected by
this plan would represent approximately 4% of the common shares outstanding.
NOTE C -- ACCOUNTING CHANGES
Effective March 31, 1996, the Company adopted Statement of Financial
Accounting Standard No. 121 ("FAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The statement
establishes accounting standards for recognizing and measuring the impairment of
long-lived assets, and requires reducing the carrying amount of any impaired
asset to fair value. The Company estimated fair values based on its experience
in the acquisition and disposal of similar assets. To reflect the change in
accounting policy, the Company recorded a non-cash charge to operating earnings
of $7.5 million ($4.6 million after tax, or $.47 per fully diluted share) for
the twelve weeks ended June 22, 1996, primarily related to the adjustment of
building and equipment carrying costs and leases of eight supermarkets and
twelve convenience stores, of which $4.9 million is included in depreciation and
amortization, and $2.6 million is included in selling, general and
administrative expenses. The Company expects prospective annual earnings to
improve approximately $900,000 annually ($565,000 after tax, or $0.06 per fully
diluted share) as a result of adopting FAS 121.
F-24
<PAGE> 121
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- INCOME TAXES
During fiscal 1997, the Company commenced a corporate restructuring
pursuant to which the Company's retail operations were organized as wholly-owned
limited liability companies and the Company's intellectual property was
transferred to a passive investment company. As a result of the restructuring,
the Company anticipates state tax loss carrybacks for the current and two
succeeding fiscal years resulting in significantly lower effective tax rates.
F-25
<PAGE> 122
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE ISSUERS OR ANY OF THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE
NOTES OR GUARANTEES IN ANY JURISDICTION WHERE, 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 AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. iii
Incorporation of Certain Documents by
Reference........................... iii
Prospectus Summary.................... 1
Risk Factors.......................... 11
The Exchange Offer.................... 18
Certain Federal Income Tax
Consequences of the Exchange
Offer............................... 25
Use of Proceeds....................... 26
Capitalization........................ 26
Selected Consolidated Financial
Data................................ 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business.............................. 37
Management............................ 49
Certain Relationships and Related
Transactions........................ 52
Principal Shareholders................ 53
Description of Certain Indebtedness... 54
Description of the Exchange Notes..... 57
Description of Certain Federal Income
Tax Consequences as an Investment in
the Exchange Notes.................. 87
Exchange Offer; Registration Rights... 89
Plan of Distribution.................. 91
Legal Matters......................... 91
Experts............................... 91
Index to Consolidated and Condensed
Consolidated Financial Statements... F-1
</TABLE>
======================================================
======================================================
[MARSH SUPERMARKETS LOGO]
MARSH SUPERMARKETS, INC.
OFFER TO EXCHANGE
$150,000,000
8 7/8% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES B
FOR
8 7/8% SENIOR SUBORDINATED
NOTES DUE 2007
-----------------------------------
PRELIMINARY PROSPECTUS
-----------------------------------
, 1997
======================================================
<PAGE> 123
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chapter 37 of the IBCL provides that a corporation may indemnify any of its
directors and officers against liability incurred in connection with a
proceeding if (i) such person acted in good faith; (ii) in the case of conduct
in such person's official capacity with the corporation, he reasonably believed
such conduct was in the corporation's best interests; (iii) in all other cases,
he reasonably believed that his conduct was at least not opposed to the best
interests of the corporation; and (iv) in connection with any criminal
proceeding, such person either had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful.
Subsection 23-1-53-2(a) of the IBCL requires that a with or before the notice of
the next shareholders' meeting.
Article XII of the Company's Restated Articles provides for indemnification
of officers, directors and employees of the Company against liabilities,
including liabilities under the Act, in connection with the defense of any
action, suit or proceeding to which such persons are made a party by reason of
being an officer, director or employee of the Company, except in relation to
matters as to which such persons are adjudged liable for negligence or
misconduct in the performance of their duties.
The Company has entered into Indemnification Agreements with its directors
and officers which may provide for indemnification against other liabilities,
including liabilities under the Act, other than as provided by the IBCL and the
Restated Articles. In addition, the Company maintains directors' and officers'
liability insurance which may cover liabilities under the Act.
II-1
<PAGE> 124
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3(a) -- Restated Articles of Incorporation, as amended as of May 15,
1991 -- Incorporated by reference to Form 10-K for the year
ended March 30, 1991.
3(b) -- By-Laws as amended as of February 16, 1996 -- Incorporated
by reference to Form 10-K for the year ended March 30, 1996.
4(a) -- Articles V, VI and VII of the Company's Restated Articles of
Incorporation, as amended as of May 15, 1991 -- Incorporated
by reference to Form 10-K for the year ended March 30, 1991.
4(b) -- Articles I and IV of the Company's By-Laws, as amended as of
August 7, 1990 -- Incorporated by reference to Form 10-Q for
the quarter ended January 5, 1991.
4(c) -- Agreement of the Company to furnish a copy of any agreement
relating to certain long-term debt and leases to the
Securities and Exchange Commission upon its
request -- Incorporated by reference to Form 10-K for the
year ended March 27, 1987.
4(d) -- Note Agreement, dated as of May 1, 1988, for $25,000,000
9.48% Senior Notes due June 30, 2003 -- Incorporated by
reference to Form 10-Q for the quarter ended June 25, 1988.
4(e) -- Rights Agreement, dated as of August 1, 1989, between Marsh
Supermarkets, Inc. and National City Bank, as successor to
Merchants National Bank and Trust Company of
Indianapolis -- Incorporated by reference to Form 10-Q for
the quarter ended October 14, 1989.
4(f) -- Amendment No. 1, dated as of May 1, 1991, to Rights
Agreement, dated as of August 1, 1989 -- Incorporated by
reference to Form 10-K for the year ended March 30, 1991.
4(g) -- Note Agreement, dated as of October 15, 1992, for
$35,000,000 8.54% Senior Notes, Series A, due December 31,
2007, and $15,000,000 8.13% Senior Notes, Series B, due
December 31, 2004 -- Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
4(h) -- Indenture dated as of February 15, 1993, between Marsh
Supermarkets, Inc. and Society National Bank, as Trustee,
including form of Indenture -- Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
4(i) -- Amendment to Note Agreements and Assumption Agreement, dated
March 29, 1997, for $35,000,000 8.54% Senior Notes, Series
A, due December 31, 2007, and $15,000,000 8.13% Senior
Notes, Series B, due December 31, 2004 -- Incorporated by
reference to Form 10-K for the year ended March 29, 1997.
4(j) -- Amendment to Note Agreements and Assumption Agreement, dated
March 29, 1997, for $25,000,000 9.48% Senior Notes, due June
30, 2003 -- Incorporated by reference to Form 10-K for the
year ended March 29, 1997.
4(k) -- Indenture dated as of August 5, 1997 between Marsh
Supermarkets, Inc. and certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee.
4(l) -- Form of Marsh Supermarkets, Inc. 8 7/8% Senior Subordinated
Notes due 2007 (contained in the Indenture filed as Exhibit
4(k))
4(m) -- Form of Marsh Supermarkets, Inc. 8 7/8% Senior Subordinated
Notes due 2007, Series B (contained in the Indenture filed
as Exhibit 4(k))
5 -- Opinion of Bass, Berry & Sims PLC.
10(a) -- Agreements between Ruan Leasing Company and Marsh
Supermarkets, Inc., dated September 18,1987 -- Incorporated
by reference to Registration Statement on Form S-2 (File No.
33-17730).
</TABLE>
II-2
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10(b) -- Lease Agreements relating to warehouse located at 333 South
Franklin Road, Indianapolis, Indiana -- Incorporated by
reference to Registration Statement on Form S-2 (File No.
33-17730).
10(c) -- Marsh Supermarkets, Inc. 1987 Stock Option
Plan -- Incorporated by reference to Registration Statement
on Form S-8 (File No. 33-33427).
10(d) -- Amendment to the Marsh Supermarkets, Inc. 1987 Stock Option
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
10(e) -- Amended and Restated Employment and Severance Agreements,
dated December 3, 1992 -- Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
10(f) -- Marsh Supermarkets, Inc. 1980 Marsh Stock
Plan -- Incorporated by reference to Registration Statement
on Form S-8 (File No. 2-74859).
10(g) -- Amendment to the Marsh Supermarkets, Inc. 1980 Marsh Stock
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
10(h) -- Supplemental Retirement Plan of Marsh Supermarkets, Inc. and
Subsidiaries -- Incorporated by reference to Registration
Statement on Form S-2 (File No. 33-17730).
10(i) -- Indemnification Agreements -- Incorporated by reference to
Form 10-Q for the quarter ended January 6, 1990.
10(j) -- Marsh Supermarkets, Inc. 1991 Employee Stock Incentive
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
10(k) -- Marsh Supermarkets, Inc. Executive Life Insurance
Plan -- Incorporated by reference to Form 10-K for the year
ended March 30, 1991.
10(l) -- Marsh Supermarkets, Inc. Executive Supplemental Long-Term
Disability Plan -- Incorporated by reference to Form 10-K
for the year ended March 30, 1991.
10(m) -- Marsh Supermarkets, Inc. 1992 Stock Option Plan for Outside
Directors -- Incorporated by reference to Proxy Statement,
dated June 25, 1992, for the annual meeting of shareholders
held August 4, 1992.
10(n) -- Employment contracts, dated January 1, 1995 -- Incorporated
by reference to Form 10-Q for the quarter ended January 7,
1995.
10(o) -- Amendment to Marsh Supermarkets, Inc. 1991 Employee Stock
Incentive Plan -- Incorporated by reference to Proxy
Statement, dated June 22, 1995, for Annual Meeting of
Shareholders held August 1, 1995.
10(p) -- Form of Severance Benefits Agreements, dated as of January
1, 1996 -- Incorporated by reference to Form 10-K for the
year ended March 29, 1997.
10(q) -- Form of Split Dollar Insurance Agreement for the benefit of
Don E. Marsh -- Incorporated by reference to Form 10-K for
the year ended March 29, 1997.
10(r) -- Purchase Agreement for $150,000,000 8 7/8% Senior
Subordinated Notes due 2007, dated July 29, 1997 between
Marsh Supermarkets, Inc. and the guarantors listed therein
and Merrill Lynch, Pierce, Fenner & Smith Incorporated and
McDonald & Company Securities, Inc.
11 -- Statement regarding Computation of Per Share Earnings.
12 -- Statement regarding Computation of Ratios.
21 -- Subsidiaries of the Registrant -- Incorporated by reference
to Form 10-K for the year ended March 29, 1997.
</TABLE>
II-3
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
23(a) -- Consent of Independent Auditors.
23(b) -- Consent of Bass, Berry & Sims PLC (contained in their
opinion filed as Exhibit 5).
24 -- Powers of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of State Street Bank and Trust Company.
99(a) -- Form of Letter of Transmittal.
99(b) -- Form of Notice of Guaranteed Delivery.
99(c) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a)(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 factors or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective 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.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of full securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) That, 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, 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
II-4
<PAGE> 127
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.
(d) 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.
(e) 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-5
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned registrants have duly caused this Registration Statement to be
signed on their behalf by the undersigned, thereunto duly authorized, in the
City of Indianapolis, State of Indiana, on August 29, 1997.
MARSH SUPERMARKETS, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARSH DRUGS, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARSH VILLAGE PANTRIES, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
Chief Executive Officer
MUNDY REALTY, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MAR PROPERTIES, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARLEASE, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
II-6
<PAGE> 129
MARSH INTERNATIONAL, INC.
By: /s/ DON E. MARSH
----------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARAINES GREENERY, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
LIMITED HOLDINGS, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
CONVENIENCE STORE DISTRIBUTING
COMPANY
By: Marsh Village Pantries, Inc.,
General Partner
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARSH P.Q., INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
S.C.T., INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
II-7
<PAGE> 130
NORTH MARION DEVELOPMENT
CORPORATION
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
CONTRACT TRANSPORT, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
CRYSTAL FOOD SERVICES, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
LOBILL FOODS, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
CONTRACT TRANSPORT, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
II-8
<PAGE> 131
MARSH SUPERMARKETS, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
VILLAGE PANTRY, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARSH DRUGS, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
MARSH CLEARING HOUSE, LLC
By: Marsh Supermarkets, Inc., Chief
Operating Officer
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
Chairman of the Board of Directors,
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below
hereby constitutes and appoints Douglas W. Dougherty and P. Lawrence Butt, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
II-9
<PAGE> 132
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DON E. MARSH Chairman of the Board of August 29, 1997
- ----------------------------------------------------- Directors and Chief Executive
Don E. Marsh Officer
/s/ DOUGLAS W. DOUGHERTY Senior Vice President, Chief August 29, 1997
- ----------------------------------------------------- Financial Officer and Treasurer
Douglas W. Dougherty
/s/ MARK A. VARNER Corporate Controller of Marsh August 29, 1997
- ----------------------------------------------------- Supermarkets, Inc.
Mark A. Varner
/s/ C. ALAN MARSH Vice Chairman of the Board of August 29, 1997
- ----------------------------------------------------- Marsh Supermarkets, Inc.,
C. Alan Marsh Senior Vice
President -- Corporate
Development of Marsh
Supermarkets, Inc. and Director
Director August , 1997
- -----------------------------------------------------
Garnet R. Marsh
/s/ WILLIAM L. MARSH Senior Vice President, Property August 29, 1997
- ----------------------------------------------------- Management of Marsh
William L. Marsh Supermarkets, Inc. and Director
/s/ CHARLES R. CLARK Director August 29, 1997
- -----------------------------------------------------
Charles R. Clark
/s/ STEPHEN M. HUSE Director August 29, 1997
- -----------------------------------------------------
Stephen M. Huse
/s/ JAMES K. RISK III Director August 29, 1997
- -----------------------------------------------------
James K. Risk III
Director August , 1997
- -----------------------------------------------------
K. Clay Smith
/s/ J. MICHAEL BLAKLEY Director August 29, 1997
- -----------------------------------------------------
J. Michael Blakley
</TABLE>
II-10
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Indianapolis, State of Indiana, on August 29, 1997.
TRADEMARK HOLDINGS, INC.
By: /s/ DON E. MARSH
------------------------------------
Don E. Marsh
President
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below
hereby constitutes and appoints Douglas W. Dougherty and P. Lawrence Butt, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
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 below by the following persons in their
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DON E. MARSH President and Director August 29, 1997
- -----------------------------------------------------
Don E. Marsh
/s/ JOHN A. OSCAR, JR. Treasurer August 29, 1997
- -----------------------------------------------------
John A. Oscar, Jr.
/s/ P. LAWRENCE BUTT Assistant Secretary, Assistant August 29, 1997
- ----------------------------------------------------- Treasurer and Director
P. Lawrence Butt
/s/ EDWARD T. HENDRIXSON Vice President and Director August 29, 1997
- -----------------------------------------------------
Edward T. Hendrixson
</TABLE>
II-11
<PAGE> 134
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C> <C>
3(a) -- Restated Articles of Incorporation, as amended as of May 15,
1991 -- Incorporated by reference to Form 10-K for the year
ended March 30, 1991.
3(b) -- By-Laws as amended as of February 16, 1996 -- Incorporated
by reference to Form 10-K for the year ended March 30, 1996.
4(a) -- Articles V, VI and VII of the Company's Restated Articles of
Incorporation, as amended as of May 15, 1991 -- Incorporated
by reference to Form 10-K for the year ended March 30, 1991.
4(b) -- Articles I and IV of the Company's By-Laws, as amended as of
August 7, 1990 -- Incorporated by reference to Form 10-Q for
the quarter ended January 5, 1991.
4(c) -- Agreement of the Company to furnish a copy of any agreement
relating to certain long-term debt and leases to the
Securities and Exchange Commission upon its
request -- Incorporated by reference to Form 10-K for the
year ended March 27, 1987.
4(d) -- Note Agreement, dated as of May 1, 1988, for $25,000,000
9.48% Senior Notes due June 30, 2003 -- Incorporated by
reference to Form 10-Q for the quarter ended June 25, 1988.
4(e) -- Rights Agreement, dated as of August 1, 1989, between Marsh
National Bank and Trust Company of
Indianapolis -- Incorporated by reference to Form 10-Q for
the quarter ended October 14, 1989.
4(f) -- Amendment No. 1, dated as of May 1, 1991, to Rights
Agreement, dated as of August 1, 1989 -- Incorporated by
reference to Form 10-K for the year ended March 30, 1991.
4(g) -- Note Agreement, dated as of October 15, 1992, for
$35,000,000 8.54% Senior Notes, Series A, due December 31,
2007, and $15,000,000 8.13% Senior Notes, Series B, due
December 31, 2004 -- Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
4(h) -- Indenture dated as of February 15, 1993, between Marsh
Supermarkets, Inc. and Society National Bank, as Trustee,
including form of Indenture -- Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
4(i) -- Amendment to Note Agreements and Assumption Agreement, dated
March 29, 1997, for $35,000,000 8.54% Senior Notes, Series
A, due December 31, 2007, and $15,000,000 8.13% Senior
Notes, Series B, due December 31, 2004 -- Incorporated by
reference to Form 10-K for the year ended March 29, 1997.
4(j) -- Amendment to Note Agreements and Assumption Agreement, dated
March 29, 1997, for $25,000,000 9.48% Senior Notes, due June
30, 2003 -- Incorporated by reference to Form 10-K for the
year ended March 29, 1997.
4(k) -- Indenture dated as of August 5, 1997 between Marsh
Supermarkets, Inc. and certain of its subsidiaries and State
Street Bank and Trust Company, as Trustee.
4(l) -- Form of Marsh Supermarkets, Inc. 8 7/8% Senior Subordinated
Notes due 2007 (contained in the Indenture filed as Exhibit
4(k)).
4(m) -- Form of Marsh Supermarkets, Inc. 8 7/8% Senior Subordinated
Notes due 2007, Series B (contained in the Indenture filed
as Exhibit 4(k)).
5 -- Opinion of Bass, Berry & Sims PLC.
</TABLE>
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EXHIBIT NUMBER
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- ------- ----------- ------------
<S> <C> <C> <C>
--
10(a) Agreements between Ruan Leasing Company and Marsh
Supermarkets, Inc., dated September 18, 1987 -- Incorporated
by reference to Registration Statement on Form S-2 (File No.
33-17730).
10(b) -- Lease Agreements relating to warehouse located at 333 South
Franklin Road, Indianapolis, Indiana -- Incorporated by
reference to Registration Statement on Form S-2 (File No.
33-17730).
10(c) -- Marsh Supermarkets, Inc. 1987 Stock Option
Plan -- Incorporated by reference to Registration Statement
on Form S-8 (File No. 33-33427).
10(d) --
10(e) -- Amendment to the Marsh Supermarkets, Inc. 1987 Stock Option
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
Amended and Restated Employment and Severance Agreements,
dated December 2 (File No. 33-56738).
10(f) -- Marsh Supermarkets, Inc. 1980 Marsh Stock
Plan -- Incorporated by reference to Registration Statement
on Form S-8 (File No. 2-74859).
10(g) -- Amendment to the Marsh Supermarkets, Inc. 1980 Marsh Stock
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
10(h) -- Supplemental Retirement Plan of Marsh Supermarkets, Inc. and
Subsidiaries -- Incorporated by reference to Registration
Statement on Form S-2 (File No. 33-17730).
10(i) -- Indemnification Agreements -- Incorporated by reference to
Form 10-Q for the quarter ended January 6, 1990.
10(j) -- Marsh Supermarkets, Inc. 1991 Employee Stock Incentive
Plan -- Incorporated by reference to Proxy Statement, dated
March 22, 1991, for a Special Meeting of Shareholders held
May 1, 1991.
10(k) -- Marsh Supermarkets, Inc. Executive Life Insurance
Plan -- Incorporated by reference to Form 10-K for the year
ended March 30, 1991.
10(l) -- Marsh Supermarkets, Inc. Executive Supplemental Long-Term
Disability Plan -- Incorporated by reference to Form 10-K
for the year ended March 30, 1991.
10(m) -- Marsh Supermarkets, Inc. 1992 Stock Option Plan for Outside
Directors -- Incorporated by reference to Proxy Statement,
dated June 25, 1992, for the annual meeting of shareholders
held August 4, 1992.
10(n) -- Employment contracts, dated January 1, 1995 -- Incorporated
by reference to Form 10-Q for the quarter ended January 7,
1995.
10(o) -- Amendment to Marsh Supermarkets, Inc. 1991 Employee Stock
Incentive Plan -- Incorporated by reference to Proxy
Statement, dated June 22, 1995, for Annual Meeting of
Shareholders held August 1, 1995.
10(p) -- Form of Severance Benefits Agreements, dated as of January
1, 1996 -- Incorporated by reference to Form 10-K for the
year ended March 29, 1997.
10(q) -- Form of Split Dollar Insurance Agreement for the benefit of
Don E. Marsh -- Incorporated by reference to Form 10-K for
the year ended March 29, 1997.
10(r) -- Purchase Agreement for $150,000,000 8 7/8% Senior
Subordinated Notes due 2007, dated July 29, 1997 between
Marsh Supermarkets, Inc. and the guarantors listed therein
and Merrill Lynch, Pierce, Fenner & Smith Incorporated and
McDonald & Company Securities, Inc.
</TABLE>
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EXHIBIT NUMBER
NUMBER DESCRIPTION PAGE
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</TABLE>
11 -- Statement regarding Computation of Per Share Earnings.
12 -- Statement regarding Computation of Ratios.
21 -- Subsidiaries of the Registrant -- Incorporated by reference
to Form 10-K for the year ended March 29, 1997.
23(a) -- Consent of Independent Auditors.
23(b) -- Consent of Bass, Berry & Sims PLC (contained in their
opinion filed as Exhibit 5).
24 -- Powers of Attorney (included on signature pages)
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of State Street Bank and Trust Company.
99(a) -- Form of Letter of Transmittal.
99(b) -- Form of Notice of Guaranteed Delivery.
99(c) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
<PAGE> 1
EXHIBIT 4(k)
MARSH SUPERMARKETS, INC., AS ISSUER,
MARSH DRUGS, INC.,
MARSH VILLAGE PANTRIES, INC.,
MUNDY REALTY, INC.,
MAR PROPERTIES, INC.,
MARLEASE, INC.,
MARSH INTERNATIONAL, INC.,
MARAINES GREENERY, INC.,
LIMITED HOLDINGS, INC.,
CONVENIENCE STORE DISTRIBUTING COMPANY,
MARSH P.Q., INC.,
S.C.T., INC.,
NORTH MARION DEVELOPMENT CORPORATION,
CONTRACT TRANSPORT, INC.,
CRYSTAL FOOD SERVICES, LLC,
LOBILL FOODS, LLC,
CONTRACT TRANSPORT, LLC,
MARSH SUPERMARKETS, LLC,
VILLAGE PANTRY, LLC,
MARSH DRUGS, LLC,
TRADEMARK HOLDINGS, INC. AND
MARSH CLEARING HOUSE, LLC
AS GUARANTORS, AND
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
---------------
INDENTURE
DATED AS OF AUGUST 5, 1997
$150,000,000
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE> 2
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and Indenture, dated as of August 5, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ----------
<S> <C>
ss.310 (a)(1).........................................................................609
(a)(2).........................................................................609
(b)............................................................................607, 610
ss.311 (a)............................................................................613
ss.312 (a)............................................................................701
(c)............................................................................702
ss.313 (a)............................................................................703
(c)............................................................................703, 704
ss.314 (a)............................................................................704
(a)(4).........................................................................1020
(c)(1).........................................................................103
(c)(2).........................................................................103
(e)............................................................................103
ss.315 (a)............................................................................601(b)
(b)............................................................................602
(c)............................................................................601(a)
(d)............................................................................601(c), 603
(e)............................................................................514
ss.316 (a)(last sentence).............................................................101("Outstanding")
(a)(1)(A)......................................................................502, 512
(a)(1)(B)......................................................................513
(b)............................................................................508
(c)............................................................................105
ss.317 (a)(1).........................................................................503
(a)(2).........................................................................504
(b)............................................................................1003
ss.318 (a)............................................................................108
</TABLE>
- -------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
PARTIES..................................................................................................1
RECITALS.................................................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions...................................................................2
"Acquired Indebtedness".......................................................2
"Affiliate"...................................................................3
"Asset Sale"..................................................................3
"Average Life to Stated Maturity".............................................3
"Bankruptcy Law"..............................................................4
"Board of Directors"..........................................................4
"Board Resolution"............................................................4
"Book-Entry Security".........................................................4
"Business Day"................................................................4
"Capital Lease Obligation"....................................................4
"Capital Stock"...............................................................4
"Change of Control"...........................................................4
"Commission"..................................................................5
"Commodity Price Protection Agreement"........................................5
"Common Stock"................................................................5
"Company".....................................................................6
"Company Request" or "Company Order"..........................................6
"Consolidated Fixed Charge Coverage Ratio"....................................6
"Consolidated Income Tax Expense".............................................6
"Consolidated Interest Expense"...............................................6
"Consolidated Net Income (Loss)"..............................................7
"Consolidated Net Sales"......................................................8
"Consolidated Net Worth"......................................................8
"Consolidated Non-cash Charges"...............................................8
"Consolidation"...............................................................8
"Corporate Trust Office"......................................................8
"Currency Hedging Arrangements"...............................................8
"Default".....................................................................8
"Depositary"..................................................................8
"Designated Senior Indebtedness"..............................................8
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"Disinterested Director"......................................................9
"Event of Default"............................................................9
"Exchange Act"................................................................9
"Exchange Offer"..............................................................9
"Exchange Offer Registration Statement".......................................9
"Fair Market Value"...........................................................9
"Gasoline Joint Venture"......................................................9
"Generally Accepted Accounting Principles" or "GAAP"..........................9
"Global Securities"...........................................................9
"Guarantee"...................................................................9
"Guaranteed Debt"............................................................10
"Guarantor"..................................................................10
"Guarantor Senior Indebtedness"..............................................10
"Holder".....................................................................11
"Indebtedness"...............................................................11
"Indenture"..................................................................12
"Indenture Obligations"......................................................12
"Initial Securities".........................................................12
"Initial Purchasers".........................................................12
"Interest Payment Date"......................................................12
"Interest Rate Agreements"...................................................12
"Investment".................................................................12
"Issue Date".................................................................12
"Lien".......................................................................12
"Maturity"...................................................................13
"Moody's"....................................................................13
"Net Cash Proceeds"..........................................................13
"Non-U.S. Person"............................................................14
"Non-U.S. Subsidiaries"......................................................14
"Officers' Certificate"......................................................14
"Opinion of Counsel".........................................................14
"Opinion of Independent Counsel".............................................14
"Outstanding"................................................................14
"Pari Passu Indebtedness"....................................................15
"Paying Agent"...............................................................15
"Permitted Holders"..........................................................15
"Permitted Indebtedness".....................................................15
"Permitted Investment".......................................................18
"Person".....................................................................19
"Predecessor Security".......................................................19
"Preferred Stock"............................................................19
</TABLE>
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"Prospectus".................................................................19
"Purchase Money Obligation"..................................................19
"QIB"........................................................................20
"Qualified Capital Stock"....................................................20
"Redeemable Capital Stock"...................................................20
"Redemption Date"............................................................20
"Redemption Price"...........................................................20
"Registration Rights Agreement"..............................................20
"Registration Statement".....................................................20
"Regular Record Date"........................................................21
"Responsible Officer"........................................................21
"Restricted Subsidiary"......................................................21
"Sale and Leaseback Transaction".............................................21
"S&P"........................................................................21
"Securities Act".............................................................21
"Senior Indebtedness"........................................................21
"Senior Representative"......................................................22
"Shelf Registration Statement"...............................................22
"Significant Restricted Subsidiary"..........................................22
"Special Record Date"........................................................22
"Stated Maturity"............................................................22
"Subordinated Indebtedness"..................................................22
"Subsidiary".................................................................22
"Temporary Cash Investments".................................................22
"Trustee"....................................................................23
"Trust Indenture Act"........................................................23
"Unrestricted Subsidiary"....................................................23
"Unrestricted Subsidiary Indebtedness".......................................24
"Voting Stock"...............................................................24
"Wholly Owned Subsidiary"....................................................25
Section 102. Other Definitions............................................................25
Section 103. Compliance Certificates and Opinions.........................................26
Section 104. Form of Documents Delivered to Trustee.......................................27
Section 105. Acts of Holders..............................................................28
Section 106. Notices, etc., to the Trustee, the Company and any
Guarantor.................................................................29
Section 107. Notice to Holders; Waiver....................................................30
Section 108. Conflict with Trust Indenture Act............................................30
Section 109. Effect of Headings and Table of Contents.....................................31
Section 110. Successors and Assigns.......................................................31
Section 111. Separability Clause..........................................................31
Section 112. Benefits of Indenture........................................................31
</TABLE>
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Section 113. GOVERNING LAW................................................................31
Section 114. Legal Holidays...............................................................31
Section 115. Independence of Covenants....................................................32
Section 116. Schedules and Exhibits.......................................................32
Section 117. Counterparts.................................................................32
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally..............................................................32
Section 202. Form of Face of Security.....................................................34
Section 203. Form of Reverse of Securities................................................43
Section 204. Form of Trustee's Certificate of Authentication..............................51
Section 205. Form of Guarantee of Each of the Guarantors..................................52
Section 206. Form of Option of Holder to Elect Purchase...................................55
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms..............................................................57
Section 302. Denominations................................................................58
Section 303. Execution, Authentication, Delivery and Dating...............................58
Section 304. Temporary Securities.........................................................59
Section 305. Registration, Registration of Transfer and Exchange..........................60
Section 306. Book-Entry Provisions for U.S. Global Security...............................62
Section 307. Special Transfer Provisions..................................................64
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.............................68
Section 309. Payment of Interest; Interest Rights Preserved...............................69
Section 310. CUSIP Numbers................................................................70
Section 311. Persons Deemed Owners........................................................71
Section 312. Cancellation.................................................................71
Section 313. Computation of Interest......................................................71
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance................................................................71
Section 402. Defeasance and Discharge.....................................................72
Section 403. Covenant Defeasance..........................................................72
</TABLE>
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Section 404. Conditions to Defeasance or Covenant Defeasance..............................73
Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.............................75
Section 406. Reinstatement................................................................76
ARTICLE FIVE
REMEDIES
Section 501. Events of Default............................................................76
Section 502. Acceleration of Maturity; Rescission and Annulment...........................79
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee...................................................................80
Section 504. Trustee May File Proofs of Claim.............................................81
Section 505. Trustee May Enforce Claims without Possession of
Securities................................................................82
Section 506. Application of Money Collected...............................................82
Section 507. Limitation on Suits..........................................................83
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest......................................................83
Section 509. Restoration of Rights and Remedies...........................................84
Section 510. Rights and Remedies Cumulative...............................................84
Section 511. Delay or Omission Not Waiver.................................................84
Section 512. Control by Holders...........................................................84
Section 513. Waiver of Past Defaults......................................................85
Section 514. Undertaking for Costs........................................................85
Section 515. Waiver of Stay, Extension or Usury Laws......................................86
Section 516. Remedies Subject to Applicable Law...........................................86
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee............................................................86
Section 602. Notice of Defaults...........................................................88
Section 603. Certain Rights of Trustee....................................................88
Section 604. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.............................89
Section 605. Trustee and Agents May Hold Securities; Collections; etc.....................90
Section 606. Money Held in Trust..........................................................90
</TABLE>
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Section 607. Compensation and Indemnification of Trustee and Its
Prior Claim...............................................................90
Section 608. Conflicting Interests........................................................91
Section 609. Trustee Eligibility..........................................................91
Section 610. Resignation and Removal; Appointment of Successor
Trustee...................................................................91
Section 611. Acceptance of Appointment by Successor.......................................93
Section 612. Merger, Conversion, Consolidation or Succession to
Business..................................................................94
Section 613. Preferential Collection of Claims Against Company............................95
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders...................................................................95
Section 702. Disclosure of Names and Addresses of Holders.................................95
Section 703. Reports by Trustee...........................................................96
Section 704. Reports by Company and Guarantors............................................96
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Guarantors May Consolidate, etc., Only on
Certain Terms.............................................................97
Section 802. Successor Substituted.......................................................100
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent
of Holders...............................................................100
Section 902. Supplemental Indentures and Agreements with Consent of
Holders..................................................................101
Section 903. Execution of Supplemental Indentures and Agreements.........................103
Section 904. Effect of Supplemental Indentures...........................................103
Section 905. Conformity with Trust Indenture Act.........................................103
Section 906. Reference in Securities to Supplemental Indentures..........................103
Section 907. Notice of Supplemental Indentures...........................................104
</TABLE>
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Section 908. Revocation and Effect of Consents...........................................104
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest..................................104
Section 1002. Maintenance of Office or Agency.............................................104
Section 1003. Money for Security Payments to Be Held in Trust.............................105
Section 1004. Corporate Existence.........................................................106
Section 1005. Payment of Taxes and Other Claims...........................................107
Section 1006. Maintenance of Properties...................................................107
Section 1007. Insurance...................................................................108
Section 1008. Limitation on Indebtedness..................................................108
Section 1009. Limitation on Restricted Payments...........................................109
Section 1010. Limitation on Transactions with Affiliates..................................112
Section 1011. Limitation on Liens.........................................................113
Section 1012. Limitation on Senior Subordinated Indebtedness..............................114
Section 1013. Limitation on Sale of Assets................................................114
Section 1014. Limitation on Issuances of Guarantees of Indebtedness.......................119
Section 1015. Restriction on Transfer of Assets...........................................121
Section 1016. Purchase of Securities upon a Change of Control.............................121
Section 1017. Limitation on Preferred Stock of Restricted Subsidiaries....................125
Section 1018. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries...................................................125
Section 1019. Limitation on Unrestricted Subsidiaries.....................................126
Section 1020. Provision of Financial Statements...........................................126
Section 1021. Statement by Officers as to Default.........................................127
Section 1022. Waiver of Certain Covenants.................................................127
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption........................................................128
Section 1102. Applicability of Article....................................................128
Section 1103. Election to Redeem; Notice to Trustee.......................................128
Section 1104. Selection by Trustee of Securities to Be Redeemed...........................128
Section 1105. Notice of Redemption........................................................129
Section 1106. Deposit of Redemption Price.................................................130
Section 1107. Securities Payable on Redemption Date.......................................130
</TABLE>
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Section 1108. Securities Redeemed or Purchased in Part....................................131
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.....................................131
Section 1202. Application of Trust Money..................................................132
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness...............................132
Section 1302. Payment Over of Proceeds Upon Dissolution, etc..............................133
Section 1303. Suspension of Payment When Designated Senior
Indebtedness in Default..................................................134
Section 1304. Payment Permitted if No Default.............................................136
Section 1305. Subrogation to Rights of Holders of Senior Indebtedness.....................136
Section 1306. Provisions Solely to Define Relative Rights.................................137
Section 1307. Trustee to Effectuate Subordination.........................................137
Section 1308. No Waiver of Subordination Provisions.......................................137
Section 1309. Notice to Trustee...........................................................138
Section 1310. Reliance on Judicial Orders or Certificates.................................139
Section 1311. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.........................................140
Section 1312. Article Applicable to Paying Agents.........................................140
Section 1313. No Suspension of Remedies...................................................140
Section 1314. Trustee's Relation to Senior Indebtedness...................................140
ARTICLE FOURTEEN
GUARANTEES
Section 1401. Guarantors' Guarantee.......................................................141
Section 1402. Continuing Guarantee; No Right of Set-Off;
Independent Obligation...................................................141
Section 1403. Guarantee Absolute..........................................................142
Section 1404. Right to Demand Full Performance............................................145
Section 1405. Waivers.....................................................................146
Section 1406. The Guarantors Remain Obligated in Event the Company is
No Longer Obligated to Discharge Indenture
Obligations..............................................................147
</TABLE>
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Section 1407. Fraudulent Conveyance; Subrogation.........................................147
Section 1408. Guarantee is in Addition to Other Security..................................147
Section 1409. Release of Security Interests...............................................148
Section 1410. No Bar to Further Actions...................................................148
Section 1411. Failure to Exercise Rights Shall Not Operate as a
Waiver; No Suspension of Remedies.......................................148
Section 1412. Trustee's Duties; Notice to Trustee........................................149
Section 1413. Successors and Assigns......................................................149
Section 1414. Release of Guarantee........................................................149
Section 1415. Execution of Guarantee......................................................150
Section 1416. Guarantee Subordinate to Guarantor Senior Indebtedness......................150
Section 1417. Payment Over of Proceeds Upon Dissolution of the
Guarantor, etc...........................................................150
Section 1418. Default on Guarantor Senior Indebtedness....................................152
Section 1419. Payment Permitted by Each of the Guarantors if No Default...................152
Section 1420. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.............................................................153
Section 1421. Provisions Solely to Define Relative Rights.................................153
Section 1422. Trustee to Effectuate Subordination.........................................154
Section 1423. No Waiver of Subordination Provisions.......................................154
Section 1424. Notice to Trustee by Each of the Guarantors.................................155
Section 1425. Reliance on Judicial Order or Certificates..................................156
Section 1426. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.........................156
Section 1427. Article Applicable to Paying Agents.........................................156
Section 1428. No Suspension of Remedies...................................................156
Section 1429. Trustee's Relation to Guarantor Senior Indebtedness.........................157
TESTIMONIUM............................................................................................158
SIGNATURES AND SEALS...................................................................................158
ACKNOWLEDGMENTS
SCHEDULE I Existing Indebtedness
SCHEDULE II Related Party Transactions
EXHIBIT A Form of Intercompany Note
</TABLE>
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<TABLE>
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<S> <C> <C>
EXHIBIT B Form of Certificate to be Delivered upon Termination of Restricted Period
EXHIBIT C Form of Certificate to be Delivered in Connection with Transfers to Non-QIB
Institutional Accredited Investors
EXHIBIT D Form of Certificate to be Delivered in Connection with Transfers Pursuant to
Regulation S
APPENDIX I Form of Transferee Certificate for Series A Securities
APPENDIX II Form of Transferee Certificate for Series B Securities
</TABLE>
(x)
<PAGE> 13
INDENTURE, dated as of August 5, 1997, among Marsh Supermarkets, Inc., an
Indiana corporation (the "Company"), Marsh Drugs, Inc., an Indiana corporation,
Marsh Village Pantries, Inc., an Indiana corporation, Mundy Realty, Inc., an
Indiana corporation, Mar Properties, Inc., an Indiana corporation, Marlease,
Inc., an Indiana corporation, Marsh International, Inc., an Indiana
corporation, Maraines Greenery, Inc., an Indiana corporation, Limited Holdings,
Inc., an Indiana corporation, Convenience Store Distributing Company, an Ohio
partnership, Marsh P.Q., Inc., an Indiana corporation, S.C.T., Inc., an Indiana
corporation, North Marion Development Corporation, an Indiana corporation,
Contract Transport, Inc., an Indiana corporation, Crystal Food Services, LLC,
an Indiana limited liability company, Lobill Foods, LLC, an Indiana limited
liability company, Contract Transport, LLC, an Indiana limited liability
company, Marsh Supermarkets, LLC, an Indiana limited liability company, Village
Pantry, LLC, an Indiana limited liability company, Marsh Drugs, LLC, an Indiana
limited liability company, Trademark Holdings, Inc., a Delaware corporation,
and Marsh Clearing House, LLC, an Indiana limited liability company
(collectively, the "Guarantors") and State Street Bank and Trust Company, a
Massachusetts trust company, as trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTORS
The Company has duly authorized the creation of an issue of 8 7/8% Senior
Subordinated Notes due 2007, Series A (the "Series A Securities" or the
"Initial Securities"), and an issue of 8 7/8% Senior Subordinated Notes due
2007, Series B (the "Series B Securities" and, together with the Series A
Securities, the "Securities"), 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 and the Securities;
Each Guarantor has duly authorized the issuance of a Guarantee of the
Securities, of substantially the tenor hereinafter set forth, and to provide
therefor, each Guarantor has duly authorized the execution and delivery of this
Indenture and its Guarantee;
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make (i) the Securities,
when duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company, (ii) the Guarantees, when
executed by each of the Guarantors and delivered hereunder, the valid
obligation of each of the
<PAGE> 14
Guarantors and (iii) this Indenture a valid agreement of the Company and each
of the Guarantors in accordance with the terms of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, 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 include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(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) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to this
Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in Article
Four.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or
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such acquisition, as the case may be. Acquired Indebtedness shall be deemed to
be incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Restricted Subsidiary, as the case may
be.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin;
or (iii) any other Person 5% or more of the Voting Stock of which is
beneficially owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of: (i)
any Capital Stock of any Subsidiary; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Subsidiaries; or (iii) any other properties or assets of the Company or any
Subsidiary other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include any transfer of
properties and assets (A) that is governed by the provisions described under
Article Eight of this Indenture, (B) that is by the Company to any Guarantor,
or by any Subsidiary to the Company or any Wholly Owned Subsidiary in
accordance with the terms of the Indenture, (C) that is of obsolete equipment
in the ordinary course of business or (D) the Fair Market Value of which in the
aggregate does not exceed $3,000,000. For the purposes of this Indenture, with
respect to Asset Sales involving the sale of stores, the term "cash" as used in
clause (a)(i) of Section 1013 shall include interest bearing notes with a
maturity of three years or less which are secured by the store or stores which
are the subject of the Asset Sale.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to
the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
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"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state 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 the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means any Securities bearing the legend specified in
Section 202 evidencing all or part of a series of Securities, authenticated and
delivered to the Depositary for such series or its nominee, and registered in
the name of such Depositary or nominee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions or trust companies in The City
of New York or the city in which the Corporate Trust Office of the Trustee is
located are authorized or obligated by law, regulation or executive order to
close.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as
a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests whether now outstanding or issued after
the date hereof.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the total outstanding Voting Stock of the Company; provided that
the Permitted Holders beneficially own (as so defined) a lesser percentage of
such Voting Stock than such other "person" or "group"; (ii) during any period
of two consecutive years, individuals who at the beginning of such period
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<PAGE> 17
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of 66-2/3%
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of such
Board of Directors then in office; (iii) the Company consolidates with or
merges with or into any Person or conveys, transfers or leases all or
substantially all of its assets to any Person, or any corporation consolidates
with or merges into or with the Company in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not changed or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock
of the surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as a Restricted
Payment as described under Section 1009 of this Indenture (and such amount
shall be treated as a Restricted Payment subject to the provisions in the
Indenture described under Section 1009) and (B) no "person" or "group", other
than Permitted Holders, owns immediately after such transaction, directly or
indirectly, more than the greater of (i) 35% of the total outstanding Voting
Stock of the surviving corporation and (ii) the percentage of the outstanding
Voting Stock of the surviving corporation owned, directly or indirectly, by
Permitted Holders immediately after such transaction; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions described under
Article Eight.
"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.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value of which is dependent upon, fluctuations
in commodity prices.
"Common Stock" means the common stock, no par value per share, of the
Company.
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<PAGE> 18
"Company" means Marsh Supermarkets, Inc., a corporation incorporated under
the laws of Indiana, until a successor Person shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person. To the extent necessary to comply with the
requirements of the provisions of Sections 310 through 317 of the Trust
Indenture Act as they are applicable to the Company, the term "Company" shall
include any other obligor with respect to the Securities for purposes of
complying with such provisions.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
President, its Chief Executive Officer, its Chief Financial Officer or a Vice
President (regardless of Vice Presidential designation), and by any one of its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income (Loss) in each
case, for such period, of such Person and its Restricted Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP to (b) the sum of
Consolidated Interest Expense for such period and cash and non-cash dividends
paid on any Preferred Stock of such Person during such period; provided that
(i) in making such computation, the Consolidated Interest Expense attributable
to interest on any Indebtedness computed on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date
of computation had been the applicable rate for the entire period and (B) which
was not outstanding during the period for which the computation is being made
but which bears, at the option of such Person, a fixed or floating rate of
interest, shall be computed by applying at the option of such Person either the
fixed or floating rate and (ii) in making such computation, the Consolidated
Interest Expense of such Person attributable to 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.
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation,
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(i) amortization of debt discount, (ii) the net costs associated with Interest
Rate Agreements, Currency Hedging Arrangements and Commodity Price Protection
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation and (iv) accrued interest, plus (b) (i) the
interest component of the Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and its Subsidiaries during such
period and (ii) all capitalized interest of such Person and its Subsidiaries
plus (c) the interest expense under any Guaranteed Debt of such Person and any
Subsidiary to the extent not included under clause (a)(iv) above, plus (d) the
aggregate amount for such period of dividends on any Redeemable Capital Stock
or Preferred Stock of the Company and its Restricted Subsidiaries, in each case
as determined on a Consolidated basis in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a Consolidated basis as determined in
accordance with GAAP, adjusted, to the extent included in calculating such net
income (or loss), by excluding, without duplication, (i) all extraordinary
gains or losses, net of taxes (less all fees and expenses relating thereto),
(ii) the portion of net income (or loss) of such Person and its Restricted
Subsidiaries on a Consolidated basis allocable to minority interests in
unconsolidated Persons to the extent that cash dividends or distributions have
not actually been received by such Person or one of its Consolidated Restricted
Subsidiaries, (iii) net income (or loss) of any Person combined with such
Person or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (or losses), net of taxes (less all fees and
expenses relating thereto), in respect of dispositions of assets other than in
the ordinary course of business, (vi) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by 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, (vii)
any restoration to income of any contingency reserve, net of taxes, except to
the extent provision for such reserve was made out of income accrued at any
time following the date of the Indenture, (viii) any gain, net of taxes,
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness of such Person, (ix) the net loss or gain resulting
from any prepayment or redemption premiums incurred with respect to
Indebtedness repaid with the proceeds of the issuance of the Securities in
accordance with the section entitled "Use of Proceeds" in the Offering
Memorandum relating to the sale of Securities or (x) the net non-cash
compensation expense in connection with the issuance of any employee stock
options.
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<PAGE> 20
"Consolidated Net Sales" of any Person means, for any period, the
Consolidated net sales of such Person and its Restricted Subsidiaries as
determined in accordance with GAAP.
"Consolidated Net Worth" of any person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock) of such
Person and its Restricted Subsidiaries, as of such date, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Restricted Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its Restricted Subsidiaries would
normally be consolidated with those of such Person, all in accordance with
GAAP. The term "Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an affiliate
or agent thereof at which at any particular time the corporate trust business
for the purposes of this Indenture shall be principally administered, which
office at the date of execution of this Indenture is located at 225 Asylum
Street, Hartford, Connecticut 06103.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form of
one or more Book-Entry Securities, The Depository Trust Company ("DTC"), its
nominees and successors, or another Person designated as Depositary by the
Company, which must be a clearing agency registered under the Exchange Act.
"Designated Senior Indebtedness" means any Senior Indebtedness which at
the time of determination has an aggregate principal amount outstanding of at
least $10,000,000 and is specifically designated in the instrument evidencing
such Senior
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Indebtedness or the agreement under which such Senior Indebtedness arises as
"Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the Board of Directors of the Company who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"Exchange Offer" means the exchange offer by the Company and the
Guarantors of Series B Securities for Series A Securities to be effected
pursuant to Section 2.1 of the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration statement
under the Securities Act contemplated by Section 2.1 of the Registration Rights
Agreement.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing
buyer under no compulsion to buy.
"Gasoline Joint Venture" means any joint venture to which the Company or
any Restricted Subsidiary is a party with a gasoline supplier in connection
with the construction, acquisition, renovation and operation of convenience
stores or car washes which are not owned or operated by the Company or any
Restricted Subsidiary as of the date of this Indenture.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
which are in effect on the date hereof.
"Global Securities" means a security evidencing all or a part of the
Securities to be issued as Book-Entry Securities issued to the Depositary in
accordance with Section 306.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations pursuant to a guarantee given in accordance with this
Indenture.
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"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to
assure the holder of such Indebtedness against loss, (iii) to supply funds to,
or in any other manner invest in, the debtor (including any agreement to pay
for property or services without requiring that such property be received or
such services be rendered), (iv) to maintain working capital or equity capital
of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor against
loss; provided that the term "guarantee" shall not include endorsements for
collection or deposit, in either case in the ordinary course of business.
"Guarantor" means the Subsidiaries listed as guarantors in this Indenture
and any other Subsidiary which is a guarantor of the Securities, including any
Person that is required after the date of this Indenture to execute a guarantee
of the Securities pursuant to Sections 1011 or Section 1014 hereof until a
successor replaces such party pursuant to the applicable provisions of the
Indenture and, thereafter, shall mean such successor; provided, that for
purposes hereof the term "Guarantor" shall not include any Unrestricted
Subsidiary unless specifically provided otherwise.
"Guarantor Senior Indebtedness" means the principal of, premium, if any,
and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of this Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to any Guarantee.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not
include (i) Indebtedness evidenced by the Guarantees, (ii) Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of any Guarantor,
(iii) Indebtedness which when incurred and without respect to any election
under Section 1111(b) of Title 11 of the United States Code, is without
recourse to any Guarantor, (iv) Indebtedness which is represented by Redeemable
Capital Stock, (v) any liability for foreign, federal, state, local or other
taxes owed or owing by any Guarantor to the extent such liability constitutes
Indebtedness, (vi) Indebtedness of any Guarantor to a Subsidiary or any other
Affiliate of
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the Company or any of such Affiliate's subsidiaries, (vii) Indebtedness
evidenced by any guarantee of any Subordinated Indebtedness or Pari Passu
Indebtedness and (viii) that portion of any Indebtedness which at the time of
issuance is issued in violation of this Indenture.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade payables arising in the ordinary
course of business, (iv) all obligations under Interest Rate Agreements,
Currency Hedging Arrangements or Commodity Price Protection Agreements of such
Person, (v) all Capital Lease Obligations of such Person, (vi) all Indebtedness
referred to in clauses (i) through (v) above of other Persons and all dividends
of other Persons, the payment of which is secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien, upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, (vii) all Guaranteed Debt of such Person, (viii) all Redeemable
Capital Stock issued by such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends,
and (ix) any amendment, supplement, modification, deferral, renewal, extension,
refunding or refinancing of any liability of the types referred to in clauses
(i) through (viii) above. For purposes hereof, the "maximum fixed repurchase
price" of any Redeemable Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value to be determined
in good faith by the board of directors of the issuer of such Redeemable
Capital Stock.
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"Indenture" means this instrument as originally executed (including all
exhibits and schedules thereto) 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.
"Indenture Obligations" means the obligations of the Company and any other
obligor under this Indenture or under the Securities, including any Guarantor,
to pay principal of, premium, if any, and interest on the Securities when due
and payable, and all other amounts due or to become due under or in connection
with this Indenture and the Securities, and the performance of all other
obligations to the Trustee and the holders under this Indenture and the
Securities, according to the respective terms hereof and thereof.
"Initial Securities" has the meaning stated in the first recital of this
Indenture.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and McDonald & Company Securities, Inc.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest
rate protection agreements (including, without limitation, interest rate swaps,
caps, floors, collars and similar agreements) and/or other types of interest
rate hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly,
any advance, loan (including guarantees), or other extension of credit or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued or owned by
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Lien" means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), privilege, security interest, assignment, deposit,
arrangement, easement, hypothecation, claim, preference, priority or other
encumbrance upon or with respect to
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any property of any kind (including any conditional sale, capital lease or
other title retention agreement, any leases in the nature thereof, and any
agreement to give any security interest), real or personal, movable or
immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Securities, the date on
which the principal of the Securities becomes due and payable as therein
provided or as provided in this Indenture, whether at Stated Maturity, the
Offer Date or the Redemption Date and whether by declaration of acceleration,
Offer in respect of Excess Proceeds, Change of Control Offer in respect of a
Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any
Person, the proceeds thereof (without duplication in respect of all Asset
Sales) in the form of cash or Temporary Cash Investments including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed of for, cash or Temporary Cash Investments
(except to the extent that such obligations are financed or sold with recourse
to the Company or any Restricted Subsidiary) net of (i) brokerage commissions
and other reasonable fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Subsidiary, as the case may be, as
a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any Restricted Subsidiary, as
the case may be, after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee and (b) with respect to any issuance or sale of
Capital Stock or options, warrants or rights to purchase Capital Stock, or debt
securities or Capital Stock that have been converted into or exchanged for
Capital Stock as referred to under Section 1009 of this Indenture, the proceeds
of such issuance or sale in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are financed or
sold with recourse to the
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<PAGE> 26
Company or any Restricted Subsidiary), net of attorneys' fees, accountants'
fees and brokerage, consultation, underwriting and other fees and expenses
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Non-U.S. Person" means a Person that is not a "U.S. person" as defined in
Regulation S under the Securities Act.
"Non-U.S. Subsidiaries" means Subsidiaries organized under the laws of
jurisdictions other than the United States and the states and territories
thereof.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, the Chief Executive Officer, the Chief Financial Officer
or a Vice President (regardless of Vice Presidential designation), and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of
the Company or any Guarantor, as the case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, any Guarantor or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and
who shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel which
is issued by a Person who is not an employee, director or consultant (other
than non-employee legal counsel) of the Company or any Guarantor and who shall
be reasonably acceptable to the Trustee.
"Outstanding" when used with respect to Securities means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, 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 Securities; provided that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee has been
made;
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<PAGE> 27
(c) Securities, except to the extent provided in Sections 402 and 403,
with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Four; and
(d) Securities in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee and the Company proof reasonably satisfactory to each of them that such
Securities are held by a bona fide purchaser in whose hands the Securities are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company, any Guarantor or any other obligor upon the Securities or
any Affiliate of the Company, any Guarantor or such other obligor.
"Pari Passu Indebtedness" means (a) any Indebtedness of the Company which
ranks pari passu in right of payment to the Securities 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) authorized by the
Company to pay the principal of, premium, if any, or interest on, any
Securities on behalf of the Company.
"Permitted Holders" means (i) Garnet Marsh, Don E. Marsh, C. Alan Marsh,
William L. Marsh or any of their spouses, issues or other member of the
immediate family of such persons (collectively, the "Marsh Family"), (ii)
trusts created for the benefit of any member of the Marsh Family, (iii)
entities controlled by any of the Marsh Family and (iv) in the event of the
death of any members of the Marsh family, the heirs or testamentary legatees of
such member of the Marsh Family.
"Permitted Indebtedness" means:
15
<PAGE> 28
(i) Indebtedness of the Company or any Guarantor under revolving credit
facilities or bank term loans in an aggregate principal amount at any one time
outstanding not to exceed $70,000,000;
(ii) Indebtedness of the Company pursuant to the Securities and
Indebtedness of any Guarantor pursuant to a Guarantee of the Securities;
(iii) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the date of this Indenture or available under contracts on the date of this
Indenture and listed on Schedule I hereto;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness for borrowed money of the Company owing to a
Subsidiary is made pursuant to an intercompany note in the form of Exhibit A
hereto; provided, further, that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to a
Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness
by the Company not permitted by this clause (iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that any such
Indebtedness for borrowed money is made pursuant to an intercompany note in the
form of Exhibit A hereto; provided, further, that (a) any disposition, pledge
or transfer of any such Indebtedness to a Person (other than the Company or a
Wholly Owned Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (v), and (b) any
transaction pursuant to which any Wholly Owned Restricted Subsidiary, which has
Indebtedness owing to the Company or any other Wholly Owned Restricted
Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary shall be deemed
to be the incurrence of Indebtedness by such Wholly Owned Restricted Subsidiary
that is not permitted by this clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance with the
provisions of Section 1014 hereof;
(vii) obligations of the Company entered into in the ordinary course of
business (a) pursuant to Interest Rate Agreements designed to protect the
Company or any Restricted Subsidiary against fluctuations in interest rates in
respect of Indebtedness of the Company or any Restricted Subsidiary as long as
such obligations do not exceed the aggregate principal amount of such
Indebtedness then outstanding, (b) under any Currency Hedging Arrangements,
which if related to Indebtedness do not increase the
16
<PAGE> 29
amount of such Indebtedness other than as a result of foreign exchange
fluctuations, or (c) under any Commodity Price Protection Agreements, which if
related to Indebtedness do not increase the amount of such Indebtedness other
than as a result of foreign exchange fluctuations;
(viii) Indebtedness of the Company or any Guarantor represented by Capital
Lease Obligations or Purchase Money Obligations or other Indebtedness incurred
or assumed in connection with the acquisition or development of real or
personal, movable or immovable, property in each case incurred for the purpose
of financing or refinancing all or any part of the purchase price or cost of
construction or improvement of property used in the business of the Company or
such Guarantor, in an aggregate principal amount pursuant to this clause (viii)
not to exceed $10,000,000 per year; provided, that the aggregate amount of
Indebtedness outstanding pursuant to this clause (viii) at any one time shall
not exceed 3% of the Consolidated Net Sales of the Company in the most recent
fiscal year for which audited financial statements are available; provided,
further, that the principal amount of any Indebtedness permitted under this
clause (viii) did not in each case at the time of incurrence exceed the Fair
Market Value, as determined by the Company or such Guarantor in good faith, of
the acquired or constructed asset or improvement so financed;
(ix) letters of credit to support workers compensation obligations and
bankers acceptances and performance bonds, surety bonds and performance
guarantees, of the Company or any Guarantor, in each case, in the ordinary
course of business consistent with past practice;
(x) Guarantees by the Company of Indebtedness of any Guarantor permitted
by the terms of this Indenture;
(xi) any renewals, extensions, substitutions, refundings, refinancings or
replacements (collectively, a "refinancing") of any Indebtedness described in
clauses (ii) and (iii) of this definition of "Permitted Indebtedness,"
including any successive refinancings so long as the aggregate principal amount
of Indebtedness represented thereby is not increased by such refinancing plus
the lesser of (I) the stated amount of any premium or other payment required to
be paid in connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (II) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness, plus, in either case,
the amount of expenses of the Company or a Restricted Subsidiary incurred in
connection with such refinancing and (A) in the case of any refinancing of
Indebtedness that is Subordinated Indebtedness, such new Indebtedness is made
subordinated to the Securities at least to the same extent as the Indebtedness
being refinanced and (B) in the
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<PAGE> 30
case of Pari Passu Indebtedness or Subordinated Indebtedness, as the case may
be, such refinancing does not reduce the Average Life to Stated Maturity or the
Stated Maturity of such Indebtedness; and
(xii) Indebtedness of the Company or any Guarantor in addition to that
described in clauses (i) through (xi) above, and any renewals, extensions,
substitutions, refinancings or replacements of such Indebtedness, so long as
the aggregate principal amount of all such Indebtedness shall not exceed
$25,000,000 outstanding at any one time in the aggregate.
"Permitted Investment" means (i) Investments in any Wholly Owned
Restricted Subsidiary or any Person which, as a result of such Investment, (a)
becomes a Wholly Owned Restricted Subsidiary or (b) is merged or consolidated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary; (ii)
Indebtedness of the Company or a Restricted Subsidiary described under clauses
(iv), (v), (vi) and (vii) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments in any of the Securities; (v)
Investments acquired by the Company or any Restricted Subsidiary in connection
with an Asset Sale permitted under Section 1013 of this Indenture to the extent
such Investments are non-cash proceeds as permitted under such covenant; (vi)
Investments in existence on the date of this Indenture; (vii) guarantees of
Indebtedness of a Wholly Owned Restricted Subsidiary given by the Company or
another Wholly Owned Restricted Subsidiary and guarantees of Indebtedness of
the Company given by any Restricted Subsidiary, in each case, in accordance
with the terms of this Indenture; (viii) loans to (a) executive officers of the
Company in the ordinary course of business not to exceed $1,000,000 in the
aggregate, (b) employees (other than executive officers) of the Company in the
ordinary course of business not to exceed $1,000,000 in the aggregate and (c)
employees (including executive officers) of the Company in respect of loans to
employees to enable such employees to pay the exercise price for options on the
Company's common stock, which loans are secured by such common stock, not to
exceed $3,000,000 in the aggregate; (ix) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and worker's
compensation, performance and other similar deposits; (x) Investments
represented by accounts receivable created or acquired in the ordinary course
of business; (xi) loans or advances to vendors in the ordinary course of
business in an amount not to exceed $1,000,000 at any one time; (xii)
Investments in Gasoline Joint Ventures, provided that after giving effect to
any such investment on a pro forma basis the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
provisions of Section 1008 of this Indenture; and (xiii) any other Investments
in the aggregate amount of $5,000,000 at any one time outstanding.
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<PAGE> 31
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 308 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Prospectus" means the prospectus included in a Registration Statement,
including any preliminary prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including any such prospectus
supplement with respect to the terms of the offering of any portion of the
Series A Securities 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 Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company and its Restricted Subsidiaries
and any additions and accessions thereto, which are purchased by the Company or
any Restricted Subsidiary at any time after the Securities are issued; provided
that (i) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom
except that, in the case of land upon which a supermarket, convenience store or
banquet facility is constructed, such Purchase Money Security Agreement may be
entered into within two years after the purchase of such land if the Purchase
Money Security Agreement is entered into within 180 days after the substantial
completion of such supermarket, convenience store or banquet facility, (ii) at
no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accession thereto and except in respect of
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<PAGE> 32
fees and other obligations in respect of such Indebtedness and (iii) (A) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Purchase Money Security Agreement is entered into
exceed 100% of the purchase price to the Company and its Restricted
Subsidiaries of the assets subject thereto or (B) the Indebtedness secured
thereby shall be with recourse solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A under the
Securities Act.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Securities or is redeemable at the option of the holder
thereof at any time prior to any such Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the price at which it is to
be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 5, 1997, among the Company, the Guarantors and the Initial
Purchasers.
"Registration Statement" means any registration statement of the Company
and the Guarantors which covers any of the Series A Securities (and related
guarantees) or Series B Securities (and related guarantees) pursuant to the
provisions of the Registration Rights 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.
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<PAGE> 33
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 15 or July 15 (whether or not a Business Day) next
preceding such Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or any other officer of the
Trustee to whom any corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means any Person, a majority of the equity
ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by the Company or by one or more other Restricted Subsidiaries, or
by the Company and one or more other Restricted Subsidiaries; provided that any
Unrestricted Subsidiary shall not be deemed a Restricted Subsidiary under the
Securities.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Restricted Subsidiary
sells or transfers any property or asset in connection with the leasing, or the
resale against installment payments, of such property or asset to the seller or
transferor.
"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc. or any successor rating agency.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or
not allowable as a claim in such proceeding) and all other monetary obligations
on any Indebtedness of the Company (other than as otherwise provided in this
definition), whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingently, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Securities. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Securities,
(ii) Indebtedness that is by its terms subordinate or junior in right of
payment to any Indebtedness of the Company, (iii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11
of the United States Code, is without recourse to the Company, (iv)
Indebtedness which is represented by Redeemable Capital Stock, (v) any
liability for foreign, federal, state, local or other tax owed or owing by the
Company to the extent such liability constitutes
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Indebtedness, (vi) Indebtedness of the Company to a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's subsidiaries and (vii) that
portion of any Indebtedness which at the time of issuance is issued in
violation of this Indenture.
"Senior Representative" means the agent, indenture trustee or other
trustee or representative for any Senior Indebtedness.
"Shelf Registration Statement" means a "shelf" registration statement of
the Company and the Guarantors pursuant to Section 2.2 of the of the
Registration Rights Agreement, which covers all of the Registrable Securities
(as defined in the Registration Rights Agreement) on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission, 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.
"Significant Restricted Subsidiary" means, at any particular time, any
Restricted Subsidiary that, together with the Subsidiaries of such Restricted
Subsidiary, (i) for the most recent fiscal year of the Company accounted for
more than 10% of the Consolidated revenues of the Company and its Subsidiaries
or (ii) at the end of such fiscal year, was the owner (beneficial or otherwise)
of more than 10% of the Consolidated assets of the Company and its Restricted
Subsidiaries, all as calculated in accordance with GAAP and shown on the
Consolidated financial statements of the Company and its Restricted
Subsidiaries.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness or such installment
of interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Securities or the Guarantee
of such Guarantor, as the case may be.
"Subsidiary" means any Restricted Subsidiary or Unrestricted Subsidiary.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal,
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premium, if any, and interest by the United States of America, or any money
market mutual fund registered under the Investment Company Act of 1940, the
principal of which is invested solely in such Indebtedness, (ii) any
certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital
and surplus and undivided profits of not less than $500,000,000, whose debt has
a rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or any successor rating agency or "A-1" (or
higher) according to S&P or any successor rating agency, (iii) commercial
paper, maturing not more than one year after the date of acquisition, issued by
a corporation (other than an Affiliate or Subsidiary of the Company) organized
and existing under the laws of the United States of America with a rating, at
the time as of which any investment therein is made, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P and (iv) any money
market deposit accounts issued or offered by a domestic commercial bank having
capital and surplus in excess of $500,000,000; provided that the short term
debt of such commercial bank has a rating, at the time of Investment, of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P.
"Trustee" means, except as set forth in Section 405, 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.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
or any successor statute.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be 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 newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if all of
the following conditions apply: (a) neither the Company nor any of its
Restricted Subsidiaries provides credit support for Indebtedness of such
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness), (b) such Unrestricted Subsidiary is not liable,
directly or indirectly, with respect to any Indebtedness other than
Unrestricted Subsidiary Indebtedness, provided that an Unrestricted Subsidiary
may provide a Guarantee for the Securities, (c) any Investment in such
Unrestricted Subsidiary made as a result of designating such Subsidiary an
Unrestricted Subsidiary shall not violate the provisions Section 1019 hereof
and such Unrestricted Subsidiary is not party to any agreement, contract,
arrangement or understanding at such time with the Company or any Restricted
23
<PAGE> 36
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company or, in the event such condition
is not satisfied, the value of such agreement, contract, arrangement or
understanding to such Unrestricted Subsidiary shall be deemed a Restricted
Payment; and (d) such Unrestricted Subsidiary does not own any Capital Stock in
any Restricted Subsidiary of the Company which is not simultaneously being
designated an Unrestricted Subsidiary. Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
conditions and shall be deemed a Restricted Payment on the date of designation
in an amount equal to the greater of (1) the net book value of such Investment
or (2) the Fair Market Value of such Investment as determined in good faith by
the Company's Board of Directors. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that
(i) immediately after giving effect to such designation, the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the restrictions under Section 1008 of the Indenture and (ii) all
Indebtedness of such Unrestricted Subsidiary shall be deemed to be incurred on
the date such Unrestricted Subsidiary becomes a Restricted Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary
means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the
Company nor any Restricted Subsidiary is directly or indirectly liable (by
virtue of the Company or any such Restricted Subsidiary being the primary
obligor on, guarantor of, or otherwise liable in any respect to, such
Indebtedness), except Guaranteed Debt of the Company or any Restricted
Subsidiary to any Affiliate, in which case (unless the incurrence of such
Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the
Company shall be deemed to have made a Restricted Payment equal to the
principal amount of any such Indebtedness to the extent guaranteed at the time
such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon
the occurrence of a default with respect thereto, does not result in, or permit
any holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Subsidiary or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity; provided that notwithstanding the foregoing any Unrestricted
Subsidiary may Guarantee the Securities.
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of a corporation
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<PAGE> 37
(irrespective of whether or not at the time Capital Stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which is owned by the Company or another Wholly Owned
Restricted Subsidiary.
<TABLE>
<CAPTION>
Section 102. Other Definitions.
Term Defined in Section
---- ------------------
<S> <C>
"Act" 105
"Agent Members" 306
"Change of Control Offer" 1016
"Change of Control Purchase Date" 1016
"Change of Control Purchase Notice" 1016
"Change of Control Purchase Price" 1016
"covenant defeasance" 403
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Excess Proceeds" 1013
"incur" 1008
"Initial Period" 1303
"Initial Securities" Recitals
"Marsh Family" 101
"Non-payment Default" 1303
"Offer" 1013
"Offer Date" 1013
"Offered Price" 1013
"Offshore Physical Securities" 201
"Offshore Securities Exchange Date" 201
"Pari Passu Debt Amount" 1013
"Pari Passu Offer" 1013
"Payment Blockage Period" 1303
"Payment Default" 1303
"Permanent Offshore Physical Securities" 201
"Permitted Guarantor Junior Securities" 1417
"Permitted Junior Securities" 1302
"Permitted Payment" 1009
</TABLE>
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<PAGE> 38
<TABLE>
<S> <C>
"Physical Securities" 201
"Private Placement Legend" 202
"Purchase Money Security Agreement" 101
"refinancing" 1009
"Registration Default" 202
"Required Filing Date" 1020
"Restricted Payments" 1009
"Rule 144A" 201
"Securities" Recitals
"Security Amount" 1013
"Security Register" 305
"Security Registrar" 305
"Series A Securities" Recitals
"Series B Securities" Recitals
"Special Payment Date" 309
"Surviving Entity" 801
"Surviving Guarantor Entity" 801
"Temporary Offshore Physical Securities" 201
"U.S. Global Security" 201
"U.S. Government Obligations" 404
"U.S. Physical Securities" 201
</TABLE>
Section 103. 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 Securities (if applicable) shall
furnish to the Trustee an Officers' Certificate in a form and substance
reasonably acceptable to the Trustee stating that all conditions precedent, if
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 in a form and substance
reasonably acceptable to the Trustee 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 certificates or opinions is specifically required by any provision of
this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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<PAGE> 39
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read such covenant or condition and
the definitions herein relating thereto;
(b) 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;
(c) 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
(d) a statement as to whether, in the opinion of each such individual or
such firm, such condition or covenant has been complied with.
Section 104. 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 Securities 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 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 Securities stating that
the information with respect to such factual matters is in the possession of
the Company, any Guarantor or other obligor on the Securities, unless such
officer or 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. Opinions of Counsel required to be delivered to the Trustee may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
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<PAGE> 40
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Any certificate or opinion of an officer of the Company, any Guarantor or
other obligor on the Securities may be based, insofar as it relates to
accounting matters, upon a certificate or opinion of, or representations by, an
accountant or firm of accountants in the employ of the Company, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting
matters upon which his certificate or opinion may be based are erroneous. Any
certificate or opinion of any independent firm of public accountants filed with
the Trustee shall contain a statement that such firm is independent with
respect to the Company.
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 105. 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 an agent 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 105.
(b) The ownership of Securities shall be proved by the Security Register.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holder of any Security shall bind every future Holder of
the same Security or the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything
done, suffered or omitted to be done by the Trustee, any Paying Agent or the
Company, any Guarantor or any other obligor of the Securities in reliance
thereon, whether or not notation of such action is made upon such Security.
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<PAGE> 41
(d) 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 his 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 which the Trustee deems sufficient.
(e) 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 such 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 Trust
Indenture Act Section 316(c), any such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such first 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 purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after such record date.
Section 106. Notices, etc., to the 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:
(a) the Trustee by any Holder or by the Company or any Guarantor or
any other obligor on the Securities shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder if in writing and mailed,
first-class postage
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<PAGE> 42
prepaid, or delivered by recognized overnight courier, to or with the Trustee
at its Corporate Trust Office, Attention: Corporate Trust Department (Marsh
Supermarkets, Inc. 8 7/8% Senior Subordinated Notes due 2007), or at any other
address previously furnished in writing to the Holders, the Company, any
Guarantor or any other obligor on the Securities by the Trustee; or
(b) the Company or any Guarantor by the Trustee or any Holder shall be
sufficient for every purpose (except as provided in Section 501(c)) hereunder
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to the Company or such Guarantor addressed to it
c/o Marsh Supermarkets, Inc., 9800 Crosspoint Boulevard, Indianapolis, Indiana
46256, Attention: Chief Financial Officer, or at any other address previously
furnished in writing to the Trustee by the Company or such Guarantor.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at its
address as it appears in the Security 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 when mailed to a Holder in the aforesaid manner
shall be conclusively deemed to have been received by such Holder whether or
not actually received by such Holder. 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.
In case by reason of the suspension of regular mail service or by reason
of any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or
30
<PAGE> 43
requirement of the Trust Indenture Act shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that
may be so modified or excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or to be excluded, as the case may be.
Section 109. 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 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Guarantors shall bind their respective successors and assigns, whether so
expressed or not.
Section 111. Separability Clause.
In case any provision in this Indenture or in the Securities or Guarantees
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 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities or Guarantees, express or
implied, shall give to any Person (other than the parties hereto and their
successors hereunder, any Paying Agent, the Holders, the holders of Senior
Indebtedness and the holders of Senior Guarantor Indebtedness) any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 113. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Maturity or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding
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<PAGE> 44
Business Day with the same force and effect as if made on such Interest Payment
Date or Redemption Date, or at the Maturity or Stated Maturity and no interest
shall accrue with respect to such payment for the period from and after such
Interest Payment Date, Redemption Date, Maturity or Stated Maturity, as the
case may be, to the next succeeding Business Day.
Section 115. Independence of Covenants.
All covenants and agreements in this Indenture shall be given independent
effect so that if a particular action or condition is not permitted by any such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
Section 116. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
Section 117. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be deemed an original; but all such counterparts shall together
constitute but one and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Securities, the Guarantees and the Trustee's certificate of
authentication thereon shall be in substantially the forms set forth in this
Article Two, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted hereby 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, any organizational document or governing instrument or applicable law
or as may, consistently herewith, be determined by the officers executing such
Securities and Guarantees, as evidenced by their execution of the Securities
and Guarantees. Any portion of the text of any Security may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Security.
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<PAGE> 45
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Initial Securities offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued initially in the form of one or
more permanent global Securities substantially in the form set forth in Section
202 (the "U.S. Global Security") deposited with the Trustee, as custodian for
the Depositary, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of the U.S. Global
Security 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.
Securities offered and sold inside the United States to an institutional
investor within the meaning of subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7)
of Rule 501 under the Securities Act shall be issued in certificated form
substantially in the form set forth in Section 202 (the "U.S. Physical
Securities").
Initial Securities offered and sold in reliance on Regulation S under the
Securities Act shall be issued initially in the form of temporary certificated
Securities in registered form substantially in the form set forth in Section
202 (the "Temporary Offshore Physical Securities"). The Temporary Offshore
Physical Securities will be registered in the name of, and held by, a temporary
certificate holder designated by the Initial Purchasers until the later of the
completion of the distribution of the Initial Securities and the termination of
the "restricted period" (as defined in Regulation S) with respect to the offer
and sale of the Initial Securities (the "Offshore Securities Exchange Date").
At any time following the Offshore Securities Exchange Date, upon receipt by
the Trustee and the Company of a certificate substantially in the form of
Exhibit B hereto, the Company shall execute, and the Trustee shall authenticate
and deliver, one or more permanent certificated Securities in registered form
substantially in the form set forth in Section 202 (the "Permanent Offshore
Physical Securities" and, together with "Temporary Offshore Physical
Securities," the "Offshore Physical Securities"), in exchange for the surrender
of Temporary Offshore Physical Securities of like tenor and amount. U.S.
Physical Securities and Offshore Physical Securities are collectively referred
to herein as "Physical Securities."
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<PAGE> 46
Section 202. Form of Face of Security.
(a) The form of the face of any Series A Securities authenticated and
delivered hereunder shall be substantially as follows:
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for a Series B
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, then (A) the U.S. Global
Security and each U.S. Physical Security shall bear the legend set forth below
(the "Private Placement Legend") on the face thereof and (B) the Temporary
Offshore Physical Securities shall bear the Private Placement Legend on the
face thereof until at least 41 days after the Issue Date and receipt by the
Company and the Trustee of a certificate substantially in the form as set forth
in Exhibit B:
THE SECURITIES HAVE 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 AS SET FORTH
BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) 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
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<PAGE> 47
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A INSIDE THE UNITED STATES, 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) OUTSIDE THE UNITED STATES PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE
TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" THAT IS ACQUIRING THE
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,
OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (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. AS USED HEREIN, THE TERMS
"UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON"
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
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<PAGE> 48
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A
SUCCESSOR DEPOSITARY. 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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
36
<PAGE> 49
MARSH SUPERMARKETS, INC.
__________________
8 7/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
CUSIP NO. 571783 AC 3
No. __________ $_______________________
Marsh Supermarkets, Inc., an Indiana 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_________________United States
dollars on August 1, 2007, at the office or agency of the Company referred to
below, and to pay interest thereon from August 5, 1997, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually on February 1 and August 1 in each year, commencing February 1,
1998 at the rate of 8 7/8% per annum, subject to adjustments as described in
the second following paragraph, in United States dollars, until the principal
hereof is paid or duly provided for. Interest shall be computed on the basis
of a 360-day year comprised of twelve 30-day months.
The Holder of this Series A Security is entitled to the benefits of the
Registration Rights Agreement among the Company, the Guarantors and the Initial
Purchasers, dated August 5, 1997, pursuant to which, subject to the terms and
conditions thereof, the Company and the Guarantors are obligated to consummate
the Exchange Offer pursuant to which the Holder of this Security (and the
related Guarantees) shall have the right to exchange this Security (and the
related Guarantees) for 8 7/8% Senior Subordinated Notes due 2007, Series B and
related guarantees (herein called the "Series B Securities") in like principal
amount as provided therein. The Series A Securities and the Series B
Securities are together (including related Guarantees) referred to as the
"Securities." The Series A Securities rank pari passu in right of payment with
the Series B Securities.
In the event that either (a) the Exchange Offer Registration Statement
is not filed with the Commission on or prior to the 30th calendar day
following the date of original issue of the Series A Securities, (b) the
Exchange Offer Registration Statement has not been declared effective on or
prior to the 90th calendar day following the date of original issue of the
Series A Securities or (c) the Exchange Offer is not consummated on or prior
to the 120th calendar day following the date of original issue of the Series
A Securities or a Shelf Registration Statement is not declared effective on
or prior to the
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<PAGE> 50
120th calendar day following the date of original issue of the Series A
Securities (each such event referred to in clauses (a) through (c) above, a
"Registration Default"), the interest rate borne by the Series A Securities
shall be increased by one-quarter of one percent per annum upon the
occurrence of each Registration Default, which rate (as increased as
aforesaid) will increase by one quarter of one percent each 90-day period
that such additional interest continues to accrue under any such
circumstance, with an aggregate maximum increase in the interest rate equal
to one percent (1%) per annum. Following the cure of all Registration
Defaults the accrual of additional interest will cease and the interest rate
will revert to the original rate.
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 Security (or any Predecessor Security) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the January 15 or July 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, and interest on such defaulted interest
at the interest rate borne by the Series A Securities, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may either be paid to the Person in whose name this Security (or any
Predecessor Security) 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 of Securities not less than
10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in this Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of the Security, will be made at the office
or agency of the Company in The City of New York maintained for that purpose,
or at such other office or agency 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 by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made
in favor
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<PAGE> 51
of the Trustee for the benefit of the Holders. Reference is hereby made to
Article Fourteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantees of each of
the Guarantors.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security 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 by the manual or facsimile signature of its authorized officers and
its corporate seal to be affixed or reproduced hereon.
Dated: MARSH SUPERMARKETS, INC.
By:
---------------------------
Title:
------------------------
Attest:
- -----------------------------
Authorized Officer
(b) The form of the face of any Series B Securities authenticated and
delivered hereunder shall be substantially as follows:
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. 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
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<PAGE> 52
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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
MARSH SUPERMARKETS, INC.
__________________
8 7/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
CUSIP NO. ______________
No. __________ $_______________________
Marsh Supermarkets, Inc., an Indiana 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_________________
United States dollars on August 1, 2007, at the office or agency of the Company
referred to below, and to pay interest thereon from August 5, 1997, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on February 1 and August 1 in each year, commencing
February 1, 1998 at the rate of 8 7/8% per annum, in United States dollars,
until the
40
<PAGE> 53
principal hereof is paid or duly provided for; provided that to the extent
interest has not been paid or duly provided for with respect to the Series A
Security exchanged for this Series B Security, interest on this Series B
Security shall accrue from the most recent Interest Payment Date to which
interest on the Series A Security which was exchanged for this Series B
Security has been paid or duly provided for. Interest shall be computed on the
basis of a 360-day year comprised of twelve 30-day months.
This Series B Security was issued pursuant to the Exchange Offer pursuant
to which the 8 7/8% Senior Subordinated Notes due 2007, Series A, and related
Guarantees (herein called the "Series A Securities") in like principal amount
were exchanged for the Series B Securities and related Guarantees. The Series
B Securities rank pari passu in right of payment with the Series A Securities.
In addition, for any period in which the Series A Security exchanged for
this Series B Security was outstanding, in the event that either (a) the
Exchange Offer Registration Statement is not filed with the Commission on or
prior to the 30th calendar day following the date of original issue of the
Series A Security, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 90th calendar day following the date of
original issue of the Series A Security or (c) the Exchange Offer is not
consummated on or prior to the 120th calendar day following the date of
original issue of the Series A Security or a Shelf Registration Statement is
not declared effective on or prior to the 120th calendar day following the
date of original issue of the Series A Security (each such event referred to
in clauses (a) through (c) above, a "Registration Default"), the interest
rate borne by the Series A Securities shall be increased by one-quarter of
one percent per annum upon the occurrence of each Registration Default, which
rate (as increased as aforesaid) will increase by one quarter of one percent
each 90-day period that such additional interest continues to accrue under
any such circumstance, with an aggregate maximum increase in the interest
rate equal to one percent (1%) per annum. Following the cure of all
Registration Defaults the accrual of additional interest will cease and the
interest rate will revert to the original rate; provided that, to the extent
interest at such increased interest rate has been paid or duly provided for
with respect to the Series A Security, interest at such increased interest
rate, if any, on this Series B Security shall accrue from the most recent
Interest Payment Date to which such interest on the Series A Security has
been paid or duly provided for; 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 shall again be increased pursuant to the
foregoing provisions.
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 Security (or any Predecessor Security) is registered
at the close of business on
41
<PAGE> 54
the Regular Record Date for such interest, which shall be the January 15 or
July 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, and interest on such defaulted interest at the interest rate
borne by the Series B Securities, to the extent lawful, shall forthwith cease
to be payable to the Holder on such Regular Record Date, and may either be paid
to the Person in whose name this Security (or any Predecessor Security) 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 of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in this Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of the Security, will be made at the office
or agency of the Company in The City of New York maintained for such purpose,
or at such other office or agency 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 by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made
in favor of the Trustee for the benefit of the Holders. Reference is hereby
made to Article Fourteen of the Indenture for a statement of the respective
rights, limitations of rights, duties and obligations under the Guarantees of
each of the Guarantors.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
42
<PAGE> 55
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by the manual or facsimile signature of its authorized
officers and its corporate seal to be affixed or reproduced hereon.
Dated: MARSH SUPERMARKETS, INC.
By:
------------------------
Title:
---------------------
Attest:
- ----------------------------
Authorized Officer
Section 203. Form of Reverse of Securities.
(a) The form of the reverse of the Series A Securities shall be
substantially as follows:
MARSH SUPERMARKETS, INC.
8 7/8% Senior Subordinated Note due 2007, Series A
This Security is one of a duly authorized issue of Securities
of the Company designated as its 8 7/8% Senior Subordinated Notes due 2007,
Series A (herein called the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of August 5, 1997, among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (herein called
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 Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
43
<PAGE> 56
The Securities are subject to redemption at any time on or
after August 1, 2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice to the Holders by first-class
mail, in amounts of $1,000 or an integral multiple thereof, at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning August 1 of the years indicated
below:
Redemption
Year Price
---- -----
2002......................................... 104.438%
2003......................................... 102.958%
2004......................................... 101.479%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant Regular Record Dates or Special Record
Dates to receive interest due on an Interest Payment Date).
If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Upon the occurrence of a Change of Control, each Holder may
require the Company to purchase such Holder's Securities in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase, pursuant to a Change of Control Offer in accordance
with the procedures set forth in the Indenture.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which proceeds are not
used to repay Senior Indebtedness or invested in capital expenditures,
properties or other assets or inventories that replace the properties and
assets that were the subject of the Asset Sale or which will be used in the
business of the Company or its Subsidiaries existing on the date of the
Indenture or in businesses reasonably related thereto, exceeds a specified
amount the Company will be required to apply such proceeds to the repayment of
the Securities and certain Indebtedness ranking pari passu in right of payment
to the Securities which Securities and Indebtedness are purchased at the option
of the Holder as described in this Indenture.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the
44
<PAGE> 57
close of business on the relevant Regular Record Date or Special Record Date
referred to on the face hereof. Securities (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 Security in
accordance with the Indenture in part only, a new Security or Securities for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Holders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders
under the Indenture and the Securities and the Guarantees 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 Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company and the Guarantors with certain provisions of the
Indenture and the Securities and the Guarantees and certain past Defaults
under the Indenture and the Securities and the Guarantees and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security 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 Security.
The Series A Securities are, to the extent and manner
provided in Article Thirteen of the Indenture, subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Securities (in the event
such Guarantor or such other obligor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on, this Security at the times, place, and
rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
45
<PAGE> 58
If this Series A Security is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable on the Security Register of the
Company, upon surrender of this Security for registration of transfer 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, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or its attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
If this Series A Security is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the Holder, provided it is a Qualified Institutional Buyer, may exchange this
Series A Security for a Book-Entry Security by instructing the Trustee (by
completing the Transferee Certificate in the form in Appendix I) to arrange for
such Series A Security to be represented by a beneficial interest in a Global
Security in accordance with the customary procedures of the Depository, unless
the Company has elected not to issue a Global Security.
If this Series A Security is a U.S. Global Security, it is
exchangeable for a Series A Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and
the Depositary. In addition, certificated securities shall be transferred to
all beneficial holders in exchange for their beneficial interests in the U.S.
Global Securities if (x) the Depositary notifies the Company that it is
unwilling or unable to continue as depository for the U.S. Global Security and
a successor depositary is not appointed by the Company within 90 days or (y)
there shall have occurred and be continuing an Event of Default and the
Security Registrar has received a request from the Depositary. Upon any such
issuance, the Trustee is required to register such certificated Series A
Securities in the name of, and cause the same to be delivered to, such Person
or Persons (or the nominee of any thereof). All such certificated Series A
Securities would be required to include the Private Placement Legend.
Series A Securities in certificated form 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 Series A Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
At any time when the Company is not subject to Sections 13 or
15(d) of the Exchange Act, upon the written request of a Holder of a Series A
Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to
46
<PAGE> 59
Rule 144A(d)(4) under the Securities Act (or any successor provision thereto)
to such Holder or to a prospective purchaser of such Series A Security who such
Holder informs the Company is reasonably believed to be a "Qualified
Institutional Buyer" within the meaning of Rule 144A under the Securities Act,
as the case may be, in order to permit compliance by such Holder with Rule 144A
under the Securities Act.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the Company,
any Guarantor or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security is overdue, and neither the Company, any Guarantor, the Trustee nor
any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
[The Transferee Certificate, in the form of Appendix I hereto,
will be attached to the Series A Security.]
(b)The form of the reverse of the Series B Securities shall be
substantially as follows:
MARSH SUPERMARKETS, INC.
8 7/8% Senior Subordinated Note due 2007, Series B
This Security is one of a duly authorized issue of Securities
of the Company designated as its 8 7/8% Senior Subordinated Notes due 2007,
Series B (herein called the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of August 5, 1997, among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (herein called
the "Trustee," which term includes any successor trustee under the Indenture),
to
47
<PAGE> 60
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 Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Securities are subject to redemption at any time on or
after August 1, 2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice to the Holders by first-class
mail, in amounts of $1,000 or an integral multiple thereof, at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning August 1 of the years indicated
below:
Redemption
Year Price
---- -----
2002......................................... 104.438%
2003......................................... 102.958%
2004......................................... 101.479%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant Regular Record Dates or Special Record
Dates to receive interest due on an Interest Payment Date).
If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Upon the occurrence of a Change of Control, each Holder may
require the Company to purchase such Holder's Securities in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase, pursuant to a Change of Control Offer in accordance
with the procedures set forth in the Indenture.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which proceeds are not
used to repay Senior Indebtedness or invested in capital expenditures,
properties or other assets or inventories that replace the properties and
assets that were the subject of the Asset Sale or which will
48
<PAGE> 61
be used in the business of the Company or its Subsidiaries existing on the date
of the Indenture or in businesses reasonably related thereto, exceeds a
specified amount the Company will be required to apply such proceeds to the
repayment of the Securities and certain Indebtedness ranking pari passu in
right of payment to the Securities which Securities and Indebtedness are
purchased at the option of the Holder as described in this Indenture.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date or Special Record Date referred to on the face hereof. Securities (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 Security in
accordance with the Indenture in part only, a new Security or Securities for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Holders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders
under the Indenture and the Securities and the Guarantees 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 Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company and the Guarantors with certain provisions of the
Indenture and the Securities and the Guarantees and certain past Defaults under
the Indenture and the Securities and the Guarantees and their consequences. Any
such consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security 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 Security.
49
<PAGE> 62
The Series B Securities are, to the extent and manner
provided in Article Thirteen of the Indenture, subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Securities (in the event
such Guarantor or such other obligor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, and premium, if any, and interest on, this Security at the times, place,
and rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
If this Series B Security is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Series B Security is registrable on the Security Register
of the Company, upon surrender of this Series B Security for registration of
transfer 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, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized
in writing, and thereupon one or more new Series B Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
If this Series B Security is a U.S. Global Security, it is
exchangeable for a Series B Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and
the Depositary. In addition, certificated securities shall be transferred to
all beneficial holders in exchange for their beneficial interests in the U.S.
Global Security if (x) the Depositary notifies the Company that it is unwilling
or unable to continue as depository for the U.S. Global Security and a
successor depositary is not appointed by the Company within 90 days or (y)
there shall have occurred and be continuing an Event of Default and the
Security Registrar has received a request from the Depositary. Upon any such
issuance, the Trustee is required to register such certificated Series B
Securities in the name of, and cause the same to be delivered to, such Person
or Persons (or the nominee of any thereof).
Series B Securities in certificated form 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 Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
50
<PAGE> 63
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the Company,
any Guarantor or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security is overdue, and neither the Company, any Guarantor, the Trustee nor
any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
[The Transferee Certificate, in the form of Appendix II hereto,
will be attached to the Series B Security.]
Section 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be included
on the form of the face of the Securities substantially in the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
[Series A Securities]
This is one of the 8 7/8% Senior Subordinated Notes due 2007,
Series A referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as
Trustee
By: _________________________________
Authorized Signer
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<PAGE> 64
[Series B Securities]
This is one of the 8 7/8% Senior Subordinated Notes due 2007,
Series B referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as
Trustee
By: _________________________________
Authorized Signer
Section 205. Form of Guarantee of Each of the Guarantors.
The form of Guarantee shall be set forth on the Securities
substantially as follows:
GUARANTEES
For value received, each of the undersigned hereby absolutely,
unconditionally and irrevocably guarantees, jointly and severally, to the
holder of this Security the payment of principal of, premium, if any, and
interest on this Security upon which these Guarantees are endorsed in the
amounts and at the time when due and payable whether by declaration thereof, or
otherwise, and interest on the overdue principal and interest, if any, of this
Security, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture or the Securities, to the holder of this
Security and the Trustee, all in accordance with and subject to the terms and
limitations of this Security and Article Fourteen of the Indenture. These
Guarantees will not become effective until the Trustee duly executes the
certificate of authentication on this Security. This Guarantee shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of law principles thereof. The Indebtedness
evidenced by these Guarantees are, 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 Guarantor Senior Indebtedness (as defined in the Indenture),
whether outstanding on the date of the Indenture or thereafter, and the
Guarantees are issued subject to such provisions.
Dated:
52
<PAGE> 65
CRYSTAL FOOD SERVICES, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
LOBILL FOODS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
CONTRACT TRANSPORT, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH SUPERMARKETS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
VILLAGE PANTRY, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH DRUGS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH CLEARING HOUSE, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
By:
---------------------------
Name: Don E. Marsh
Title: President and Chief
Executive Officer
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MARSH DRUGS, INC.
MUNDY REALTY, INC.
MAR PROPERTIES, INC.
MARLEASE, INC.
MARSH INTERNATIONAL, INC.
MARAINES GREENERY, INC.
LIMITED HOLDINGS, INC.
MARSH P.Q., INC.
S.C.T., INC.
NORTH MARION DEVELOPMENT
CORPORATION
CONTRACT TRANSPORT, INC.
TRADEMARK HOLDINGS, INC.
By:
------------------------
Name: Don E. Marsh
Title: President
MARSH VILLAGE PANTRIES, INC.
CONVENIENCE STORE
DISTRIBUTING COMPANY
By: Marsh Village Pantries,
Inc., its
General Partner
By:
----------------------
Name: Don E. Marsh
Title:Chief Executive
Officer
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Attest:
---------------------------
P. Lawrence Butt, Secretary
Marsh Supermarkets, Inc.
Marsh Drugs, Inc.
Marsh Village Pantries, Inc.
Mundy Realty, Inc.
Mar Properties, Inc.
Marlease, Inc.
Marsh International, Inc.
Maraines Greenery, Inc.
Limited Holdings, Inc.
Marsh Village Pantries, Inc., as
general partner of Convenience
Store Distributing Company
Marsh P.Q., Inc.
S.C.T., Inc.
North Marion Development Corporation
Contract Transport, Inc.
Marsh Supermarkets, Inc.,
as Chief Operating Officer of
Crystal Food Services, LLC
LoBill Foods, LLC
Contract Transport, LLC
Marsh Supermarkets, LLC
Village Pantry, LLC
Marsh Drugs, LLC
Marsh Clearing House, LLC
Attest:
-------------------------------------
P. Lawrence Butt, Assistant Secretary
Trademark Holdings, Inc.
Section 206. Form of Option of Holder to Elect Purchase.
The form of Option of Holder to Elect Purchase Form shall be
set forth on the Securities substantially as follows:
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OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 1013 or Section 1016, as applicable, of the Indenture,
check the Box: [ ].
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 1013 or Section 1016 as applicable, of the
Indenture, state the amount (in original principal amount):
$ ---------------.
Date: Your Signature:
----------------------------- -----------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
-----------------------------------
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
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ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $150,000,000 in
principal amount of Securities, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 303, 304, 305, 306, 307, 308, 906, 1013,
1016 or 1108.
The Securities shall be known and designated as the "8 7/8%
Senior Subordinated Notes due 2007" of the Company. The Stated Maturity of the
Securities shall be August 1, 2007, and the Securities shall each bear interest
at the rate of 8 7/8% per annum, as such interest rate may be adjusted as set
forth in the Securities, from August 5, 1997, or from the most recent Interest
Payment Date to which interest has been paid, payable semiannually on February
1 and August 1 in each year, commencing February 1, 1998, 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, premium, if any, and interest on, the
Securities shall be payable and the Securities will be exchangeable and
transferable at an office or agency of the Company in The City of New York
maintained for such purposes; provided, however, that payment of interest may
be made at the option of the Company by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register.
For all purposes hereunder, the Series A Securities and the
Series B Securities will be treated as one class and are together referred to
as the "Securities." The Series A Securities rank pari passu in right of
payment with the Series B Securities.
The Securities shall be subject to repurchase by the Company
pursuant to an Offer as provided in Section 1013.
Holders shall have the right to require the Company to
purchase their Securities, in whole or in part, in the event of a Change of
Control pursuant to Section 1016.
The Securities shall be redeemable as provided in Article
Eleven and in the Securities.
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The Indebtedness evidenced by the Securities shall be
subordinated in right of payment to Senior Indebtedness as provided in Article
Thirteen.
At the election of the Company, the entire Indebtedness on
the Securities or certain of the Company's obligations and covenants and
certain Events of Default thereunder may be defeased as provided in Article
Four.
Section 302. Denominations.
The Securities shall be issuable only in fully registered
form without coupons and only in denominations of $1,000 and any integral
multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
one of its Chairman of the Board, its President, its Chief Executive Officer,
its Chief Financial Officer or one of its Vice Presidents under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signatures of any of these officers on the Securities may be
manual or facsimile.
Securities 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
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee (with Guarantees endorsed thereon) for authentication,
together with a Company Order for the authentication and delivery of such
Securities; and the Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as provided in this Indenture and not
otherwise.
Each Security shall be dated the date of its authentication.
No Security or Guarantee endorsed thereon shall be entitled
to any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee by
manual signature of an authorized officer, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture.
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<PAGE> 71
In case the Company or any Guarantor, pursuant to Article
Eight, shall, in a single transaction or through a series of related
transactions, be consolidated or merged with or into any other Person or shall
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets 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 successor
Person which shall have participated in the sale, assignment, 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 Securities authenticated or delivered prior to such consolidation,
merger, sale, assignment, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities 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 Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities 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 Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities
at the time Outstanding for Securities authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities on behalf of the Trustee. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Securities 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 Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
If an officer whose signature is on a Security no longer
holds that office at the time the Trustee authenticates such Security such
Security shall be valid nevertheless.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities.
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<PAGE> 72
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities 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 Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause the Trustee to keep, so long as it is
the Security Registrar, at the Corporate Trust Office of the Trustee, or such
other office as the Trustee may designate, a register (the register maintained
in such office or in any other office or agency designated pursuant to Section
1002 being herein sometimes referred to as the "Security Register") in which,
subject to such reasonable regulations as the Security Registrar may prescribe,
the Company shall provide for the registration of Securities and of transfers
of Securities. The Trustee shall initially be the "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided. The Company may appoint one or more co-Security Registrars.
Upon surrender for registration of transfer of any Security
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 Securities of
the same series of any authorized denomination or denominations, of a like
aggregate principal amount.
Furthermore, any Holder of the U.S. Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Holder of such Global Security (or its agent), and
that ownership of a beneficial interest in a Security shall be required to be
reflected in a book entry.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination or denominations, of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver,
Securities of the same series which the Holder making the exchange is entitled
to receive; provided that no exchange of Series A
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<PAGE> 73
Securities for Series B Securities shall occur until an Exchange Offer
Registration Statement shall have been declared effective by the Commission and
that the Series A Securities exchanged for the Series B Securities shall be
canceled.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same Indebtedness, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer, or for exchange, repurchase or redemption, shall (if so required by
the Company or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made to a Holder for any
registration of transfer, exchange or redemption of Securities, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith, other than exchanges pursuant to Sections 303,
304, 305, 308, 906, 1013, 1016 or 1108 not involving any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of the
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing or (b) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of Securities being redeemed in part.
Every Security shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Security pursuant to Section 202, and to the restrictions set forth in this
Section 305, and the Holder of each Security, by such Holder's acceptance
thereof (or interest therein), agrees to be bound by such restrictions on
transfer.
The restrictions imposed by this Section 305 upon the
transferability of any particular Security shall cease and terminate on (a) the
later of August 5, 1999 or two years after the last date on which the Company
or any Affiliate of the Company was the owner of such Security (or any
predecessor of such Security) or (b) (if earlier) if and when such Security has
been sold pursuant to an effective registration statement under the Securities
Act or transferred pursuant to Rule 144 or Rule 904 under the Securities Act
(or any successor provision), unless the Holder thereof is an affiliate of the
Company within the meaning of Rule 144 (or such successor provisions). Any
Security as to which
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such restrictions on transfer shall have expired in accordance with their terms
or shall have terminated may, upon surrender of such Security for exchange to
the Security Registrar in accordance with the provision of this Section 305
(accompanied, in the event that such restrictions on transfer have terminated
pursuant to Rule 144 or Rule 904 (or any successor provision), by an Opinion of
Counsel satisfactory to the Company and the Trustee, to the effect that the
transfer of such security has been made in compliance with Rule 144 or Rule 904
(or any such successor provision)), be exchanged for a new Security, of like
tenor and aggregate principal amount, which shall not bear the Private
Placement Legend. The Company shall inform the Trustee of the effective date of
any Registration Statement registering the Securities under the Securities Act
no later than two Business Days after such effective date.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any U.S. Global Security, whether pursuant to this Section
305, Section 304, 308, 906 or 1108 or otherwise, shall also be a U.S. Global
Security and bear the legend specified in Section 202.
Section 306. Book-Entry Provisions for U.S. Global Security.
(a) The U.S. Global Security initially shall (i) be
registered in the name of the Depositary for such Global Security or the
nominee of such Depositary, (ii) be deposited with, or on behalf of, the
Depositary or with the Trustee as custodian for such 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 Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Security, 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 Security 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
Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in the U.S. Global Security may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
307. Beneficial owners may obtain U.S. Physical Securities in
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<PAGE> 75
exchange for their beneficial interests in the U.S. Global Security upon
request in accordance with the Depositary's and the Security Registrar's
procedures. In connection with the execution, authentication and delivery of
such Physical Securities, the Security Registrar shall reflect on its books and
records a decrease in the principal amount of the relevant Global Security
equal to the principal amount of such Physical Securities and the Company shall
execute and the Trustee shall authenticate and deliver one or more Physical
Securities having an equal aggregate principal amount. In addition, U.S.
Physical Securities and Offshore Physical Securities shall be issued to all
beneficial owners in exchange for their beneficial interests in the U.S. Global
Security or the Offshore Global Security, respectively, if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the U.S. Global Security or the Offshore Global Security and a successor
Depositary is not appointed by the Company within 90 days of such notice or
(ii) an Event of Default has occurred and is continuing and the Security
Registrar has received a request from the Depositary.
(c) In connection with any transfer of a portion of the
beneficial interest in the U.S. Global Security pursuant to subsection (b) of
this Section to beneficial owners who are required to hold U.S. Physical
Securities, the Security Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Securities of
like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security or Offshore Global Security to beneficial owners pursuant to
subsection (b) of this Section, the U.S. Global Security or Offshore Global
Security, as the case may be, 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 the U.S. Global Security or Offshore
Global Security, as the case may be, an equal aggregate principal amount of
U.S. Physical Securities or Offshore Physical Securities, as the case may be,
of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an
interest in U.S. Global Securities 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 Private Placement Legend.
(f) The registered holder of the U.S. Global Security may
grant proxies and otherwise authorize any person, including Agent Members and
Persons that may hold
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interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
Section 307. Special Transfer Provisions.
Unless and until (i) an Initial Security is sold under an
effective Registration Statement, or (ii) an Initial Security is exchanged for
a Series B Security in connection with the Exchange Offer, 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 Security to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Security Registrar shall register the
transfer of any Initial Security whether or not such Initial
Security bears the Private Placement Legend, if (x) the
requested transfer is at least two years after the Issue Date
of the Initial Securities or (y) the proposed transferee has
delivered to the Security Registrar a certificate
substantially in the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Security,
upon receipt by the Security Registrar of (x) the documents,
if any, required by paragraph (i) and (y) instructions given
in accordance with the Depositary's and the Security
Registrar's procedures therefor, the Security Registrar shall
reflect on its books and records the date and a decrease in
the principal amount of the U.S. Global Security in an amount
equal to the principal amount of the beneficial interest in
the U.S. Global Security transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver,
one or more U.S. Physical Certificates of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial
Security to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of
U.S. Physical Securities, Temporary Offshore Physical
Securities or Permanent Offshore Physical Securities, the
Security 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 Security
stating, or has otherwise advised
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<PAGE> 77
the Company and the Security Registrar in writing, that the
sale has been made in compliance with the provisions of Rule
144A to the transferee who has signed the certification
provided for on the form of Initial Security stating, or has
otherwise advised the Company and the Security Registrar in
writing, that it is purchasing the Initial Security 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 Security to be transferred consists of U.S.
Physical Securities, Temporary Offshore Physical Securities
or Permanent Offshore Physical Securities, upon receipt by
the Security Registrar of instructions given in accordance
with the Depositary's and the Security Registrar's procedures
therefor, the Security Registrar shall reflect on its books
and records the date and an increase in the principal amount
of the U.S. Global Security in an amount equal to the
principal amount of the U.S. Physical Securities, Temporary
Offshore Physical Securities or Permanent Offshore Physical
Securities, as the case may be, to be transferred, and the
Trustee shall cancel the Physical Security so transferred.
(c) Transfers by Non-U.S. Persons on or Prior to September
14, 1997. The following provisions shall apply with respect to registration of
any proposed transfer of an Initial Security by a Non-U.S. Person on or prior
to September 14, 1997:
(i) The Security Registrar shall register the
transfer of any Initial Security (x) if the proposed
transferee is a Non-U.S. Person and the proposed transferor
has delivered to the Security Registrar a certificate
substantially in the form of Exhibit D hereto or (y) if the
proposed transferee is a QIB and the proposed transferor has
checked the box provided for on the form of Initial Security
stating, or has otherwise advised the Company and the
Security 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 Security stating, or has otherwise advised the
Company and the Security Registrar in
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<PAGE> 78
writing, that it is purchasing the Initial Security 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 Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member,
upon receipt by the Security Registrar of instructions given
in accordance with the Depositary's and the Security
Registrar's procedures therefor, the Security Registrar shall
reflect on its books and records the date and an increase in
the principal amount at maturity of the U.S. Global Security
in an amount equal to the principal amount of the Temporary
Offshore Physical Security to be transferred, and the Trustee
shall cancel the Temporary Offshore Physical Security, if
any, so transferred.
(d) Transfers by Non-U.S. Persons on or After September
15, 1997. The following provisions shall apply with respect to any transfer of
an Initial Security by a Non-U.S. Person on or after September 15, 1997:
(i)(x) If the Initial Security to be transferred is
a Permanent Offshore Physical Security, the Security
Registrar shall register such transfer, (y) if the Initial
Security to be transferred is a Temporary Offshore Physical
Security, upon receipt of a certificate substantially in the
form of Exhibit B from the proposed transferor, the Security
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 Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member,
upon receipt by the Security Registrar of instructions given
in accordance with the Depositary's and the Security
Registrar's procedures therefor, the Security Registrar shall
reflect on its books and records the date and an increase in
the principal amount of the U.S. Global Security in an amount
equal to the
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principal amount of the Temporary Offshore Physical Security
or Permanent Offshore Physical Security to be transferred,
and the Trustee shall cancel the Physical Security 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
Security to a Non-U.S. Person:
(i) Prior to September 15, 1997, the Security
Registrar shall register any proposed transfer of an Initial
Security to a Non-U.S. Person upon receipt of a certificate
substantially in the form of Exhibit D hereto from the
proposed transferor and the Company shall execute, and the
Trustee shall authenticate and
deliver, one or more Temporary Offshore Physical Securities of
like tenor and amount.
(ii) On and after September 15, 1997, the Security
Registrar shall register any proposed transfer to any
Non-U.S. Person (w) if the Initial Security to be transferred
is a Permanent Offshore Physical Security, (x) if the Initial
Security to be transferred is a Temporary Offshore Physical
Security, upon receipt of a certificate substantially in the
form of Exhibit D from the proposed transferor, (y) if the
Initial Security to be transferred is a U.S. Physical
Security or an interest in the U.S. Global Security, upon
receipt of a certificate substantially in the form of Exhibit
D 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 Securities of like tenor and amount.
(iii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Security,
upon receipt by the Security Registrar of (x) the document,
if any, required by paragraph (i), and (y) instructions in
accordance with the Depositary's and the Security Registrar's
procedures therefor, the Security Registrar shall reflect on
its books and records the date and a decrease in the
principal amount of the U.S. Global Security in an amount
equal to the principal amount of the beneficial interest in
the U.S. Global Security to be transferred and the Company
shall execute, and the Trustee shall authenticate and
deliver, one or more Permanent Offshore Physical Securities
of like tenor and amount.
(f) Private Placement Legend. Upon the registration of
transfer, exchange or replacement of Securities not bearing the Private
Placement Legend, the Security Registrar shall deliver Securities that do not
bear the Private Placement Legend.
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Upon the registration of transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Security Registrar shall deliver only
Securities that bear the Private Placement Legend unless either (i) the
circumstances contemplated by paragraphs (a)(i)(x), (d)(i) or (e)(ii) of this
Section 307 exist or (ii) there is delivered to the Security 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 Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Security 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 Security Registrar.
In the event that Regulation S is amended during the term of
this Indenture to alter the applicable holding period, all reference in this
Indenture to a holding period for Non-U.S. Persons will be deemed to include
such amendment.
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee,
or (b) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, 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
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon a Company Request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of like tenor and principal amount,
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this
Section, the Company may require the payment of a sum sufficient to pay all
documentary, stamp or
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similar issue or transfer taxes or other governmental charges that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and any Guarantor, whether or
not the destroyed, lost or stolen Security 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 Securities 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 Securities.
Section 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on the Stated Maturity of such interest shall be
paid to the Person in whose name the Security (or any Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest payment.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on the Stated Maturity of such interest,
and interest on such defaulted interest at the then applicable interest rate
borne by the Securities, to the extent lawful (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest"), shall
forthwith cease to be payable to the Holder on the Regular Record Date; and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or any
relevant Predecessor Securities) 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
Security and the date (not less than 30 days after such
notice) of the proposed payment (the "Special Payment 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 Special Payment Date, such money when
deposited to be held in trust for the
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benefit of the Persons entitled to such Defaulted Interest as
in this Subsection 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 date of the Special Payment 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 in writing of such Special Record
Date. In the name and at the expense of the Company, the
Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at its
address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special
Record Date and Special Payment Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities are registered on such Special
Record Date and shall no longer be payable pursuant to the
following Subsection (b).
(b) 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
Securities may be listed, and upon such notice as may be
required by such exchange, if, after written notice given by
the Company to the Trustee of the proposed payment pursuant
to this Subsection, such payment shall be deemed practicable
by the Trustee.
Subject to the foregoing provisions of this Section 309, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 310. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP"
numbers (if then generally in use), and the Company, or the Trustee on behalf
of the Company, shall use CUSIP numbers in notices of redemption or exchange as
a convenience to Holders; provided, however, that any such notice shall state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of redemption or
exchange and that reliance may be placed only on the other identification
numbers printed on the Securities; and provided further, however, that failure
to use CUSIP numbers in any notice of redemption or exchange shall not affect
the validity or sufficiency of such notice.
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Section 311. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the Company,
any Guarantor or the Trustee may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payment
of principal of, premium, if any, and (subject to Section 309) interest on,
such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and neither 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 312. Cancellation.
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already canceled, shall be promptly canceled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
or such Guarantor may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section 312, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be destroyed and
certification of their destruction delivered to the Company, unless by a
Company Order received by the Trustee prior to such destruction, the Company
shall direct that the canceled Securities be returned to it. The Trustee shall
provide the Company a list of all Securities that have been canceled from time
to time as requested by the Company.
Section 313. Computation of Interest.
Interest on the Securities shall be computed on the basis of
a 360-day year comprised of twelve 30-day months.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have either Section 402 or
Section 403 be applied to all
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of the Outstanding Securities (the "Defeased Securities"), upon compliance with
the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
Upon the Company's exercise under Section 401 of the option
applicable to this Section 402, the Company, each Guarantor and any other
obligor upon the Securities, if any, shall be deemed to have been discharged
from its obligations with respect to the Defeased Securities on the date the
conditions set forth in Section 404 below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company, each
Guarantor and any other obligor upon the Securities shall be deemed to have
paid and discharged the entire Indebtedness represented by the Defeased
Securities, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 405 and the other Sections of this Indenture referred to in
(a) and (b) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company and upon Company Request, 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 Defeased Securities to receive, solely from the trust fund
described in Section 404 and as more fully set forth in such Section, payments
in respect of the principal of, premium, if any, and interest on, such
Securities, when such payments are due, (b) the Company's obligations with
respect to such Defeased Securities under Sections 304, 305, 308, 1002 and
1003, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, including, without limitation, the Trustee's rights under Section
607, and (d) this Article Four. Subject to compliance with this Article Four,
the Company may exercise its option under this Section 402 notwithstanding the
prior exercise of its option under Section 403 with respect to the Securities.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option
applicable to this Section 403, the Company and each Guarantor shall be
released from its obligations under any covenant or provision contained or
referred to in Sections 1005 through 1020, inclusive, and the provisions of
clause (iii) of Section 801(a), with respect to the Defeased Securities on and
after the date the conditions set forth in Section 404 below are satisfied
(hereinafter, "covenant defeasance"), and the Defeased Securities shall
thereafter be deemed to be not "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. For this purpose, such covenant
defeasance means that, with respect to the Defeased Securities, the Company and
each Guarantor may omit to comply with and shall
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have no liability in respect of any term, condition or limitation set forth in
any such Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article 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 Sections 501(c), (d) or (g), but, except as
specified above, the remainder of this Indenture and such Defeased Securities
shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of
either Section 402 or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee 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 Securities, (a) United States
dollars in an amount, (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms and with no further reinvestment will provide, not later than
one day before the due date of any payment, money in an amount, or (c) a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants or a nationally
recognized investment banking firm expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee to pay and discharge, the principal of, premium, if any, and
interest on, the Defeased Securities, on the Stated Maturity of such principal
or interest (or on any date after August 1, 2002 (such date being referred to
as the "Defeasance Redemption Date") if at or prior to electing to exercise
either its option applicable to Section 402 or its option applicable to Section
403, the Company has delivered to the Trustee an irrevocable notice to redeem
all of the Outstanding Securities on the Defeasance Redemption Date). For this
purpose, "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) 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 U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation 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
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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 U.S.
Government Obligation or the specific payment of principal of or interest on
the U.S. Government Obligation evidenced by such depository receipt;
(2) In the case of an election under Section 402, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in the
United States stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
hereof, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Independent
Counsel in the United States shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(3) In the case of an election under Section 403, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in the
United States to the effect that the Holders of the Outstanding Securities will
not recognize income, gain or loss for federal income tax purposes as a result
of such covenant defeasance and will be subject to federal income 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;
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Section 501(h) or (i) is
concerned, at any time during the period ending on the 91st day after the date
of deposit (it being understood that this condition shall not be satisfied
until the expiration of such period);
(5) Such defeasance or covenant defeasance shall not cause
the Trustee for the Securities to have a conflicting interest for purposes of
the Trust Indenture Act with respect to any other securities of the Company or
any Guarantor;
(6) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a Default under, this Indenture or
any other material agreement or instrument to which the Company, any Guarantor
or any Subsidiary is a party or by which it is bound;
(7) Such defeasance or covenant defeasance shall not result
in the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940, as amended, unless
such trust shall be registered under such Act or exempt from registration
thereunder;
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(8) The Company shall have delivered to the Trustee an
Opinion of Independent Counsel to the effect that after the 91st day 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;
(9) 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 preferring the holders of the Securities or any Guarantee over
the other creditors of the Company or any Guarantor with the intent of
defeating, hindering, delaying or defrauding creditors of the Company, any
Guarantor or others;
(10) No event or condition shall exist that would prevent the
Company from making payments of the principal of, premium, if any, and interest
on the Securities on the date of such deposit or at any time ending on the 91st
day after the date of such deposit; and
(11) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Independent Counsel, each stating that
all conditions precedent provided for relating to either the defeasance under
Section 402 or the covenant defeasance under Section 403 (as the case may be)
have been complied with.
Opinions of Counsel or Opinions of Independent Counsel
required to be delivered under this Section shall be in form and substance
reasonably satisfactory to the Trustee may have qualifications customary for
opinions of the type required and counsel delivering such opinions may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, which certificates shall be limited as to
matters of fact, including that various financial covenants have been complied
with.
Section 405. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all United States dollars and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 404 in respect
of the Defeased Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (excluding the Company or
any of its Affiliates acting as Paying Agent), as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law. Money so held
in trust shall not be subject to the provisions of Article Thirteen.
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The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is imposed, assessed or for the account of the Holders of the Defeased
Securities.
Anything in this Article Four to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any United States dollars or U.S. Government
Obligations held by it as provided in Section 404 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
defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 402 or
403, as the case may be, by 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
Securities and any Guarantor's obligations under any Guarantee shall be revived
and reinstated, with present and prospective effect, as though no deposit had
occurred pursuant to Section 402 or 403, as the case may be, until such time as
the Trustee or Paying Agent is permitted to apply all such United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403,
as the case may be; provided, however, that if the Company makes any payment to
the Trustee or Paying Agent of principal of, premium, if any, or interest on
any Security following the reinstatement of its obligations, the Trustee or
Paying Agent shall promptly pay any such amount to the Holders of the
Securities and the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the United States dollars and U.S.
Government Obligations 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 voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or
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order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) there shall be a default in the payment of any interest on
any Security when it becomes due and payable, and such default shall continue
for a period of 30 days;
(b) there shall be a default in the payment of the principal
of (or premium, if any, on) any Security at its Maturity (upon acceleration,
optional or mandatory redemption, required repurchase or otherwise);
(c) (i) there shall be a default in the performance, or
breach, of any covenant or agreement of the Company or any Guarantor under this
Indenture or any Guarantee (other than a default in the performance, or breach,
of a covenant or agreement which is specifically dealt with in clause (a) or
(b) or in clause (ii), (iii) or (iv) of this clause (c)) and such default or
breach shall continue for a period of 30 days after written notice has been
given, by certified mail, (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the holders of at least 25% in aggregate principal
amount of the Outstanding Securities, which notice shall specify that it is a
"notice of default" and shall demand that such a default be remedied; (ii)
there shall be a default in the performance or breach of the provisions
described in Article Eight herein; (iii) the Company shall have failed to make
or consummate an Offer in accordance with the provisions of Section 1013
herein; or (iv) the Company shall have failed to make or consummate a Change of
Control Offer in accordance with the provisions of Section 1016 herein;
(d) one or more defaults shall have occurred under any
agreements, indentures or instruments under which the Company, any Guarantor or
any Restricted Subsidiary then has outstanding Indebtedness in excess of
$5,000,000, individually or in the aggregate, and either (i) such default
results from the failure to pay such Indebtedness at its stated final maturity
or (ii) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness;
(e) any Guarantee shall for any reason cease to be, or shall
for any reason be asserted in writing by any Guarantor or any Unrestricted
Subsidiary which has guaranteed the Securities or the Company not to be, in
full force and effect and enforceable in accordance with its terms except to
the extent contemplated by this Indenture and any such Guarantee;
(f) one or more judgments, orders or decrees for the payment
of money in excess of $5,000,000 (in excess of the coverage under applicable
insurance policies after giving effect to any deductibles as to which judgment,
order or decree the insurer has agreed in writing that it is liable), either
individually or in the aggregate, shall be
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rendered against the Company, any Guarantor or any Restricted Subsidiary or any
of their respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of an
appeal or otherwise, shall not be in effect;
(g) any holder or holders of at least $10,000,000 in
aggregate principal amount of Indebtedness of the Company, any Guarantor or any
Restricted Subsidiary after a default under such Indebtedness shall notify the
Trustee of the intended sale or disposition of any assets of the Company, any
Guarantor or any Subsidiary that have been pledged to or for the benefit of
such holder or holders to secure such Indebtedness or shall commence
proceedings, or take any action (including by way of set-off), to retain in
satisfaction of such Indebtedness or to collect on, seize, dispose of or apply
in satisfaction of Indebtedness, assets of the Company, any Guarantor or any
Restricted Subsidiary (including funds on deposit or held pursuant to lock-box
and other similar arrangements);
(h) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company, any
Guarantor or any Significant Restricted Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (ii) a decree or order
adjudging the Company, any Guarantor or any Significant Restricted Subsidiary
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any Significant
Restricted Subsidiary under any applicable federal or state law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company, any Guarantor or any Significant Restricted
Subsidiary or of any substantial part of their respective properties, or
ordering the winding up or liquidation of their respective affairs, and any
such decree or order for relief shall continue to be in effect, or any such
other decree or order shall be unstayed and in effect, for a period of 60
consecutive days; or
(i) (i) the Company, any Guarantor or any Significant
Restricted Subsidiary commences a voluntary case or proceeding under any
applicable Bankruptcy Law or any other case or proceeding to be adjudicated
bankrupt or insolvent, (ii) the Company, any Guarantor or any Significant
Restricted Subsidiary consents to the entry of a decree or order for relief in
respect of the Company, such Guarantor or such Significant Restricted
Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy
Law or to the commencement of any bankruptcy or insolvency case or proceeding
against it, (iii) the Company, any Guarantor or any Significant Restricted
Subsidiary files a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, (iv) the Company, any
Guarantor or any Significant Restricted Subsidiary (1) consents to the filing
of such petition or the appointment of, or
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taking possession by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company, any Guarantor or such
Significant Restricted Subsidiary or of any substantial part of their
respective properties, (2) makes an assignment for the benefit of creditors or
(3) admits in writing its inability to pay its debts generally as they become
due, or (v) the Company, any Guarantor or any Significant Restricted Subsidiary
takes any corporate action in furtherance of any such actions in this paragraph
(i).
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Sections 501(h) and (i) with respect to the Company or any
Significant Restricted Subsidiary) shall occur and be continuing with respect
to this Indenture, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities then Outstanding may, and the Trustee at the
request of such Holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all Securities to be due and payable, by a notice
in writing to the Company (and to the Trustee if given by the Holders of the
Securities) and upon any such declaration, such principal, premium, if any, and
interest shall become due and payable immediately. If an Event of Default
specified in clause (h) or (i) of Section 501 occurs with respect to the
Company or any Significant Restricted Subsidiary and is continuing, then all
the Securities shall ipso facto become and be due and payable immediately in an
amount equal to the principal amount of the Securities, together with accrued
and unpaid interest, if any, to the date the Securities become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
Thereupon, the Trustee may, at his or her discretion, proceed to protect and
enforce the rights of the Holders of the Securities by appropriate judicial
proceedings.
After such declaration of acceleration with respect to the
Securities, but before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Securities
Outstanding, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under
this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(ii) all overdue interest on all Outstanding
Securities,
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(iii) the principal of and premium, if any, on any
Outstanding Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at a
rate borne by the Securities, and
(iv) to the extent that payment of such interest
is lawful, interest upon overdue interest at the rate borne by
the Securities; and
(b) all Events of Default, other than the non-payment of
principal of the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513. No such
rescission shall affect any subsequent Default or impair any right consequent
thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and each Guarantor covenant that if
(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
(b) default is made in the payment of the principal of,
premium, if any, on any Security at the Stated Maturity thereof,
the Company and such Guarantor will, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal and premium, if any, and interest,
with interest upon the overdue principal and premium, if any, and, to the
extent that payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate borne by the Securities; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company or any Guarantor, as the case may be, fails to
pay such amounts forthwith upon such demand, the Trustee, in its own name and
as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid and may prosecute such proceeding to
judgment or final decree, and may enforce the same against the Company or any
Guarantor or any other obligor upon the Securities 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
Securities, wherever situated.
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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
private or judicial proceedings as the Trustee shall deem most effectual to
protect and enforce 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 therein, 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 512. 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.
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 Securities or the property of the Company or
of such other obligor or their creditors, the Trustee (irrespective of whether
the principal of the Securities 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 or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) 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
Securities 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
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official 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 607.
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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 Securities 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.
Section 505. Trustee May Enforce Claims without Possession of
Securities.
All rights of action and claims under this Indenture, the
Securities or the Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Securities 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 of the
Securities in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
or otherwise on behalf of the Holders or the Trustee pursuant to this Article
or through any proceeding or any arrangement or restructuring in anticipation
or in lieu of any proceeding contemplated by this Article shall be applied,
subject to applicable law, 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, premium, if any, or interest, upon presentation of the Securities
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
upon the Securities for principal, premium, if any, and interest, 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 Securities for principal, premium, if any, and interest; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto, including the Company, provided that all sums due and owing to the
Holders and the Trustee have been paid in full as required by this Indenture.
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Section 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of
the Outstanding Securities 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;
(c) such Holder or Holders have offered to the Trustee an
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 15 days after its receipt of such notice,
request and offer (and if requested, provision) of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 15-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
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 Security or any 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 Security or any Guarantee, except in the manner provided in this Indenture
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 Security shall have the right based on the terms stated herein,
which is absolute and unconditional, to receive payment of the principal of,
premium, if any, and (subject to Section 309) interest on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or the repurchase date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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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 the Company, any Guarantor, any other obligor on the Securities, the
Trustee and the Holders shall, subject to any determination in such proceeding,
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.
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
Security 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.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, provided that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture (including, without limitation, Section 507) or any
Guarantee, expose the Trustee to personal liability, or be unduly prejudicial
to Holders not joining therein; and
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(b) 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.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities may on behalf of the Holders of
all Outstanding Securities waive any past Default hereunder and its
consequences, except a Default
(a) in the payment of the principal of, premium, if any, or
interest on any Security; or
(b) in respect of a covenant or a provision hereof which
under this Indenture cannot be modified or amended without the consent of the
Holder of each Security Outstanding affected by such modification or amendment.
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 impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security 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, 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 Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, premium, if any, or interest
on, any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
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Section 515. Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantors 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 or any usury or other law wherever enacted, now or at
any time hereafter in force, which would prohibit or forgive the Company or any
Guarantor from paying all or any portion of the principal of, premium, if any,
or interest on the Securities contemplated herein or in the Securities or which
may affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantors (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 516. Remedies Subject to Applicable Law.
All rights, remedies and powers provided by this Article Five
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law in the premises, and all the provisions of this
Indenture are intended to be subject to all applicable mandatory provisions of
law which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Indenture invalid, unenforceable or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.
Subject to the provisions of Trust Indenture Act Sections
315(a) through 315(d):
(a) if a Default or 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 its exercise
thereof as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs;
(b) except during the continuance of a Default or an Event of
Default:
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(1) the Trustee need perform only those duties as
are specifically set forth in this Indenture and no covenants
or obligations shall be implied in this Indenture that are
adverse to 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 to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture;
(c) the Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this Subsection (c) does not limit the
effect of Subsection (b) of this Section 601;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith, in
accordance with a direction of the Holders of a majority in
principal amount of Outstanding Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or
power confirmed upon the Trustee under this Indenture;
(d) 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;
(e) whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to Subsections (a), (b), (c) and (d) of this Section 601; and
(f) the Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
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Section 602. Notice of Defaults.
Within 30 days after a Responsible Officer of the Trustee
receives notice of the occurrence of any Default, the Trustee shall transmit by
mail to all Holders and any other Persons entitled to receive reports pursuant
to Section 313(c) of the Trust Indenture Act, as their names and addresses
appear in the Security Register, 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, premium, if any, or interest on any Security, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601 hereof and Trust
Indenture Act Sections 315(a) through 315(d):
(a) 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;
(b) 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;
(c) the Trustee may consult with counsel 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 in accordance
with such advice or Opinion of Counsel;
(d) 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 security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred
therein or thereby in compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than any
liabilities arising out of the negligence, bad faith or willful misconduct of
the Trustee;
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(f) 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,
approval, appraisal, bond, debenture, note, coupon, security or other paper or
document unless requested in writing to do so by the Holders of not less than a
majority in aggregate principal amount of the Securities then Outstanding;
provided that, if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every such
investigation so requested by the Holders of not less than 25% in aggregate
principal amount of the Securities Outstanding shall be paid by the Company or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by the
Company upon demand; provided, further, the Trustee in its discretion may make
such further inquiry or investigation into such facts or matters as it may deem
fit, and, if the Trustee shall 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;
(g) 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, rely upon an Officers' Certificate; and
(h) 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.
Section 604. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except
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 Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in any Statement of Eligibility and Qualification on Form
T-1 supplied to the Company are or will be true and accurate subject to the
qualifications set
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forth therein. The Trustee shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof nor shall the Trustee be
responsible for any statement in any registration statement for the Securities
under the Securities Act or responsible for the determination as to which
beneficial owners are entitled to receive notices hereunder.
Section 605. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any
other agent of the Company, in its individual or any other capacity, may become
the owner or pledgee of Securities, with the same rights it would have if it
were not the Trustee, Paying Agent, Security Registrar or such other agent and,
subject to Sections 608 and 613 hereof and Trust Indenture Act Sections 310 and
311, may otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Security Registrar 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 for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Except for funds or securities
deposited with the Trustee pursuant to Article Four, the Trustee shall be
required to invest all moneys received by the Trustee, until used or applied as
herein provided, in Temporary Cash Investments in accordance with the
directions of the Company.
Section 607. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation 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) and the Company covenants and agrees to pay or reimburse the
Trustee and each predecessor Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all agents and other persons not regularly in its employ) except any
such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct. The Company also covenants and agrees to indemnify
the Trustee and each predecessor Trustee for, and to hold it harmless against,
any claim, loss, liability, tax, assessment or other governmental charge (other
than taxes applicable to the Trustee's
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compensation hereunder) or expense incurred without negligence, bad faith or
willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including enforcement of this Section 607 and also including
any liability which the Trustee may incur as a result of failure to withhold,
pay or report any tax, assessment or other governmental charge, and the costs
and expenses of defending itself against or investigating 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 607 to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for reasonable expenses,
disbursements and advances shall constitute an additional obligation hereunder
and shall survive the satisfaction and discharge of this Indenture and the
resignation or removal of the Trustee and each predecessor Trustee.
Section 608. Conflicting Interests.
The Trustee shall comply with the provisions of Section
310(b) of the Trust Indenture Act.
Section 609. Trustee Eligibility.
There shall at all times be a Trustee hereunder which shall
be eligible to act as trustee under Trust Indenture Act Section 310(a)(5) and
which shall have a combined capital and surplus of at least $100,000,000, to
the extent there is an institution eligible and willing to serve. 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 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 Trustee 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 609, 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 609, the Trustee shall resign immediately in the
manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor Trustee.
(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 under
Section 611.
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(b) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign by giving written notice thereof to the
Company. Upon receiving such notice or resignation, the Company shall promptly
appoint a successor trustee, a copy of such appointment which shall be
delivered to the resigning Trustee and a copy to the successor trustee. If an
instrument of acceptance by a successor trustee shall not have been delivered
to the Trustee within 30 days after the giving of such notice of resignation,
the resigning Trustee may, or any Holder who has been a bona fide Holder of a
Security 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. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint and prescribe a successor
trustee.
(c) The Trustee may be removed at any time for any cause or
for no cause by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the
provisions of Trust Indenture Act Section 310(b) after
written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for at least six
months,
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver 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 case, (i) the Company may remove the Trustee, or (ii) subject to
Section 514, the Holder of any Security who has been a bona fide Holder of a
Security for at least six 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. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
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(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 shall promptly appoint a successor trustee and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, the Company has not appointed a successor Trustee, a successor trustee
shall be appointed by the Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Company and the retiring
Trustee. Such 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 of the Securities and accepted
appointment in the manner hereinafter provided, the Holder of any Security who
has been a bona fide Holder for at least six months may, subject to Section
514, 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 by
mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor trustee and the
address of its Corporate Trust Office or agent hereunder.
Section 611. 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 as if originally
named as Trustee hereunder; but, nevertheless, on the written request of the
Company or the successor trustee, upon payment of its charges pursuant to
Section 607 then unpaid, such retiring Trustee shall pay over to the successor
trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor trustee all such rights,
powers, duties and obligations. 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 and powers.
No successor trustee with respect to the Securities shall
accept appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act
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Section 310(a) and this Article Six and shall have a combined capital and
surplus of at least $100,000,000 and have a Corporate Trust Office or an agent
selected in accordance with Section 609.
Upon acceptance of appointment by any successor trustee as
provided in this Section 611, the Company shall give notice thereof to the
Holders of the Securities, by mailing such notice to such Holders at their
addresses as they shall appear on the Security Register. If the acceptance of
appointment is substantially contemporaneous with the appointment, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 610. If the Company fails to give such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be given at the expense of the Company.
Section 612. 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 (including the trust created by this
Indenture) shall be the successor of the Trustee hereunder, provided that such
corporation shall be eligible under Trust Indenture Act Section 310(a) and this
Article Six and shall have a combined capital and surplus of at least
$100,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 609, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Securities shall
have been authenticated but not delivered, any such successor to the Trustee
may adopt the certificate of authentication of any predecessor Trustee and
deliver such Securities so authenticated; and, in case at that time any of the
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor trustee; and in all such cases such certificate
shall have the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall have; provided
that the right to adopt the certificate of authentication of any predecessor
Trustee or to authenticate Securities in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
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Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or other obligor under the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee who has resigned or
been removed shall be subject to Trust Indenture Act Section 311(a) to the
extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
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 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 Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act
Section 312(b) with other Holders with respect to their rights under this
Indenture or the Securities, and the Trustee shall comply with Trust Indenture
Act Section 312(b). The Company, the Trustee, the Security Registrar and any
other Person shall have the protection of Trust Indenture Act Section 312(c).
Further, every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee or
any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Trust Indenture Act 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
Trust Indenture Act Section 312.
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Section 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with
the first May 15 after the issuance of Securities, the Trustee, if so required
under the Trust Indenture Act, shall transmit by mail to all Holders, in the
manner and to the extent provided in Trust Indenture Act Section 313(c), a
brief report dated as of such May 15 in accordance with and with respect to the
matters required by Trust Indenture Act Section 313(a). The Trustee shall also
transmit by mail to all Holders, in the manner and to the extent provided in
Trust Indenture Act Section 313(c), a brief report in accordance with and with
respect to the matters required by Trust Indenture Act Section 313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to
this Section 703 shall, at the time of such transmission, be mailed to the
Company and filed with each stock exchange, if any, upon which the Securities
are listed and also with the Commission. The Company will notify the Trustee
promptly if the Securities are listed on any stock exchange.
Section 704. Reports by Company and Guarantors.
The Company, and each Guarantor, as the case may be, shall:
(a) file with the Trustee, within 15 days after the Company
or any Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which the
Company or any Guarantor may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Exchange Act; or, if the Company or any
Guarantor, as the case may be, is not required to file information, documents
or reports pursuant to either of said Sections, then it shall (i) deliver to
the Trustee annual audited financial statements of the Company and its
Subsidiaries, prepared on a Consolidated basis in conformity with generally
accepted accounting principles then in effect, within 120 days after the end of
each fiscal year of the Company, and (ii) file with the Trustee and, to the
extent permitted by law, the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance
with the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to compliance
by the Company or any
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Guarantor, as the case may be, with the conditions and covenants of this
Indenture as are required from time to time by such rules and regulations
(including such information, documents and reports referred to in Trust
Indenture Act Section 314(a)); and
(c) within 15 days after the filing thereof with the Trustee,
transmit by mail to all Holders in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company or any Guarantor, as
the case may be, pursuant to Section 1019 hereunder and subsections (a) and (b)
of this Section as are required by rules and regulations prescribed from time
to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company and Guarantors May Consolidate, etc., Only on
Certain Terms.
(a) The Company will not, in a single transaction or through
a series of related transactions, consolidate with or merge with or into any
other Person or sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis to any other Person or group of affiliated Persons, unless at the time
and after giving effect thereto:
(i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company)
formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company
and its Subsidiaries on a Consolidated basis (the "Surviving
Entity") will be a corporation duly organized and validly
existing under the laws of the United States of America, any
state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form
satisfactory to the Trustee, all the obligations of the
Company under the Securities and hereunder, and the
Securities and this Indenture will remain in full force and
effect as so supplemented;
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(ii) immediately before and immediately after giving
effect to such transaction on a pro forma basis (and treating
any Indebtedness not previously an obligation of the Company
or any of its Restricted Subsidiaries which becomes the
obligation of the Company or any of its Restricted
Subsidiaries as a result of such transaction as having been
incurred at the time of such transaction), no Default or
Event of Default will have occurred and be continuing;
(iii) immediately after giving effect to such
transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or
any of its Restricted Subsidiaries which becomes the
obligation of the Company or any of its Subsidiaries as a
result of such transaction as having been incurred at the
time of such transaction), the Consolidated Net Worth of the
Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) is equal to or
greater than the Consolidated Net Worth of the Company
immediately prior to such transaction;
(iv) immediately before and immediately after giving
effect to such transaction on a pro forma basis (on the
assumption that the transaction occurred on the first day of
the four-quarter period for which financial statements are
available ending immediately prior to the consummation of
such transaction with the appropriate adjustments with
respect to the transaction being included in such pro forma
calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor hereunder) could incur
$1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1008;
(v) at the time of the transaction, each Guarantor,
if any, unless it is the other party to the transactions
described above, will have by supplemental indenture
confirmed that its Guarantees shall apply to such Person's
obligations hereunder and under the Securities;
(vi) at the time of the transaction if any of the
property or assets of the Company or any of its Restricted
Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1011 are complied with; and
(vii) at the time of the transaction the Company or
the Surviving Entity will have delivered, or caused to be
delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate
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and an Opinion of Counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment,
conveyance, transfer, lease or other transaction and the
supplemental indenture in respect thereof comply with this
Indenture and that all conditions precedent herein provided
for relating to such transaction have been complied with.
(b) Each Guarantor shall not, and the Company will not permit
a Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person (other
than the Company or any Restricted Subsidiary) or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a Consolidated basis to any Person or group of
affiliated Persons (other than the Company or any Restricted Subsidiary), or
permit any of its Subsidiaries to enter into any such transaction or series of
related transactions if such transaction or series of related transactions, in
the aggregate, would result in a sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all of the properties and assets of the
Guarantor and its Subsidiaries on a Consolidated basis to any other Person or
group of affiliated Persons (other than the Company or any Guarantor), unless
at the time and after giving effect thereto:
(i) either (1) the Guarantor will be the continuing
corporation or (2) the Person (if other than the Guarantor)
formed by such consolidation or into which such Guarantor is
merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the
Guarantor and its Subsidiaries on a Consolidated basis (the
"Surviving Guarantor Entity") will be a corporation duly
organized and validly existing under the laws of the United
States of America, any state thereof or the District of
Columbia and such Person expressly assumes, by a supplemental
indenture, in a form satisfactory to the Trustee, all the
obligations of such Guarantor under its Guarantee of the
Securities and this Indenture, and such Guarantee will remain
in full force and effect;
(ii) immediately before and immediately after giving
effect to such transaction, on a pro forma basis no Default
or Event of Default shall have occurred and be continuing;
and
(iii) at the time of the transaction such Guarantor
or the Surviving Guarantor Entity will have delivered, or
caused to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each to the effect
that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other
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transaction and the supplemental indenture in respect thereof
comply with this Indenture and that all conditions precedent
therein provided for relating to such transaction have been
complied with.
Notwithstanding the foregoing, Section 801(b) shall not apply
upon 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, a Guarantor in accordance with Section 1014(c) herein.
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company or any Guarantor, if any, in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company or such Guarantor, as the case may be, is merged or the
successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be,
under this Indenture, in the Securities and/or the Guarantee, as the case may
be, with the same effect as if such successor had been named as the Company or
such Guarantor, as the case may be, herein, in the Securities and/or in the
Guarantee, as the case may be. When a successor (other than a successor that is
an Affiliate of the Company) assumes all the obligations of its predecessor
under this Indenture, the Securities or a Guarantee, as the case may be, the
predecessor shall be released from those obligations and covenants hereof and
the Securities; provided that in the case of a transfer by lease, the
predecessor shall not be released from the payment of principal and interest on
the Securities or a Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Without the consent of any Holders, the Company, the
Guarantors, if any, and any other obligor upon the Securities when authorized
by appropriate corporate action, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto or agreements
or other instruments with respect to any Guarantee, in form and substance
satisfactory to the Trustee, for any of the following purposes:
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(a) to evidence the succession of another Person to the
Company, any Guarantor or any other obligor upon the Securities, and the
assumption by any such successor of the covenants of the Company or such
Guarantor or obligor herein and in the Securities and in any Guarantee in
accordance with Article Eight;
(b) to add to the covenants of the Company, any Guarantor or
any other obligor upon the Securities for the benefit of the Holders, or to
surrender any right or power conferred upon the Company or any Guarantor or any
other obligor upon the Securities, as applicable, herein, in the Securities or
in any Guarantee;
(c) to cure any ambiguity, or to correct or supplement any
provision herein or in any supplemental indenture, the Securities or any
Guarantee which may be defective or inconsistent with any other provision
herein or in the Securities or any Guarantee or to make any other provisions
with respect to matters or questions arising under this Indenture, the
Securities or the Guarantees; provided that, in each case, such provisions
shall not adversely affect the interest of the Holders;
(d) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section
1014;
(f) to evidence and provide the acceptance of the appointment
of a successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the Holders as additional
security for the payment and performance of the Company's or any Guarantor's
Indenture Obligations, in any property, or assets, including any of which are
required to be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted to the Trustee pursuant to this Indenture or
otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Except as permitted by Section 901, with the consent of the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities, by Act of said Holders delivered to the Company, each Guarantor, if
any, and the Trustee, the Company and each Guarantor (if a party thereto) when
authorized by Board Resolutions, and the Trustee may (i) enter into an
indenture or indentures supplemental hereto or agreements or other instruments
with respect to any Guarantee in form and substance satisfactory to the
Trustee, for the purpose of adding any provisions to or amending,
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modifying or changing in any manner or eliminating any of the provisions of
this Indenture, the Securities or any Guarantee (including but not limited to,
for the purpose of modifying in any manner the rights of the Holders under this
Indenture, the Securities or any Guarantee) or (ii) waive compliance with any
provision in this Indenture, the Securities or any Guarantee (other than
waivers of past Defaults covered by Section 513 and waivers of covenants which
are covered by Section 1022); provided, however, that no such supplemental
indenture, agreement or instrument shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, or change to an earlier date any redemption date
of, or waive a default in the payment of the principal or interest on, any such
Security or reduce the principal amount thereof or the rate of interest thereon
or any premium payable upon the redemption thereof, or change the coin or
currency in which the principal of any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(b) amend, change or modify the obligation of the Company to
make and consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with Section 1013 or the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control in
accordance with Section 1016, including, in each case, amending, changing or
modifying any definitions relating thereto;
(c) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver or compliance with certain provisions of this Indenture;
(d) modify any of the provisions of this Section 902, Section
513 or 1022, except to increase the percentage of such Outstanding Securities
required for any such actions or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder
of each such Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent
to the assignment or transfer by the Company or any Guarantor of any of its
rights and obligations hereunder; or
(f) amend or modify any of the provisions of this Indenture
relating to the subordination of the Securities or any Guarantee in any manner
adverse to the Holders or the holders of any Guarantee.
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Upon the written request of the Company and each Guarantor,
if any, accompanied by a copy of Board Resolutions authorizing the execution of
any such supplemental indenture or Guarantee, and upon the filing with the
Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall
join with the Company and each Guarantor in the execution of such supplemental
indenture or Guarantee.
It shall not be necessary for any Act of Holders under this
Section 902 to approve the particular form of any proposed supplemental
indenture or Guarantee or agreement or instrument relating to any Guarantee,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by,
any supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Trust
Indenture Act Sections 315(a) through 315(d) and Section 602 hereof) shall be
fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate stating that the execution of such supplemental indenture,
agreement or instrument (a) is authorized or permitted by this Indenture and
(b) does not violate the provisions of any agreement or instrument evidencing
any other Indebtedness of the Company, any Guarantor or any other Restricted
Subsidiary. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture, agreement or instrument which affects the Trustee's own
rights, duties or immunities under this Indenture, any Guarantee 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 of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article Nine shall conform to the requirements of the Trust Indenture Act as
then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article Nine may, and shall if
required by the
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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 Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and each Guarantor and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
Section 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company, any Guarantor
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 Security affected, in the manner provided for in Section 106,
setting forth in general terms the substance of such supplemental indenture.
Section 908. Revocation and Effects of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same Indebtedness as the consenting Holder's Security, even if a notation of
the consent is not made on any Security. However, any such Holder, or
subsequent Holder, may revoke the consent as to his Security or portion of a
Security if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. An amendment or waiver shall become
effective in accordance with its terms and thereafter bind every Holder.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of,
premium, if any, and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company shall maintain an office or agency where
Securities may be presented or surrendered for payment. The Company also will
maintain in The City of New York an office or agency where Securities may be
surrendered for registration of transfer, redemption or exchange and where
notices and demands to or upon the
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Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location and any
change in the location of any such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the office of the
agent of the Trustee and the Company hereby appoints the Trustee such agent as
its agent to receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes, and
may from time to time rescind such designation. 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 office or agency.
The Trustee shall initially act as Paying Agent for the
Securities.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company or any of its Affiliates shall at any time act
as Paying Agent, it will, on or before each due date of the principal of,
premium, if any, or interest on any of the Securities, segregate and hold in
trust for the benefit of the Holders entitled thereto a sum sufficient to pay
the principal, 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 so to act.
If the Company or any of its Affiliates is not acting as
Paying Agent, the Company will, on or before each due date of the principal of,
premium, if any, or interest on any of the Securities, deposit with a Paying
Agent a sum in same day funds sufficient to pay the principal, premium, if any,
or interest so becoming due, such sum to be held in trust for 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 so to act.
If the Company is not acting as Paying Agent, 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:
(a) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on the Securities 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;
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(b) give the Trustee notice of any Default by the Company or
any Guarantor (or any other obligor upon the Securities) in the making of any
payment of principal, premium, if any, or interest on the Securities;
(c) 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; and
(d) acknowledge, accept and agree to comply in all aspects
with the provisions of this Indenture relating to the duties, rights and
disabilities of 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 money.
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,
premium, if any, or interest on any Security and remaining unclaimed for two
years after such principal and premium, if any, or interest has become due and
payable shall promptly 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 Security 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, may at
the expense of the Company cause to be published once, in the New York Times
and The Wall Street Journal (national edition), and mail to each such Holder,
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
notification, publication and mailing, any unclaimed balance of such money then
remaining will promptly be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence and related rights and franchises (charter and statutory)
of the Company and each Restricted Subsidiary; provided, however, that the
Company shall not be required to preserve any
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such right or franchise or the corporate existence of any such Restricted
Subsidiary if the Board of Directors of the Company shall determine that the
preservation thereof is no longer necessary or desirable in the conduct of the
business of the Company and its Restricted Subsidiaries as a whole and that the
loss thereof would not reasonably be expected to have a material adverse effect
on the ability of the Company to perform its obligations hereunder; and
provided, further, however, that the foregoing shall not prohibit a sale,
transfer or conveyance of a Restricted Subsidiary or any of its assets in
compliance with the terms of this Indenture.
Section 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, on or before the date the same shall become due and payable, (a)
all taxes, assessments and governmental charges levied or imposed upon the
Company or any of its Restricted Subsidiaries shown to be due on any return of
the Company or any of its Restricted Subsidiaries or otherwise assessed or upon
the income, profits or property of the Company or any of its Restricted
Subsidiaries if failure to pay or discharge the same could reasonably be
expected to have a material adverse effect on the ability of the Company or any
Guarantor to perform any of their obligations hereunder and (b) all lawful
claims for labor, materials and supplies, which, if unpaid, would by law become
a Lien upon the property of the Company or any of its Restricted Subsidiaries,
except for any Lien permitted to be incurred under Section 1011, if failure to
pay or discharge the same could reasonably be expected to have a material
adverse effect on the ability of the Company or any Guarantor to perform any of
their obligations hereunder; 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 properly instituted and
diligently conducted and in respect of which appropriate reserves (in the good
faith judgment of management of the Company) are being maintained in accordance
with GAAP.
Section 1006. Maintenance of Properties.
The Company shall cause all material properties owned by the
Company and any of its Restricted Subsidiaries or used or held for use in the
conduct of its business or the business of any of its Restricted Subsidiaries
to be maintained and kept in good condition, repair and working order (ordinary
wear and tear excepted) and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the reasonable judgment of the Company may be
consistent with sound business practice and necessary so that the business
carried on in connection therewith may be properly conducted at all times;
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provided, however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the reasonable judgment of the Company, desirable in the conduct of its
business or the business of any of its Restricted Subsidiaries and not
reasonably expected to have a material adverse effect on the ability of the
Company to perform its obligations hereunder.
Section 1007. Insurance.
The Company shall at all times keep all of its and its
Restricted Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company in good faith to be financially sound
and responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties in the same general geographic areas in which the Company and
its Restricted Subsidiaries operate, except where the failure to do so could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or prospects of the
Company and its Restricted Subsidiaries, taken as a whole.
Section 1008. Limitation on Indebtedness.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, issue, incur, assume, guarantee or
otherwise in any manner become directly or indirectly liable for the payment of
or otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness but excluding Permitted Indebtedness), unless such
Indebtedness is incurred by the Company or a Guarantor or constitutes Acquired
Indebtedness of a Restricted Subsidiary (which is not a Guarantor) and, in each
case, the Company's Consolidated Fixed Charge Coverage Ratio for the four full
fiscal quarters for which financial statements are available immediately
preceding the incurrence of such Indebtedness taken as one period (and after
giving pro forma effect to (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including the
refinancing of other Indebtedness, as if such Indebtedness was incurred, and
the application of such proceeds occurred, on the first day of such applicable
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company and its Restricted Subsidiaries since the first day of such
applicable period as if such Indebtedness was incurred, repaid or retired at
the beginning of such applicable period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such applicable period); (iii) in the case of Acquired Indebtedness or
any acquisition occurring at the time of the incurrence of such Indebtedness,
the related acquisition, assuming such acquisition had been consummated on the
first day of such applicable period; and (iv) any acquisition or disposition by
the Company and its Restricted Subsidiaries of any company or any business or
any assets out of the ordinary course of business, whether by merger, stock
purchase or sale or asset purchase or sale, or any related repayment of
Indebtedness, in each case since the first day of such applicable period,
assuming such acquisition or disposition had been consummated on the first day
of such applicable period) is at least equal to or greater than 2.00 to 1.
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consummated on the first day of such applicable period; and (iv) any
acquisition or disposition by the Company and its Restricted Subsidiaries of
any company or any business or any assets out of the ordinary course of
business, whether by merger, stock purchase or sale or asset purchase or sale,
or any related repayment of Indebtedness, in each case since the first day of
such applicable period, assuming such acquisition or disposition had been
consummated on the first day of such applicable period) is at least equal to or
greater than 2.00 to 1.
Section 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly:
(i) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Company's
Capital Stock (other than dividends or distributions payable
solely in its shares of Qualified Capital Stock or in options,
warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire
for value, directly or indirectly, the Company's Capital Stock
or any Capital Stock of any Affiliate of the Company (other
than Capital Stock of any Wholly Owned Restricted Subsidiary)
or options, warrants or other rights to acquire such Capital
Stock;
(iii) make any principal payment on, or repurchase,
redeem, defease, retire or otherwise acquire for value, prior
to any scheduled principal payment, sinking fund payment or
maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on
any Capital Stock of any Restricted Subsidiary to any Person
(other than (a) to the Company or any of its Wholly Owned
Restricted Subsidiaries or (b) to all holders of Capital Stock
of such Restricted Subsidiary on a pro rata basis); or
(v) make any Investment in any Person (other than any
Permitted Investments)
(any of the foregoing actions described in clauses (i) through (v), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other
than cash, as determined
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by the Board of Directors of the Company, whose determination shall be
conclusive and evidenced by a Board Resolution), unless (1) immediately before
and immediately after giving effect to such proposed Restricted Payment on a
pro forma basis, no Default or Event of Default shall have occurred and be
continuing and such Restricted Payment shall not be an event which is, or after
notice or lapse of time or both, would be, an "event of default" under the
terms of any Indebtedness of the Company or its Restricted Subsidiaries; (2)
immediately before and immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions described
in Section 1008; and (3) after giving effect to the proposed Restricted
Payment, the aggregate amount of all such Restricted Payments declared or made
after the date hereof, does not exceed the sum of:
(A) $10,000,000;
(B) 50% of the aggregate cumulative Consolidated Net Income of
the Company accrued on a cumulative basis during the period
beginning on the first day of the fiscal quarter beginning after the
date hereof and ending on the last day of the Company's last fiscal
quarter ending prior to the date of the Restricted Payment (or, if
such aggregate cumulative Consolidated Net Income shall be a loss,
minus 100% of such loss);
(C) the aggregate Net Cash Proceeds received after the date
hereof by the Company from the issuance or sale (other than to any
of its Restricted Subsidiaries) of Qualified Capital Stock of the
Company or any options, warrants or rights to purchase such
Qualified Capital Stock of the Company (except, in each case, to the
extent such proceeds are used to purchase, redeem or otherwise
retire Capital Stock or Subordinated Indebtedness as set forth below
in clause (ii) or (iii) of paragraph (b) below);
(D) the aggregate Net Cash Proceeds received after the date
hereof by the Company (other than from any of its Subsidiaries) upon
the exercise of any options, warrants or rights to purchase
Qualified Capital Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date
hereof by the Company from the conversion or exchange, if any, of
debt securities or Redeemable Capital Stock of the Company or its
Subsidiaries into or for Qualified Capital Stock of the Company
plus, to the extent such debt securities or Redeemable Capital Stock
were issued prior to or after the date hereof, the aggregate of Net
Cash Proceeds from their original issuance; and
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(F) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date hereof, an
amount equal to the lesser of the return of capital with respect to
such Investment and the initial amount of such Investment, in either
case, less the cost of the disposition of such Investment.
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(vii) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (each of clauses
(i) through (iv) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement
of any shares of any class of Capital Stock of the Company in exchange
for (including any such exchange pursuant to the exercise of a conversion
right or privilege in connection with which cash is paid in lieu of the
issuance of fractional shares or scrip), or out of the Net Cash Proceeds
of a substantially concurrent issue and sale for cash (other than to a
Restricted Subsidiary) of, other shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(C) of
paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or in an amount not in excess of the Net
Cash Proceeds of, a substantially concurrent issuance and sale for cash
(other than to any Restricted Subsidiary of the Company) of any Qualified
Capital Stock of the Company, provided that the Net Cash Proceeds from
the issuance of such shares of Qualified Capital Stock are excluded from
clause (3)(C) of paragraph (a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, provided that any such new
Subordinated Indebtedness (1) shall be in a principal amount
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that does not exceed the principal amount so refinanced (or, if such
Subordinated Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration
thereof, then such lesser amount as of the date of determination), plus
the lesser of (I) the stated amount of any premium or other payment
required to be paid in connection with such a refinancing pursuant to the
terms of the Indebtedness being refinanced or (II) the amount of premium
or other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing; (2) has an Average Life to
Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Securities; (3) has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Securities; and (4) is expressly
subordinated in right of payment to the Securities at least to the same
extent as the Subordinated Indebtedness to be refinanced;
(v) the repurchase of any Subordinated Indebtedness of the Company
or any Guarantor at a purchase price not greater than 101% of the
principal amount of such Subordinated Indebtedness of the event of a
Change of Control (as defined below) pursuant to a provision similar to
Section 1016 hereof; provided that prior to or simultaneously with such
repurchase, the Company has made the Change of Control Offer as provided
in such covenant and has repurchased all Securities validly tendered for
payment in connection with such Change of Control Offer;
(vi) the repurchase of any Subordinated Indebtedness of the Company
or any Guarantor, at a purchase price not greater than 100% of the
principal amount of such Indebtedness in the event of an Asset Sale
pursuant to a provision similar to Section 1013 hereof; provided that
prior to such repurchase the Company has made an Offer to purchase the
Securities as provided in such covenant and has repurchased all
Securities validly tendered for payment in connection with such Offer;
and
(vii) the payment of dividends on the Company's Common Stock of up
to $1,000,000 per quarter in the aggregate.
Section 1010. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Wholly Owned Restricted Subsidiary) unless
such transaction or series of related
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transactions is entered into in good faith and in writing and (a) such
transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that would be available
in a comparable transaction in arm's-length dealings with an unrelated third
party, (b) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5,000,000, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction or series
of related transactions complies with clause (a) above and (c) with respect to
any transaction or series of related transactions involving aggregate payments
in excess of $10,000,000, either (i) such transaction or series of related
transactions has been approved by a majority of the Disinterested Directors of
the Company, or in the event there is only one Disinterested Director, by such
Disinterested Director, or (ii) the Company delivers to the Trustee a written
opinion of an investment banking firm of national standing or other recognized
independent expert with experience appraising the terms and conditions of the
type of transaction or series of related transactions for which an opinion is
required stating that the transaction or series of related transactions is fair
to the Company or such Restricted Subsidiary from a financial point of view;
provided, however, that this provision shall not apply to (i) any transaction
with an officer or director of the Company entered into in the ordinary course
of business (including compensation and employee benefit arrangements with any
officer, director or employee of the Company, including under any stock option
or stock incentive plans), (ii) the payment of dividends otherwise permitted by
the terms of this Indenture, (iii) indemnification agreements for the benefit
of officers, directors and employees, and (iv) transactions and arrangements
pursuant to any contract in effect on the date of this Indenture and listed on
Schedule II attached hereto, as the same may be amended or modified from time
to time so long as any amendment or modification is no less favorable to the
Company or its Restricted Subsidiary, as the case may be, than such contract or
agreement as in effect on the date hereof.
Section 1011. Limitation on Liens.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur or affirm any Lien of any kind
securing any Pari Passu Indebtedness or Subordinated Indebtedness (including
any assumption, guarantee or other liability with respect thereto by any
Restricted Subsidiary) upon any property or assets (including any intercompany
notes) of the Company or any Subsidiary owned on the date of this Indenture or
acquired after the date of this Indenture, or any income or profits therefrom,
unless the Securities are directly secured equally and ratably with (or, in the
case of Subordinated Indebtedness, prior or senior thereto, with the same
relative priority as the Securities shall have with respect to such
Subordinated Indebtedness) the obligation or liability secured by such Lien
except for Liens (A) securing any Indebtedness which become Indebtedness
pursuant to a transaction permitted under
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Article Eight hereof or securing Acquired Indebtedness which, in each case,
were created prior to (and not created in connection with, or in contemplation
of) the incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect thereto by
any Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of Section 1008 hereof or (B) securing any Indebtedness incurred in
connection with any refinancing, renewal, substitution or replacement of any
such Indebtedness described in clause (A), so long as the aggregate principal
amount of Indebtedness represented thereby is not increased by such refinancing
by an amount greater than the lesser of (i) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Indebtedness being refinanced or (ii) the amount
of premium or other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing, provided, however, that in the
case of clauses (A) and (B), any such Lien only extends to the assets that were
subject to such Lien securing such Indebtedness prior to the related
acquisition by the Company or its Restricted Subsidiaries.
Section 1012. Limitation on Senior Subordinated Indebtedness.
The Company will not, and will not permit any Guarantor to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise in
any manner become directly or indirectly liable for or with respect to or
otherwise permit to exist any Indebtedness that is subordinate in right of
payment to any Indebtedness of the Company or such Guarantor, as the case may
be, unless such Indebtedness is also pari passu with the Securities or the
Guarantee of such Guarantor or subordinate in right of payment to the
Securities or such Guarantee at least to the same extent as the Securities or
such Guarantee are subordinate in right of payment to Senior Indebtedness or
Senior Indebtedness of such Guarantor, as the case may be.
Section 1013. Limitation on Sale of Assets.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless (i) at
least 80% of the consideration from such Asset Sale is received in cash and
(ii) the Company or such Subsidiary receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or assets
subject to such Asset Sale (as determined by the Board of Directors of the
Company and evidenced in a Board Resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale
are not required to be applied to repay permanently any Senior Indebtedness
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash
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Proceeds to the permanent repayment of the Senior Indebtedness, or if no such
Indebtedness under the Senior Indebtedness is outstanding then, the Company or
a Subsidiary may, within 365 days of such Asset Sale, invest the Net Cash
Proceeds in capital expenditures, properties and other assets or inventories
that (as determined by the Board of Directors of the Company) replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the businesses of the Company or its
Subsidiaries existing on the date of this Indenture or in businesses reasonably
related thereto; provided that the properties or assets that replace the
properties and assets that are subject to such Asset Sale in the case of a sale
of a store or stores shall be deemed to have been applied to the extent of any
capital expenditures made to acquire or construct a replacement store in the
general vicinity of the store or stores sold within 180 days preceding the date
of such Asset Sale. The amount of such Net Cash Proceeds not used or invested
as set forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000 or
more, the Company will apply the Excess Proceeds to the repayment of the
Securities and any other Pari Passu Indebtedness outstanding with similar
provisions requiring the Company to make an offer to purchase such Indebtedness
with the proceeds from any Asset Sale as follows: (A) the Company will make an
offer to purchase (an "Offer") from all holders of the Securities in accordance
with the procedures set forth in this Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Securities that may be purchased out of
an amount (the "Security Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Securities, and the denominator of which is the sum of the
outstanding principal amount of the Securities and such Pari Passu Indebtedness
(subject to proration in the event such amount is less than the aggregate
Offered Price (as defined herein) of all Securities tendered) and (B) to the
extent required by such Pari Passu Indebtedness to permanently reduce the
principal amount of such Pari Passu Indebtedness, the Company will make an
offer to purchase or otherwise repurchase or redeem Pari Passu Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Security Amount; provided that in no
event will the Company be required to make a Pari Passu Offer in a Pari Passu
Debt Amount exceeding the principal amount of such Pari Passu Indebtedness plus
the amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price for the Securities will be payable in cash in an
amount equal to 100% of the principal amount of the Securities plus accrued and
unpaid interest, if any, to the date (the "Offer Date") such Offer is
consummated (the "Offered Price"), in accordance with the procedures set forth
herein. To the extent that the aggregate Offered Price of the Securities
tendered pursuant to the Offer is less than the Security Amount relating
thereto or the aggregate amount of Pari Passu Indebtedness that is purchased in
a Pari Passu
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Offer is less than the Pari Passu Debt Amount, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Securities and Pari Passu Indebtedness surrendered by
holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Securities to be purchased on a pro rata basis. Upon the completion of the
purchase of all the Securities tendered pursuant to an Offer and the completion
of a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be reset at
zero.
(d) When the aggregate amount of Excess Proceeds exceeds $5,000,000, such
Excess Proceeds will, prior to any purchase of Securities described in
paragraph (c) above, be set aside by the Company in a separate account pending
(i) deposit with the depository or a paying agent of the amount required to
purchase the Securities tendered in an Offer or Pari Passu Indebtedness
tendered in a Pari Passu Offer, (ii) delivery by the Company of the Offered
Price to the holders of the Securities tendered in an Offer or Pari Passu
Indebtedness tendered in a Pari Passu Offer and (iii) application, as set forth
above, of Excess Proceeds in the business of the Company and its Subsidiaries
for general corporate purposes. Such Excess Proceeds may be invested in
Temporary Cash Investments, provided that the maturity date of any such
investment made after the amount of Excess Proceeds exceeds $5,000,000 shall
not be later than the Offer Date. The Company shall be entitled to any
interest or dividends accrued, earned or paid on such Temporary Cash
Investments; provided that the Company shall not withdraw such interest from
the separate account if an Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Securities and the Pari Passu Indebtedness shall be purchased by
the Company, at the option of the holders thereof, in whole or in part in
integral multiples of $1,000, on a date that is not earlier than 45 days and
not later than 60 days from the date the notice of the Offer is given to
holders, or such later date as may be necessary for the Company to comply with
the requirements under the Exchange Act.
(f) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with an Offer.
(g) Subject to paragraph (f) above, within 30 days after the date on which
the amount of Excess Proceeds equals or exceeds $5,000,000, the Company shall
send or cause to be sent by first-class mail, postage prepaid, to the Trustee
and to each Holder, at his address appearing in the Security Register, a notice
stating or including:
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(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the
Offered Price;
(2) the Offer Date;
(3) the instructions a Holder must follow in order to have his
Securities purchased in accordance with paragraph (c) of this
Section;
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Sales otherwise described in the
offering materials (or corresponding successor reports) (or in the
event the Company is not required to prepare any of the foregoing
Forms, the comparable information required pursuant to Section
1020), (ii) a description of material developments, if any, in the
Company's business subsequent to the date of the latest of such
Reports, (iii) if material, appropriate pro forma financial
information, and (iv) such other information, if any, concerning
the business of the Company which the Company in good faith
believes will enable such Holders to make an informed investment
decision regarding the Offer;
(5) the Offered Price;
(6) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(7) that Securities must be surrendered prior to the Offer
Date to the Paying Agent at the office of the Paying Agent or to an
office or agency referred to in Section 1002 to collect payment;
(8) that any Securities not tendered will continue to accrue
interest and that unless the Company defaults in the payment of the
Offered Price, any Security accepted for payment pursuant to the
Offer shall cease to accrue interest on and after the Offer Date;
(9) the procedures for withdrawing a tender; and
(10) that the Offered Price for any Security which has been
properly tendered and not withdrawn and which has been accepted for
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payment pursuant to the Offer will be paid promptly following the
Offered Date.
(h) Holders electing to have Securities purchased hereunder will be
required to surrender such Securities at the address specified in the notice on
or prior to the Offer Date. Holders will be entitled to withdraw their
election to have their Securities purchased pursuant to this Section 1013 if
the Company receives, not later than the Offer Date, a telegram, telex,
facsimile transmission or letter setting forth (1) the name of the Holder, (2)
the certificate number of the Security in respect of which such notice of
withdrawal is being submitted, (3) the principal amount of the Security (which
shall be $1,000 or an integral multiple thereof) delivered for purchase by the
Holder as to which his election is to be withdrawn, (4) a statement that such
Holder is withdrawing his election to have such principal amount of such
Security purchased, and (5) the principal amount, if any, of such Security
(which shall be $1,000 or an integral multiple thereof) that remains subject to
the original notice of the Offer and that has been or will be delivered for
purchase by the Company.
(i) The Company shall (i) not later than the Offer Date, accept for
payment Securities or portions thereof tendered pursuant to the Offer, (ii) not
later than 10:00 a.m. (New York time) on the Business Day following the Offer
Date, deposit with the Trustee or with a Paying Agent an amount of money in
same day funds (or New York Clearing House funds if such deposit is made prior
to the Offer Date) sufficient to pay the aggregate Offered Price of all the
Securities or portions thereof which are to be purchased on that date and (iii)
not later than 10:00 a.m. (New York time) on the Business Day following the
Offer Date, deliver to the Paying Agent an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Offered Price of the Securities purchased
from each such Holder, and the Company shall execute and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount to any unpurchased portion of the Security surrendered.
Any Securities not so accepted shall be promptly mailed or delivered by the
Paying Agent at the Company's expense to the Holder thereof. For purposes of
this Section 1013, the Company shall choose a Paying Agent which shall not be
the Company.
Subject to applicable escheat laws, the Trustee and the Paying
Agent shall return to the Company any cash that remains unclaimed, together
with interest, if any, thereon, held by them for the payment of the Offered
Price; provided, however, that (x) to the extent that the aggregate amount of
cash deposited by the Company with the Trustee in respect of an Offer exceeds
the aggregate Offered Price of the Securities or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and
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(y) unless otherwise directed by the Company in writing, no later than the
second Business Day following the Offer Date the Trustee shall return any such
excess (including, without limitation, monies deposited with respect to an
election which has been withdrawn in accordance with paragraph (h)) to the
Company together with interest or dividends, if any, thereon.
(j) Securities to be purchased shall, on the Offer Date, become due
and payable at the Offered Price and from and after such date (unless the
Company shall default in the payment of the Offered Price) such Securities
shall cease to bear interest. Such Offered Price shall be paid to such Holder
promptly following the later of the Offer Date and the time of delivery of such
Security to the relevant Paying Agent at the office of such Paying Agent by the
Holder thereof in the manner required. Upon surrender of any such Security for
purchase in accordance with the foregoing provisions, such Security shall be
paid by the Company at the Offered Price; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Offer Date shall be
payable to the Person in whose name the Securities (or any Predecessor
Securities) is registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 309; provided, further,
that Securities to be purchased are subject to proration in the event the
Excess Proceeds are less than the aggregate Offered Price of all Securities
tendered for purchase, with such adjustments as may be appropriate by the
Trustee so that only Securities in denominations of $1,000 or integral
multiples thereof, shall be purchased. If any Security tendered for purchase
shall not be so paid upon surrender thereof by deposit of funds with the
Trustee or a Paying Agent in accordance with paragraph (h) above, the principal
thereof (and premium, if any, thereon) shall, until paid, bear interest from
the Offer Date at the rate borne by such Security. Any Security that is to be
purchased only in part shall be surrendered to a Paying Agent at the office of
such Paying Agent (with, if the Company, the Security Registrar or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge, one or more new
Securities of any authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered that is not purchased. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Offer Date.
Section 1014. Limitation on Issuances of Guarantees of Indebtedness.
(a) The Company will not permit any Restricted Subsidiary, other
than the Guarantors, directly or indirectly, to secure the payment of any Senior
Indebtedness of the Company and the Company will not, and will not permit any
Restricted Subsidiary to,
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pledge any intercompany notes representing obligations of any Restricted
Subsidiary (other than the Guarantors) to secure the payment of any Senior
Indebtedness unless in each case such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture providing for
a guarantee of payment of the Securities by such Restricted Subsidiary, which
guarantee shall be on the same terms as the guarantee of the Senior
Indebtedness (if a guarantee of Senior Indebtedness is granted by any such
Restricted Subsidiary) except that the guarantee of the Securities need not be
secured and shall be subordinated to the claims against such Restricted
Subsidiary in respect of Senior Indebtedness to the same extent as the
Securities are subordinated to Senior Indebtedness of the Company under this
Indenture.
(b) The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of the Securities, on the same terms as the guarantee
of such Indebtedness except that (A) such guarantee need not be secured unless
required pursuant to Section 1011 hereof, (B) if such Indebtedness is by its
terms Senior Indebtedness, any such assumption, guarantee or other liability of
such Restricted Subsidiary with respect to such Indebtedness shall be senior to
such Restricted Subsidiary's Guarantee of the Securities to the same extent as
such Senior Indebtedness is senior to the Securities and (C) if such
Indebtedness is by its terms expressly subordinated to the Securities any such
assumption, guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated to such Restricted
Subsidiary's Guarantee of the Securities at least to the same extent as such
Indebtedness is subordinated to the Securities.
(c) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the Securities shall provide by its terms that it (and all Liens
securing the same) 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 transaction
is in compliance with the terms of this Indenture and such Restricted
Subsidiary is released from all guarantees, if any, by it of other Indebtedness
of the Company or any Restricted Subsidiaries or (ii) (with respect to any
Guarantees created after the date of this Indenture) the release by the holders
of the Indebtedness of the Company described in clauses (a) and (b) above of
their security interest or their guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under
such Indebtedness), at a time when (A) no other Indebtedness of the Company has
been secured or guaranteed by such Restricted Subsidiary, as the case may be,
or (B) the holders of all such other Indebtedness which is secured or
guaranteed by such Restricted Subsidiary also release their security interest
in, or
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guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness).
Section 1015. Restriction on Transfer of Assets.
The Company and the Guarantors will not sell, convey, transfer or
otherwise dispose of its assets or property to any of its Restricted
Subsidiaries, except for sales, conveyances, transfers or other dispositions
(a) made in the ordinary course of business or (b) to any Restricted Subsidiary
if such Subsidiary is a Guarantor or simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of the
payment of the Securities by such Restricted Subsidiary on a senior
subordinated basis. For purposes of this provision any sale, conveyance,
transfer, lease or other disposition of property or assets having a Fair Market
Value in excess of (a) $5,000,000 for any sale, conveyance, transfer or
disposition or series of related sales, conveyances, transfers, leases or
dispositions and (b) $10,000,000 in the aggregate for all such sales,
conveyances, transfers, leases or dispositions in any fiscal year of the
Company shall not be considered "in the ordinary course of business".
Section 1016. Purchase of Securities upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each
Holder shall have the right to require that the Company purchase such Holder's
Securities in whole or in part in integral multiples of $1,000, at a purchase
price (the "Change of Control Purchase Price") in cash in an amount equal to
101% of the principal amount of such Securities, plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described below in this Section 1015 (the "Change
of Control Offer") and in accordance with the other procedures set forth in
subsections (b), (c), (d) and (e) of this Section 1016.
(b) Within 30 days following any Change of Control, the Company
shall notify the Trustee thereof and give written notice (a "Change of Control
Purchase Notice") of such Change of Control to each Holder by first-class mail,
postage prepaid, at such Holder's address appearing in the Security Register,
stating among other things:
(1) that a Change of Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's Securities at the Change of Control
Purchase Price;
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect
to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control);
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(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report (or in the event
the Company is not required to prepare any of the foregoing Forms,
the comparable information required to be prepared by the Company
and any Guarantor pursuant to Section 1020), (ii) a description of
material developments, if any, in the Company's business subsequent
to the date of the latest of such reports and (iii) such other
information, if any, concerning the business of the Company which
the Company in good faith believes will enable such Holders to make
an informed investment decision regarding the Change of Control
Offer;
(4) that the Change of Control Offer is being made pursuant to
this Section 1016 and that all Securities properly tendered
pursuant to the Change of Control Offer will be accepted for
payment at the Change of Control Purchase Price;
(5) the Change of Control Purchase Date, which shall be a
Business Day fixed by the Company which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed, or
such later date as is necessary to comply with requirements under
the Exchange Act;
(6) the Change of Control Purchase Price;
(7) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(8) that Securities must be surrendered prior to the Change of
Control Purchase Date to the Paying Agent at the office of the
Paying Agent or to an office or agency referred to in Section 1002
to collect payment;
(9) that the Change of Control Purchase Price for any Security
which has been properly tendered and not withdrawn will be paid
promptly following the Change of Control Offer Purchase Date;
(10) the procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance;
(11) that any Security not tendered will continue to accrue
interest; and
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(12) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Securities accepted for
payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date.
(c) Upon receipt by the Company of the proper tender of Securities, the
Holder of the Security in respect of which such proper tender was made shall
(unless the tender of such Security is properly withdrawn) thereafter be
entitled to receive solely the Change of Control Purchase Price with respect to
such Security. Upon surrender of any such Security for purchase in accordance
with the foregoing provisions, such Security shall be paid by the Company at
the Change of Control Purchase Price; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Change of Control Purchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 309. If any Security
tendered for purchase in accordance with the provisions of this Section 1016
shall not be so paid upon surrender thereof, the principal thereof (and
premium, if any, thereon) shall, until paid, bear interest from the Change of
Control Purchase Date at the rate borne by such Security. Holders electing to
have Securities purchased will be required to surrender such Securities to the
Paying Agent at the address specified in the Change of Control Purchase Notice
on or prior to the Change of Control Purchase Date. Any Security that is to be
purchased only in part shall be surrendered to a Paying Agent at the office of
such Paying Agent (with, if the Company, the Security Registrar or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or the Trustee, as the
case may be, duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing), and the Company shall execute and the Trustee
shall authenticate and deliver to the Holder of such Security, without service
charge, one or more new Securities of any authorized denomination as requested
by such Holder in an aggregate principal amount equal to, and in exchange for,
the portion of the principal amount of the Security so surrendered that is not
purchased.
(d) The Company shall (i) not later than the Change of Control Purchase
Date, accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) not later than 10:00 a.m. (New York time) on
the Business Day following the Change of Control Purchase Date, deposit with
the Trustee or with a Paying Agent an amount of money in same day funds (or New
York Clearing House funds if such deposit is made prior to the Change of
Control Purchase Date) sufficient to pay the aggregate Change of Control
Purchase Price of all the Securities or portions thereof which are to be
purchased as of the Change of Control Purchase Date and (iii) not later than
10:00 a.m. (New York time) on the Business Day following the Change of Control
Purchase Date, deliver to the Paying Agent an Officers' Certificate stating the
Securities
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or portions thereof accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so accepted payment in
an amount equal to the Change of Control Purchase Price of the Securities
purchased from each such Holder, and the Company shall execute and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Paying Agent at the Company's expense to the Holder thereof.
The Company will publicly announce the results of the Change of Control Offer
on the Change of Control Purchase Date. For purposes of this Section 1016, the
Company shall choose a Paying Agent which shall not be the Company.
(e) A tender made in response to a Change of Control Purchase
Notice may be withdrawn if the Company receives, not later than one Business
Day prior to the Change of Control Purchase Date, a telegram, telex, facsimile
transmission or letter, specifying, as applicable:
(1) the name of the Holder;
(2) the certificate number of the Security in respect of which
such notice of withdrawal is being submitted;
(3) the principal amount of the Security (which shall be
$1,000 or an integral multiple thereof) delivered for purchase by
the Holder as to which such notice of withdrawal is being
submitted;
(4) a statement that such Holder is withdrawing his election
to have such principal amount of such Security purchased; and
(5) the principal amount, if any, of such Security (which
shall be $1,000 or an integral multiple thereof) that remains
subject to the original Change of Control Purchase Notice and that
has been or will be delivered for purchase by the Company.
(f) Subject to applicable escheat laws, the Trustee and the Paying
Agent shall return to the Company any cash that remains unclaimed, together
with interest or dividends, if any, thereon, held by them for the payment of
the Change of Control Purchase Price; provided, however, that, (x) to the
extent that the aggregate amount of cash deposited by the Company pursuant to
clause (ii) of paragraph (d) above exceeds the aggregate Change of Control
Purchase Price of the Securities or portions thereof to be purchased, then the
Trustee shall hold such excess for the Company and (y) unless otherwise
directed by the Company in writing, no later than the second Business Day
following the Change of Control Purchase Date the Trustee shall return any such
excess
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(including, without limitation, monies deposited with respect to a tender
withdrawn in accordance with the provisions of paragraph (e))to the Company
together with interest, if any, thereon.
(g) The Company shall comply, to the extent applicable, with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and
any other applicable securities laws or regulations in connection with a Change
of Control Offer.
Section 1017. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company will not permit (a) any Restricted Subsidiary of the
Company to issue, sell or transfer any Preferred Stock, except for (i)
Preferred Stock issued or sold to, held by or transferred to the Company or a
Wholly Owned Restricted Subsidiary, and (ii) Preferred Stock issued by a Person
prior to the time (A) such Person becomes a Restricted Subsidiary, (B) such
Person merges with or into a Restricted Subsidiary or (C) a Subsidiary merges
with or into such Person; provided that such Preferred Stock was not issued or
incurred by such Person in anticipation of the type of transaction contemplated
by subclause (A), (B) or (C) or (b) any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to acquire Preferred Stock of any
Restricted Subsidiary from the Company or any Wholly Owned Restricted
Subsidiary except, (a) in the case of clause (A) or (B), upon the acquisition
of all the outstanding Capital Stock of such Restricted Subsidiary in
accordance with the terms of this Indenture. Notwithstanding the above, the
Company will not permit Marsh Supermarkets, LLC to issue, sell or transfer any
Capital Stock, except for Capital Stock issued or sold to, held by or
transferred to the Company or a Wholly Owned Restricted Subsidiary, and will
not permit any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to acquire any Capital Stock of Marsh Supermarkets, LLC from the
Company or any Wholly Owned Restricted Subsidiary.
Section 1018. 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 to become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distribution on
its Capital Stock, (ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (iii) make any Investment in the Company or any other
Restricted Subsidiary or (iv) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary, except for: (a) any agreement in
effect on the date of this Indenture; (b) any encumbrance or restriction, with
respect to a Subsidiary that is not a Restricted Subsidiary of the Company
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on the date of this Indenture, in existence at the time such Person becomes a
Restricted Subsidiary of the Company and not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary; and (c) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (a) and (b), or in this clause (c),
provided that the terms and conditions of any such encumbrances or restrictions
are no more restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced.
Section 1019. Limitations on Unrestricted Subsidiaries.
The Company will not make, and will not permit its Restricted
Subsidiaries to make, any Investment in Unrestricted Subsidiaries if, at the
time thereof, the aggregate amount of such Investments would exceed the amount
of Restricted Payments then permitted to be made pursuant to Section 1009 of
this Indenture. Any Investments in Unrestricted Subsidiaries permitted to be
made pursuant to this Section 1019 (i) will be treated as a Restricted Payment
in calculating the amount of Restricted Payments made by the Company and (ii)
may be made in cash or property.
Section 1020. Provision of Financial Statements.
Whether or not the Company or any Guarantor is subject to Section
13(a) or 15(d) of the Exchange Act, the Company and such Guarantor will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company and such
Guarantor would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) if the Company and such Guarantor were so subject, such
documents to be filed with the Commission on or prior to the date (the
"Required Filing Date") by which the Company and such Guarantor would have been
required so to file such documents if the Company and such Guarantor were so
subject. The Company and such Guarantor will also in any event (x) within 15
days of each Required Filing Date (i) transmit by mail to all holders, as their
names and addresses appear in the security register, without cost to such
holders and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company and such Guarantor would have
been required to file with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act if the Company and such Guarantor were subject to either of
such Sections and (y) if filing such documents by the Company and such
Guarantor with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder at the
Company's and such Guarantor's cost. If any Guarantor's or other Subsidiaries'
financial statements would be required to be included in the financial
statements filed or delivered pursuant
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hereto if the Company were subject to Section 13(a) or 15(d) of the Exchange
Act, the Company shall include such Guarantor's or other Subsidiaries'
financial statements in any filing or delivery pursuant hereto.
Section 1021. Statement by Officers as to Default.
(a) The Company and the Guarantors will deliver to the Trustee, on
or before a date not more than 60 days after the end of each fiscal quarter and
not more than 120 days after the end of each fiscal year of the Company ending
after the date hereof, a written statement signed by two executive officers of
the Company and each Guarantors, one of whom shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company and such Guarantor, as to compliance herewith, including whether or
not, after a review of the activities of the Company during such year or such
quarter and of the Company's and each Guarantor's performance under this
Indenture, to the best knowledge, based on such review, of the signers thereof,
no Default or Event of Default exists, or if a Default exists, specifying the
nature and status thereof and any actions being taken by the Company and the
Guarantors with respect thereto.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or 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 the Company
and the Guarantors shall deliver to the Trustee by registered or certified mail
or facsimile transmission followed by hard copy an Officers' Certificate
specifying such Default, Event of Default, notice or other action, the status
thereof and what actions the Company and the Guarantors are taking or propose
to take with respect thereto, within ten Business Days of its occurrence.
Section 1022. Waiver of Certain Covenants.
The Company and the Guarantors may omit in any particular instance
to comply with any covenant or condition set forth in Sections 1006 through
1012, 1014, 1015, and 1017 through 1020, if, before or after the time for such
compliance, the Holders of not less than a majority in aggregate principal
amount of the Securities at the time Outstanding shall, by Act of such Holders,
waive such compliance in such instance with such covenant or provision, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
The Securities are subject to redemption at any time on or after
August 1, 2002, at the option of the Company, in whole or in part, subject to
the conditions, and at the Redemption Prices, specified in the form of
Security, together with accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on relevant Regular Record
Dates and Special Record Dates to receive interest due on relevant Interest
Payment Dates and Special Payment Dates).
Section 1102. Applicability of Article.
Redemption of Securities 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 Eleven.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than 45 nor more than 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice period shall be satisfactory
to the Trustee), notify the Trustee in writing of such Redemption Date and of
the principal amount of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than
30 days prior to the Redemption Date. The Trustee shall select the Securities
or portions thereof to be redeemed pro rata, by lot or by any other method the
Trustee shall deem fair and reasonable. The amounts to be redeemed shall be
equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities 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 Securities shall relate, in
the case of any Security
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redeemed or to be redeemed only in part, to the portion of the principal amount
of such Security which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at its address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security or portion thereof to be redeemed, and
that (unless the Company shall default in payment of the Redemption Price)
interest thereon shall cease to accrue on and after said date;
(g) the names and addresses of the Paying Agent and the offices or
agencies referred to in Section 1002 where such Securities are to be
surrendered for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the procedures that a Holder must follow to surrender the
Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company. If the
Company elects to give
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notice of redemption, it shall provide the Trustee with a certificate stating
that such notice has been given in compliance with the requirements of this
Section 1105.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any other Security.
Section 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company or any of its Affiliates
is acting as Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money in same day funds sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date
or Special Payment Date) accrued interest on, all the Securities or portions
thereof which are to be redeemed on that date. The Paying Agent shall promptly
mail or deliver to Holders of Securities so redeemed payment in an amount equal
to the Redemption Price of the Securities purchased from each such Holder. All
money, if any, earned on funds held in trust by the Trustee or any Paying Agent
shall be remitted to the Company. For purposes of this Section 1106, the
Company shall choose a Paying Agent which shall not be the Company.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price together with accrued
interest 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 Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates and Special
Record Dates according to the terms and the provisions of Section 309.
If any Security 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 such
Security.
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Section 1108. Securities Redeemed or Purchased in Part.
Any Security which is to be redeemed or purchased only in part shall
be surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee, as the case may be, duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal amount equal
to, and in exchange for, the unredeemed portion of the principal of the
Security so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities as expressly provided for herein) as to all Outstanding
Securities hereunder, and the Trustee, upon Company Request and at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and delivered
(other than (i) lost, stolen or destroyed Securities which have
been replaced or paid as provided in Section 308 or (ii) all
Securities for whose payment United States dollars have theretofore
been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from
such trust as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, (ii) will
become due and payable at their Stated Maturity within one year or
(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
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expense, of the Company; and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust an amount in United States dollars sufficient
to pay and discharge the entire Indebtedness on the Securities not
theretofore delivered to the Trustee for cancellation, including
the principal of, premium, if any, and accrued interest on, such
Securities at such Maturity, Stated Maturity or Redemption Date;
(b) the Company or any Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company and any Guarantor; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, in form and substance
reasonably satisfactory to the Trustee, each stating that (i) all conditions
precedent herein relating to the satisfaction and discharge hereof have been
complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of, or constitute a default under, this Indenture.
Notwithstanding the satisfaction and discharge hereof, the
obligations of the Company to the Trustee under Section 607 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of subsection (a) of this Section 1201, the obligations of the Trustee
under Section 1202 and the last paragraph of Section 1003 shall survive.
Section 1202. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1201 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities 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 of,
premium, if any, and interest on, the Securities for whose payment such United
States dollars have been deposited with the Trustee.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
such Holder's acceptance thereof, likewise covenants and agrees, that, to the
extent and in the
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manner hereinafter set forth in this Article, the Indebtedness represented by
the Securities and the payment of the principal of, premium, if any, and
interest on, the Securities are hereby expressly made subordinate and subject
in right of payment as provided in this Article to the prior payment in full of
the Senior Indebtedness.
This Article Thirteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold Senior Indebtedness; and such provisions are made for the benefit of
the holders of Senior Indebtedness; and such holders are made obligees
hereunder and they or each of them may enforce such provisions as provided
herein.
Section 1302. Payment Over of Proceeds Upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its assets,
or (b) any liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary, or whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshaling of
assets or liabilities of the Company, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due on or in respect of Senior Indebtedness
before the Holders of the Securities are entitled to receive any payment or
distribution of any kind or character (excluding securities of the Company or
any other corporation that are equity securities or are subordinated in right
of payment to all Senior Indebtedness, that may be outstanding, to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article ("Permitted Junior
Securities")) on account of the principal of, premium, if any, or interest on
the Securities or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, the Securities (other than amounts previously
set aside with the Trustee, or payments previously made, in either case,
pursuant to the provisions of Sections 402 and 403 of this Indenture); and
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall be paid
by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the
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Senior Indebtedness held or represented by each, to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (excluding Permitted Junior
Securities), in respect of principal, premium, if any, and interest on the
Securities before all Senior Indebtedness is paid in full, then and in such
event such payment or distribution (excluding Permitted Junior Securities)
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other Person
making payments or distributions of assets of the Company for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the sale, assignment, conveyance, transfer, lease or other disposal
of its properties and assets substantially as an entirety to another Person
upon the terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of the Company for
the purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of such properties
and assets substantially as an entirety, as the case may be, shall, as a part
of such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposal, comply with the conditions set forth in Article Eight.
Section 1303. Suspension of Payment When Designated Senior Indebtedness in
Default.
(a) Unless Section 1302 shall be applicable, upon the occurrence and
during the continuance of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period (a "Payment Default") and after
the receipt by the Trustee from a Senior Representative of any Designated
Senior Indebtedness of written notice of such default, no payment (other than
amounts previously set aside with the Trustee or payments previously made, in
either case, pursuant to Section 402 or 403 in this Indenture) or distribution
of any assets of the Company or any Subsidiary of any kind or character
(excluding Permitted Junior
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Securities) may be made by the Company on account of the principal of, premium,
if any, or interest on, the Securities, or on account of the purchase,
redemption, defeasance or other acquisition of or in respect of, the Securities
unless and until such Payment Default shall have been cured or waived or shall
have ceased to exist or the Designated Senior Indebtedness shall have been
discharged or paid in full, after which the Company shall (subject to the other
provisions of this Article Thirteen) resume making any and all required
payments in respect of the Securities, including any missed payments.
(b) Unless Section 1302 shall be applicable, (1) upon the occurrence and
during the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may then
be accelerated immediately (a "Non-payment Default") and (2) after the receipt
by the Trustee and the Company from a Senior Representative of any Designated
Senior Indebtedness of written notice of such Non-payment Default, no payment
(other than any amounts previously set aside with the Trustee, or payments
previously made, in either case, pursuant to the provisions of Sections 402 or
403 in this Indenture) or distribution of any assets of the Company of any kind
or character (excluding Permitted Junior Securities) may be made by the Company
or any Subsidiary on account of the principal of, premium, if any, or interest
on, the Securities, or on account of the purchase, redemption, defeasance or
other acquisition of, or in respect of, the Securities for the period specified
below ("Payment Blockage Period").
(c) The Payment Blockage Period shall commence upon the receipt of notice
of the Non-payment Default by the Trustee and the Company from a Senior
Representative and shall end on the earliest of (i) the 179th day after such
commencement, (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) is cured, waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged or paid in full, or (iii) the date
on which such Payment Blockage Period (and all Non-payment Defaults as to which
notice is given after such Payment Blockage Period is initiated) shall have
been terminated by written notice to the Company or the Trustee from the Senior
Representative initiating such Payment Blockage Period, after which, in the
case of clauses (i), (ii) and (iii), the Company shall promptly resume making
any and all required payments in respect of the Securities, including any
missed payments. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Company and the Trustee of the notice
initiating such Payment Blockage Period (such 179-day period referred to as the
"Initial Period"). Any number of notices of Non-payment Defaults may be given
during the Initial Period; provided that during any period of 365 consecutive
days only one Payment Blockage Period, during which payment of principal of,
premium, if any, or interest on, the Securities may not be made, may commence
and the duration of such period may not exceed 179 days. No Non-
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payment Default with respect to any Designated Senior Indebtedness that existed
or was continuing on the date of the commencement of any Payment Blockage
Period will be, or can be, made the basis for the commencement of a second
Payment Blockage Period, whether or not within a period of 365 consecutive
days, unless such default has been cured or waived for a period of not less
than 90 consecutive days. The Company shall deliver a notice to the Trustee
promptly after the date on which any Non-payment Default is cured or waived or
ceases to exist or on which the Designated Senior Indebtedness related thereto
is discharged or paid in full, and the Trustee is authorized to act in reliance
on such notice.
(d) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, then and in such event such
payment shall be paid over and delivered forthwith to a Senior Representative
of the holders of the Designated Senior Indebtedness or as a court of competent
jurisdiction shall direct.
Section 1304. Payment Permitted if No Default.
Nothing contained in this Article, elsewhere in this Indenture or
in any of the Securities 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 marshaling 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, premium, if any, or interest on the Securities.
Section 1305. Subrogation to Rights of Holders of Senior Indebtedness.
After the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated 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 principal of,
premium, if any, and interest on, the Securities 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 of
the Securities 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 of the Securities or the
Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
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Section 1306. Provisions Solely to Define Relative Rights.
The provisions of this Article are intended solely for the purpose
of defining the relative rights of the Holders of the Securities 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 Securities
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of, premium, if any, and interest on,
the Securities as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company or the
Holders of the Securities and creditors of the Company other than the holders
of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Security 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 (1) in any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Company referred
to in Section 1302, to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 1303,
to prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 1303(d).
Section 1307. Trustee to Effectuate Subordination.
Each Holder of a Security by such Holder's 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 such Holder's attorney-in-fact for any
and all such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company whether in bankruptcy, insolvency,
receivership proceedings, or otherwise, the timely filing of a claim for the
unpaid balance of the indebtedness of the Company owing to such Holder in the
form required in such proceedings and the causing of such claim to be approved.
Section 1308. No Waiver of Subordination Provisions.
(a) 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
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the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (1) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (3) release any Person liable in any manner for
the collection or payment of Senior Indebtedness; and (4) exercise or refrain
from exercising any rights against the Company and any other Person; provided,
however, that in no event shall any such actions limit the right of the Holders
of the Securities to take any action to accelerate the maturity of the
Securities pursuant to Article Five of this Indenture or to pursue any rights
or remedies hereunder or under applicable laws if the taking of such action
does not otherwise violate the terms of this Article.
Section 1309. 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 Securities. 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 Securities,
unless and until the Trustee shall have received written notice thereof from
the Company or a holder of Senior Indebtedness or from a Senior Representative
or any trustee, fiduciary or agent therefor; and, prior to the receipt of any
such written notice, the Trustee 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 by Noon, Eastern Time, on the
Business Day 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, premium, if any, or interest on any Security), then, anything
herein contained to the contrary notwithstanding but without limiting the
rights and remedies of the holders of Senior Indebtedness, a Senior
Representative or any trustee, fiduciary or agent thereof, 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
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received by it after such date; nor shall the Trustee be charged with knowledge
of the curing of any such default or the elimination of the act or condition
preventing any such payment unless and until the Trustee shall have received an
Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and the Company by a Person which represents
itself as a Senior Representative or a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor) to establish that such notice has been
given by a Senior Representative or a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor); provided, however, that failure to give
such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. 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 1310. Reliance on Judicial Orders or Certificates.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee and the Holders of the Securities 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, or a certificate of a Senior
Representative, delivered to the Trustee or to the Holders of Securities 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 the foregoing shall apply only if such court has been
fully apprised of the provisions of this Article.
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Section 1311. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's 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 1312. 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 under this Indenture, 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 1311 shall not apply to the Company or
any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Section 1313. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five of this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to the
rights, if any, under this Article of the holders, from time to time, of Senior
Indebtedness to receive the cash, property or securities receivable upon the
exercise of such rights or remedies.
Section 1314. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Article against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall in good faith
mistakenly (absent willful misconduct) pay over or deliver to Holders, the
Company or any other Person moneys or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article or otherwise.
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ARTICLE FOURTEEN
GUARANTEES
Section 1401. Guarantors' Guarantee.
For value received, each of the Guarantors, in accordance with this
Article Fourteen, hereby absolutely, unconditionally and irrevocably
guarantees, jointly and severally, to the Trustee and the Holders, as if the
Guarantors were the principal debtor, the punctual payment and performance when
due of all Indenture Obligations (which for purposes of this Guarantee shall
also be deemed to include all commissions, fees, charges, costs and other
expenses (including reasonable legal fees and disbursements of one counsel)
arising out of or incurred by the Trustee or the Holders in connection with the
enforcement of this Guarantee).
Section 1402. Continuing Guarantee; No Right of Set-Off; Independent
Obligation.
(a) This Guarantee shall be a continuing guarantee of the payment
and performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture including those set forth in Article Eight.
Without limiting the generality of the foregoing, each Guarantor's liability
shall extend to all amounts which constitute part of the Indenture Obligations
and would be owed by the Company under this Indenture and the Securities but
for the fact that they are unenforceable, reduced, limited, impaired, suspended
or not allowable due to the existence of a bankruptcy, reorganization or
similar proceeding involving the Company.
(b) Each Guarantor, jointly and severally, hereby guarantees that
the Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the
Indenture Obligations shall be paid strictly in accordance with their terms
regardless of any law,
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regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the holders of the Securities.
(d) Each Guarantor's liability to pay or perform or cause the
performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been given
to the Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article
Fourteen cover all agreements between the parties hereto relative to this
Guarantee and none of the parties shall be bound by any representation,
warranty or promise made by any Person relative thereto which is not embodied
herein; and it is specifically acknowledged and agreed that this Guarantee has
been delivered by each Guarantor free of any conditions whatsoever and that no
representations, warranties or promises have been made to any Guarantor
affecting its liabilities hereunder, and that the Trustee shall not be bound by
any representations, warranties or promises now or at any time hereafter made
by the Company to any Guarantor.
(f) This Guarantee is a guarantee of payment, performance and
compliance and not of collectibility and is in no way conditioned or contingent
upon any attempt to collect from or enforce performance or compliance by the
Company or upon any event or condition whatsoever.
(g) The obligations of the Guarantors set forth herein constitute
the full recourse obligations of the Guarantors enforceable against them to the
full extent of all their assets and properties.
Section 1403. Guarantee Absolute.
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any Guarantor
whether or not an action or proceeding is brought against the Company and
whether or not the Company is joined in any such action or proceeding. The
liability of the Guarantors hereunder is irrevocable, absolute and
unconditional and (to the extent permitted by law) the liability and
obligations of the Guarantors hereunder shall not be released, discharged,
mitigated, waived, impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of
any Indebtedness or other obligation of the Company or any
other Person
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under this Indenture or the Securities, or any agreement or
instrument relating to any of the foregoing;
(b) any grants of time, renewals, extensions,
indulgences, releases, discharges or modifications which the
Trustee or the Holders may extend to, or make with, the
Company, any Guarantor or any other Person, or any change in
the time, manner or place of payment of, or in any other term
of, all or any of the Indenture Obligations, or any other
amendment or waiver of, or any consent to or departure from,
this Indenture or the Securities, including any increase or
decrease in the Indenture Obligations;
(c) the taking of security from the Company, any
Guarantor or any other Person, and the release, discharge or
alteration of, or other dealing with, such security;
(d) the occurrence of any change in the laws, rules,
regulations or ordinances of any jurisdiction by any present
or future action of any governmental authority or court
amending, varying, reducing or otherwise affecting, or
purporting to amend, vary, reduce or otherwise affect, any of
the Indenture Obligations and the obligations of any Guarantor
hereunder;
(e) the abstention from taking security from the
Company, any Guarantor or any other Person or from perfecting,
continuing to keep perfected or taking advantage of any
security;
(f) any loss, diminution of value or lack of
enforceability of any security received from the Company, any
Guarantor or any other Person, and including any other
guarantees received by the Trustee;
(g) any other dealings with the Company, any
Guarantor or any other Person, or with any security;
(h) the Trustee's or the Holders' acceptance of
compositions from the Company or any Guarantor;
(i) the application by the Holders or the Trustee of
all monies at any time and from time to time received from the
Company, any Guarantor or any other Person on account of any
indebtedness and
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liabilities owing by the Company or any Guarantor to the
Trustee or the Holders, in such manner as the Trustee or the
Holders deems best and the changing of such application in
whole or in part and at any time or from time to time, or any
manner of application of collateral, or proceeds thereof, to
all or any of the Indenture Obligations, or the manner of
sale of any collateral;
(j) the release or discharge of the Company or any
Guarantor of the Securities or of any Person liable directly
as surety or otherwise by operation of law or otherwise for
the Securities, other than an express release in writing given
by the Trustee, on behalf of the Holders, of the liability and
obligations of any Guarantor hereunder;
(k) any change in the name, business, capital
structure or governing instrument of the Company or any
Guarantor or any refinancing or restructuring of any of the
Indenture Obligations;
(l) the sale of the Company's or any Guarantor's
business or any part thereof;
(m) subject to Section 1414, any merger or
consolidation, arrangement or reorganization of the Company,
any Guarantor, any Person resulting from the merger or
consolidation of the Company or any Guarantor with any other
Person or any other successor to such Person or merged or
consolidated Person or any other change in the corporate
existence, structure or ownership of the Company or any
Guarantor or any change in the corporate relationship between
the Company and any Guarantor, or any termination of such
relationship;
(n) the insolvency, bankruptcy, liquidation,
winding-up, dissolution, receivership, arrangement,
readjustment, assignment for the benefit of creditors or
distribution of the assets of the Company or its assets or any
resulting discharge of any obligations of the Company (whether
voluntary or involuntary) or of any Guarantor (whether
voluntary or involuntary) or the loss of corporate existence;
(o) subject to Section 1414, any arrangement or plan
of reorganization affecting the Company or any Guarantor;
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(p) any failure, omission or delay on the part of the
Company to conform or comply with any term of this Indenture;
(q) any limitation on the liability or obligations of
the Company or any other Person under this Indenture, or any
discharge, termination, cancellation, distribution,
irregularity, invalidity or unenforceability in whole or in
part of this Indenture;
(r) any other circumstance (including any statute of
limitations) that might otherwise constitute a defense
available to, or discharge of, the Company or any Guarantor;
or
(s) any modification, compromise, settlement or
release by the Trustee, or by operation of law or otherwise,
of the Indenture Obligations or the liability of the Company
or any other obligor under the Securities, in whole or in
part, and any refusal of payment by the Trustee, in whole or
in part, from any other obligor or other guarantor in
connection with any of the Indenture Obligations, whether or
not with notice to, or further assent by, or any reservation
of rights against, each of the Guarantors.
Section 1404. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Trustee
from any Guarantor hereunder, the Trustee or the Holders shall have the right
to demand its full claim and to receive all dividends or other payments in
respect thereof until the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable hereunder for any
balance which may be owing to the Trustee or the Holders by the Company under
this Indenture and the Securities. The retention by the Trustee or the Holders
of any security, prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as between the
Trustee and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations due to the
Trustee or the Holders by the Company or any part thereof. Each Guarantor,
promptly after demand, will reimburse the Trustee and the Holders for all costs
and expenses of collecting such amount under, or enforcing this Guarantee,
including, without limitation, the reasonable fees and expenses of counsel.
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Section 1405. Waivers.
(a) Each Guarantor hereby expressly waives (to the extent permitted
by law) notice of the acceptance of this Guarantee and notice of the existence,
renewal, extension or the non-performance, non-payment, or non-observance on
the part of the Company of any of the terms, covenants, conditions and
provisions of this Indenture or the Securities or any other notice whatsoever
to or upon the Company or such Guarantor with respect to the Indenture
Obligations, whether by statute, rule of law or otherwise. Each Guarantor
hereby acknowledges communication to it of the terms of this Indenture and the
Securities and all of the provisions therein contained and consents to and
approves the same. Each Guarantor hereby expressly waives (to the extent
permitted by law) diligence, presentment, protest and demand for payment with
respect to (i) any notice of sale, transfer or other disposition of any right,
title to or interest in the Securities by the Holders or in this Indenture,
(ii) any release of any Guarantor from its obligations hereunder resulting from
any loss by it of its rights of subrogation hereunder and (iii) any other
circumstances whatsoever that might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety or that might otherwise
limit recourse against such Guarantor.
(b) Without prejudice to any of the rights or recourses which the
Trustee or the Holders may have against the Company, each Guarantor hereby
expressly waives (to the extent permitted by law) any right to require the
Trustee or the Holders to:
(i) enforce, assert, exercise, initiate
or exhaust any rights, remedies or recourse against the
Company, any Guarantor or any other Person under this
Indenture or otherwise;
(ii) value, realize upon, or dispose of
any security of the Company or any other Person held by
the Trustee or the Holders;
(iii) initiate or exhaust any other remedy
which the Trustee or the Holders may have in law or
equity; or
(iv) mitigate the damages resulting from
any default under this Indenture;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
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Section 1406. The Guarantors Remain Obligated in Event the Company Is No
Longer Obligated to Discharge Indenture Obligations.
It is the express intention of the Trustee and the Guarantors that
if for any reason the Company has no legal existence, is or becomes under no
legal obligation to discharge the Indenture Obligations owing to the Trustee or
the Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the
covenants, agreements and obligations of the Guarantors contained in this
Article Fourteen shall nevertheless be binding upon the Guarantors, as
principal debtor, until such time as all such Indenture Obligations have been
paid in full to the Trustee and all Indenture Obligations owing to the Trustee
or the Holders by the Company have been discharged, or such earlier time as
Section 402 shall apply to the Securities and the Guarantors shall be
responsible for the payment thereof to the Trustee or the Holders upon demand.
Section 1407. Fraudulent Conveyance; Subrogation.
(a) Any term or provision of this Guarantee to the contrary
notwithstanding, the aggregate amount of the Indenture Obligations guaranteed
hereunder shall be reduced to the extent necessary to prevent this Guarantee
from violating or becoming voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) Each Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under federal bankruptcy law) or
otherwise by reason of any payment by it pursuant to the provisions of this
Article Fourteen.
Section 1408. Guarantee Is in Addition to Other Security.
This Guarantee shall be in addition to and not in substitution for
any other guarantees or other security which the Trustee may now or hereafter
hold in respect of the Indenture Obligations owing to the Trustee or the
Holders by the Company and (except as may be required by law) the Trustee shall
be under no obligation to marshal in favor of each of the Guarantors any other
guarantees or other security or any moneys or other assets which the Trustee
may be entitled to receive or upon which the Trustee or the Holders may have a
claim.
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Section 1409. Release of Security Interests.
Without limiting the generality of the foregoing and except as
otherwise provided in this Indenture, each Guarantor hereby consents and
agrees, to the fullest extent permitted by applicable law, that the rights of
the Trustee hereunder, and the liability of the Guarantors hereunder, shall not
be affected by any and all releases for any purpose of any collateral, if any,
from the Liens and security interests created by any collateral document and
that this Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Indenture Obligations is
rescinded or must otherwise be returned by the Trustee upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, all as though such
payment had not been made.
Section 1410. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or
instituted under Article Fourteen and this Guarantee and no recovery or
judgment in pursuance thereof shall be a bar or defense to any further action
or proceeding which may be brought under Article Fourteen and this Guarantee by
reason of any further default or defaults under Article Fourteen and this
Guarantee or in the payment of any of the Indenture Obligations owing by the
Company.
Section 1411. Failure to Exercise Rights Shall Not Operate as a Waiver;
No Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part
of the Trustee or the Holders, any right, power, privilege or remedy under this
Article Fourteen and this Guarantee shall operate as a waiver thereof, nor
shall any single or partial exercise of any rights, power, privilege or remedy
preclude any other or further exercise thereof, or the exercise of any other
rights, powers, privileges or remedies. The rights and remedies herein
provided for are cumulative and not exclusive of any rights or remedies
provided in law or equity.
(b) Nothing contained in this Article Fourteen shall limit the right
of the Trustee or the Holders to take any action to accelerate the maturity of
the Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
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Section 1412. Trustee's Duties; Notice to Trustee.
(a) Any provision in this Article Fourteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of any Guarantor, shall be permissive and shall not
be obligatory on the Trustee except as the Holders may direct in accordance
with the provisions of this Indenture or where the failure of the Trustee to
request any such information or to take any such action arises from the
Trustee's negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company, any Guarantor or the officers, directors
or agents acting or purporting to act on their respective behalf.
Section 1413. Successors and Assigns.
All terms, agreements and conditions of this Article Fourteen shall
extend to and be binding upon each Guarantor and its successors and permitted
assigns and shall enure to the benefit of and may be enforced by the Trustee
and its successors and assigns; provided, however, that the Guarantors may not
assign any of their rights or obligations hereunder other than in accordance
with Article Eight.
Section 1414. Release of Guarantee.
Concurrently with the payment in full of all of the Indenture
Obligations, the Guarantors shall be released from and relieved of their
obligations under this Article Fourteen. Upon the delivery by the Company to
the Trustee of an Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the
release of this Guarantee was made by the Company in accordance with the
provisions of this Indenture and the Securities, the Trustee shall execute any
documents reasonably required in order to evidence the release of the
Guarantors from their obligations under this Guarantee. If any of the
Indenture Obligations are revived and reinstated after the termination of this
Guarantee, then all of the obligations of the Guarantors under this Guarantee
shall be revived and reinstated as if this Guarantee had not been terminated
until such time as the Indenture Obligations are paid in full, and each
Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate with respect to each Guarantor and
shall be automatically and unconditionally released and discharged as provided
in Section 1014(c).
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Section 1415. Execution of Guarantee.
To evidence the Guarantee, each Guarantor hereby agrees to execute
the guarantee substantially in the form set forth in Section 205, to be
endorsed on each Security authenticated and delivered by the Trustee and that
this Indenture shall be executed on behalf of each Guarantor by its Chairman of
the Board, its President, its Chief Executive Officer, Chief Operating Officer
or one of its Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature
of any of these officers on the Securities may be manual or facsimile.
If an officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates a Security on which this
Guarantee is endorsed, such Guarantee shall be valid nevertheless.
Section 1416. Guarantee Subordinate to Guarantor Senior Indebtedness.
Each Guarantor covenants and agrees, and each Holder of a
Guarantee, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article, the
Indebtedness represented by the Guarantees is hereby expressly made
subordinate and subject in right of payment as provided in this Article to the
prior payment in full of all Guarantor Senior Indebtedness; provided, however,
that the Indebtedness represented by this Guarantee in all respects shall rank
equally with, or prior to, all existing and future Indebtedness of such
Guarantor that is expressly subordinated to such Guarantor's Guarantor Senior
Indebtedness.
This Article Thirteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold Guarantor Senior Indebtedness; and such provisions are made for the
benefit of the holders of Guarantor Senior Indebtedness; and such holders are
made obligees hereunder and they or each of them may enforce such provisions.
Section 1417. Payment Over of Proceeds Upon Dissolution of the Guarantor,
etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Guarantor or to its
assets, or (b) any liquidation, dissolution or other winding up of any
Guarantor, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of any Guarantor, then and in any
such event:
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(1) the holders of Guarantor Senior Indebtedness shall be entitled to
receive payment in full of all amounts due on or in respect of all Guarantor
Senior Indebtedness before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character (excluding
securities of any Guarantor or any other corporation that are equity securities
or are subordinated in right of payment to all Guarantor Senior Indebtedness,
that may be outstanding, to substantially the same extent as, or to a greater
extent than, the Guarantees are so subordinated as provided in this Article
("Permitted Guarantor Junior Securities")) on account of the Guarantee of such
Guarantor (other than amounts previously set aside with the Trustee, or
payments previously made, in either case, pursuant to the provisions of
Sections 402 and 403 of this Indenture); and
(2) any payment or distribution of assets of any Guarantor of any kind or
character, whether in cash, property or securities (excluding Permitted
Guarantor Junior Securities), by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior Indebtedness
or their representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Guarantor
Senior Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Guarantor Senior Indebtedness held
or represented by each, to the extent necessary to make payment in full of all
Guarantor Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Guarantor Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of any Guarantor of any kind or character,
whether in cash, property or securities (excluding Permitted Guarantor Junior
Securities), in respect the Guarantee of such Guarantor before all Guarantor
Senior Indebtedness is paid in full, then and in such event such payment or
distribution (excluding Permitted Guarantor Junior Securities) shall be paid
over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payments or
distributions of assets of such Guarantor for application to the payment of all
Guarantor Senior Indebtedness remaining unpaid, to the extent necessary to pay
all Guarantor Senior Indebtedness in full after giving effect to any concurrent
payment or distribution to or for the holders of Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any Guarantor
with or into, another Person or the liquidation or dissolution of any Guarantor
following
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the sale, assignment, conveyance, transfer, lease or other disposal of its
properties and assets substantially as an entirety to another Person upon the
terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of such Guarantor
for the purposes of this Section if the Person formed by such consolidation or
the surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of such properties
and assets substantially as an entirety, as the case may be, shall, as a part
of such consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposal, comply with the conditions set forth in Article Eight.
Section 1418. Default on Guarantor Senior Indebtedness.
(a) Upon the maturity of any Guarantor Senior Indebtedness by lapse
of time, acceleration or otherwise, all principal thereof and interest thereon
and other amounts due in connection therewith shall first be paid in full or
such payment duly provided for before any payment is made by any of the
Guarantors or any Person acting on behalf of any of the Guarantors in respect
of the Guarantee of such Guarantor.
(b) No payment (excluding payments in the form of Permitted
Guarantor Junior Securities) shall be made by any Guarantor in respect of its
Guarantee during the period in which Section 1417 shall be applicable, during
any suspension of payments in effect under Section 1303(a) of this Indenture or
during any Payment Blockage Period in effect under Sections 1303(b) and (c) of
this Indenture.
(c) In the event that, notwithstanding the foregoing, any Guarantor
shall make any payment to the Trustee or the Holder of its Guarantee prohibited
by the foregoing provisions of this Section, then and in such event such payment
shall be paid over and delivered forthwith to the representatives of the
holders of the Guarantor Senior Indebtedness or as a court of competent
jurisdiction shall direct.
Section 1419. Payment Permitted by Each of the Guarantor if No Default.
Nothing contained in this Article, elsewhere in this Indenture or
in any of the Securities shall prevent any Guarantor, 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 marshaling of
assets and liabilities of such Guarantor referred to in Section 1417 or under
the conditions described in Section 1418, from making payments at any time of
principal of, premium, if any, or interest on the Securities.
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Section 1420. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.
After the payment in full of all Guarantor Senior Indebtedness, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Guarantor Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Guarantor Senior Indebtedness
until the principal of, premium, if any, and interest on, the Securities shall
be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of Guarantor Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities 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 Guarantor
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as
among any Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by such Gurantor to or on account of the Guarantor Senior
Indebtedness.
Section 1421. Provisions Solely to Define Relative Rights.
The provisions of Sections 1416 through 4129 of this Indenture are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities on the one hand and the holders of Guarantor Senior
Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in this Indenture or in the Securities is intended to or shall (a) impair, as
among any Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness and the Holders of the Securities, the obligation such Guarantor,
which is absolute and unconditional, to pay to the Holders of the Securities
the principal of, premium, if any, and interest on, the Securities as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against each of the Guarantors of the Holders of the
Securities and creditors of each of the Guarantors other than the holders of
Guarantor Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Security 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 Guarantor Senior Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Guarantors referred to in Section 1417, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder, or (2) under the conditions
specified in Section 1418, to prevent any payment prohibited by such Section or
enforce their rights pursuant to Section 1418(c).
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Section 1422. Trustee to Effectuate Subordination.
Each Holder of a Security by such Holder's 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 such Holder's attorney-in-fact for any
and all such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of any Guarantor whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely filing of a
claim for the unpaid balance of the indebtedness of any Guarantor owing to such
Holder in the form required in such proceedings and the causing of such claim
to be approved.
Section 1423. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Guarantor 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
any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by any Guarantor with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section, the holders of Guarantor Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders
of the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Guarantor Senior Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Guarantor Senior Indebtedness or any
instrument evidencing the same or any agreement under which Guarantor Senior
Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Guarantor Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against any of the Guarantors and any other Person;
provided, however, that in no event shall any such actions limit the right of
the Holders of the Securities to take any action to accelerate the maturity of
the Securities pursuant to Article Five of this Indenture or to pursue any
rights or remedies hereunder or under applicable laws if the taking of such
action does not otherwise violate the terms of this Article.
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Section 1424. Notice to Trustee by Each of the Guarantors.
(a) Each Guarantor shall give prompt written notice to the Trustee
of any fact known to such Guarantor which would prohibit the making of any
payment to or by the Trustee in respect of the Guarantee. 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
Securities, unless and until the Trustee shall have received written notice
thereof from any Guarantor or a holder of Guarantor Senior Indebtedness or any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee 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 by Noon, Eastern Time, on the
Business Day 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, premium, if any, or interest on any Security), then, anything
herein contained to the contrary notwithstanding but without limiting the
rights and remedies of the holders of Guarantor Senior Indebtedness or any
trustee, fiduciary or agent thereof, 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 after such date; nor shall the Trustee be charged
with knowledge of the curing of any such default or the elimination of the act
or condition preventing any such payment unless and until the Trustee shall
have received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and each Guarantor by a Person which represents
itself as a representative of one or more holders of Guarantor Senior or a
holder of Guarantor Senior Indebtedness (or a trustee, fiduciary or agent
therefor) to establish that such notice has been given by a representative of
or a holder of Guarantor Senior Indebtedness (or a trustee, fiduciary or agent
therefor); provided, however, that failure to give such notice to the Company
or any Guarantor shall not affect in any way the ability of the Trustee to rely
on such notice. 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 Guarantor 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 Guarantor 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.
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Section 1425. Reliance on Judicial Orders or Certificates.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article, the Trustee and the Holders of the Securities
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 of Securities for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of
Guarantor Senior Indebtedness and other indebtedness of such Guarantor, 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
the foregoing shall apply only if such court has been fully apprised of the
provisions of this Article.
Section 1426. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Guarantor Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Guarantor 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 1427. 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 under this Indenture, 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 1426 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Section 1428. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five of this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to the
rights, if any, under this Article of the holders, from
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time to time, of Guarantor Senior Indebtedness to receive the cash, property or
securities receivable upon the exercise of such rights or remedies.
Section 1429. Trustee's Relation to Guarantor Senior Indebtedness.
With respect to the holders of Guarantor Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Guarantor Senior Indebtedness shall
be read into this Article against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Guarantor Senior Indebtedness and
the Trustee shall not be liable to any holder of Guarantor Senior Indebtedness
if it shall in good faith mistakenly (absent willful misconduct) pay over or
deliver to Holders, the Company or any other Person moneys or assets to which
any holder of Guarantor Senior Indebtedness shall be entitled by virtue of this
Article or otherwise.
* * *
157
<PAGE> 170
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
MARSH SUPERMARKETS, INC.
CRYSTAL FOOD SERVICES, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
LOBILL FOODS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
CONTRACT TRANSPORT, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH SUPERMARKETS, LLC
By: Marsh Supermarkets, Inc.. its
Chief Operating Officer
VILLAGE PANTRY, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH DRUGS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH CLEARING HOUSE, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
By: /s/ Don E. Marsh
--------------------------------
Name:Don E. Marsh
Title:President and Chief
Executive Officer
158
<PAGE> 171
MARSH DRUGS, INC.
MUNDY REALTY, INC.
MAR PROPERTIES, INC.
MARLEASE, INC.
MARSH INTERNATIONAL, INC.
MARAINES GREENERY, INC.
LIMITED HOLDINGS, INC.
MARSH P.Q., INC.
S.C.T., INC.
NORTH MARION DEVELOPMENT
CORPORATION
CONTRACT TRANSPORT, INC.
TRADEMARK HOLDINGS, INC.
By: /s/ Don E. Marsh
----------------------------
Name: Don E. Marsh
Title: President
MARSH VILLAGE PANTRIES, INC.
CONVENIENCE STORE DISTRIBUTING
COMPANY
By: Marsh Village Pantries, Inc., its
General Partner
By: /s/ Don E. Marsh
---------------------------
Name: Don E. Marsh
Title: Chief Executive Officer
159
<PAGE> 172
Attest: /s/ P. Lawrence Butt
-----------------------------
P. Lawrence Butt, Secretary
Marsh Supermarkets, Inc.
Marsh Drugs, Inc.
Marsh Village Pantries, Inc.
Mundy Realty, Inc.
Mar Properties, Inc.
Marlease, Inc.
Marsh International, Inc.
Maraines Greenery, Inc.
Limited Holdings, Inc.
Marsh Village Pantries, Inc., as
general partner of Convenience
Store Distributing Company
Marsh P.Q., Inc.
S.C.T., Inc.
North Marion Development Corporation
Contract Transport, Inc.
Marsh Supermarkets, Inc.,
as Chief Operating Officer of
Crystal Food Services, LLC
LoBill Foods, LLC
Contract Transport, LLC
Marsh Supermarkets, LLC
Village Pantry, LLC
Marsh Drugs, LLC
Marsh Clearing House, LLC
Attest: /s/ P. Lawrence Butt
------------------------------------
P. Lawrence Butt, Assistant Secretary
Trademark Holdings, Inc.
160
<PAGE> 173
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Dennis Fisher
-------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
Attest: /s/ Laurel Melody Casasanta
-------------------------------
Name: Laurel Melody Casasanta
Title: Assistant Vice President
161
<PAGE> 174
STATE OF INDIANA
----------------------- )
) ss.:
COUNTY OF HAMILTON
---------------------- )
On the 5th day of August, 1997, before me personally came Don E. Marsh,
to me known, who, being by me duly sworn, did depose and say that he resides at
9800 Crosspoint Boulevard, Indianapolis, IN 46256; that he is (i) President
and Chief Executive Officer of Marsh Supermarkets, Inc., (ii) President of each
Marsh Drugs, Inc., Mundy Realty, Inc., Mar Properties, Inc., Marlease, Inc.,
Marsh International, Inc., Maraines Greenery, Inc., Limited Holdings, Inc.,
Marsh P.Q., Inc., S.C.T., Inc., North Marion Development Corporation, Contract
Transport, Inc., and Trademark Holdings, Inc., (iii) President and Chief
Executive Officer of Marsh Supermarkets, Inc., the Chief Operating Officer of
each of Crystal Food Services, LLC, Lobill Foods, LLC, Contract Transport, LLC,
Marsh Supermarkets, LLC, Village Pantry, LLC, Marsh Drugs, LLC and Marsh
Clearing House, LLC, and (iv) Chief Executive Officer of Marsh Village
Pantries, Inc., on behalf of itself and as general partner of Convenience Store
Distributing Company, each of which are corporations, limited liability
companies or partnerships, as the case may be, described in and which executed
the foregoing instrument; and that he signed his name thereto pursuant to
authority of the Board of Directors of each such corporation.
(NOTARIAL
SEAL)
---------
/s/ Debra Richcreek
-------------------------------
Debra Richcreek
Notary Public
Resident of Delaware County, IN
My Commission Expires: January 14, 1999
<PAGE> 175
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On the 5th day of August, 1997, before me personally came
Dennis Fisher, to me known, who, being by me duly sworn, did depose and
say that he resides at Marlborough, CT; that he is Assistant Vice President
of State Street Bank and Trust Company, a Massachusetts trust company described
in and which executed the foregoing instrument; and that he signed his name
thereto pursuant to authority of the Board of Directors of such trust company.
(NOTARIAL
SEAL)
-----------
/s/ Susan P. McNally
---------------------------
Susan P. McNally
Notary Public
My Commission Expires March 31, 2000
<PAGE> 176
SCHEDULE I
Existing Indebtedness
<TABLE>
<CAPTION>
Amount
Outstanding as of
August 4, 1997
-------------------
<S> <C> <C>
1. 10.05% Notes...................................................... $18,580,656
2. 9.05% Notes....................................................... 19,449,037
3. Mortgage notes.................................................... 873,711
4. Capital lease obligations(a)...................................... 4,817,729
5. Economic development bond......................................... 1,934,482
6. 7% Convertible subordinated debentures............................ 19,909,000
7. Note Payable to Bank One.......................................... 15,000,000
8. Note Payable to First Merchants(b)................................ 5,000,000
9. 8.54% Senior Notes, 8.13% Senior Notes and 9.48% Senior
Notes(c)...................................................... 60,909,090
10. Other............................................................ 714,266
</TABLE>
- ------------
(a) Amount outstanding as of July 19, 1997.
(b) Amount available.
(c) These amounts may remain outstanding for a period of 30 days from the
date hereof and will be repaid with amounts deposited pursuant to an
escrow agreement on the date hereof.
<PAGE> 177
SCHEDULE II
Related Party Transactions
Mr. C. Alan Marsh owns a 17.5% interest in McWheel Properties, LLC, a
limited liability company to which the Company paid $779,588 in fiscal 1997 and
$418,537 in fiscal 1996 in connection with the lease of a supermarket facility
in Muncie, Indiana, upon terms the Company believes were no less favorable than
the Company could have obtained from unaffiliated third parties.
Mr. J. Michael Blakley is a director of the Company and Chairman of
the Board and Chief Executive Officer of the Blakley Corporation, a full
service flooring company, which, as a subcontractor of the general contractor
which constructed a supermarket facility, indirectly supplied $241,838 in
fiscal 1997 and $328,227 in fiscal 1996 of flooring material to the Company in
the ordinary course of business and upon terms the Company believes were no
less favorable than it could have obtained for unaffiliated third parties. The
Blakley Corporation also supplied directly to the Company $2,424 in fiscal 1997
and $12,135 in fiscal 1996 of flooring materials in the ordinary course of
business and upon terms which the Company believes were no less favorable than
the Company could have obtained from unaffiliated third parties.
Mr. Jack E. Buckles, a member of the Salary Committee, and Mr. Charles
R. Clark are directors of the Company and partners in the law firm Beasley
Gilkison Retherford Buckles & Clark, which the Company has retained and intends
to continue to retain.
Mr. James K. Risk, III is a director of the Company and a member of
the Salary Committee, and President and Chief Executive Officer of Kirby Risk
Corporation, a wholesale electrical equipment distributor from which the
Company purchased $265,970 in fiscal 1996, $287,541 in fiscal 1996 and $331,328
in fiscal 1995 of electrical supplies in the ordinary course of business and
upon terms the Company believes were no less favorable than it could have
obtained from unaffiliated third parties.
Mr. Stephen M. Huse is a director of the Company and a director of
KeyBank. In May 1997 the Company entered into the KeyBank Revolving Credit
Agreement, a $20.0 million facility. A portion of the proceeds of the Offering
will be used to repay the outstanding balance under such agreement unless it is
terminated and repaid prior to the closing of the Offering.
Mr. Don E. Marsh is the Company's Chairman of the Board, President and
Chief Executive Officer, and is also a director of National City Bank. National
City Bank is the issuer of the Company's VISA co-branded credit card. Mr. Marsh
owns a controlling interest in Maison Blanc which has provided chartering
services to the Company in each of the last three fiscal years in the ordinary
course of business and upon terms the Company believes were no less favorable
than the Company could have obtained from unaffiliated third parties.
The Salary Committee authorized the Company to make loans to Mr. Don
E. Marsh and to certain other optionees under the 1980 Marsh Stock Plan to fund
the exercise of options granted thereunder which would have expired May 31,
1993. The loans bear interest at the rate of 6.0% per anum and are due May 28,
1998. The largest aggregate amount of indebtedness outstanding and owed by Mr.
Marsh to the Company was $275,046 during fiscal 1997, $261,669 during fiscal
1996 and $248,292 during fiscal 1995.
The Company continues each of the above relationships as of the date
hereof.
<PAGE> 178
EXHIBIT A
---------
INTERCOMPANY NOTE
, 19
----------- -----
Evidences of all loans or advances ("Loans") made hereunder shall be
reflected on the grid attached hereto. FOR VALUE RECEIVED,________, a______
corporation (the "Maker"), HEREBY PROMISES TO PAY ON DEMAND to
the order of___________(the "Holder") the principal sum of the aggregate
unpaid principal amount of all Loans (plus accrued interest thereon) at any
time and from time to time made hereunder which has not been previously paid.
All capitalized terms used herein that are defined in, or by reference in,
the Indenture among Marsh Supermarkets, Inc., an Indiana corporation (the
"Company"), the Guarantors listed therein and State Street Bank and Trust
Company, as trustee, dated as of August 5, 1997 (the "Indenture"), have the
meanings assigned to such terms therein, or by reference therein, unless
otherwise defined.
ARTICLE I
TERMS OF INTERCOMPANY NOTE
Section 1.01 Note Not Forgivable. Unless the Maker of the Loan hereunder
is the Company or any Guarantor, the Holder may not forgive any amounts owing
under this intercompany note.
Section 1.02 Interest: Prepayment. (a) The interest rate ("Interest
Rate") on the Loans shall be a rate per annum reflected on the grid attached
hereto.
(b) The interest, if any, payable on each of the Loans shall accrue from
the date such Loan is made and, subject to Section 2.01, shall be payable upon
demand of the Holder.
(c) If the principal or accrued interest, if any, of the Loans is not paid
on the date demand is made, interest on the unpaid principal and interest will
accrue at a rate equal to the Interest Rate, if any, plus 100 basis points per
annum from maturity until the principal and interest on such Loans are fully
paid.
(d) Subject to Section 2.01, any amounts hereunder may be repaid at any
time by the Maker.
<PAGE> 179
Section 1.02 Subordination. All Loans made to the Company or any
Guarantor shall be subordinated in right of payment to the payment and
performance of the obligations of the Company, the Guarantors and any
Restricted Subsidiary under the Indenture, the Securities, the Guarantees or
any other Indebtedness ranking senior to or pari passu with the Securities or
the Guarantees, including, without limitation, any Indebtedness incurred under
the Revolving Credit Agreements; provided, that with respect to a Subsidiary in
any specific instance, such Restricted Subsidiary is also an obligor under the
Indenture, the Securities, the Guarantees or such other senior or pari passu
Indebtedness, as the case may be, whether as a borrower, guarantor or pledgor
of collateral.
ARTICLE II
EVENTS OF DEFAULT
Section 2.01 Events of Default. If after the date of issuance of this
Loan (i) an Event of Default has occurred under the Indenture, (ii) an Event of
Default (as defined) has occurred under either of the Revolving Credit
Agreements or any refinancing of the Revolving Credit Agreements or (iii) an
"event of default" (as defined) has occurred under any other Indebtedness of
the Company or any Guarantor, then (x) in the event the Maker is not either one
of the Company or a Guarantor, all amounts owing under the Loans hereunder
shall be immediately due and payable to the Holder, and (y) in the event the
Maker is either the Company or a Guarantor, the amounts owing under the Loans
hereunder shall not be due and payable; provided, however, that if such Event
of Default or event of default has been waived, cured or rescinded, such
amounts shall no longer be due and payable in the case of clause (x), and such
amounts may be payable in the case of clause (y). If the Holder is a
Subsidiary, then the Holder hereby agrees that if it receives any payments or
distributions on any Loan from the Company or a Guarantor which is not payable
pursuant to clause (y) of the prior sentence after any Event of Default or
event of default described in clauses (i), (ii) or (iii) above has occurred, is
continuing and has not been waived, cured or rescinded, it will pay over and
deliver forthwith to the Company or such Guarantor, as the case may be, all
such payments and distributions.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments, Etc. No amendment or waiver of any provision of
this intercompany note, or consent to depart herefrom is permitted at any time
for any
A-2
<PAGE> 180
reason, except with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities.
Section 3.02 Assignment. No party to this Agreement may assign, in whole
or in part, any of its rights and obligations under this intercompany note,
except to its legal successor in interest.
Section 3.03 Third Party Beneficiaries. The holders of the Securities or
any other Indebtedness ranking pari passu with or senior to, the Securities or
any Guarantees, including without limitation, any Indebtedness incurred under
the Credit Facility, shall be third party beneficiaries to this intercompany
note and upon an Event of Default shall have the right to enforce this
intercompany note against the Company or any of its Subsidiaries.
Section 3.04 Headings. Article and Section headings in this intercompany
note are included for convenience of reference only and shall not constitute a
part of this intercompany note for any other purpose.
Section 3.05 Entire Agreement. This intercompany note sets forth the
entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
Section 3.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
A-3
<PAGE> 181
Section 3.07 Waivers. The Maker hereby waives presentment, demand for
payment, notice of protest and all other demands and notices in connection with
the delivery, acceptance, performance or enforcement hereof.
By:
------------------
A-4
<PAGE> 182
BORROWINGS, MATURITIES, AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Maturity of Amount
Borrowing/ Borrowing/ Principal Paid Unpaid Principal Notation
Date Principal Principal or Prepaid Balance Made by
- ---- --------- ----------- -------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
A-5
<PAGE> 183
Exhibit B
Form of Certificate
to be Delivered upon
Termination of Restricted Period
----------------------------------
On or after September 15, 1997
State Street Bank and Trust Company
225 Asylum Avenue
Hartford, CT 06103
Attention: Corporate Trust Division
Re: Marsh Supermarkets, Inc. (the "Company")
8 7/8% Senior Subordinated Notes due 2007 (the "Securities")
------------------------------------------------------------
Ladies and Gentlemen:
This letter relates to U.S. $______ principal amount of Securities
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of August 5,
1997 relating to the Securities (the "Indenture"), we hereby certify that (1)
we are the beneficial owner of such principal amount of Securities represented
by the Temporary Certificate and (2) we are a person outside the United States
to whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a certificated Security
representing the undersigned's interest in the principal amount of Securities
represented by the Temporary Certificate, all in the manner provided by the
Indenture.
B-1
<PAGE> 184
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
B-2
<PAGE> 185
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
____________________________________________
__________________, ________
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Division
Re: Marsh Supermarkets, Inc. (the "Company")
8 7/8% Senior Subordinated Notes due 2007 (the "Securities")
------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate principal
amount of the Securities:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
within the United States or to, or for the benefit of, U.S. Persons except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing the Securities to offer,
resell, pledge or otherwise transfer such Securities 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
Securities, 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
Securities are eligible for resale pursuant to Rule 144A under the Securities
Act, inside the United States to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB to whom notice is given that the transfer
is being made in reliance on Rule 144A, (d) outside the United States pursuant
to offers and sales to non-U.S. Persons in an Offshore Transaction within the
meaning of Regulations S under the Securities Act, (e) inside the United States
to an institutional
<PAGE> 186
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Securities Act that is acquiring the Securities 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 thereof 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 and 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 Securities is
proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Trustee, which shall
provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Securities Act and that it is acquiring such
Securities 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 prior to the Resale
Restriction Termination Date of the Securities pursuant to clauses (d), (e) and
(f) above to require the delivery of an opinion of counsel, certifications
and/or other information satisfactory to the Company and the Trustee. As used
herein, the terms "United States", "Offshore Transaction", and "U.S. Person"
have the respective meanings given to them by Regulation S under the Securities
Act.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities 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 the securities laws of any state of the
United States or any other applicable jurisdiction; provided that the
disposition of our property and the property of any accounts for which we are
acting as fiduciary shall remain at all times within our and their control; 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
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence
C-2
<PAGE> 187
satisfactory to the Company and the Trustee that the foregoing restrictions on
transfer have been complied with. We further understand that the Notes
purchased by us will be in the form of definitive physical certificates and
that such certificates will bear a legend reflecting the substance of this
paragraph. We further agree to provide to any person acquiring any of the
Notes from us a notice advising such person that resales of the Notes are
restricted as stated herein and that certificates representing the Notes will
bear a legend to that effect.
5. We acknowledge that you, the Company, the Trustee and others will rely
upon our acknowledgments, representations and agreements set forth herein, and
we agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein cease to be accurate and complete.
6. We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
By:
---------------------------------
(Name of Purchaser)
Date:
---------------
C-3
<PAGE> 188
Upon transfer, the Securities should be registered in the name of the new
beneficial owner as follows:
Name:_________________________________________________________________
Address:______________________________________________________________
Taxpayer ID Number:___________________________________________________
C-4
<PAGE> 189
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
________________________
________________, _____
State Street Bank and Trust Company
225 Asylum Street
Hartford, CT 06103
Attention: Corporate Trust Division
Re: Marsh Supermarkets, Inc. (the "Company")
8 7/8% Senior Subordinated Notes due 2007 (the "Securities")
------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Securities 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
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
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
<PAGE> 190
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
D-2
<PAGE> 191
APPENDIX I
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES FOR SERIES A SECURITIES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
August 5, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security 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 Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
<PAGE> 192
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security 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 to this assignment
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:
------------------------------
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security 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.
Dated:
--------------------- --------------------------------------------------
NOTICE: To be executed by an authorized signatory
I-2
<PAGE> 193
APPENDIX II
FORM OF TRANSFEREE CERTIFICATE
I or we assign and transfer this Security to:
Please insert social security or other identifying number of assignee
________________________________________________________________________________
________________________________________________________________________________
Print or type name, address and zip code of assignee and irrevocably
appoint________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
---------------------- ------------------------------------
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
<PAGE> 1
[BASS, BERRY & SIMS PLC LETTERHEAD]
September 3, 1997
Marsh Supermarkets, Inc.
9800 Crosspoint Boulevard
Indianapolis, Indiana 46256-3350
Re: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have acted as counsel to Marsh Supermarkets, Inc., an Indiana
corporation (the "Company"), in the preparation of a Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission with respect to up to $150,000,000 aggregate principal
amount of the Company's 8 7/8% Senior Subordinated Notes due 2007, Series B (the
"Exchange Notes") and the related guarantees (the "Guarantees") of certain of
the Company's subsidiaries named in the Registration Statement (the
"Guarantors"). The Exchange Notes and the Guarantees will be offered in exchange
for the Company's issued and outstanding 8 7/8% Senior Subordinated Notes due
2007, Series A (the "144A Notes") and related guarantees, all as described in
the Registration Statement.
The Exchange Notes are to be issued in exchange for 144A Notes pursuant
to an indenture (the "Indenture") dated as of August 5, 1997 between the
Company, the Guarantors and State Street Bank and Trust Company, as Trustee (the
"Trustee") and the related Registration Rights Agreement among the Company, the
Guarantors, Merrill Lynch, Pierce, Fenner & Smith Incorporated and McDonald &
Company Securities, Inc. (the "Registration Rights Agreement").
In so acting, we have examined and relied upon such records, documents
and other instruments as in our judgment are necessary or appropriate in order
to express the opinion hereinafter set forth and have assumed the genuineness of
all signatures, 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.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes and the Guarantees, when duly executed and authenticated in
accordance with the terms of the Indenture, and delivered in exchange for 144A
Notes and related guarantees in accordance with the terms of the Indenture, will
have been validly issued and will be legally binding obligations of the Company
and the Guarantors, respectively, subject to (a) the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyance,
fraudulent transfer and other similar laws relating to or affecting the rights
of creditors and (b) general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies), regardless of whether considered in a
proceeding at law or in equity.
<PAGE> 2
We express no opinion herein other than as to the law of the
State of Tennessee, the federal law of the United States and the Delaware
General Corporation Law. With respect to matters of Indiana and Ohio law, we
have relied solely on the opinion of P. Lawrence Butt, Senior Vice President,
Counsel and Secretary of the Company, addressed to you of even date herewith and
we have made no independent examination of the law of such jurisdictions.
We hereby consent to the reference to our law firm in the Registration
Statement under the caption "Legal Matters" and to the use of this opinion as an
exhibit to the Registration Statement.
Sincerely,
/s/ Bass, Berry & Sims PLC
<PAGE> 1
EXHIBIT 10(r)
================================================================================
MARSH SUPERMARKETS, INC. (an Indiana corporation),
MARSH DRUGS, INC. (an Indiana corporation),
MARSH VILLAGE PANTRIES, INC. (an Indiana corporation),
MUNDY REALTY, INC. (an Indiana corporation),
MAR PROPERTIES, INC. (an Indiana corporation),
MARLEASE, INC. (an Indiana corporation),
MARSH INTERNATIONAL, INC. (an Indiana corporation),
MARAINES GREENERY, INC. (an Indiana corporation),
LIMITED HOLDINGS, INC. (an Indiana corporation),
CONVENIENCE STORE DISTRIBUTING COMPANY (an Ohio partnership),
MARSH P.Q., INC. (an Indiana corporation),
S.C.T., INC. (an Indiana corporation),
NORTH MARION DEVELOPMENT CORPORATION (an Indiana corporation),
CONTRACT TRANSPORT, INC. (an Indiana corporation),
CRYSTAL FOOD SERVICES, LLC (an Indiana limited liability company),
LOBILL FOODS, LLC (an Indiana limited liability company),
CONTRACT TRANSPORT, LLC (an Indiana limited liability company),
MARSH SUPERMARKETS, LLC (an Indiana limited liability company),
VILLAGE PANTRY, LLC (an Indiana limited liability company),
MARSH DRUGS, LLC (an Indiana limited liability company),
TRADEMARK HOLDINGS, INC. (a Delaware corporation) and
MARSH CLEARING HOUSE, LLC (an Indiana limited liability company)
$150,000,000
8 7/8% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
Dated: July 29, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PURCHASE AGREEMENT................................................................................................1
SECTION 1. Representations and Warranties.......................................................3
(a) Representations and Warranties by the Company and the
Guarantors...........................................................................3
(i) Similar Offerings.........................................................3
(ii) Offering Memorandum.......................................................3
(iii) Independent Accountants...................................................4
(iv) Financial Statements......................................................4
(v) No Material Adverse Change in Business....................................4
(vi) Good Standing of the Company..............................................4
(vii) Good Standing of Subsidiaries.............................................5
(viii) Capitalization............................................................5
(ix) Authorization of Agreements...............................................6
(x) Authorization of the Indenture............................................6
(xi) Authorization of the Securities and the Guarantees........................6
(xii) Description of the Securities, the Guarantees and
the Indenture.............................................................7
(xiii) Absence of Defaults and Conflicts.........................................7
(xiv) Absence of Labor Disputes.................................................8
(xv) Absence of Proceedings....................................................8
(xvi) Possession of Intellectual Property.......................................9
(xvii) Absence of Further Requirements...........................................9
(xviii) Possession of Licenses and Permits.......................................10
(xix) Title to Property........................................................10
(xx) Tax Returns..............................................................11
(xxi) Insurance................................................................11
(xxii) Solvency.................................................................11
(xxiii) Stabilization or Manipulation............................................12
(xxiv) Related Party Transactions...............................................12
(xxv) Suppliers................................................................12
(xxvi) Environmental Laws.......................................................12
(xxvii) Registration Rights......................................................13
(xxviii) Accounting Controls......................................................13
(xxix) Investment Company Act...................................................13
(xxx) Rule 144A Eligibility....................................................14
(xxxi) No General Solicitation..................................................14
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(xxxii) No Registration Required.................................................14
(xxxiii) No Directed Selling Efforts..............................................14
(xxxiv) PORTAL...................................................................14
(xxxv) Authorization of the Credit Agreement....................................15
(b) Officer's Certificates..............................................................15
SECTION 2. Sale and Delivery to Initial Purchasers; Closing...................................15
(a) Securities and Guarantees...........................................................15
(b) Payment.............................................................................15
(c) Qualified Institutional Buyer.......................................................16
(d) Denominations; Registration........................................................16
SECTION 3. Covenants of the Company and the Guarantors.........................................16
(a) Offering Memorandum.................................................................16
(b) Notice and Effect of Material Events................................................16
(c) Amendment to Offering Memorandum and Supplements....................................17
(d) Qualification of Securities and Guarantees for Offer and Sale.......................17
(e) Integration.........................................................................17
(f) Rating of Securities................................................................18
(g) Rule 144A Information...............................................................18
(h) Restriction on Resales..............................................................18
(i) Use of Proceeds.....................................................................18
(j) Restriction on Sale of Securities...................................................18
(k) DTC Clearance.......................................................................19
(l) Legends.............................................................................19
(m) Interim Financial Statements........................................................19
(n) Periodic Reports....................................................................19
SECTION 4. Payment of Expenses.................................................................19
(a) Expenses............................................................................19
(b) Termination of Agreement............................................................20
SECTION 5. Conditions of Initial Purchasers' Obligations.......................................20
(a) Opinion of Counsel for the Company and the Guarantors...............................20
(b) Opinion of Counsel for the Initial Purchasers.......................................20
(c) Officers' Certificate...............................................................21
(d) Accountant's Comfort Letter and Consent.............................................21
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
(e) Bring-down Comfort Letter...........................................................21
(f) Maintenance of Rating...............................................................22
(g) PORTAL..............................................................................22
(h) Chief Financial Officer's Certificate...............................................22
(i) Registration Rights Agreement and Indenture.........................................22
(j) Credit Agreements...................................................................22
(k) Debt Prepayment Arrangements........................................................23
(l) Additional Documents................................................................23
(m) Termination of Agreement............................................................23
SECTION 6. Indemnification.....................................................................23
(a) Indemnification of Initial Purchasers...............................................23
(b) Indemnification of Company, Guarantors and Directors................................24
(c) Actions against Parties; Notification..............................................25
(d) Settlement without Consent if Failure to Reimburse..................................25
SECTION 7. Contribution........................................................................26
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery............................................................................27
SECTION 9. Termination of Agreement............................................................27
(a) Termination; General...............................................................27
(b) Liabilities.........................................................................28
SECTION 10. Default by One or More of the Initial Purchasers....................................28
SECTION 11. Notices.............................................................................29
SECTION 12. Parties.............................................................................29
SECTION 13. Governing Law and Time..............................................................29
SECTION 14. Effect of Headings..................................................................30
Schedule A--Initial Purchasers
Schedule B--Guarantors
Schedule C--Securities
Exhibit A-1--Form of Opinion of Bass, Berry & Sims
Exhibit A-2--Form of Opinion of P. Lawrence Butt
Exhibit B--Form of Comfort Letter
</TABLE>
-iii-
<PAGE> 5
$150,000,000
MARSH SUPERMARKETS, INC.
(an Indiana corporation)
PURCHASE AGREEMENT
July 29, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
McDonald & Company Securities, Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Marsh Supermarkets, Inc., an Indiana corporation (the "Company"), and
each of the Guarantors listed on Schedule B hereto (the "Guarantors") confirm
their respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial
Purchasers named in Schedule A hereto (collectively, the "Initial Purchasers",
which term shall also include any initial purchaser substituted as hereinafter
provided in Section 10 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the "Representative"), with respect to (i)
the issue and sale by the Company and the purchase by the Initial Purchasers,
acting severally and not jointly, of the respective principal amounts set forth
in said Schedule A of $150,000,000 aggregate principal amount of the Company's
Senior Subordinated Notes due 2007 (the "Securities") and (ii) the issue and
sale by the Guarantors and the purchase by the Initial Purchasers, acting
severally and not jointly, of the senior subordinated guarantees (the
"Guarantees") of the Company's obligations under the Securities. The Securities
and the Guarantees are to be issued pursuant to an
-1-
<PAGE> 6
indenture dated as of August 5, 1997 (the "Indenture") among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee").
Securities and Guarantees issued in book-entry form will be issued to Cede &
Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter
agreement, to be dated as of the Closing Time (as defined in Section 2(b)) (the
"DTC Agreement"), among the Company, the Guarantors, the Trustee and DTC.
The Company and the Guarantors understand that the Initial Purchasers
propose to make an offering of the Securities and the Guarantees on the terms
and in the manner set forth herein and agree that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Securities and the Guarantees to purchasers ("Subsequent Purchasers") at any
time after the date of this Agreement. The Securities and the Guarantees are to
be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities, the Guarantees
and the Indenture, investors that acquire Securities and Guarantees may only
resell or otherwise transfer such Securities and Guarantees if such Securities
and Guarantees are hereafter registered under the 1933 Act or if an exemption
from the registration requirements of the 1933 Act is available (including the
exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S")
of the rules and regulations promulgated under the 1933 Act by the Securities
and Exchange Commission (the "Commission")).
The Company and the Guarantors have prepared and delivered to each
Initial Purchaser copies of a preliminary offering memorandum dated July 16,
1997 (the "Preliminary Offering Memorandum") and have prepared and will deliver
to each Initial Purchaser, on the date hereof or the next succeeding day,
copies of a final offering memorandum dated July 29, 1997 (the "Final Offering
Memorandum"), each to be used by such Initial Purchaser in connection with its
solicitation of, purchases of, or offering of, the Securities and the
Guarantees. "Offering Memorandum" means, with respect to any date or time
referred to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document), including exhibits thereto
and any documents incorporated therein by reference, which has been prepared
and delivered by the Company and the Guarantors to the Initial Purchasers in
connection with their solicitation of purchases of, or offering of, the
Securities and the Guarantees.
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is incorporated by reference in the
-2-
<PAGE> 7
Offering Memorandum; and all references in this Agreement to amendments or
supplements to the Offering Memorandum shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934 (the "1934
Act") which is incorporated by reference in the Offering Memorandum.
The holders of the Securities and the Guarantees will be entitled to
the benefits of the registration rights agreement to be dated as of the Closing
Time (the "Registration Rights Agreement"), among the Company, the Guarantors
and the Initial Purchasers, pursuant to which the Company will agree to file,
as soon as practicable after the Closing Time but in any event within 30 days
of the Closing Time, a registration statement with the Commission registering
the Exchange Securities (as defined in the Registration Rights Agreement) under
the 1933 Act.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and the Guarantors.
The Company and each of the Guarantors, jointly and severally, represent and
warrant to each Initial Purchaser as of the date hereof and as of the Closing
Time referred to in Section 2(b) hereof, and agree with each Initial Purchaser
as follows:
(i) Similar Offerings. The Company and the Guarantors have
not, directly or indirectly, solicited any offer to buy or offered to
sell, and will not, directly or indirectly, solicit any offer to buy
or offer to sell, in the United States or to any United States citizen
or resident, any security which is or would be integrated with the
sale of the Securities and the Guarantees in a manner that would
require the Securities or the Guarantees to be registered under the
1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does not,
and at the Closing Time will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, that this
representation, warranty and agreement shall not apply to statements
in or omissions from the Offering Memorandum made in reliance upon and
in conformity with information furnished to the Company and the
Guarantors in writing by any Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum. The documents
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum at the time they were or hereafter are filed
with the Commission complied and will comply in all material respects
with the applicable requirements of the 1934 Act and the applicable
rules and regulations of the Commission thereunder and, when read
together with the other information in the Offering Memorandum, at the
date of the Offering
-3-
<PAGE> 8
Memorandum and at the Closing Time, did not and will 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, in the light of the circumstances under which they were made,
not misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included or
incorporated by reference in the Offering Memorandum are independent
certified public accountants with respect to the Company, the
Guarantors and their respective subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
(iv) Financial Statements. The financial statements, together
with the related schedules and notes, included in the Offering
Memorandum and the documents incorporated by reference therein present
fairly the financial position of the Company and its consolidated
Subsidiaries at the dates indicated and the statements of income,
changes in shareholders' equity and cash flows of the Company and its
consolidated Subsidiaries for the periods specified; said financial
statements have been prepared in conformity with United States
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The selected
financial data and the summary financial information included in the
Offering Memorandum and the documents incorporated by reference
therein present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum and the documents
incorporated by reference therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein or contemplated
thereby, (A) there has been no material adverse change in the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its Subsidiaries,
other than those in the ordinary course of business, which are
material with respect to the Company and its Subsidiaries considered
as one enterprise, and (C) there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its
capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation under the laws of
the State of Indiana and has corporate power and authority to own,
lease and operate its
-4-
<PAGE> 9
properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Indenture, the
Securities, the Exchange Securities, and the DTC Agreement and to
enter into and consummate all the transactions in connection therewith
as contemplated in the Offering Memorandum; and the Company is duly
qualified as a foreign corporation to transact business in each other
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the
Company (each a "Subsidiary" and collectively the "Subsidiaries") has
been duly organized and is validly existing as a corporation, limited
liability corporation or partnership under the laws of the
jurisdiction of its incorporation or existence, has corporate or
partnership power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation, limited
liability company or partnership to transact business in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify would not result in a
Material Adverse Effect; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock or
partnership interests of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and except as
disclosed in the Offering Memorandum is owned by the Company, directly
or through the Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock or partnership interests of the
Subsidiaries was issued in violation of any preemptive or similar
rights arising by operation of law, or under the charter, by-laws or
other charter documents of any Subsidiary or under any agreement to
which the Company or any Subsidiary is a party. All of the
Subsidiaries of the Company are listed on Schedule B attached hereto.
During the fiscal year ended March 29, 1997, C.E. Publishing, Inc.,
Decatur Plaza Associates and Walnut Hills Associates reported, on a
collective basis, revenues of $475,888 and net income of $65,901 and
as of March 19, 1997 had, on a collective basis, total assets of
$2,718,146.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company was at the date indicated in the Offering
Memorandum as set forth in the financial statements, including the
schedules and notes, included in the Offering Memorandum (except for
subsequent issuances, if any, pursuant to
-5-
<PAGE> 10
employee benefit plans referred to in the Offering Memorandum or
pursuant to the exercise of convertible securities or options referred
to in the Offering Memorandum). The shares of issued and outstanding
capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company arising by operation of law, under the
charter or by-laws of the Company, under any agreement to which the
Company or any of the Subsidiaries is a party or otherwise.
(ix) Authorization of Agreements. This Agreement, the
Registration Rights Agreement and the DTC Agreement have each been
duly authorized by the Company and each of the Guarantors. This
Agreement has been, and as of the Closing Time the Registration Rights
Agreement and the DTC Agreement each will have been, duly executed and
delivered by the Company and each of the Guarantors. Upon the
execution and delivery thereof by the Company and each of the
Guarantors, the Registration Rights Agreement and the DTC Agreement
will constitute valid and binding obligations of the Company and each
of the Guarantors, enforceable against the Company and each of the
Guarantors in accordance with their terms.
(x) Authorization of the Indenture. The Indenture has been
duly authorized by the Company and each of the Guarantors and, at the
Closing Time, will have been duly executed and delivered by the
Company and each of the Guarantors and will constitute a valid and
binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in
accordance with its terms.
(xi) Authorization of the Securities and the Guarantees. The
Securities have been duly authorized by the Company and, at the
Closing Time, will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, and will be in the
form contemplated by, and entitled to the benefits of, the Indenture.
The Guarantees have been duly authorized by the Guarantors and, at the
Closing Time, will have been duly executed by the Guarantors and, when
authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor, will
constitute valid and binding obligations of the Guarantors,
enforceable against the Guarantors in accordance with their terms, and
will be in the form contemplated by, and entitled to the benefits of,
the Indenture. The
-6-
<PAGE> 11
Exchange Securities have been duly authorized by the Company and each
of the Guarantors and, when executed and authenticated and issued and
delivered by the Company and each of the Guarantors in exchange for
the Securities and the Guarantees pursuant to the Exchange Offer (as
defined in the Registration Rights Agreement), will constitute valid
and binding obligations of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in
accordance with their terms.
(xii) Description of the Securities, the Guarantees and the
Indenture. The Securities, the Guarantees, the Indenture and the
Registration Rights Agreement will conform in all material respects to
the respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms
previously delivered to the Initial Purchasers. The Exchange
Securities will conform in all material respects to the statements
relating thereto contained in the Offering Memorandum and the
Registration Statement at the time it becomes effective. There are no
contracts or documents which are required to be described in a
registration statement on Form S-1 under the 1933 Act which have not
been described in the Offering Memorandum.
(xiii) Absence of Defaults and Conflicts. Neither the Company
nor any of the Subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them may be bound, or to
which any of the property or assets of the Company or any of the
Subsidiaries is subject (collectively, "Agreements and Instruments")
or has violated or is in violation of any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of
their assets or properties, except in each case for such defaults or
violations that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Indenture, the DTC Agreement, the
Securities, the Guarantees, the Exchange Securities and any other
agreement or instrument entered into or issued or to be entered into
or issued by the Company or any of the Guarantors in connection with
the transactions contemplated hereby or thereby or in the Offering
Memorandum or in connection with the consummation of the transactions
contemplated herein and in the Offering Memorandum (including the
issuance and sale of the Securities and the Guarantees and the use of
the proceeds from the sale of the Securities and the Guarantees as
described in the Offering Memorandum under the caption "Use of
-7-
<PAGE> 12
Proceeds") and compliance by the Company and the Guarantors with their
respective obligations hereunder have been duly authorized by all
necessary corporate or partnership action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or a
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to, the
Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company
or any of the Subsidiaries or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of
their assets or properties. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or
any of the Subsidiaries which has not been repurchased, redeemed or
repaid.
(xiv) Absence of Labor Disputes. No labor dispute with the
employees of the Company or any of the Subsidiaries exists or, to the
knowledge of the Company and the Guarantors, is imminent, and the
Company and the Guarantors are not aware of any existing or imminent
labor disturbance by the employees of any of their or any of the
Subsidiaries' principal suppliers, manufacturers, customers or
contractors, which, in any case, may reasonably be expected to result
in a Material Adverse Effect.
(xv) Absence of Proceedings. Except as disclosed in the
Offering Memorandum, there is no action, suit, proceeding, inquiry or
investigation, in each case before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge
of the Company or any Guarantor, threatened, against or affecting the
Company or any Subsidiary thereof which, singly or in the aggregate,
might reasonably be expected to result in a Material Adverse Effect,
or which, singly or in the aggregate, might reasonably be expected to
materially and adversely affect the consummation of this Agreement or
the performance by the Company and the Guarantors of their respective
obligations hereunder or under the Securities, the Guarantees or the
Exchange Securities. The aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary
thereof is a party or of which any of their respective property or
assets is the subject which are not described in the Offering
Memorandum, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect. The indemnification agreement
-8-
<PAGE> 13
between the Company and certain parties in connection with a certain
Indiana lawsuit brought against the Company has been authorized,
executed and delivered by the Company and constitutes the valid and
binding obligation of the parties thereto, enforceable in accordance
with its terms, and provides the Company with full and complete
indemnification (without deductibles) for all costs, liabilities and
expenses in connection with such lawsuit and the claims related
thereto. Other than such Indiana lawsuit and other than as disclosed
to the Initial Purchasers in writing, there is no other action, suit,
proceeding, inquiry or investigation, in each case before or by any
court or governmental agency or body, domestic or foreign, now pending
or, to the knowledge of the Company or any Guarantor, threatened
against the Company or any Subsidiary thereof, in connection with or
related to the sale by the Company or any Subsidiary thereof of
tobacco-related products.
(xvi) Possession of Intellectual Property. The Company and
the Subsidiaries own, possess or license, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Company nor any of the Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property (including
Intellectual Property which is licensed) or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. Except as disclosed
in the Offering Memorandum, no filing with, or authorization,
approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary
or required for the performance by the Company or any of the
Guarantors of their respective obligations hereunder, in connection
with the offering, issuance or sale of the Securities and the
Guarantees hereunder or the consummation of the transactions
contemplated by or for the due execution, delivery or performance of
this Agreement, the Registration Rights Agreement, the Indenture, the
DTC Agreement, the Securities, the Guarantees, the Exchange Securities
or any other agreement or instrument entered into or issued or to be
entered into or issued by the Company or any of the Subsidiaries in
connection with the consummation of the transactions contemplated
herein and in the Offering
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<PAGE> 14
Memorandum (including the issuance and sale of the Securities and the
Guarantees and the use of the proceeds from the sale of the Securities
and the Guarantees as described in the Offering Memorandum under the
caption "Use of Proceeds").
(xviii) Possession of Licenses and Permits. The Company and
the Subsidiaries possess all governmental permits, licenses,
approvals, consents, certificates and other authorizations
(collectively, "Governmental Licenses") which are material to the
Company issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them respectively; the Company and the Subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses and with the rules and regulations of the regulatory
authorities and governing bodies having jurisdiction with respect
thereto, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses, nor are
there, to the knowledge of the Company or any Guarantor, pending or
threatened actions, suits, claims or proceedings against the Company
or any Subsidiary before any court, governmental agency or body or
otherwise that, if successful, would limit, revoke, cancel, suspend or
cause not to be renewed any Governmental License, in each case, which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and the Subsidiaries
have good and marketable title to all real property owned by the
Company and the Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Offering Memorandum or
(b) do not, singly or in the aggregate, materially affect the value of
such property and do not materially interfere with the use made and
proposed to be made of such property by the Company or any of the
Subsidiaries; and all of the leases and subleases material to the
business of the Company and the Subsidiaries, considered as one
enterprise, and under which the Company or any of the Subsidiaries
holds properties described in the Offering Memorandum, are in full
force and effect, and neither the Company nor any of the Subsidiaries
has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any of the
Subsidiaries under any of the leases or
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<PAGE> 15
subleases mentioned above, or affecting or questioning the rights of
the Company or any Subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xx) Tax Returns. All United States federal income tax
returns of the Company and the Subsidiaries required by law to be
filed have been filed and all taxes shown by such returns or otherwise
assessed, which are due and payable, have been paid, except
assessments against which appeals have been or will be promptly taken
and as to which adequate reserves have been provided. The Company and
the Subsidiaries have filed all other tax returns that are required to
have been filed by them pursuant to applicable foreign, federal,
state, local or other law except insofar as the failure to file such
returns would not result in a Material Adverse Effect, and have paid
all taxes due pursuant to such returns or pursuant to any assessment
received by the Company and the Subsidiaries, except for such taxes,
if any, as are being contested in good faith and by appropriate
proceedings and as to which adequate reserves have been provided. The
charges, accruals and reserves on the books of the Company in respect
of all federal, state, local and foreign tax liabilities of the
Company and each Subsidiary for any years not finally determined are
adequate to meet any assessments or re-assessments for additional
income tax for any years not finally determined, except to the extent
of any inadequacy that would not result in a Material Adverse Effect.
(xxi) Insurance. The Company and the Subsidiaries carry or
are entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts and covering such risks as is
generally maintained by companies of established repute engaged in the
same or similar business, and all such insurance is in full force and
effect.
(xxii) Solvency. The Company and each of the Guarantors is,
and immediately after the Closing will be, Solvent. As used herein,
the term "Solvent" means, with respect to the Company and each
Guarantor, as the case may be, on a particular date, that on such date
(A) the fair market value of the assets of the Company or such
Guarantor is greater than the total amount of liabilities (including
contingent liabilities) of the Company or such Guarantor, (B) the
present fair salable value of the assets of the Company or such
Guarantor is greater than the amount that will be required to pay the
probable liabilities of the Company or such Guarantor on its debts as
they become absolute and mature, (C) the Company or such Guarantor is
able to realize upon its assets and pay its debts and other
liabilities, including contingent obligations, as they mature, and (D)
the Company or such Guarantor does not have unreasonably small
capital.
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<PAGE> 16
(xxiii) Stabilization or Manipulation. Neither the Company
nor any Guarantor nor any of their respective officers, directors or
controlling persons has taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or any
Guarantor in order to facilitate the sale or resale of the Securities
or the Guarantees. The Company and the Guarantors have not distributed
and, prior to the later to occur of (i) the Closing Time and (ii)
completion of the distribution of the Securities and the Guarantees,
will not distribute any offering material in connection with the
offering and sale of the Securities and the Guarantees other than the
Offering Memorandum or other materials, if any, permitted by the 1933
Act and approved by the Representative.
(xxiv) Related Party Transactions. No relationship, direct or
indirect, exists between or among any of the Company, the Guarantors
or any affiliate of the Company or any Guarantor, on the one hand, and
any director, officer, stockholder, customer or supplier of any of
them, on the other hand, which is required by the 1933 Act or by the
rules and regulations enacted thereunder to be described in a
registration statement on Form S-1 which is not so described or is not
described as required in the Offering Memorandum.
(xxv) Suppliers. No supplier of merchandise to the Company or
any of the Subsidiaries has ceased shipments of merchandise to the
Company or any of the Subsidiaries, other than in the normal and
ordinary course of business consistent with past practices, which
cessation would not result in a Material Adverse Effect.
(xxvi) Environmental Laws. Except as described in the
Offering Memorandum and except such matters as would not, singly or in
the aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of the Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products or nuclear or
radioactive material (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous
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<PAGE> 17
Materials (collectively, "Environmental Laws"), (B) the Company and
the Subsidiaries have all permits, licenses, authorizations and
approvals currently required for their respective businesses under any
applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or
any of the Subsidiaries and (D) there are no events, facts or
circumstances that might reasonably be expected to form the basis of
any liability or obligation of the Company or any of the Subsidiaries,
including, without limitation, any order, decree, plan or agreement
requiring clean-up or remediation, or any action, suit or proceeding
by any private party or governmental body or agency, against or
affecting the Company or any of the Subsidiaries relating to any
Hazardous Materials or Environmental Laws.
(xxvii) Registration Rights. There are no holders of
securities (debt or equity) of the Company or any Guarantor, or
holders of rights (including, without limitation, preemptive rights),
warrants or options to obtain securities of the Company or any
Guarantor, who in connection with the issuance, sale and delivery of
the Securities, the Guarantees and the Exchange Securities, if any,
and the execution, delivery and performance of this Agreement and the
Registration Rights Agreement, have the right to request the Company
or any Guarantor to register securities held by them under the 1933
Act.
(xxviii) Accounting Controls. The Company and its
consolidated Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxix) Investment Company Act. The Company and each of the
Guarantors is not, and upon the issuance and sale of the Securities
and the Guarantees as herein contemplated and the application of the
net proceeds therefrom as described in the Offering Memorandum will
not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
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<PAGE> 18
(xxx) Rule 144A Eligibility. The Securities and the
Guarantees are eligible for resale pursuant to Rule 144A and will not
be, at the Closing Time, of the same class as securities listed on a
national securities exchange registered under Section 6 of the 1934
Act, or quoted in a U.S. automated interdealer quotation system.
(xxxi) No General Solicitation. None of the Company, the
Guarantors, any of their respective affiliates, as such term is
defined in Rule 501(b) under the 1933 Act ("Affiliates"), or any
person acting on any of their behalf (other than the Initial
Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage, in connection with the
offering of the Securities and the Guarantees, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the 1933 Act.
(xxxii) No Registration Required. Subject to compliance by
the Initial Purchasers with the representations and warranties set
forth in Section 2, it is not necessary in connection with the offer,
sale and delivery of the Securities and the Guarantees to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated
by this Agreement and the Offering Memorandum to register the
Securities and the Guarantees under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act").
(xxxiii) No Directed Selling Efforts. With respect to those
Securities and Guarantees sold in reliance on Regulation S, (A) none
of the Company, the Guarantors, any of their respective Affiliates or
any person acting on their behalf (other than the Initial Purchasers,
as to whom the Company and the Guarantors make no representation) has
engaged or will engage in any directed selling efforts within the
meaning of Regulation S and (B) each of the Company, the Guarantors,
any of their respective Affiliates and any person acting on their
behalf (other than the Initial Purchasers, as to whom the Company and
the Guarantors make no representation) has complied and will comply
with the offering restrictions requirement of Regulation S.
(xxxiv) PORTAL. There are no securities of the Company or any
of the Guarantors which are of the same class as the Securities or the
Guarantees that are listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a United
States automated inter dealer quotation system. The Company and the
Guarantors have been advised by the National Association of Securities
Dealers, Inc. PORTAL Market that the Securities and the Guarantees
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<PAGE> 19
will be designated PORTAL eligible securities in accordance with the
rules and regulations of the National Association of Securities
Dealers, Inc.
(xxxv) Authorization of the Credit Agreement. The $30 million
credit agreement among the Company, Marsh Supermarkets, LLC ("LLC"),
the other guarantors named therein and Harris Bank, dated as of July
25, 1997 (the "Harris Credit Agreement"), has been duly authorized,
executed and delivered by the Company and LLC and constitutes a valid
and binding obligation of the Company and LLC, enforceable against the
Company and LLC in accordance with its terms.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company or any of the Subsidiaries delivered to the Initial Purchasers or
to counsel for the Initial Purchasers pursuant to the terms of this Agreement
shall be deemed a representation and warranty by the Company or any of the
Subsidiaries to each Initial Purchaser as to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities and Guarantees. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and the Guarantors agree to sell to each Initial Purchaser,
severally and not jointly, and each Initial Purchaser, severally and not
jointly, agrees to purchase from the Company and the Guarantors, at the price
set forth in Schedule C, the aggregate principal amount of Securities
(including the Guarantees) set forth in Schedule A opposite the name of such
Initial Purchaser, plus any additional principal amount of Securities
(including the Guarantees) which such Initial Purchaser may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities and the Guarantees shall be made at the office
of Fried, Frank, Harris, Shriver & Jacobson, or at such other place as shall be
agreed upon by the Representative, the Company and the Guarantors at 9:00 A.M.
(New York Time) on the fifth business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representative, the Company and the Guarantors (such time and date of payment
and delivery being herein called the "Closing Time").
Payment shall be made to the Company and the Guarantors by wire
transfer of immediately available funds to a bank account designated by the
Company and the Guarantors, against delivery to the respective accounts of the
Initial Purchasers of certificates for the Securities and the Guarantees to be
purchased by them. It is
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understood that each Initial Purchaser has authorized the Representative, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Securities and the Guarantees which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the Initial
Purchasers, may (but shall not be obligated to) make payment of the purchase
price for the Securities and the Guarantees to be purchased by any Initial
Purchaser whose funds have not been received by the Closing Time, but such
payment shall not relieve such Initial Purchaser from its obligations
hereunder. The certificates representing the Securities and the Guarantees
shall be registered in the name of Cede & Co. pursuant to the DTC Agreement, or
physical certificates representing the Securities and the Guarantees shall be
registered in the names and denominations requested by the Initial Purchasers,
and in either case shall be made available for examination and packaging by the
Initial Purchasers in The City of New York not later than 9:00 A.M. on the last
business day prior to the Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally
and not jointly represents and warrants to, and agrees with, the Company and
each of the Guarantors that it is a "qualified institutional buyer" within the
meaning of Rule 144A under the 1933 Act (a "Qualified Institutional Buyer") and
an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act
(an "Accredited Investor").
(d) Denominations; Registration. Certificates for the Securities
(including the Guarantees) shall be in such denominations ($1,000 or integral
multiples thereof) and registered in such names as the Representative may
request in writing at least one full business day before the Closing Time.
SECTION 3. Covenants of the Company and the Guarantors. The Company
and the Guarantors, jointly and severally, covenant with each Initial Purchaser
as follows:
(a) Offering Memorandum. The Company and the Guarantors, as promptly
as possible, will furnish to each Initial Purchaser, without charge, such
number of copies of the Preliminary Offering Memorandum, the Final Offering
Memorandum and any amendments and supplements thereto and documents
incorporated by reference therein as such Initial Purchaser may reasonably
request.
(b) Notice and Effect of Material Events. The Company and the
Guarantors will immediately notify each Initial Purchaser, and confirm such
notice in writing, of (x) any filing made by the Company or any Guarantor of
information relating to the offering of the Securities and the Guarantees with
any securities exchange or any other regulatory body in the United States or
any other jurisdiction, and (y) prior to the completion of the placement of the
Securities and the Guarantees by the Initial Purchasers as evidenced by a
notice in writing from the Initial Purchasers to the Company, any material
changes in or
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<PAGE> 21
affecting the earnings, business affairs or business prospects of the Company
and the Subsidiaries which (i) make any statement in the Offering Memorandum or
any document incorporated by reference in the Offering Memorandum false or
misleading or (ii) are not disclosed in the Offering Memorandum. In such event
or if during such time any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of the Company and the
Guarantors, their counsel, the Initial Purchasers or counsel for the Initial
Purchasers, to amend or supplement the Final Offering Memorandum in order that
the Final Offering Memorandum not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances then existing, the
Company and the Guarantors will forthwith amend or supplement the Final
Offering Memorandum by preparing and furnishing to each Initial Purchaser an
amendment or amendments of, or a supplement or supplements to, the Final
Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company and
the Guarantors will advise each Initial Purchaser promptly of any proposal to
amend or supplement the Offering Memorandum and will not effect such amendment
or supplement without the consent of the Initial Purchasers, which shall not be
unreasonably withheld. Neither the consent of the Initial Purchasers to, nor
the Initial Purchaser's delivery of, any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities and Guarantees for Offer and Sale. The
Company and the Guarantors will use their best efforts to register or qualify
the Securities and the Guarantees for offering and sale under the applicable
securities laws of such jurisdictions as the Representative may designate and
will maintain such qualifications in effect as long as required for the sale of
the Securities and the Guarantees; provided, however, that the Company and the
Guarantors shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(e) Integration. The Company and the Guarantors agree that they will
not and will cause their affiliates not to make any offer or sale of securities
of the Company or any Guarantor of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act, such offer or sale
could be deemed to render invalid (for the
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<PAGE> 22
purpose of (i) the sale of the Securities and the Guarantees by the Company and
the Guarantors to the Initial Purchasers, (ii) the resale of the Securities and
the Guarantees by the Initial Purchasers to Subsequent Purchasers or (iii) the
resale of the Securities and the Guarantees by such Subsequent Purchasers to
others) the exemption from the registration requirements of the 1933 Act
provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder
or otherwise.
(f) Rating of Securities. The Company and the Guarantors shall take
all reasonable action necessary to enable Standard & Poor's Corporation
("S&P"), and Moody's Investors Service, Inc. ("Moody's"), to provide their
respective credit ratings of the Securities and the Guarantees.
(g) Rule 144A Information. The Company and the Guarantors agree that,
in order to render the Securities and the Guarantees eligible for resale
pursuant to Rule 144A under the 1933 Act, while any of the Securities and the
Guarantees remain outstanding, it will make available, upon request, to any
holder of Securities and Guarantees or prospective purchasers of Securities and
Guarantees the information specified in Rule 144A(d)(4), unless the Company and
the Guarantors furnish information to the Commission pursuant to Section 13 or
15(d) of the 1934 Act (such information, whether made available to holders or
prospective purchasers or furnished to the Commission, is hereinafter referred
to as "Additional Information").
(h) Restriction on Resales. Until the expiration of two years after
the original issuance of the Securities and the Guarantees, the Company and the
Guarantors will not, and will cause their "affiliates" (as such term is defined
in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities and
Guarantees which are "restricted securities" (as such term is defined under
Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and
shall immediately upon any purchase of any such Securities and Guarantees
submit such Securities and Guarantees to the Trustee for cancellation.
(i) Use of Proceeds. The Company and the Guarantors will use the net
proceeds received by them from the sale of the Securities and the Guarantees in
the manner specified in the Offering Memorandum under "Use of Proceeds." The
Company will send a notice of redemption to Holders of the Senior Notes (as
defined in the Offering Memorandum) no later than the Closing Time.
(j) Restriction on Sale of Securities. During a period of 90 days from
the date of the Offering Memorandum, the Company and the Guarantors will not,
without the prior written consent of Merrill Lynch, directly or indirectly,
issue, sell, offer to sell, grant any option for the sale of, or otherwise
dispose of, any debt securities or guarantees of
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<PAGE> 23
debt securities of the Company (other than borrowings under the Company's bank
credit agreements, the Securities, the Guarantees and the Exchange Securities).
(k) DTC Clearance. The Company and the Guarantors will use all
reasonable efforts in cooperation with the Initial Purchasers to permit the
Securities and the Guarantees to be eligible for clearance and settlement
through DTC.
(l) Legends. Each certificate for a Security (including the Guarantee)
will bear the legend contained in "Notice to Investors" in the Offering
Memorandum for the time period and upon the other terms stated in the Offering
Memorandum.
(m) Interim Financial Statements. Prior to the Closing Time, the
Company shall furnish to the Initial Purchasers copies of any budgets or
revised budgets for fiscal 1997 and any unaudited interim financial statements
of the Company, promptly after they have been completed, for any periods
subsequent to the periods covered by the financial statements appearing in the
Offering Memorandum.
(n) Periodic Reports. For a period of three years after the Closing
Time, the Company and the Guarantors will furnish to the Initial Purchasers
copies of all annual reports, quarterly reports and current reports filed with
the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
be designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company and the Guarantors generally
to the holders of the Securities and the Guarantees or to security holders of
its publicly issued securities generally.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company and the Guarantors, jointly and severally,
will pay all expenses incident to the performance of their respective
obligations under this Agreement, including (i) the preparation, printing and
any filing of the Offering Memorandum and the Registration Statement (including
financial statements and any schedules or exhibits) and of each amendment or
supplement thereto, including the preliminary prospectuses and the prospectus
to be contained in the Registration Statement, (ii) the preparation, printing
and delivery to the Initial Purchasers of this Agreement, the Registration
Rights Agreement, the Indenture and such other documents as may be required in
connection with the offering, purchase, sale and delivery of the Securities and
the Guarantees, (iii) the preparation, issuance and delivery of the
certificates for the Securities and the Guarantees to the Initial Purchasers,
including any charges of DTC in connection therewith, (iv) the fees and
disbursements of the Company's and the Guarantors' counsel, accountants and
other advisors, (v) the qualification of the Securities and the Guarantees
under securities laws in accordance
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with the provisions of Section 3(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Initial Purchasers in
connection therewith and in connection with the preparation of the Blue Sky
Survey, any supplement thereto and any Legal Investment Survey, (vi) the fees
and expenses of the Trustee, including the fees and disbursements of counsel
for the Trustee in connection with the Indenture, the Securities and the
Guarantees, (vii) any fees payable in connection with the rating of the
Securities and the Guarantees and the listing of the Securities and the
Guarantees with the Private Offerings, Resales and Trading Through Automated
Linkages ("PORTAL") market, and (viii) any filing fees incident to, and any
reasonable fees and disbursements of counsel to the Initial Purchasers in
connection with, the review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Securities and the Guarantees.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section
9(a)(i) or 9(a)(ii) hereof, the Company and the Guarantors, jointly and
severally, shall reimburse the Initial Purchasers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company and the
Guarantors contained in Section 1 hereof or in certificates of any officer of
the Company or any of the Subsidiaries delivered pursuant to the provisions
hereof, to the performance by the Company and the Guarantors of their covenants
and other obligations hereunder, and to the following further conditions:
(a) Opinion of Counsel for the Company and the Guarantors. At the
Closing Time, the Initial Purchasers shall have received the favorable
opinions, dated as of the Closing Time, of each of Bass, Berry & Sims PLC,
counsel for the Company and the Guarantors, and P. Lawrence Butt, Vice
President, Counsel and Secretary of the Company, in each case in form and
substance satisfactory to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letters for each of the other Initial
Purchasers to the effect set forth in Exhibits A-1 and A-2, respectively,
hereto and to such further effect as counsel to the Initial Purchasers may
reasonably request.
(b) Opinion of Counsel for the Initial Purchasers. At the Closing
Time, the Initial Purchasers shall have received the favorable opinion, dated
as of the Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel
for the Initial Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers, with respect to certain
matters set forth in paragraphs (1) through (5), inclusive, (8) (solely as to
the information in the Offering Memorandum under "Description of the Notes")
and the penultimate paragraph of Exhibit A-1 hereto and paragraphs (1) and (2)
-20-
<PAGE> 25
of Exhibit A-2 hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representative, including internal counsel of the Company.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company, the Guarantors and the Subsidiaries and certificates
of public officials.
(c) Officers' Certificate. At the Closing Time, (i) the Offering
Memorandum, as it may then be amended or supplemented, including the documents
incorporated by reference therein, shall 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; (ii) there shall not
have been, since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
of the Subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business; (iii) the Company and the Guarantors shall
have complied with all agreements and satisfied all conditions on their part to
be performed or satisfied at or prior to the Closing Time; and (iv) the
representations and warranties of the Company and the Guarantors in Section 1
shall be accurate and true and correct as though expressly made at and as of
the Closing Time. At the Closing Time, the Initial Purchasers shall have
received a certificate of the Chief Executive Officer of the Company and the
Chief Financial Officer of the Company, and equivalent officials of each
Guarantor, dated as of the Closing Time, to such effect.
(d) Accountant's Comfort Letter and Consent. At the time of the
execution of this Agreement, the Initial Purchasers shall have received from
Ernst & Young LLP a letter dated such date, in form and substance satisfactory
to the Representative or to counsel for the Initial Purchasers, together with
signed or reproduced copies of such letter for each of the other Initial
Purchasers, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to Initial Purchasers with respect
to the financial statements and certain financial information contained in the
Offering Memorandum and in the form of Exhibit B attached hereto. Ernst & Young
LLP shall provide in a separate writing a consent to the inclusion of its
report in the Offering Memorandum and to the reference to it under the caption
"Independent Auditors" in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Ernst & Young LLP a letter, dated as of the
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to
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<PAGE> 26
subsection (d) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities and the
Guarantees shall be rated at least B2 by Moody's and B+ by S&P, and the Company
and the Guarantors shall have delivered to the Representative a letter dated
the Closing Time, from each such rating agency, or other evidence satisfactory
to the Representative, confirming that the Securities and the Guarantees have
such ratings; and since the date of this Agreement, there shall not have
occurred a downgrading in the rating assigned to the Securities and the
Guarantees or any of the Company's and the Guarantor's other debt securities by
any nationally recognized securities rating agency, and no such securities
rating agency shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of the Securities and
the Guarantees or any of the Company's and the Guarantor's other debt
securities.
(g) PORTAL. At the Closing Time, the Securities and the Guarantees
shall have been designated for
trading on PORTAL.
(h) Chief Financial Officer's Certificate. At the Closing Time, the
Initial Purchasers shall have received a certificate of the principal financial
officer of the Company and the Guarantors as to certain agreed
upon accounting matters.
(i) Registration Rights Agreement and Indenture. The Company and each
of the Guarantors shall have duly authorized, executed and delivered the
Registration Rights Agreement and the Indenture to the Initial Purchasers in a
form and substance satisfactory to the Representative and counsel to the
Initial Purchasers.
(j) Credit Agreements. At the Closing Time and upon consummation of
the transactions contemplated hereby, (i) the Company and LLC shall have either
amended the credit agreement, dated as of August 1, 1992, with National City
Bank, Indiana, as amended, and the credit agreement, dated as of May 23, 1997,
with Keybank National Association (collectively, the "Revolving Credit
Agreements"), so that such Revolving Credit Agreements permit and a default or
event of default under such Revolving Credit Agreements is not caused by the
issuance of the Notes and the Guarantees and the use of the estimated net
proceeds thereof, or alternatively shall have terminated the Revolving Credit
Agreements and (ii) the Company and the Guarantors shall have received all
consents, including consents under any credit agreements, necessary to the
issuance and sale of the Securities and the Guarantees and the consummation of
the transactions contemplated hereby, or shall have amended any agreements so
as to obviate the necessity of such consents, in each case in a form and
substance satisfactory to the Representative and counsel for the Initial
Purchasers.
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<PAGE> 27
(k) Debt Prepayment Arrangements. At or prior to the Closing Time, the
Company shall have entered into escrow arrangements, in form and substance
satisfactory to the Representative or to counsel for the Initial Purchasers,
for the prepayment of the Senior Notes as described in the section entitled
"Use of Proceeds" in the Offering Memorandum
(l) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may require (including any consents under any agreements to which the Company
or any Guarantor is a party) for the purpose of enabling them to pass upon the
issuance and sale of the Securities and the Guarantees as herein contemplated,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained; and
all proceedings taken by the Company and the Guarantors in connection with the
issuance and sale of the Securities and the Guarantees as herein contemplated
shall be satisfactory in form and substance to the Initial Purchasers and
counsel for the Initial Purchasers.
(m) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representative by notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1, 6 and 7 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Initial Purchasers. The Company and each of the
Guarantors, jointly and severally, agree to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Final Offering Memorandum (or
any amendment or supplement thereto (including any document
incorporated by reference into the Preliminary Offering Memorandum or
Final Offering Memorandum)), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
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<PAGE> 28
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company or the
Guarantors by any Initial Purchaser through Merrill Lynch expressly for use in
the Offering Memorandum (or any amendment thereto); provided, further, that the
Company and the Guarantors will not be liable to the Initial Purchasers or any
person controlling such Initial Purchasers with respect to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Offering Memorandum to the extent that the Company and the
Guarantors shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that the Initial Purchaser sold
securities to a person to whom such Initial Purchaser failed to send or give,
at or prior to the written confirmation of the sale of such Securities, a copy
of the Final Offering Memorandum (as amended or supplemented) if the Company
and the Guarantors have previously furnished copies thereof to the Initial
Purchasers (sufficiently in advance of the Closing Time to allow for
distribution of the Final Offering Memorandum in a timely manner) and complied
with their obligations under Sections 3(b) and 3(c) hereof and the loss,
liability, claim, damage or expense of the Initial Purchasers resulted from an
untrue statement or omission or alleged untrue statement or omission of a
material fact contained in or omitted from such Preliminary Offering Memorandum
(as amended or supplemented) which was corrected in the Final Offering
Memorandum (as amended or supplemented).
(b) Indemnification of Company, Guarantors, and Directors. Each
Initial Purchaser severally agrees to indemnify and hold harmless the Company,
the Guarantors
-24-
<PAGE> 29
and their directors, and each person, if any, who controls the Company or the
Guarantors within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandum in reliance
upon and in conformity with written information furnished to the Company or the
Guarantors by such Initial Purchaser through Merrill Lynch expressly for use in
the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 6(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after
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<PAGE> 30
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand and the Initial Purchasers on the
other hand from the offering of the Securities and the Guarantees pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Guarantors on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Guarantors on
the one hand and the Initial Purchasers on the other hand in connection with
the offering of the Securities and the Guarantees pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Securities and the Guarantees pursuant to
this Agreement (before deducting expenses) received by the Company and the
Guarantors and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities and
the Guarantees.
The relative fault of the Company and the Guarantors on the one hand
and the Initial Purchasers on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantors, or by the
Initial Purchasers, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by
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<PAGE> 31
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities (including the Guarantees) underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such Initial Purchaser 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 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company and each Guarantor, and each
person, if any, who controls the Company and each Guarantor within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company and each Guarantor. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 7 are
several in proportion to the principal amount of Securities (including the
Guarantees) set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of the
Subsidiaries submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Initial Purchaser or controlling person, or by or on behalf of the Company or
any Guarantor, and shall survive delivery of the Securities (including the
Guarantees) to the Initial Purchasers.
-27-
<PAGE> 32
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Company and the Guarantors, at any time at or prior
to the Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
the Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there shall have occurred a downgrading
in the rating assigned to the Securities or the Guarantees or any of the
Company's or any Guarantor's other debt securities by any nationally recognized
securities rating agency, or if such securities rating agency shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities, the Guarantees or any of
the Company's or Guarantor's other debt securities or guarantees of debt
securities, or (iii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis
or any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representative,
impracticable to market the Securities or the Guarantees or to enforce
contracts for the sale of the Securities or the Guarantees, or (iv) if trading
in any securities of the Company or any Guarantor has been suspended or limited
by the Commission or the NASDAQ National Market System, or if trading generally
on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ
National Market System has been suspended or limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices have been
required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6 and 7 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Initial Purchasers. If one
or both of the Initial Purchasers shall fail at Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for the
non-defaulting Initial Purchaser, or any other initial purchaser, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
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<PAGE> 33
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then this Agreement shall terminate without liability on the part of
any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representative, the Company or the
Guarantors shall have the right to postpone the Closing Time for a period not
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangements. As used herein, the term
"Initial Purchaser" includes any person substituted for an Initial Purchaser
under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Cara I. Londin,
Esq., with a copy to Fried, Frank, Harris, Shriver & Jacobson, 1 New York
Plaza, New York, New York 10004, attention of Valerie Ford Jacob, Esq.; notices
to the Company or the Guarantors shall be directed to them at 9800 Crosspoint
Boulevard, Indianapolis, Indiana 46256-3350, attention of P. Lawrence Butt,
Esq., with a copy to Bass, Berry & Sims PLC, 2700 First American Center,
Nashville, Tennessee, 37238, attention of J. Page Davidson, Esq.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Initial Purchasers, the Company and the Guarantors and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation,
other than the Initial Purchasers, the Company and the Guarantors and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Initial Purchasers, the Company and the Guarantors and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of Securities and Guarantees from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
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<PAGE> 34
SECTION 13. Governing Law And Time. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY HEREIN REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
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<PAGE> 35
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Guarantors a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the Initial Purchasers, the Company and
the Guarantors in accordance with its terms.
Very truly yours,
MARSH SUPERMARKETS, INC.
CRYSTAL FOOD SERVICES, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
LOBILL FOODS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
CONTRACT TRANSPORT, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH SUPERMARKETS, LLC
By: Marsh Supermarkets, Inc.. its
Chief Operating Officer
VILLAGE PANTRY, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH DRUGS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH CLEARING HOUSE, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
By: /s/ Don E. Marsh
-----------------------------
Name: Don E. Marsh
Title: President and Chief
Executive Officer
-31-
<PAGE> 36
MARSH DRUGS, INC.
MUNDY REALTY, INC.
MAR PROPERTIES, INC.
MARLEASE, INC.
MARSH INTERNATIONAL, INC.
MARAINES GREENERY, INC.
LIMITED HOLDINGS, INC.
MARSH P.Q., INC.
S.C.T., INC.
NORTH MARION DEVELOPMENT
CORPORATION
CONTRACT TRANSPORT, INC.
TRADEMARK HOLDINGS, INC.
By: /s/ Don E. Marsh
-------------------------------
Name: Don E. Marsh
Title: President
MARSH VILLAGE PANTRIES, INC.
CONVENIENCE STORE DISTRIBUTING
COMPANY
By: Marsh Village Pantries, Inc.,
its General Partner
By: /s/ Don E. Marsh
------------------------
Name: Don E. Marsh
Title: Chief Executive
Officer
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<PAGE> 37
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MCDONALD & COMPANY SECURITIES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/
-------------------------------------------
Authorized Signatory
For itself and the other Initial Purchasers
named in Schedule A hereto.
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<PAGE> 38
SCHEDULE A
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................. $120,000,000
McDonald & Company Securities, Inc........................................................... 30,000,000
------------
Total $150,000,000
============
</TABLE>
<PAGE> 39
SCHEDULE B
Guarantors
MARSH DRUGS, INC. (an Indiana corporation),
MARSH VILLAGE PANTRIES, INC. (an Indiana corporation),
MUNDY REALTY, INC. (an Indiana corporation),
MAR PROPERTIES, INC. (an Indiana corporation),
MARLEASE, INC. (an Indiana corporation),
MARSH INTERNATIONAL, INC. (an Indiana corporation),
MARAINES GREENERY, INC. (an Indiana corporation),
LIMITED HOLDINGS, INC. (an Indiana corporation),
CONVENIENCE STORE DISTRIBUTING COMPANY (an Ohio partnership),
MARSH P.Q., INC. (an Indiana corporation),
S.C.T., INC. (an Indiana corporation),
NORTH MARION DEVELOPMENT CORPORATION (an Indiana corporation),
CONTRACT TRANSPORT, INC. (an Indiana corporation),
CRYSTAL FOOD SERVICES, LLC (an Indiana limited liability company),
LOBILL FOODS, LLC (an Indiana limited liability company),
CONTRACT TRANSPORT, LLC (an Indiana limited liability company),
MARSH SUPERMARKETS, LLC (an Indiana limited liability company),
VILLAGE PANTRY, LLC (an Indiana limited liability company),
MARSH DRUGS, LLC (an Indiana limited liability company),
TRADEMARK HOLDINGS, INC. (a Delaware corporation),
MARSH CLEARING HOUSE, LLC (an Indiana limited liability company),
Other Subsidiaries
C.E. PUBLISHING, INC. (an Indiana corporation)
WALNUT HILL ASSOCIATES (an Indiana partnership)
DECATUR PLAZA ASSOCIATES (an Indiana partnership)
<PAGE> 40
SCHEDULE C
MARSH SUPERMARKETS, INC.
$150,000,000 Senior Subordinated Notes due 2007
1. The initial offering price of the Securities (including the
Guarantees) shall be 99.185% of the principal amount thereof, plus accrued
interest, if any, from the date of issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities and the Guarantees shall be 96.56% of the principal amount thereof.
3. The interest rate on the Securities shall be 8 7/8% per annum.
4. The interest payment dates of the Securities shall be February 1
and August 1 of each year, commencing February 1, 1998.
5. The Securities and the Guarantees will be subject to redemption at
any time on or after August 1, 2002, at the option of the Company and the
Guarantors, at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning August 1 of
the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
2002 104.438%
2003 102.958%
2004 101.479%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
<PAGE> 41
Exhibit A-1
_____, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
McDonald & Company Securities, Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, NY 10281-1209
Ladies and Gentlemen:
We have acted as counsel to Marsh Supermarkets, Inc., an Indiana
corporation (the "Company"), and the Guarantors (as defined below) in
connection with the sale of $150,000,000 in principal amount of the Company's
___% Senior Subordinated Notes due 2007 to Merrill Lynch, Pierce, Fenner &
Smith, Incorporated and McDonald & Company Securities, Inc. (the "Initial
Purchasers"), pursuant to the Purchase Agreement, dated as of _____, by and
among the Company, the guarantors listed on Schedule B thereto (the
"Guarantors") and the Initial Purchasers (the "Purchase Agreement"). We have
been requested by the Company and the Guarantors to render this opinion
pursuant to Section 5(a) of the Purchase Agreement. The terms used in this
opinion that are defined in the Purchase Agreement shall have the same
definitions when used herein, unless otherwise defined herein.
In connection with this opinion, we have reviewed, among other
matters, the following agreements and instruments:
1. the Purchase Agreement;
2. the Registration Rights Agreement;
3. the DTC Agreement;
4. the Guarantees;
5. the Indenture
6. the Global Note; and
7. the form of Exchange Securities
We have also reviewed such other corporate documents and records of
the Company and the Guarantors, such
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<PAGE> 42
other certificates of public officials and such other matter as we have deemed
necessary or appropriate for purposes of this opinion. As to various issues of
fact, we have relied upon the representations and warranties of the Company and
the Guarantors contained in the Purchase Agreement and upon statements and
certificates of officers of the Company and the Guarantors, without independent
verification or investigation.
We have assumed regarding documents executed by parties other than the
Company and the Guarantors that such documents are the valid and binding
obligations of and enforceable against such parties. We have also assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures, the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies and the legal
capacity of all natural persons.
Based on the foregoing, and subject to the assumptions, limitations
and qualifications set forth herein, we are of the opinion that:
1. The Purchase Agreement has been duly authorized by all necessary
corporate or partnership action on the part of the Company and each of the
Guarantors and has been duly executed and delivered by the Company and by each
of the Guarantors.
2. The Registration Rights Agreement and the DTC Agreement have each
been duly authorized by all necessary corporate or partnership action on the
part of the Company and, in the case of the Registration Rights Agreement, each
of the Guarantors and have been duly executed and delivered by the Company and,
in the case of the Registration Rights Agreement, each of the Guarantors and
constitute valid and binding obligations of the Company and, in the case of the
Registration Rights Agreement, each of the Guarantors, enforceable against the
Company and, in the case of the Registration Rights Agreement, each of the
Guarantors in accordance with their terms, subject to (a) the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance, fraudulent transfer and other similar laws relating to or affecting
the rights of creditors and (b) general principles of equity (including,
without limitation, concepts of materiality, reasonableness, good faith and
fair dealing and the possible unavailability of specific performance,
injunctive relief and other equitable remedies), regardless of whether
considered in a proceeding at law or in equity.
3. The Indenture has been duly authorized by all necessary corporate
or partnership action on the part of the Company and each of the Guarantors and
has been duly executed and delivered by the Company and each of the Guarantors
and
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<PAGE> 43
constitutes a valid and binding agreement of the Company and each of the
Guarantors, enforceable against the Company and each of the Guarantors in
accordance with its terms, subject to (a) the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance, fraudulent
transfer and other similar laws relating to or affecting the rights of
creditors and (b) general principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance, injunctive relief and other
equitable remedies), regardless of whether considered in a proceeding at law or
in equity.
4. The Securities and Guarantees are in the form contemplated by the
Indenture, have been duly authorized by all necessary corporate or partnership
action on the part of the Company and each of the Guarantors and, when executed
by the Company and each of the Guarantors and authenticated by the Trustee in
the manner provided in the Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee) and delivered against payment of
the purchase price therefor will constitute valid and binding obligations of
the Company and each of the Guarantors, enforceable against the Company and
each of the Guarantors in accordance with their terms, subject to (a) the
effect of bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance, fraudulent transfer and other similar laws relating to
or affecting the rights of creditors and (b) general principles of equity
(including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance,
injunctive relief and other equitable remedies), regardless of whether
considered in a proceeding at law or in equity.
5. The Exchange Securities have been duly authorized by all necessary
corporate or partnership action on the part of the Company and each of the
Guarantors and, when executed and authenticated and issued and delivered by the
Company and each of the Guarantors in exchange for the Securities and the
Guarantees pursuant to the Exchange Offer, will constitute valid and binding
obligations of the Company and each of the Guarantors, enforceable against the
Company and each of the Guarantors in accordance with their terms, subject to
(a) the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance, fraudulent transfer and other similar laws
relating to or affecting the rights of creditors and (b) general principles of
equity (including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance, injunctive relief and other equitable remedies), regardless of
whether considered in a proceeding at law or in equity.
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<PAGE> 44
6. The Securities, the Guarantees and the Indenture conform in all
material respects to the descriptions thereof contained in the Offering
Memorandum.
7. The documents incorporated by reference in the Offering Memorandum
(other than the financial statements and notes and supporting schedules
thereto, or other statistical data derived from the financial statements and
notes and supporting schedules thereto, contained or required to be contained
in the Offering Memorandum, as to which we express no opinion), when they were
filed with the Commission, or, in the case of the Company's Annual Report on
Form 10-K for the year ended March 29, 1997, at the time of its amendment filed
with the Commission on July 15, 1997, complied as to form in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the Commission thereunder.
8. The information in the Offering Memorandum under "Exchange Offer;
Registration Rights," "Description of the Notes" and "Description of Certain
Indebtedness," to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed and is correct in all material respects.
9. No authorization, approval, consent, license, order, registration,
qualification or decree of any court or governmental authority or agency is
necessary or required in connection with the due authorization, execution and
delivery of the Purchase Agreement or the due execution, delivery or
performance of the Indenture by the Company or any of the Guarantors or for the
offering, issuance, sale or delivery of the Securities and the Guarantees to
the Initial Purchasers or the resale by the Initial Purchasers in accordance
with the Purchase Agreement or for the performance by the Company or any of the
Guarantors of their respective obligations thereunder, in connection with the
offering, issuance or sale of the Securities and Guarantees under the Purchase
Agreement or for the consummation of the transaction contemplated by the
Purchase Agreement, the Registration Rights Agreement, the Indenture, the DTC
Agreement, the Securities, the Guarantees and the Exchange Securities
(including the issuance and sale of the Securities and Guarantees as described
in the Offering Memorandum under the caption "Use of Proceeds"), except such as
have been obtained and such as may be required under the 1933 Act, the Trust
Indenture Act or under applicable securities laws of the various jurisdictions
in which the Securities, Guarantees and Exchange Securities will be offered or
sold.
10. Assuming the truthfulness of the representations and warranties of
the Initial Purchasers contained in the Purchase Agreement, it is not necessary
in
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<PAGE> 45
connection with the offer, sale and delivery of the Securities and
Guarantees to the Initial Purchasers and to each Subsequent Purchaser in the
manner contemplated by the Purchase Agreement and the Offering Memorandum to
register the Securities and Guarantees under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act except as contemplated by the Offering
Memorandum, the Purchase Agreement and the Registration Rights Agreement.
11. Except as described in the Offering Memorandum, the execution,
delivery and performance of the Purchase Agreement, the Registration Rights
Agreement, the Indenture, the DTC Agreement, the Securities, the Guarantees and
the Exchange Securities, the consummation of the transactions contemplated in
the Purchase Agreement and in the Offering Memorandum (including the issuance
and sale of the Securities and the Guarantees and the use of proceeds from the
sale of the Securities and the Guarantees as described in the Offering
Memorandum under the caption "Use of Proceeds"), and compliance by the Company
and the Guarantors with their respective obligations under the Purchase
Agreement, the Registration Rights Agreement, the Indenture, the DTC Agreement,
the Securities, the Guarantees and the Exchange Securities do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or a Repayment Event (as
defined below; except to the extent that such breach, default or Repayment
Event relates to the incurrence of indebtedness which has been previously
provided for pursuant to the Escrow Agreement dated August __, 1997 between the
Company and State Street Bank and Trust Company of Connecticut, N.A.) under, or
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any Guarantor or any of their
respective subsidiaries pursuant to, any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease, or any other agreement or
instrument, limited in each case to those related to the incurrence of
indebtedness or filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended March 29, 1997, to which the Company or any Guarantor
or any of their respective subsidiaries is a party, nor will such action result
in any violation of (i) the provisions of the charter or bylaws or other
constituent documents of the Company; (ii) any applicable law, statute, rule or
regulation, in each case of the United States; or (iii) any judgment, order,
writ or decree, in each case in the clause (iii) listed on a schedule attached
hereto, of any government, government instrumentality or court having
jurisdiction over the Company. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or any of the Guarantors.
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<PAGE> 46
12. Neither the Company nor any of the Guarantors is an "investment
company" or an entity "controlled" by an "investment company," as such terms
are defined in the 1940 Act.
The limitations inherent in the independent verification of factual
matters and the character of determinations involved in the offering process
are such that we have not verified and, except as to the description in the
Offering Memorandum of statutes, regulations, legal proceedings and contracts
and other instruments, are not passing upon and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum.
We have participated in conferences with representatives of the
Initial Purchasers, officers and other representatives of the Company and
representatives of Ernst & Young LLP, independent certified public accountants
of the Company, however, at which conferences the contents of the Offering
Memorandum and related matters were discussed, and although we do not pass upon
and do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Offering Memorandum, on the basis of the
foregoing, no facts have come to our attention which lead us to believe that
the Offering Memorandum at the time of issuance contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Offering Memorandum, as amended or supplemented at the Closing Time, contained
or contains an untrue statement of material fact or omitted or omits to state a
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; except that in each case, we express no opinion with respect to
the financial statements and notes and supporting schedules thereto, or other
statistical data derived from the financial statements and notes and supporting
schedules thereto, contained or required to be contained in the Offering
Memorandum.
We express no opinion herein other than as to the law of the State of
Tennessee, the federal law of the United States and the Delaware General
Corporation Law. With respect to the opinions set forth in paragraphs 2, 3, 4
and 5 to the extent they are governed by New York law, we have relied solely
upon the opinion of Fried, Fried, Harris, Shriver & Jacobson addressed to you
of even date herewith and we have made on independent examination of the law of
such jurisdiction. With respect to matters of Indiana and Ohio law, we have
relied solely on the opinion of P. Lawrence Butt, Vice President, Counsel and
Secretary of the Company, addressed to you of even date herewith and we have
made no independent examination of the law of such jurisdiction.
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<PAGE> 47
Our opinion is rendered as of the date hereof and we assume no
obligation to advice you of changes in law or fact (or the effect thereof on
the opinions expressed herein) that hereafter may come to our attention.
Subject to the foregoing, this opinion is rendered solely for your
information in connection with the above-referenced transaction and may not be
delivered or quoted to any other person or relied upon for any other purpose
without our prior written consent.
Very truly yours,
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<PAGE> 48
Exhibit A-2
August 5, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
McDonald & Company Securities, Inc.
c/o Merrill Lynch & Co.
North Tower
World Financial Center
New York, NY 10281-1209
Re: Marsh Supermarkets, Inc.
$150,000,000 % Senior Subordinated Securities
Due 2007
Ladies and Gentlemen:
I have acted as counsel for Marsh Supermarkets, Inc., an Indiana
corporation (the "Company"), and the Guarantors (as defined below) in
connection with the sale of an aggregate of $150,000,000 principal amount of
the Company's % Senior Subordinated Notes, due 2007 (the "Securities"), to
Merrill Lynch & Co. and McDonald Securities, Inc. (the "Initial Purchasers"),
pursuant to that certain Purchase Agreement, dated July 29, 1997 among the
Company, the guarantors listed on Schedule B thereto (the "Guarantors") and the
Initial Purchasers (the "Purchase Agreement"). I have been requested by the
Company and the Guarantors to render this opinion pursuant to Section 5(a) of
the Purchase Agreement. The terms used herein that are defined in the Purchase
Agreement shall have the same meaning when used herein, unless otherwise
defined herein.
In connection with the opinion below, I have reviewed, among other
matters the following agreement and instruments (hereinafter referred to
collectively as the "Documents"):
1. Purchase Agreement;
2. Registration Rights Agreement;
3. DTC Agreement;
4. Guarantees;
5. Indenture;
6. The Global Note; and
7. The form of Exchange Securities.
A-2-1
<PAGE> 49
I have also reviewed such corporate documents and records of the
Company and the Guarantors, certificates of public officials and such other
matters as I have deemed necessary for purposes of the opinions expressed
below. As to various issues of fact, I have relied upon the representations and
warranties of the Company and the Guarantors contained in the Purchase
Agreement and upon statements and certificates of officers of the Company and
the Guarantors, without independent verification or investigation.
I have assumed regarding the execution of the Documents by parties
other than the Company and the Guarantors that each such party has the
requisite power, capacity and authority to execute and deliver the Documents to
which they are a party and to perform their respective obligations thereunder,
and that the Documents are valid and binding obligations of and enforceable
against such parties. I have also assumed the authenticity of all Documents
submitted to me as originals, the genuineness of all signatures, and the
conformity to authentic original Documents of all Documents submitted to me as
certified, conformed or photostatic copies and the legal capacity of all
natural persons.
Whenever my opinion herein with respect to the existence of absence of
facts is qualified b the phrase "to the best of my knowledge" or "of which I
have knowledge", it is intended to indicate that, during the course of my
representation of the Company, no information has come to my attention which
would give me actual knowledge of the existence or absence of such fact, as
appropriate. Moreover, with the exception of reasonable inquiries I have made
of the officers of the Company, I have not undertaken any independent
investigation to determine the existence or absence of such facts and any
limited inquiries made by me during the preparation of this opinion should not
be regarded as such an investigation.
It should be expressly understood that I am licensed to practice law
only in the State of Indiana. Accordingly, except as expressly set forth
therein, this opinion is limited to the laws of the State of Indiana, the
General Corporation Law of the State of Delaware and the general partnership of
the State of Ohio, and I express no opinion with respect to the effect upon the
Documents of any laws other than the laws of the State of Indiana, the General
Corporation Law of the State of Delaware and the general partnership law of the
State of Ohio.
Based on and subject to the assumptions, limitations ands
qualifications set forth herein, I am of the opinion that as of the date
hereof;
1. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Indiana.
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<PAGE> 50
2. The Company has the corporate power and authority to own, lease and
operate its properties and to conduct the business as described in the Offering
Memorandum and to enter into and perform its obligations under the Documents.
3. The Company is duly qualified as a foreign corporation to transact
business in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify would not result in a Material Adverse
Effect.
4. The authorized, issued and outstanding capital stock of the Company
is as set forth in the financial statements, including the schedules and notes,
included in the Offering Memorandum (except for subsequent issuances, if any,
pursuant to reservations, agreements, employee benefit plans or the exercise of
convertible securities or options referred to in the Offering Memorandum); the
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of the capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of
the Company.
5. Each of the Guarantors has been duly incorporated (if it is a
corporation) and is validly existing as a corporation, limited liability
company or partnership, as the case may be, under the laws of the jurisdiction
of its incorporation, organization or existence, has corporate, limited
liability company or partnership power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and is duly qualified as a foreign corporation, limited liability
company or partnership to transact business in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock or limited liability company or partnership interests
of each Guarantor has been duly authorized and validly issued, is fully paid
and non-assessable and, to the best of my knowledge and information, is owned
by the Company either directly or through one or more of the Guarantors, free
and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim.
6. There is not pending or, to the best of my knowledge, threatened,
any action, suit, proceeding, inquiry or investigation, to which the Company or
any Guarantor is a party, or to which the property of the Company or of any
Guarantor is subject, before or brought by any court or governmental agency or
body, which might reasonably be expected to result in a Material Adverse Effect
or might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the
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<PAGE> 51
Company or any Guarantor of their respective obligations under the Purchase
Agreement, Securities, Guarantees or Exchange Securities.
7. The information in the Offering Memorandum under "Risk Factors-Risk
of Environmental Liabilities", "Business-Legal Proceedings" and "Business
Regulatory Matters", to the extent that it constitutes matters of law,
summaries of legal matters, the Company's Restated Articles of Incorporation
and Bylaws or legal proceedings, or legal conclusion, has been reviewed and is
correct in all material respects.
8. All descriptions in the Offering Memorandum and in the documents
incorporated by reference therein of contracts and other documents to which the
Company or any Guarantor is a party are accurate in all material respects; to
the best of my knowledge, there are no franchises, contracts, indentures, loan
agreements, notes, leases or other instruments that would be required to be
described in the Offering Memorandum and in the documents incorporated by
reference therein that are not described or referred to in the Offering
Memorandum or the documents incorporated by reference therein other than those
described or referred to therein, and the descriptions thereof or references
thereto are correct in all material respects.
9. Neither the Company nor any of the Guarantors is in violation of
its Articles of Incorporation and By laws or, if not a corporation, equivalent
constituent documents, and to the best of my knowledge, no default by the
Company or any Guarantor exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described in or referred to in the Offering Memorandum or
filed or incorporated by reference as an exhibit to the Offering Memorandum or
to any document incorporated by reference therein which default, singly or in
the aggregate, would have a Material Adverse Effect.
10. The execution, delivery and performance of the Documents, the
consummation of the transactions contemplated in the Purchase Agreement and in
the Offering Memorandum (including the issuance and sale of the Securities and
the Guarantees and the use of the proceeds from the sale of the Securities and
Guarantees as described in the Offering Memorandum under the caption "Use of
Proceeds"), and compliance by the Company and the Guarantors with their
respective obligations under the Documents do not and will not, whether with or
without the giving of notice or the passage of time, or both, conflict with or
constitute a breach of, or default or a Repayment Event (as defined below;
except to the extent that such breach, default or Repayment Event relates to
the incurrence of indebtedness which has been previously provided for pursuant
to the Escrow Agreement, dated August _, 1997, between the Company and State
Street Bank and Trust Company of Connecticut, N.A.) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of
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<PAGE> 52
the Company or any Guarantor pursuant to, any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease, or any other agreement or
instrument to which the Company or any Guarantor is a party, nor will such
action result in any violation of (i) the provisions of the Article of
Incorporation or Bylaws of the Company or other constituent document of any
Guarantor or (ii) any applicable law, statute, rule or regulation, judgment,
order, writ or decree of any government, government instrumentality or court
having jurisdiction over the Company or any Guarantor or any of their assets or
properties. As used herein, a "Repayment Event" means any event or condition
which gives the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such indebtedness by
the Company or any Guarantor.
This opinion is rendered solely as to the matters set forth herein
based on the laws in effect on the date hereof, except as otherwise noted
herein, and no other opinion should be inferred therefrom. I assume no
obligation to advise you of changes of law or fact (or the effect thereof on
the opinions expressed herein) that hereafter may come to my attention. I have
furnished this opinion to you solely for your information in connection with
the above referenced transaction and this opinion may not be delivered or
quoted to any other person or relied upon by any other person other than
yourself or for any other purpose without the prior written consent of the
undersigned, except that Bass, Berry & Sims and Fried, Frank, Harris, Shriver &
Jacobson may rely on this opinion as if it were addressed to them.
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<PAGE> 53
Exhibit B
[FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(d)]
(1) We are independent public accountants with respect to the Company
and the Guarantors within the meaning of the Securities Act of 1933, as amended
(the "1933 Act") and the published rules and regulations thereunder.
(2) In our opinion, the audited financial statements included or
incorporated by reference in the Offering Memorandum comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the published rules and regulations thereunder.
(3) On the basis of procedures (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
unaudited interim consolidated financial statements of the Company for the
12-week periods ended June 21, 1997 and June 22, 1996 (the "12-week
financials"), a reading of the latest available interim consolidated financial
statements of the Company, a reading of the minutes of all meetings of the
stockholders and board of directors and committees of the board of directors of
the Company and the Guarantors and their subsidiaries since January 1, 1996,
inquiries of certain officials of the Company and the Guarantors and their
subsidiaries responsible for financial and accounting matters, a review of the
12-week financials in accordance with standards established by the American
Institute of Certified Public Accountants in Statement on Auditing Standards
No. 71, Interim Financial Information ("SAS 71"), and such other inquiries and
procedures as may be specified in such letter, nothing came to our attention
that caused us to believe that:
(A) the 12-week financials were not determined on a
basis substantially consistent with that of the corresponding
amounts in the audited consolidated financial statements;
(B) at July 19, 1997 there was any change in the
capital stock of the Company and its subsidiaries or any decrease
in the total assets, working capital or total shareholders' equity
of the Company and its subsidiaries on a consolidated basis or any
increase in the long-term liabilities of the Company and its
subsidiaries on a consolidated basis, in each case as compared
with amounts shown in the latest consolidated balance sheet
included in the Offering Memorandum, except in each case for
changes, decreases or increases that the Offering Memorandum
discloses have occurred or may occur, or that at a specified date
not more
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<PAGE> 54
than three business days prior to the date of this Agreement there
was any change in the capital stock of the Company and its
subsidiaries or any increase in the long-term liabilities of the
Company and its subsidiaries on a consolidated basis, in each case
as compared with amounts shown in the latest consolidated balance
sheet included in the Offering Memorandum, except in each case for
changes, decreases or increases that the Offering Memorandum
discloses have occurred or may occur; or
(C) for the period from March 30, 1997 to July 19,
1997 there was any decrease in sales and other revenues, gross
profit, operating profit, income before income taxes or net
income, in each case as compared with the comparable period in the
preceding year, except in each case for any decreases that the
Offering Memorandum discloses have occurred or may occur, or for
the period from June 22, 1997 to a specified date not more than
three business days prior to the date of this Agreement, there was
any decrease in sales and other revenues, as compared with the
comparable period in the preceding year, except in each case for
any decreases that the Offering Memorandum discloses have occurred
or may occur.
(4) Based upon the procedures set forth in clauses (2) and (3) above
and a reading of the Selected Financial Data included in the Offering
Memorandum and a reading of the financial statements from which such data were
derived, nothing came to our attention that caused us to believe that the
Selected Financial Data included in the Offering Memorandum do not conform in
all material respects with the disclosure requirements of Item 301 of
Regulation S-K of the 1933.
(5) We have compared the information in the Offering Memorandum under
selected captions with the disclosure requirements of Regulation S-K of the
1933 Act and on the basis of limited procedures specified herein, nothing came
to our attention that caused us to believe that this information does not
conform in all material respects with the disclosure requirements of Items 302,
402 and 503(d), respectively, of Regulation S-K.
(6) In addition to the procedures referred to in clause (2) above, we
have performed other procedures, not constituting an audit, with respect to
certain amounts, percentages, numerical data and financial information
appearing in the Offering Memorandum and in documents incorporated by reference
therein, which are specified herein, and have compared certain of such items
with, and have found such items to be in agreement with, the accounting and
financial records of the Company.
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<PAGE> 55
THE SECURITIES HAVE 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 AS SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) 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 THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE
UNITED STATES, 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) OUTSIDE THE UNITED STATES PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS IN AN
<PAGE> 56
OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" THAT IS ACQUIRING THE 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, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (I) PURSUANT TO CLAUSES (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. AS USED HEREIN, THE
TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON"
HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY.
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.
2
<PAGE> 57
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
3
<PAGE> 58
MARSH SUPERMARKETS, INC.
------------------
8 7/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
CUSIP NO. 571783 AC 3
No. 1 $150,000,000
-----------
Marsh Supermarkets, Inc., an Indiana 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 Cede & Co. or registered assigns, the principal sum of $150,000,000 United
States dollars on August 1, 2007, at the office or agency of the Company
referred to below, and to pay interest thereon from August 5, 1997, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on February 1 and August 1 in each year, commencing
February 1, 1998 at the rate of 8 7/8% per annum, subject to adjustments as
described in the second following paragraph, in United States dollars, until
the principal hereof is paid or duly provided for. Interest shall be computed
on the basis of a 360-day year comprised of twelve 30-day months.
The Holder of this Series A Security is entitled to the
benefits of the Registration Rights Agreement among the Company, the Guarantors
and the Initial Purchasers, dated August 5, 1997, pursuant to which, subject to
the terms and conditions thereof, the Company and the Guarantors are obligated
to consummate the Exchange Offer pursuant to which the Holder of this Security
(and the related Guarantees) shall have the right to exchange this Security
(and the related Guarantees) for 8 7/8% Senior Subordinated Notes due 2007,
Series B and related guarantees (herein called the "Series B Securities") in
like principal amount as provided therein. The Series A Securities and the
Series B Securities are together (including related Guarantees) referred to as
the "Securities." The Series A Securities rank pari passu in right of payment
with the Series B Securities.
In the event that either (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 30th calendar day
following the date of original issue of the Series A Securities, (b) the
Exchange Offer Registration Statement has not been declared effective on or
prior to the 90th calendar day following the date of original issue of the
Series A Securities or (c) the Exchange Offer is not consummated on or prior to
the 120th calendar day following the date of original issue of the Series A
Securities or a Shelf Registration Statement is not declared effective on or
prior to the 120th calendar day following the date of original issue of the
Series A Securities (each
4
<PAGE> 59
such event referred to in clauses (a) through (c) above, a "Registration
Default"), the interest rate borne by the Series A Securities shall be
increased by one-quarter of one percent per annum upon the occurrence of each
Registration Default, which rate (as increased as aforesaid) will increase by
one quarter of one percent each 90-day period that such additional interest
continues to accrue under any such circumstance, with an aggregate maximum
increase in the interest rate equal to one percent (1%) per annum. Following
the cure of all Registration Defaults the accrual of additional interest will
cease and the interest rate will revert to the original rate.
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 Security (or any Predecessor Security) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 15 or July 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, and interest on such
defaulted interest at the interest rate borne by the Series A Securities, to
the extent lawful, shall forthwith cease to be payable to the Holder on such
Regular Record Date, and may either be paid to the Person in whose name this
Security (or any Predecessor Security) 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 of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in this Indenture.
Payment of the principal of, premium, if any, and interest
on, this Security, and exchange or transfer of the Security, will be made at
the office or agency of the Company in The City of New York maintained for that
purpose, or at such other office or agency 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 by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by
each of the Guarantors of the punctual payment when due of the Indenture
Obligations made in favor of the Trustee for the benefit of the Holders.
Reference is hereby made to Article
5
<PAGE> 60
Fourteen of the Indenture for a statement of the respective rights, limitations
of rights, duties and obligations under the Guarantees of each of the
Guarantors.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof or by the
authenticating agent appointed as provided in the Indenture by manual signature
of an authorized signer, this Security shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.
6
<PAGE> 61
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by the manual or facsimile signature of its authorized
officers and its corporate seal to be affixed or reproduced hereon.
Dated: MARSH SUPERMARKETS, INC.
By:
-------------------------------------
Name: Don E. Marsh
Title: President and Chief Executive
Officer
Attest:
- ----------------------------
Authorized Officer
7
<PAGE> 62
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the 8 7/8% Senior Subordinated Notes due 2007,
Series A referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:
------------------------------------
Authorized Signer
8
<PAGE> 63
MARSH SUPERMARKETS, INC.
8 7/8% Senior Subordinated Note due 2007, Series A
This Security is one of a duly authorized issue of Securities
of the Company designated as its 8 7/8% Senior Subordinated Notes due 2007,
Series A (herein called the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of August 5, 1997, among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (herein called
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 Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Securities are subject to redemption at any time on or
after August 1, 2002, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice to the Holders by first-class
mail, in amounts of $1,000 or an integral multiple thereof, at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning August 1 of the years indicated
below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002...................................... 104.438%
2003...................................... 102.958%
2004...................................... 101.479%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant Regular Record Dates or Special Record
Dates to receive interest due on an Interest Payment Date).
If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
9
<PAGE> 64
Upon the occurrence of a Change of Control, each Holder may
require the Company to purchase such Holder's Securities in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase, pursuant to a Change of Control Offer in accordance
with the procedures set forth in the Indenture.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which proceeds are not
used to repay Senior Indebtedness or invested in capital expenditures,
properties or other assets or inventories that replace the properties and
assets that were the subject of the Asset Sale or which will be used in the
business of the Company or its Subsidiaries existing on the date of the
Indenture or in businesses reasonably related thereto, exceeds a specified
amount the Company will be required to apply such proceeds to the repayment of
the Securities and certain Indebtedness ranking pari passu in right of payment
to the Securities which Securities and Indebtedness are purchased at the option
of the Holder as described in the Indenture.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date or Special Record Date referred to on the face hereof. Securities (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 Security in
accordance with the Indenture in part only, a new Security or Securities for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Holders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders
under the Indenture and the Securities and the Guarantees 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 Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the
10
<PAGE> 65
Company and the Guarantors with certain provisions of the Indenture and the
Securities and the Guarantees and certain past Defaults under the Indenture and
the Securities and the Guarantees and their consequences. Any such consent or
waiver by or on behalf of the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security 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 Security.
The Series A Securities are, to the extent and manner
provided in Article Thirteen of the Indenture, subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Securities (in the event
such Guarantor or such other obligor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on, this Security at the times, place, and
rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
If this Series A Security is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable on the Security Register of the
Company, upon surrender of this Security for registration of transfer 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, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or its attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
If this Series A Security is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the Holder, provided it is a Qualified Institutional Buyer, may exchange this
Series A Security for a Book-Entry Security by instructing the Trustee (by
completing the Transferee Certificate in the form in Appendix I) to arrange for
such Series A Security to be represented by a beneficial interest in a Global
Security in accordance with the customary procedures of the Depository, unless
the Company has elected not to issue a Global Security.
If this Series A Security is a U.S. Global Security, it is
exchangeable for a Series A Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and
the Depositary. In addition, certificated
11
<PAGE> 66
securities shall be transferred to all beneficial holders in exchange for their
beneficial interests in the U.S. Global Securities if (x) the Depositary
notifies the Company that it is unwilling or unable to continue as depository
for the U.S. Global Security and a successor depositary is not appointed by the
Company within 90 days or (y) there shall have occurred and be continuing an
Event of Default and the Security Registrar has received a request from the
Depositary. Upon any such issuance, the Trustee is required to register such
certificated Series A Securities in the name of, and cause the same to be
delivered to, such Person or Persons (or the nominee of any thereof). All such
certificated Series A Securities would be required to include the Private
Placement Legend.
Series A Securities in certificated form 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 Series A Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
At any time when the Company is not subject to Sections 13 or
15(d) of the Exchange Act, upon the written request of a Holder of a Series A
Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Series A Security who such Holder informs the Company is
reasonably believed to be a "Qualified Institutional Buyer" within the meaning
of Rule 144A under the Securities Act, as the case may be, in order to permit
compliance by such Holder with Rule 144A under the Securities Act.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the Company,
any Guarantor or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security is overdue, and neither the Company, any Guarantor, the Trustee nor
any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
All terms used in this Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
12
<PAGE> 67
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 1013 or Section 1016, as applicable, of the Indenture,
check the Box: [ ].
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 1013 or Section 1016 as applicable, of the
Indenture, state the amount (in original principal amount):
$ .
---------------
Date: Your Signature:
------------------- ---------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
----------------------------------
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
13
<PAGE> 68
TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -----------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- -------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- -------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration
Statement or August 5, 1999, the undersigned confirms that without utilizing
any general solicitation or general advertising that:
[Check One]
[ ] (a) this Security 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 Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
14
<PAGE> 69
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security 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 to this
assignment 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:
-----------------------------
[Signature must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security 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.
Dated:
------------------ ----------------------------------------------------
NOTICE: To be executed by an authorized signatory
15
<PAGE> 70
GUARANTEES
For value received, each of the undersigned hereby absolutely,
unconditionally and irrevocably guarantees, jointly and severally, to the
holder of this Security the payment of principal of, premium, if any, and
interest on this Security upon which these Guarantees are endorsed in the
amounts and at the time when due and payable whether by declaration thereof, or
otherwise, and interest on the overdue principal and interest, if any, of this
Security, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture or the Securities, to the holder of this
Security and the Trustee, all in accordance with and subject to the terms and
limitations of this Security and Article Fourteen of the Indenture. These
Guarantees will not become effective until the Trustee duly executes the
certificate of authentication on this Security. This Guarantee shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of law principles thereof. The Indebtedness
evidenced by these Guarantees are, 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 Guarantor Senior Indebtedness (as defined in the Indenture),
whether outstanding on the date of the Indenture or thereafter, and the
Guarantees are issued subject to such provisions.
Dated:
MARSH DRUGS, INC.
MUNDY REALTY, INC.
MAR PROPERTIES, INC.
MARLEASE, INC.
MARSH INTERNATIONAL, INC.
MARAINES GREENERY, INC.
LIMITED HOLDINGS, INC.
MARSH P.Q., INC.
S.C.T., INC.
NORTH MARION DEVELOPMENT
CORPORATION
CONTRACT TRANSPORT, INC.
TRADEMARK HOLDINGS, INC.
By:
------------------------------------------
Name: Don E. Marsh
Title: President
16
<PAGE> 71
CRYSTAL FOOD SERVICES, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
LOBILL FOODS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
CONTRACT TRANSPORT, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH SUPERMARKETS, LLC
By: Marsh Supermarkets, Inc.. its
Chief Operating Officer
VILLAGE PANTRY, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH DRUGS, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
MARSH CLEARING HOUSE, LLC
By: Marsh Supermarkets, Inc., its
Chief Operating Officer
By:
---------------------------------
Name: Don E. Marsh
Title: President and Chief
Executive Officer
MARSH VILLAGE PANTRIES, INC.
CONVENIENCE STORE DISTRIBUTING
COMPANY
By: Marsh Village Pantries, Inc., its
General Partner
By:
---------------------------------
Name: Don E. Marsh
Title: Chief Executive Officer
17
<PAGE> 72
Attest:
------------------------------------
P. Lawrence Butt, Secretary
Marsh Supermarkets, Inc.
Marsh Drugs, Inc.
Marsh Village Pantries, Inc.
Mundy Realty, Inc.
Mar Properties, Inc.
Marlease, Inc.
Marsh International, Inc.
Maraines Greenery, Inc.
Limited Holdings, Inc.
Marsh Village Pantries, Inc., as
general partner of Convenience
Store Distributing Company
Marsh P.Q., Inc.
S.C.T., Inc.
North Marion Development Corporation
Contract Transport, Inc.
Marsh Supermarkets, Inc.,
as Chief Operating Officer of
Crystal Food Services, LLC
LoBill Foods, LLC
Contract Transport, LLC
Marsh Supermarkets, LLC
Village Pantry, LLC
Marsh Drugs, LLC
Marsh Clearing House, LLC
Attest:
-------------------------------------
P. Lawrence Butt, Assistant Secretary
Trademark Holdings, Inc.
18
<PAGE> 1
EXHIBIT 11 -- STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
12 WEEKS ENDED
---------------------------------
JUNE 21, JUNE 22,
1997 1996
------------ ------------
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding.......................... 8,395,163 8,394,966
Net effect of dilutive stock options -- based on the treasury
stock method.............................................. 50,157 0(a)
---------- ----------
Total.................................................. 8,445,320 8,394,966
---------- -----------
Net income (loss)............................................ $2,899,379 $(7,111,787)
---------- -----------
Per share amount.......................................... $ 0.34 $ (0.85)
---------- -----------
FULLY DILUTED:
Weighted average shares outstanding.......................... 8,395,163 8,394,966
Net effect of dilutive stock options -- based on the treasury
stock method using average market price................... 62,281 0(a)
Assumed conversion of 7% convertible subordinated
debentures issued March 5, 1993........................... 1,290,323 0(a)
---------- -----------
Total.................................................. 9,747,767 8,394,966
---------- -----------
Net income (loss)............................................ $2,899,379 $(7,111,787)
Add 7% convertible subordinated debenture interest, net of tax
effect.................................................... 229,837 0(a)
---------- -----------
$3,129,216 $(7,111,787)
---------- -----------
Per share amount....................................... $ 0.32 $ (0.85)
</TABLE>
- ------------
(a) Antidilutive common stock equivalents excluded.
<PAGE> 2
EXHIBIT 11 -- STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(All amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
March 29, March 30, April 1,
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Average shares outstanding................................... 8,395 8,403 8,424
Net effect of dilutive stock options -- based on the
Treasury Stock method using average market price......... 38 36 5
------ ------ ------
Total primary shares and equivalents......................... 8,433 8,439 8,429
====== ====== ======
Net income (loss)............................................ $ (244) $9,033 $8,573
------ ------ ------
Per primary share amount................................. $(0.03) $ 1.07 $ 1.02
====== ====== ======
FULLY DILUTED EARNINGS PER SHARE:
Average shares outstanding................................... 8,395 8,403 8,424
Net effect of dilutive stock options -- based on the
Treasury Stock method using higher of average market
or last price............................................ 74 47 6
Assumed conversion of 7% convertible subordinated
debentures............................................... 1,290 1,290 1,290
------ ------ ------
Total shares and equivalents........................... 9,759 9,740 9,720
====== ====== ======
Net income (loss)............................................ $ (244) $9,033 $8,573
Add 7% convertible subordinated debentures interest, net
of tax benefit........................................... 877 895 948
----- ------ ------
Total $ 633 $9,928 $9,521
------ ------ ------
Per fully diluted share amount...................... $ 0.06(a) $ 1.02 $ 0.98
</TABLE>
- ------------
(a) For financial reporting purposes, adjusted to exclude the effects of
antidilutive stock options and convertible subordinated debentures of
$0.09.
<PAGE> 1
EXHIBIT 12 -- STATEMENT REGARDING COMPUTATION OF RATIOS
Ratio of Earnings to Fixed Charges:
(Dollars in thousands)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FISCAL YEAR ENDED
---------------------- ------------------------------------------------------------
JUNE 21, JUNE 22, MARCH 29, MARCH 30, APRIL 1, APRIL 2, MARCH 27,
1997 1996 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Rent expense, interest portion.......... $1,664 $ 2,065 $ 7,290 $ 7,388 $ 6,710 $ 6,459 $ 5,966
Interest expense, net of interest income 3,062 3,014 13,030 13,087 13,292 13,336 10,318
------ ------- ------- ------- ------- ------- -------
Fixed charges........................... 4,726 5,079 20,320 20,475 20,002 19,795 16,284
Consolidated net income................. 2,899 (7,112) (244) 9,033 8,573 10,467 9,828
Income taxes............................ 1,248 (3,617) 3,255 8,386 7,287 7,972 8,682
Interest expense........................ 3,062 3,014 13,030 13,087 13,292 13,336 10,318
Rent expense, interest portion.......... 1,664 2,065 7,290 7,388 6,710 6,459 5,966
Less interest capitalized............... (11) (94) (528) (714) (555) (1,257) (1,263)
Accounting changes(a)................... -- -- -- -- -- (1,941) --
FAS 121 charges(b)...................... -- 7,366 7,366 -- -- -- --
Benefit curtailment charges(c).......... -- 2,360 2,360 -- -- -- --
------ ------- ------- ------- ------- ------- -------
Earnings available for fixed charges.... $8,862 $ 3,982 $32,529 $37,180 $35,307 $35,036 $33,531
Ratio of earnings to fixed charges...... 1.88 0.78 1.60 1.82 1.77 1.77 2.06
</TABLE>
- -------------
(a) Reflects an increase in net income of $1.9 million in fiscal 1994 as a
result of an increase of $3.6 million from the adoption of FAS 109,
"Accounting for Income Taxes," partially offset by the recognition of a
$1.7 million (net of tax benefit) accrued benefit obligation as a result of
the adoption of FAS 106, "Employers Accounting for Postretirement Benefits
Other than Pensions."
(b) Reflects a pre-tax charge to earnings in the first quarter of fiscal 1997
upon the adoption of FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of."
(c) Reflects a pre-tax charge to earnings in the first quarter of fiscal 1997
from the decision to curtail the accrual of benefits under the Company's
qualified defined benefit pension plan.
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
May 15, 1997 in the Registration Statement (Form S-4) and related Prospectus of
Marsh Supermarkets, Inc. for the registration of $150,000,000 of 8.875% Senior
Subordinated Notes, Series B due 2007.
/s/ Ernst & Young LLP
Indianapolis, Indiana
August 28, 1997
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM T-1
----------------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF l939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
[ ] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
STATE STREET BANK AND TRUST COMPANY
-------------------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
---------------------------------- ----------------------------------
(State of incorporation if (I.R.S. Employer
not a national bank Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
John R. Towers, Executive Vice President and General Counsel,
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
-------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
MARSH SUPERMARKETS, INC.
- --------------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Indiana 35-0918179
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9800 Crosspoint Boulevard, Indianapolis, Indiana 46256-3350
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
8 7/8% Senior Subordinated Notes, Series B
-------------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item l. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
Department of Banking and Insurance of
The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee or its parent, State Street
Corporation.
Item l6. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
l. A copy of the Articles of Association of the trustee
as now in effect.
A copy of the Articles of Association of the trustee, as
now in effect, is on file with the Securities and
Exchange Commission as Exhibit 1 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
2. A copy of the Certificate of Authority of the trustee
to do Business.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities
- 2 -
<PAGE> 3
and Exchange Commission as Exhibit 2 to Amendment No. 1 to
the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
3. A copy of the Certification of Fiduciary Powers of the
Trustee.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
4. A copy of the By-laws of the trustee as now in effect.
A copy of the By-Laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with
Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
5. Consent of the trustee required by Section 32l(b) of
the Act.
6. A copy of the latest Consolidated Reports of Condition of
the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 6 and made a part hereof.
- 3 -
<PAGE> 4
NOTES
Inasmuch as this Form T-l is filed prior to the ascertainment
by the trustee of all facts on which to base its answer to Item 2, the answer to
said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-l.
- 4 -
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
l939, the trustee, State Street Bank and Trust Company, a Massachusetts trust
company, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Hartford, and State of Connecticut, on the 28th day of August, 1997.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Mark A. Forgetta
--------------------------
Name: Mark A. Forgetta
Title: Vice President
- 5 -
<PAGE> 6
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture to be entered into
between Marsh Supermarkets, Inc. and State Street Bank and Trust Company,
Trustee, does hereby consent that, pursuant to Section 321(b) of the Trust
Indenture Act of 1939, reports of examinations with respect to the undersigned
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Mark A. Forgetta
--------------------------------
Name: Mark A. Forgetta
Title: Vice President
Dated: August 28, 1997
<PAGE> 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
ASSETS THOUSANDS OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................... 1,665,142
Interest-bearing balances........................................................ 8,193,292
Securities............................................................................ 10,238,113
Federal funds sold and securities purchased under agreements to resell
in domestic offices of the bank and of its Edge subsidiary....................... 5,863,144
Loans and lease financing receivables:
Loans and leases, net of unearned income........................ 4,936,454
Allowance for loan and lease losses............................. 70,307
Loans and leases, net of unearned income and allowance........................... 4,866,147
Assets held in trading accounts....................................................... 957,478
Premises and fixed assets............................................................. 380,117
Other real estate owned............................................................... 884
Investments in unconsolidated subsidiaries............................................ 26,835
Customers' liability to this bank on acceptances outstanding.......................... 45,548
Intangible assets..................................................................... 158,080
Other assets.......................................................................... 1,066,957
----------
TOTAL ASSETS.......................................................................... 33,450,737
==========
LIABILITIES
Deposits:
In domestic offices.............................................................. 8,270,845
Noninterest-bearing......................................... 6,318,360
Interest-bearing............................................ 1,952,485
In foreign offices and Edge subsidiary........................................... 12,760,086
Noninterest-bearing......................................... 53,052
Interest-bearing............................................ 12,707,034
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge subsidiary............ 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities...................... 926,821
Other borrowed money.................................................................. 671,164
Subordinated notes and debentures..................................................... 0
Bank's liability on acceptances executed and outstanding.............................. 46,137
Other liabilities..................................................................... 745,529
----------
TOTAL LIABILITIES..................................................................... 31,637,223
==========
EQUITY CAPITAL
Perpetual preferred stock and related surplus......................................... 0
Common Stock.......................................................................... 29,931
Surplus............................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses).......... 1,426,881
Cumulative foreign currency translation adjustments................................... (4,015)
TOTAL EQUITY CAPITAL.................................................................. 1,813,514
----------
TOTAL LIABILITIES AND EQUITY CAPITAL.................................................. 33,450,737
==========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above-named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
<PAGE> 1
EXHIBIT 99(a)
LETTER OF TRANSMITTAL
MARSH SUPERMARKETS, INC.
OFFER TO EXCHANGE
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ANY AND ALL OF THE OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED
STATE STREET BANK AND TRUST COMPANY
(THE "EXCHANGE AGENT")
<TABLE>
<C> <C> <C>
By Mail By Facsimile Transmission: By Hand or Overnight Courier:
(registered or certified mail (617) 664-5395
recommended): State Street Bank and
Trust Company
State Street Bank and Corporate Trust Department,
Trust Company Confirm by Telephone 4th floor
Corporate Trust Department or for Information Call: Two International Place
P.O. Box 778 (617) 664-5587 Boston, MA 02110
Boston, MA 02102-0078
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the ones listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned hereby acknowledges receipt of the Prospectus dated
September , 1997 (the "Prospectus") of Marsh Supermarkets, Inc. (the
"Company") and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 8 7/8% Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for each $1,000 principal amount of its outstanding 8 7/8% Senior
Subordinated Notes due 2007 (the "144A Notes"). The term "Expiration Date" shall
mean 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. Capitalized terms used
but not defined herein have the meaning given to them in the Prospectus.
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 on the next page the 144A Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate or Registration
Numbers and the Principal Amounts should be listed on a separately signed
schedule affixed hereto.
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
- --------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED AGGREGATE PRINCIPAL
OWNER(S) CERTIFICATE OR AMOUNT REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN) REGISTRATION NUMBERS* 144A NOTES TENDERED**
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------------------------------------
* 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 144A Notes. All tenders must be in integral multiples of $1,000.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used (i) if certificates of 144A Notes
are to be forwarded herewith, (ii) if delivery of 144A Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository" or "DTC"), pursuant to the procedures
set forth in the "The Exchange Offer -- Procedures for Tendering" in the
Prospectus or (iii) if tender of the 144A Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to a book-entry transfer facility does not constitute
delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name 144A 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. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their 144A Notes must complete
this letter in its entirety.
[ ] CHECK HERE IF TENDERED 144A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------------------------------------
Account Number
----------------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------------------
Holders whose 144A Notes are not immediately available or who cannot
deliver their 144A Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their 144A Notes according
to the guaranteed delivery procedure set forth in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction
2.
[ ] CHECK HERE IF TENDERED 144A 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
-----------------------------------------------------
----------------------------------------------------------------------------
If delivery by book-entry transfer:
Account Number
-----------------------------------------------------------------------
Transfer Code Number
-----------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
-----------------------------------------------------------------------
Address
-----------------------------------------------------------------------
2
<PAGE> 3
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 principal amount of the 144A Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such 144A Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such 144A Notes as are being tendered hereby, including all rights to
accrued and unpaid interest thereon as of the Expiration Date. 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 144A 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 144A Notes and to acquire
Exchange Notes issuable upon the exchange of such tendered 144A Notes, and that
when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered 144A Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned; (ii) neither the undersigned nor any such other
person has an arrangement or understanding with any person to participate in a
distribution of such Exchange Notes; and (iii) the undersigned and any such
other person acknowledge that, if they are participating in the Exchange Offer
for the purpose of distributing the Exchange Notes, (a) they cannot rely on the
position of the staff of the Securities and Exchange Commission enunciated in
Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley &
Co., Inc. (available June 5, 1991) or similar no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with the
resale transaction and (b) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified by
the Company. If the undersigned or the person receiving the Exchange Notes
covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Company, the Exchange Notes may not be offered for
resale, resold or otherwise transferred by the undersigned or such other person
without registration under the Securities Act or an exemption therefrom. If the
exchange offeree is a broker-dealer holding 144A Notes acquired for its own
account as a result of market-making activities or other trading activities, it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such 144A
Notes 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 Securities Act.
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 144A Notes or transfer ownership of such 144A Notes on the account
books maintained by a book-entry transfer facility. The undersigned further
agrees that acceptance of any tendered 144A 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
and that the Company shall have no further obligations or liabilities thereunder
for the registration of the 144A Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." 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 144A Notes tendered
hereby and, in such event, the 144A Notes not exchanged will be returned to the
undersigned at the address shown below the signature of the undersigned.
3
<PAGE> 4
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 144A Notes may be withdrawn at any time
prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered 144A Notes, and any 144A Notes delivered herewith but not exchanged,
will be registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If 144A Notes are surrendered by Holder(s) that
have completed either the box entitled "Special Registration Instructions" or
the box entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 2).
------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be issued in the
name of someone other than the undersigned.
Name
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Book-Entry Transfer Facility Account:
--------------------------------------------------------------------------
Employer Identification or Social Security Number:
--------------------------------------------------------------------------
(Please print or type)
--------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be sent to someone
other than the undersigned, or to the undersigned at an address other than
that shown above under "Description of Senior Subordinated Notes Tendered
Hereby."
Name
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(Please print or type)
--------------------------------------------------------------------------
4
<PAGE> 5
REGISTERED HOLDER(S) OF 144A NOTES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
144A Notes or on a security position listing as the owner of the 144A Notes or
by person(s) authorized to become registered holder(s) by properly completed
bond powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information.
(Please print or type):
Name and Capacity (full title):
- --------------------------------------------------------------------------------
Address (including zip code):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- --------------------------------------------------------------------------------
Dated:
- ------------------------------
SIGNATURE GUARANTEE
(If Required -- See Instruction 4)
Authorized Signature:
- --------------------------------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
- --------------------------------------------------------------------------------
Name of Plan:
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
(Please print or type)
Dated:
- ------------------------------
5
<PAGE> 6
PAYOR'S NAME: MARSH SUPERMARKETS, INC.
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE
SUBJECT TO BACKUP WITHHOLDING.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ----------------------------
SUBSTITUTE AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY
FORM W-9 NUMBER
OR EMPLOYER
IDENTIFICATION NUMBER
----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO PART 3 --
INTERNAL REVENUE SERVICE BACKUP WITHHOLDING UNDER THE PROVISIONS OF SECTION AWAITING TIN []
3406(A)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE
(1) YOU ARE EXEMPT FROM BACKUP WITHHOLDING, (2) YOU
HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS OR (3) THE INTERNAL REVENUE
SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER
SUBJECT TO BACKUP WITHHOLDING. []
----------------------------------------------------------------------------------------
CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON
PAYOR'S REQUEST FOR THIS FORM IS TRUE, CORRECT AND COMPLETE.
TAXPAYER IDENTIFICATION
NUMBER ("TIN") SIGNATURE: __________ DATE: __________
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: ANY FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) 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 (B) I INTEND TO MAIL
OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION
NUMBER WITHIN 60 DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD, UNTIL I PROVIDE
A NUMBER.
------------------------------------------------------------------- ------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered 144A Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at a book-entry transfer facility of
144A Notes tendered by book-entry transfer, as well as a properly completed and
duly executed copy of this Letter of Transmittal or facsimile thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date. The method of delivery of this Letter of Transmittal, the 144A
Notes and all other required documents is at the election and risk of the
Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. Except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
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 144A Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their 144A Notes, and (i) whose Notes are not
immediately available, or (ii) who cannot deliver their 144A Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent (or comply
with the procedures for book-entry transfer) prior to the Expiration Date, may
effect a tender if:
a. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
b. prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the 144A Notes, the
certificate or registration number(s) of such 144A Notes and the principal
amount of 144A Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five (5) business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together
with the certificate(s) representing the 144A Notes to be tendered in
proper form for transfer (or a confirmation of book-entry transfer of such
144A Notes into the Exchange Agent's account at the Depository) and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
c. such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered 144A Notes in proper form for
transfer (or a confirmation of book-entry transfer of such 144A Notes into
the Exchange Agent's account at the Depository) and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within five business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their 144A Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender 144A Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
144A Notes prior to the Expiration Date. Failure to complete the guaranteed
delivery procedures outlined above will not, of itself,
7
<PAGE> 8
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by a Holder who attempted to use the guaranteed
delivery procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of 144A Notes evidenced by a
submitted certificate is tendered, the tendering Holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Senior Subordinated Notes Tendered Hereby." A
newly issued 144A Note for the principal amount of 144A Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the Expiration
Date. All 144A Notes delivered to the Exchange Agent will be deemed to have been
tendered in full unless otherwise indicated.
Any 144A Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of 144A Notes are
irrevocable. To withdraw a tender of 144A Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent by 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the 144A
Notes to be withdrawn (the "Depositor"), (ii) identify the 144A Notes to be
withdrawn (including the certificate or registration number(s) and principal
amount of such 144A Notes, or, in the case of 144A Notes transferred by
book-entry transfer, the name and number of the account at the DTC to be
credited), (iii) be signed by the Depositor in the same manner as the original
signature on this Letter of Transmittal (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the 144A Notes register the transfer of such 144A Notes
into the name of the Depositor withdrawing the tender, (iv) specify the name in
which such 144A Notes are to be registered, if different from that of the
Depositor and (v) include a statement that such holder is withdrawing his
election to have such 144A Notes exchanged. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any 144A Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the 144A Notes so withdrawn are validly retendered.
Any 144A Notes which have been tendered but which are not accepted for exchange,
will be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of Exchange
Offer.
4. 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
144A Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or enlargement or any
change whatsoever. If this Letter of Transmittal is signed by a participant in
the Depository, the signature must correspond with the name as it appears on the
security position listing as the owner of the 144A Notes.
If any of the 144A 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 144A 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 144A Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the 144A Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of 144A Notes (which term, for the purposes described herein, shall include a
participant in the Depository whose name appears on a security
8
<PAGE> 9
listing as the owner of the 144A Notes) listed and tendered hereby, no
endorsements of the tendered 144A Notes or separate written instruments of
transfer or exchange are required. In any other case, the registered Holder (or
acting Holder) must either properly endorse the 144A Notes or transmit properly
completed bond powers with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered Holder(s) appear(s) on the 144A Notes,
and, with respect to a participant in the Depository whose name appears on a
security position listing as the owner of 144A Notes, exactly as the name of the
participant appears on such security position listing), with the signature on
the 144A Notes or bond power guaranteed by an Eligible Institution (except where
the 144A Notes are tendered for the account of an Eligible Institution).
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.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Depository) in which the Exchange Notes or substitute
144A Notes for principal amounts not tendered or not accepted for exchange are
to be issued (or deposited), if different from the names and addresses or
accounts of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the tendering
Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any 144A Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the 144A Notes or deposited at such Holder's account at the
Depository.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
exchange of 144A Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or 144A Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the 144A Notes
tendered, or if tendered 144A 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 144A Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other person) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption 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 6, it will not be necessary for
transfer stamps to be affixed to the 144A Notes listed in the Letter of
Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any Holder whose 144A Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. 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
9
<PAGE> 10
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 P. Lawrence Butt, Marsh
Supermarkets, Inc., 9800 Crosspoint Boulevard, Indianapolis, Indiana 46256-3350;
telephone: (317) 594-2100 (collect).
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered 144A Notes and withdrawal of tendered 144A
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all 144A Notes not properly tendered or any 144A Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular 144A Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of 144A Notes
must be cured within such 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 defects or irregularities with respect to tenders of 144A Notes,
nor shall any of them incur any liability for failure to give such notification.
Tenders of 144A Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any 144A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering Holders of 144A Notes, unless
otherwise provided herein, as soon as practicable following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering 144A Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered 144A Notes may be subject to backup
withholding.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9, should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. 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.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to 144A Notes tendered for exchange, the Holder is required to notify
the Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) such Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all
10
<PAGE> 11
interest or dividends or (iii) the Internal Revenue Service has notified such
Holder that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the 144A
Notes. If 144A Notes are in more than one name or are not in the name of the
actual Holder, consult the instructions on Internal Revenue Service Form W-9,
which may be obtained from the Exchange Agent, for additional guidance on which
number to report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
144A 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.
11
<PAGE> 1
EXHIBIT 99(b)
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
MARSH SUPERMARKETS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Marsh Supermarkets, Inc. (the "Company") made pursuant to the
Prospectus, dated September , 1997 (the "Prospectus"), if certificates for the
outstanding 8 7/8% Senior Subordinated Notes due 2007 of the Company (the "144A
Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Exchange Agent prior to 5:00 p.m., New York
time, on the Expiration Date of the Exchange Offer. Such form may be delivered
or transmitted by telegram, telex, facsimile transmission, mail or hand delivery
to State Street Bank and Trust Company (the "Exchange Agent") as set forth
below. In addition, in order to utilize the guaranteed delivery procedure to
tender 144A Notes pursuant to the Exchange Offer, a completed, signed and dated
Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<C> <C> <C>
By Mail By Facsimile Transmission: By Hand or Overnight Courier:
(registered or certified mail (617) 664-5395
recommended): State Street Bank and
Trust Company
State Street Bank and Corporate Trust Department,
Trust Company Confirm by Telephone 4th floor
Corporate Trust Department or for Information Call: Two International Place
P.O. Box 778 (617) 664-5587 Boston, MA 02110
Boston, MA 02102-0078
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
LADIES AND GENTLEMEN:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of 144A Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of 144A Notes Tendered:*
$
- ------------------------------------
Certificate No(s). (if available):
- -------------------------------------
Total Principal Amount Represented by Certificate(s):
$
- ------------------------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
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.
PLEASE SIGN HERE
<TABLE>
<C> <C>
X
- --------------------------------------------- ---------------------------------------------
X
- ---------------------------------------------
Signature(s) of Owner(s) ---------------------------------------------
or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number:
------------------------------------
Must be signed by the holder(s) of 144A Notes as their name(s) appear(s) on
certificates for 144A Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If 144A Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
Please print name(s) and address(es)
<TABLE>
<S> <C>
Name(s) ------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Capacity:
------------------------------------------------------------
Address(es):
------------------------------------------------------------
Account Number:
------------------------------------------------------------
</TABLE>
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the 144A Notes being tendered hereby or confirmation of book-entry
transfer of such 144A Notes into the Exchange Agent's account at The Depository
Trust Company, in proper form for transfer, together with any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the Expiration Date.
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone No.
- -------------------------------------------------------------------------------
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Title
- --------------------------------------------------------------------------------
Dated:
- ------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF 144A NOTES WITH THIS FORM. CERTIFICATES OF
144A NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99(c)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship account The owner(3)
6. A valid trust, estate or Legal entity
pension trust
(Do not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(4)
- -----------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
7. Corporate account The corporation
8. Partnership account held in The partnership
the name of the business
9. Association, club or other tax The organization
exempt organization
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. The name of the business or the "doing business
as" name may also be entered. Either the social security number or the
employer identification number may be used.
(4) List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all interest, dividends
and broker transactions payments include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more, and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. COMPLETE THIS SUBSTITUTE FORM W-9 AS FOLLOWS:
ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE
FORM, SIGN, DATE AND RETURN THE FORM TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the sections 6041, 6041A(a), 6044, 6045, 6049,
6050A and 6050N and the regulations thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax returns. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure which is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations, may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS. If the payer discloses or uses
taxpayer identification numbers in violation of Federal law, the payer may be
subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
