<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
NASH-FINCH COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5141 41-0431960
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
7600 FRANCE AVENUE SOUTH
P.O. BOX 355
MINNEAPOLIS, MINNESOTA 55440-0355
(612) 832-0534
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
--------------------------
NORMAN R. SOLAND
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
NASH-FINCH COMPANY
7600 FRANCE AVENUE SOUTH
P.O. BOX 355
MINNEAPOLIS, MINNESOTA 55440-0355
(612) 832-0534
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
MARK A. KIMBALL
OPPENHEIMER WOLFF & DONNELLY LLP
3400 PLAZA VII, 45 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 607-7000
--------------------------
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, please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
8 1/2% Senior Subordinated Notes, Series
B........................................ $165,000,000 $1,000 $165,000,000 $48,675
Guarantees of 8 1/2% Senior Subordinated
Notes, Series B.......................... $165,000,000 (2) (2) None(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457.
(2) No separate consideration will be received for the guarantees of the 8 1/2%
Senior Subordinated Notes, Series B by certain subsidiaries of Nash-Finch
Company.
--------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
TABLE OF ADDITIONAL REGISTRANTS(1)
<TABLE>
<S> <C> <C>
EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF PRIMARY STANDARD
AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION INDUSTRIAL
- ------------------------------------------------- -------------------------------- CLASSIFICATION CODE NUMBER
--------------------------
Nash-DeCamp Company California 5148
T. J. Morris Company Georgia 5141
Super Food Services, Inc. Delaware 5141
Forrest Transportation Service, Inc. California 4700
GTL Truck Lines, Inc. Nebraska 4213
Piggly Wiggly Northland Corporation Minnesota 7399
Gillette Dairy of the Black Hills, Inc. South Dakota 2026
Nebraska Dairies, Inc. Nebraska 5143
</TABLE>
(1) The address, including zip code, and telephone number, including area code,
of the additional Registrants' principal executive offices is 7600 France
Avenue South, P.O. Box 355, Minneapolis, Minnesota 55440-0355, (612)
832-0534, except as follows: .
Nash-DeCamp Company
3300 South Demaree Road
Visalia, CA 93277
(209) 622-1850
T. J. Morris Company
917 US Highway 301 South
Statesboro, GA 30458
(912) 681-4580
Forrest Transportation Service, Inc.
3300 South Demaree Road
Visalia, CA 93277
(209) 622-1870
GTL Truck Lines, Inc.
4228 South 72nd Street
Omaha, NE 68127
(402) 371-8223
Gillette Dairy of the Black Hills, Inc.
1699 Sedivy Lane
Rapid City, SD 57709
(605) 348-1500
Nebraska Dairies, Inc.
1200 South Johnny Carson Blvd.
Norfolk, NE 68702
(402) 371-3661
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE , 1998
PRELIMINARY PROSPECTUS
[LOGO]
OFFER TO EXCHANGE
UP TO $165,000,000 OF
8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
FOR ANY AND ALL OF THE OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
OF
NASH-FINCH COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1998, UNLESS EXTENDED
Nash-Finch Company, a Delaware corporation (the "Company"), hereby offers,
upon the terms and 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
$165,000,000 principal amount of 8 1/2% Senior Subordinated Notes due 2008,
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 1/2% Senior Subordinated Notes due 2008, Series A
(the "Series A 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 $165,000,000 in aggregate
principal amount of the Series A Notes outstanding. The terms of the Exchange
Notes are identical in all material respects to the Series A 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 Series
A 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 Series A
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 on May 1 and
November 1 of each year, commencing November 1, 1998. The Exchange Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after May 1, 2003, at the redemption prices set forth herein, plus accrued and
unpaid interest thereon, if any, to the date of redemption. In addition, on or
prior to May 1, 2001, the Company may redeem up to 35% of the originally issued
aggregate principal amount of the Exchange Notes at a redemption price of 108.5%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of redemption, with the net proceeds of a Public Equity
Offering (as defined herein); PROVIDED, HOWEVER, that at least $107.25 million
in aggregate principal amount of Exchange Notes is outstanding immediately after
giving effect to such redemption. Following the occurrence of a Change of
Control (as defined herein), each holder of Exchange Notes will have the right
to 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, plus
accrued and unpaid interest thereon, if any, to the date of purchase. See
"Description of the Exchange Notes."
The Exchange Notes will represent unsecured senior subordinated obligations
of the Company and will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined herein) 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 Company has not issued, and does not have any current
arrangements to issue, any significant indebtedness to which the Exchange Notes
would be senior, subordinate or rank PARI PASSU in right of payment. The
Exchange Notes will be effectively subordinate to essentially all of the
currently outstanding indebtedness of the Company and its subsidiaries. The
Exchange Notes will be guaranteed, jointly and severally, on a senior
subordinated basis (the "Guarantees"), by all of the Company's existing material
subsidiaries (and not by the Company's special purpose financing subsidiary)
(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 Senior Indebtedness of the Guarantors.
See "Description of the Notes--Subordination." As of March 28, 1998, on an as
adjusted basis for the offering of the Series A Notes and the application of the
estimated net proceeds therefrom, the Issuers would have had an aggregate of
approximately $221.5 million of Senior Indebtedness outstanding. See "Use of
Proceeds."
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
-----------------
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 , 1998 (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 , 1998.
<PAGE>
The Company will accept for exchange any and all validly tendered Series A
Notes on or prior to the Expiration Date (as defined herein). Any Series A Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to or
on the Expiration Date, after which tenders of Series A Notes are irrevocable.
The Exchange Offer is not conditioned upon any minimum principal amount of
Series A Notes being tendered for exchange. For certain conditions to the
Exchange Offer, see "The Exchange Offer--Conditions."
The Series A Notes were offered and sold on April 24, 1998 at a price of
$992.00 per $1,000 principal amount of the Series A Notes. For federal income
tax purposes, the amount of original issue discount on the Series A Notes is
considered to be DE MINIMIS and is treated as zero. See "Description of Certain
Federal Income Tax Consequences of an Investment in the Notes."
The Series A Notes were offered and sold in a transaction not registered
under the Securities Act in reliance upon an exemption from the registration
requirements thereof. In general, the Series A 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 dated
April 24, 1998 (the "Registration Rights Agreement") by and among the Issuers
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities
Inc. and Piper Jaffray Inc. (the "Initial Purchasers"). 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 Series A
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 Series A Notes where such Series A Notes were
acquired by such broker-dealer for its own account as a result of market-making
activities or other trading activities (other than Series A 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 Series
A 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 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 a Global Security (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 Security 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, Series A Notes held in
certificated form will be exchanged solely for Certificated Securities (as
defined herein). After the initial issuance of the Global Security, Certificated
Securities will be issued in exchange for interests in the Global Security only
on the terms set forth in the Indenture. See "Book-Entry; Delivery and Form."
2
<PAGE>
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 Series A Notes remain outstanding, the Company will make
available, upon request, to any holder and any prospective purchaser of Series A
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 7600
France Avenue South, P.O. Box 355, Minneapolis, Minnesota 55440-0355.
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 January 3,
1998;
2. The Company's Quarterly Report on Form 10-Q for the twelve weeks ended
March 28, 1998; and
3. The Company's Current Report on Form 8-K dated April 6, 1998.
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 , 1998 (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
NORMAN R. SOLAND, VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL, NASH FINCH
COMPANY, 7600 FRANCE AVENUE SOUTH, P.O. BOX 355, MINNEAPOLIS, MINNESOTA
55440-0355 (612) 832-0534. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE RECEIVED BY , 1998 (DATE FIVE BUSINESS DAYS
PRIOR TO THE DATE ON WHICH THE FINAL INVESTMENT DECISION MUST BE MADE).
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS AND
THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED AND
INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE INDICATED, ALL REFERENCES IN
THIS PROSPECTUS TO THE "COMPANY" REFER TO NASH FINCH COMPANY, A DELAWARE
CORPORATION, AND ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED, INDUSTRY DATA
CONTAINED HEREIN IS DERIVED FROM PUBLICLY AVAILABLE INDUSTRY TRADE JOURNALS,
REPORTS AND OTHER PUBLICLY AVAILABLE SOURCES, WHICH THE COMPANY HAS NOT
INDEPENDENTLY VERIFIED, OR FROM COMPANY ESTIMATES WHICH THE COMPANY BELIEVES TO
BE REASONABLE BUT WHICH HAVE NOT BEEN INDEPENDENTLY VERIFIED. UNLESS OTHERWISE
INDICATED, ALL INFORMATION CONTAINED HEREIN WITH RESPECT TO THE NUMBERS OF THE
COMPANY'S RETAIL STORES AND THE SQUARE FOOTAGE OF SUCH STORES IS AS OF JANUARY
3, 1998. ALL REFERENCES TO FISCAL YEARS IN THIS PROSPECTUS REFER TO THE FISCAL
YEAR ENDING ON THE SATURDAY CLOSEST TO DECEMBER 31 OF THE YEAR INDICATED (E.G.,
FISCAL 1997 REFERS TO THE FISCAL YEAR ENDED JANUARY 3, 1998). THE COMPANY'S
FISCAL YEAR GENERALLY CONSISTS OF 52 WEEKS, EXCEPT FOR CERTAIN YEARS SUCH AS
FISCAL 1997, WHICH CONSISTED OF 53 WEEKS.
THE COMPANY
Nash Finch Company, organized in 1921 as the successor to a business founded
in 1885, is the third largest publicly traded wholesale food distributor in the
United States (based on 1997 estimates), serving primarily the Midwestern and
Southeastern regions of the United States. In addition, the Company operates 97
conventional and warehouse supermarkets in 13 states. The Company's wholesale
operations, which include 21 distribution centers serving approximately 2,250
affiliated and independent supermarkets, U.S. military commissaries and other
customers in approximately 30 states, accounted for 79.8% of the Company's total
revenues in fiscal 1997, while its retail operations accounted for 18.7%. In
fiscal 1997, the Company had total revenues of $4.4 billion and EBITDA (as
defined herein) of $113.1 million.
The Company's wholesale operations serve two primary markets: (i)
supermarkets (70.4% of wholesale revenues in fiscal 1997), where the Company
combines a wide offering of national brand and private label products with
comprehensive support services to develop strong relationships with customers;
and (ii) military commissaries (29.6% of wholesale revenues in fiscal 1997),
where the Company believes it is currently the largest distributor of groceries
and related products to such facilities in the United States. The Company's
broad product offering includes dry groceries, fresh fruits and vegetables,
frozen foods, fresh and processed meat products and dairy products, as well as a
wide variety of non-food products, including health and beauty care, tobacco,
paper products, cleaning supplies and small household items. Private label
products are branded primarily under the Our Family-Registered Trademark-
trademark, a long-standing private label of the Company, and
Fame-Registered Trademark-, a trademark acquired in the acquisition of Super
Food Services, Inc. ("Super Food") in November 1996. The Company offers a wide
range of support services to its independent retailers to help them compete more
effectively in their markets and to build customer loyalty, including
supermarket merchandising support, accounting services, price management
systems, retail technology support, advertising and promotional programs,
training and human resource development services, market research and store
development services.
The Company's retail stores, as well as many of the retail outlets supplied
by the Company's wholesale operations, are located primarily in small to
midsized markets and rural areas. The Company's retail operations consist of 66
conventional supermarkets, averaging approximately 23,300 square feet in size,
operating principally under the Sun Mart-TM-, Easter Foods-TM- and Food
Folks-Registered Trademark- trade names; 27 warehouse stores, averaging
approximately 42,900 square feet in size, operating principally under the
Econofoods-Registered Trademark- trade name; and four combination general
merchandise/food stores averaging approximately 43,000 square feet in size,
operating under the Family Thrift Center-TM- trade name.
4
<PAGE>
COMPANY STRENGTHS
LEADING WHOLESALE FOOD DISTRIBUTOR. Through recent acquisitions, the
Company has become the third largest publicly traded wholesale food distributor
in the United States (based on 1997 estimates) with geographically dispersed
operations serving primarily the Midwestern and Southeastern regions of the
United States. The Company serves a diversified group of approximately 2,250
affiliated and independent supermarkets, U.S. military commissaries and other
customers, none of which accounted for more than 2.5% of the Company's total
revenues in fiscal 1997. The Company believes it is the largest wholesale
distributor of groceries and related products to military commissaries in the
United States. The Company derives increased purchasing power and economies of
scale from its large sales volume and distribution network.
INTEGRATED AND EFFICIENT DISTRIBUTION NETWORK. The Company has and
continues to develop a highly integrated and efficient distribution network by
realizing synergies from acquisitions and implementing innovative logistical
techniques. The Company continues to pursue opportunities to increase volume
through strategic acquisitions and to realize greater efficiencies in its
distribution network through consolidation of distribution centers. The Company
believes it is an industry leader in the development of advanced information
systems and the application of innovative logistics, such as port of entry
purchasing in full truck load quantities, cross docking and redistribution,
which have resulted in price and freight savings and operating efficiencies.
EXPERTISE IN PRIVATE LABEL PRODUCTS AND PERISHABLES. The Company has
developed extensive expertise in marketing and distributing a wide range of
private label products, including approximately 1,600 SKUs under the Our Family
private label and approximately 1,300 SKUs under the Fame private label. The
Company's private labels enjoy strong brand name recognition in the Company's
markets. Sales and transfers of private label products accounted for 9.8% of the
Company's non-military wholesale revenues in fiscal 1997. The Company has also
developed significant expertise in handling, marketing and distributing
perishables, including produce and dairy products. The Company's commitment to
distributing perishables enables it to provide a full spectrum of quality
products to customers. The Company believes that offering high quality private
label products and perishables provides it with certain competitive advantages
in attracting and retaining independent retailers and consumers. Private label
products and perishables generally result in higher margins than branded
products and other food categories.
STRONG RETAIL STORE BASE. The Company's 97 retail stores serve primarily
small to midsized markets and rural areas. The Company believes that
approximately 70% of the Company's stores are in markets where the Company is
first or second in market share. The Company believes its strong market share
positions result primarily from offering a variety of store formats and retail
concepts targeted to different geographical markets under several store names,
including Sun Mart, Easter Foods, Food Folks, Econofoods and Food
Bonanza-Registered Trademark-. In addition, the Company believes its retail
store base enhances the Company's wholesale operations by enabling it to (i)
better understand the needs of independent retailers, thereby improving customer
service; and (ii) test retail concepts and innovations, including advertising
and promotional programs, in the Company's stores before they are rolled out to
independent retailers. The Company's retail stores are typically located close
to distribution centers, thereby creating certain operating efficiencies and
logistical savings.
LEADING DISTRIBUTOR TO DOMESTIC MILITARY COMMISSARIES. The Company believes
that it is the largest wholesale distributor of groceries and related products
to domestic military commissaries. The Company's military distribution centers
also provide products for distribution to U.S. military commissaries in Europe
and to ships afloat. The Company serves as a third party distributor to
commissaries, contracting with a variety of food producers and other
manufacturers to procure and warehouse products for distribution to
commissaries. The Company's military distribution operations generally result in
higher net margins than the Company's civilian distribution operations due
primarily to lower operating expenses.
5
<PAGE>
REPUTATION FOR SUPERIOR CUSTOMER SERVICE. The Company's 113 year operating
history, centered on the theme "CUSTOMER SATISFACTION IS ALWAYS
FIRST!"-Registered Trademark-, has resulted in strong relationships with
long-standing customers. To further enhance its reputation and strengthen
customer relationships, the Company offers a wide range of support services to
customers to help them compete more effectively in their markets, including
supermarket merchandising support, accounting services, price management
systems, retail technology support, advertising and promotional programs,
training and human resource development services, market research and store
development services.
EXPERIENCED MANAGEMENT TEAM. The Company is led by a strong and experienced
executive management team, the members of which have on average 20 years with
the Company and 24 years of industry expertise across all facets of wholesale
distribution, marketing, merchandising and retail operations.
COMPANY STRATEGY
Management believes that the role of the distributor will continue to change
from the warehousing of goods toward a greater emphasis on the strategic
facilitation of goods and services for customers in a manner that provides
greater efficiencies. In addition, the Company believes that food retailers will
be required to offer a wider variety of goods and services at attractive prices
to compete effectively. Accordingly, the Company's goals are to (i) profitably
build the competitive strength of the Company's wholesale customers by being a
reliable cost-effective provider of superior products and services, and (ii)
achieve critical mass of profitable Company retail stores in target markets. To
achieve these goals, the Company has adopted the following strategic
initiatives:
COST SAVINGS AND VALUE ADDED INITIATIVES. The Company has implemented and
will continue to focus on a wide range of cost savings and value added
initiatives, including (i) maximizing the Company's substantial purchasing power
through centralized buying; (ii) consolidating operations and distribution
centers to achieve operating efficiencies and economies of scale; (iii) reducing
the Company's investment in working capital through strategic partnerships with
suppliers and more aggressive management of receivables; (iv) implementing
innovations in logistics and supply chain management to reduce procurement
costs, freight charges, inventory levels and delivery lead times; (v)
emphasizing greater cost consciousness among the Company's workforce; and (vi)
identifying underperforming assets and adopting an aggressive "fix, sell or
close" approach.
IMPLEMENTATION OF HORIZONS INFORMATION SYSTEM. The Company, working in
conjunction with SAP America and a number of other vendors and consultants, has
committed significant resources over the last two years to develop and implement
HORIZONS, a client server based enterprise management and financial information
system. The HORIZONS system will be a fully integrated and scalable system that
management believes will provide the Company with competitive advantages that
can be aggressively marketed to independent retailers. Implementation of the
HORIZONS system is scheduled to be substantially completed in 1999 and is
expected to provide (i) a solution to the Company's Year 2000 software issues,
(ii) greater flexibility for the changing business environment, (iii) greater
connectivity opportunities with customers and suppliers, (iv) the ability to
integrate and standardize information systems throughout the Company, (v) timely
and easy-to-use information, (vi) greater business process and workflow
efficiencies, and (vii) more powerful decision-making and analysis tools. To
parallel the development and implementation of the HORIZONS project, management
has led a cultural change and training initiative designed to prepare the
Company's workforce for changes in the industry and in the use of the HORIZONS
system to address these changes.
GROWTH THROUGH STRATEGIC ACQUISITIONS AND ALLIANCES. The Company has grown
significantly in recent years through strategic acquisitions that have (i)
enhanced the Company's purchasing power, (ii) expanded the Company's geographic
scope and breadth of product offering, (iii) increased the volume and efficiency
of several of the Company's distribution centers, (iv) significantly enhanced
the Company's presence in the military commissary market, and (v) added retail
stores in the Company's target markets. The Company
6
<PAGE>
will continue to strive to achieve additional synergies through further
integration of recent acquisitions. In addition, the Company will continue to
seek new opportunities for strategic acquisitions and alliances that will
provide a superior return on investment and achieve one or more of the criteria
described above.
STRENGTHEN RETAIL STORE BASE. The Company will continue to focus on
improving the profitability and contribution of the Company's retail store base
by investing to achieve critical mass and market dominance in the Company's key
retail markets, including seeking acquisition opportunities that provide
synergies, constructing new stores, remodeling and expanding existing stores and
remodeling, selling or closing underperforming stores. In the past two years,
the Company has acquired seven stores, remodeled 16 stores, sold seven stores
and closed 16 stores. In addition, the Company has and will continue to develop
and utilize a number of different retail formats in its retail stores. The
Company believes that multiple retail formats enable the Company to more
effectively respond to competition in the varied markets in which it operates.
Addressing each market individually has resulted in the strong market position
the Company enjoys in the majority of the Company's retail markets. Multiple
formats also allow the Company to test different concepts prior to extending
such concepts to independent retail customers.
7
<PAGE>
THE SERIES A NOTE OFFERING
<TABLE>
<S> <C>
The Series A Notes................ The Series A Notes were sold by the Company to the
Initial Purchasers in the Series A Note Offering on
April 24, 1998, and were subsequently resold by the
Initial Purchasers pursuant to Rule 144A and Regulation
S under the Securities Act and other available
exemptions under the Securities Act.
Registration Rights Agreement..... In connection with the Series A Note Offering, the
Company entered into the Registration Rights Agreement,
which grants Holders of the Series A 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................ $165,000,000 in aggregate principal amount of 8 1/2%
Senior Subordinated Notes due 2008, Series B.
The Exchange Offer................ $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of Series A
Notes. As of the date hereof, $165,000,000 in aggregate
principal amount of Series A 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 Series A 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 April 24,
1998, the date of issuance of the Series A Notes, or the
most recent interest payment date to which interest on
such Series A Notes has been paid, whichever is later.
Accordingly, Holders of Series A Notes that are accepted
for exchange will not receive interest on such Series A
Notes that is accrued but unpaid at the 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 Series A Notes being
tendered for exchange.
Expiration Date................... 5:00 p.m., New York City time, on , 1998
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.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Exchange Date..................... The date of acceptance for exchange of the Series A
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 Series A Notes and
Delivery of Exchange Notes...... The Company will accept for exchange any and all Series
A 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 Series A
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 Series A 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 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 Series A Notes, tendering Holders may
transfer Series A 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 Series A 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 such beneficial owner's own
behalf, such beneficial owner must, prior to completing
and executing the Letter of Transmittal and delivering
the Series A Notes, either make appropriate arrangements
to register ownership of the Series A Notes in such
beneficial owner's name or obtain a properly completed
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
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 Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their Series
A 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 Series A 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 "The
Exchange Offer--Certain Federal Income Tax Consequences
of the Exchange Offer."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Series A Notes pursuant to the Exchange
Offer.
Exchange Agent.................... U.S. Bank Trust National Association is serving as
exchange agent (the "Exchange Agent") in connection with
the Exchange Offer. See "The Exchange Offer--Exchange
Agent."
</TABLE>
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Series A Notes (which they replace) except that (i) the issuance of the
Exchange Notes will have been registered under the Securities Act and,
therefore, the Exchange Notes 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 Series A Notes and will be
entitled to the benefits of the Indenture. See "Description of the Exchange
Notes."
<TABLE>
<S> <C>
Securities Offered................ $165,000,000 aggregate principal amount of 8 1/2% Senior
Subordinated Notes due 2008, Series B.
Maturity Date..................... May 1, 2008.
Interest Payment Dates............ May 1 and November 1 of each year, commencing November
1, 1998.
Optional Redemption............... The Exchange Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after May 1, 2003, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon, if
any, to the date of redemption. In addition, on or prior
to May 1, 2001, the Company may redeem up to 35% of the
originally issued aggregate principal amount of the
Exchange Notes, at a redemption price of 108.5% of the
principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption with
the net proceeds of a Public Equity Offering; PROVIDED,
HOWEVER, that at least $107.25 million in aggregate
principal amount of Exchange
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Notes is outstanding immediately after giving effect to
such redemption. See "Description of the Exchange
Notes--Optional Redemption."
Guarantees........................ The Exchange Notes will be guaranteed, jointly and
severally, on a senior subordinated basis, by
substantially all of the Company's existing material
subsidiaries (and not by the Company's special purpose
financing subsidiary). See "Description of the Exchange
Notes--Subsidiary Guarantees."
Subordination..................... The Exchange Notes and the Guarantees will represent
unsecured senior subordinated obligations of the Company
and the Guarantors, as applicable, and will be
subordinated in right of payment to all existing and
future Senior Indebtedness of the Company or the
Guarantors, as applicable. 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 Company has not issued, and does not
have any current arrangements to issue, any significant
additional indebtedness to which the Exchange Notes
would be senior, subordinate or rank PARI PASSU in right
of payment. The Exchange Notes will be effectively
subordinate to essentially all of the currently
outstanding indebtedness of the Company and its
subsidiaries. As of March 28, 1998, and as adjusted for
the offering of the Series A Notes and the application
of the estimated net proceeds therefrom, the Issuers
would have had an aggregate of approximately $221.5
million of Senior Indebtedness outstanding. See
"Description of the Exchange Notes-- Subordination" and
"Use of Proceeds."
Change of Control................. Following the occurrence of a Change of Control, each
holder of Exchange Notes will have the right to 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, plus accrued and
unpaid interest thereon, if any, to the date of
purchase. See "Description of the Exchange Notes--Change
of Control."
Certain Covenants................. The indenture under which the Exchange Notes will be
issued (the "Indenture") contains certain restrictive
covenants, including, but not limited to, covenants with
respect to the following matters: (i) limitation on
additional indebtedness; (ii) limitation on restricted
payments; (iii) limitation on transactions with
affiliates; (iv) limitation on liens; (v) limitation on
incurrence of senior subordinated indebtedness; (vi)
limitation on sale of assets; (vii) limitation on
issuances of guarantees by Restricted Subsidiaries (as
defined herein); (viii) limitation on preferred stock of
Restricted Subsidiaries; (ix) limitation on dividends
and other payment restrictions affecting Restricted
Subsidiaries; and (x) limitations on Unrestricted
Subsidiaries (as defined herein). See "Description of
the Exchange Notes--Certain Covenants."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
The Indenture will provide that after the Notes achieve
an investment grade rating from both Standard & Poor's
Ratings Group and Moody's Investors Service, Inc., the
Company's obligation to comply with certain of the
restrictive covenants described herein will be
terminated. See "Description of the Notes--Certain
Covenants."
Exchange Offer; Registration
Rights.......................... In the event that applicable law or interpretations of
the staff of the Commission do not permit the Issuers to
file the Exchange Offer Registration Statement or to
effect the Exchange Offer, or if the Exchange Offer is
not consummated within 120 days after the Issue Date, or
if certain holders of the Notes notify the Issuers that
they are not permitted to participate in, or would not
receive freely tradable Notes pursuant to, the Exchange
Offer, the Issuers will use their best efforts to cause
to become effective a registration statement (the "Shelf
Registration Statement") with respect to the resale of
the Notes and to keep the Shelf Registration Statement
effective until up to two years after the effective date
thereof. If the Issuers default with respect to such
registration obligations, then the Issuers will pay
liquidated damages in cash to each holder of Transfer
Restricted Notes (as defined) in an amount equal to
0.25% per annum of the principal amount of the Notes for
the first 90-day period (or portion thereof) following
each such default and will increase by an additional
0.25% per annum with respect to each subsequent 90-day
period (or portion thereof) up to a maximum amount of
1.00% per annum until all registration defaults are
cured, whereupon the accrual of liquidated damages will
cease. See "Exchange Offer; Registration Rights."
Absence of a Public Market for
the Notes....................... The Exchange Notes are 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 securities exchange or for quotation of the
Exchange Notes on any automated dealer quotation system.
Although the Initial Purchasers have informed the
Company that they currently intend to make a market in
the Exchange Notes, they are not obligated to do so and
any such market-making may be discontinued at any time
without notice. Accordingly, there can be no assurance
as to the development or liquidity of any market for the
Exchange Notes. 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."
</TABLE>
RISK FACTORS
See "Risk Factors" beginning on page 14 for a discussion of certain factors
that should be considered by holders of Series A Notes before deciding to tender
Series A Notes in the Exchange Offer.
12
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial data of the
Company. The annual historical financial data have been derived from the
Company's audited Consolidated Financial Statements. The summary consolidated
financial data for the fiscal quarters ended March 28, 1998 and March 22, 1997
are derived from the Unaudited Consolidated Financial Statements of the Company
included elsewhere in this Prospectus. Such Unaudited 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 condition and results of operations of the Company for such
periods and as of such dates. The summary 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 Financial
Statements of the Company and the related notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED YEAR ENDED (A)
------------------------ ------------------------------------------------------------------
MARCH 28, MARCH 22, JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1,
1998 1997 1998 1996 1995 1994 1994
----------- ----------- ----------- ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.................. $ 937,101 $ 947,832 $4,391,602 $3,375,485 $2,888,836 $2,832,000 $2,723,535
Cost of sales................... 820,360 825,189 3,826,377 2,932,709 2,469,841 2,410,292 2,325,249
----------- ----------- ----------- ------------ ------------ ------------ -----------
Gross profit.................... 116,741 122,643 565,225 442,776 418,995 421,708 398,286
Selling, general and
administrative, and other
operating expenses (b)........ 94,310 99,158 453,645 359,456 350,201 352,683 332,349
Special charges (c)............. -- -- 31,272 -- -- -- --
Depreciation and amortization... 11,078 10,905 47,697 34,759 29,406 31,831 29,145
Interest expense................ 6,860 7,321 32,845 14,894 10,793 11,384 10,114
----------- ----------- ----------- ------------ ------------ ------------ -----------
Income before income taxes and
extraordinary charge.......... 4,493 5,259 (234) 33,667 28,595 25,810 26,678
Income taxes.................... 1,865 2,203 994 13,635 11,181 10,330 10,804
Extraordinary charge (d)........ (5,569) -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------ -----------
Net income (loss)............... $(2,941) $3,056 $(1,228 ) $20,032 $17,414 $15,480 $15,874
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
Net income (loss) per share:
Basic......................... (.26 ) .27 (.11 ) 1.83 1.60 1.42 1.46
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
Diluted....................... (.26 ) .27 (.11 ) 1.81 1.60 1.42 1.46
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
BALANCE SHEET DATA:
Working capital................. $186,114 $247,394 $199,931 $228,508 $104,002 $89,457 $79,904
Total assets.................... 912,423 935,806 904,883 945,477 514,260 531,604 521,654
Total debt, including
capitalized leases............ 381,185 433,527 383,270 427,617 95,889 143,045 140,167
Stockholders' equity............ 220,970 234,566 225,618 232,861 215,313 206,269 199,264
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges (e)................... 1.46 x 1.53 x 1.00 x 2.34 x 2.49 x 2.28 x 2.35 x
Capital expenditures (f)........ $13,474 $7,939 $67,725 $51,333 $33,264 $34,965 $36,382
</TABLE>
- ----------------------------------
(a) Fiscal year operating results include 52 weeks for each year except fiscal
1997, which consisted of 53 weeks.
(b) Includes expenses incurred in connection with HORIZONS estimated to be $1.8
million in the first quarter of fiscal 1998, $5.5 million in fiscal 1997 and
$1.6 million in fiscal 1996. See "Business -- Information Systems."
(c) Includes $14.5 million for the consolidation of selected warehouses, $2.5
million of integration costs associated with the acquisition of the business
and assets of United-A.G. Cooperative, Inc. in Omaha, Nebraska, $5.2 million
from closing or consolidating underperforming retail stores, a $5.4 million
asset impairment charge relating to seven retail stores, a $1.0 million
asset impairment charge relating to the Company's produce marketing
operations, a $0.9 million write-off of current systems software being
replaced by HORIZONS and a $0.6 million loss relating to the sale of the
Company's investment in a Hungarian food wholesaler.
(d) Reflects prepayment premiums from early extinguishment of debt, net of
income tax benefits. See "Use of Proceeds."
(e) For purposes of computing the ratios, earnings represent income 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.
(f) Includes approximately $5.8 million, $2.1 million, $20.0 million and $8.1
million of capital expenditures incurred in connection with HORIZONS in the
first quarter of fiscal 1998, the first quarter of fiscal 1997, fiscal 1997
and fiscal 1996, respectively.
13
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RISK FACTORS
HOLDERS OF SERIES A NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE
DECIDING TO TENDER SERIES A NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET
FORTH BELOW ARE GENERALLY APPLICABLE TO THE SERIES A NOTES AS WELL AS THE
EXCHANGE NOTES.
SUBSTANTIAL LEVERAGE
The Company has substantial indebtedness and, as a result, significant debt
service obligations. As of March 28, 1998, on an as adjusted basis for the
offering of the Series A Notes and the application of the estimated net proceeds
therefrom, the Company would have had approximately $370.3 million of long-term
indebtedness which would have represented approximately 62.6% of 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 March 28, 1998 and after
giving pro forma effect to the offering of the Series A Notes and the
application of the estimated net proceeds therefrom, a required reduction of the
Revolving Credit Facility (as defined below) from $360.0 million to $350.0
million and the expiration of the Company's bank credit facility with Wachovia
Bank of Georgia, N.A. effective as of June 9, 1998, the Company would have had
an aggregate of $339.2 million available for borrowing under the Company's
$350.0 million revolving credit facility with a variety of lending institutions
(the "Revolving Credit Facility") and under the Company's $160.0 million of
other bank credit facilities with Brinson Trust Company and Norwest Bank
Minnesota, N.A. (the "Other Bank Credit Facilities" and, together with the
Revolving Credit Facility, the "Bank Credit Facilities"). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain Other
Indebtedness."
Upon the issuance of the Series A Notes, the Company's interest expense
increased as compared with prior years. See "Capitalization." The ability of the
Company to pay interest and principal on the Notes and to satisfy its debt
obligations will be dependent on the future operating performance of the
Company, which could be affected by changes in economic conditions and
financial, competitive, legislative, regulatory and other factors, including
factors beyond the control of the Company. A failure to comply with the
covenants and other provisions of its debt instruments could result in events of
default under such instruments, which could permit acceleration of the debt
under such instruments and in some cases acceleration of debts under other
instruments that contain cross-default or cross-acceleration provisions. The
Company believes, based on current circumstances, that the Company's cash flow,
together with available borrowings under the Bank Credit Facilities, 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.
There can be no assurance that the Company will be able to generate sufficient
cash flow to service its interest payment obligations under its indebtedness or
that cash flows, future borrowings or equity financing will be available for the
payment or refinancing of the Company's indebtedness. 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 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 future operations; (iii) certain
14
<PAGE>
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's substantial
leverage may make it more vulnerable to changing economic conditions, limit its
ability to withstand competitive pressures and reduce its flexibility in
responding to changing business and 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.
SUBORDINATION OF THE NOTES AND THE GUARANTEES; ASSET ENCUMBRANCES
The payment of principal of, premium, if any, and interest on the 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 Bank
Credit Facilities. Therefore, in the event of a liquidation, dissolution,
insolvency, bankruptcy, reorganization or any similar proceeding regarding the
Company, the assets of the Company will be available to pay obligations on the
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 Notes. In addition,
the Company may not pay principal of, premium, if any, interest on or any other
amounts owing in respect of the Notes, make any deposit pursuant to defeasance
provisions or purchase, redeem or otherwise retire the 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 (as defined herein), 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--Subordination." The Guarantees by the Guarantors will be subordinated to
all existing and future guarantees by the Guarantors of Senior Indebtedness of
the Company and to any other Senior Indebtedness of the Guarantors on a similar
basis. As of March 28, 1998, on an as adjusted basis for the Prepayments, the
offering of the Series A Notes and the application of the estimated net proceeds
therefrom, the Issuers would have had an aggregate of approximately $221.5
million in aggregate principal amount of Senior Indebtedness outstanding which
ranked senior in right of payment to the Notes and the Guarantees and the
ability to borrow an additional $339.2 million of Senior Indebtedness under the
Bank Credit Facilities. Under the terms of the Indenture, 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 Notes--Certain Covenants."
The 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 secured indebtedness. The Bank Credit Facilities contain
restrictive covenants and financial maintenance tests and the Company's ability
to comply therewith may be affected by events beyond its control. A breach of
any of these covenants could result in an event of default under the Bank Credit
Facilities allowing the lenders thereunder to elect to declare all outstanding
amounts thereunder to be immediately due and payable. If the Company becomes
insolvent or is liquidated, or if payment under any of the instruments governing
the Company's secured indebtedness is so 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 of such events, because the 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 Notes could
be satisfied or, if any such assets remained, such assets might be insufficient
to satisfy such claims in full. See "Description of Certain Other Indebtedness."
15
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DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES; POSSIBLE INVALIDITY OF GUARANTEES;
POTENTIAL RELEASE OF GUARANTEES
The Notes are the obligations of the Company. As of the date of this
Prospectus, a substantial portion of the consolidated assets of the Company were
held by the Guarantors and a substantial portion 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 Notes is
dependent, in part, upon the receipt of sufficient funds from its subsidiaries.
The payment of dividends or the making of loans or advances to the Company by
its subsidiaries may be subject to statutory restrictions and are contingent
upon the earnings of those subsidiaries.
The Company's obligations under the 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 existing material subsidiaries (and not the
Company's special purpose financing subsidiary). 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 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 were greater than all of the company's property at a fair
valuation, or if the present fair salable value of the company's assets were
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 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
Notes against the issuer of an invalid Guarantee would effectively be
subordinated to all indebtedness and other liabilities and commitments and
subject to the prior payment in full of such indebtedness, other liabilities and
commitments 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 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 Other
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 in
compliance with the terms of the Indenture. See "Description of the Exchange
Notes-- Subsidiary Guarantees."
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LOW MARGIN BUSINESS; INCREASING COMPETITION AND MARGIN PRESSURE
The wholesale food distribution and retail grocery industries in which the
Company operates are characterized by low profit margins. As a result, the
Company's results of operations are sensitive to, and may be materially
adversely impacted by, among other things, competitive pricing pressures, vendor
selling programs, increasing interest rates and food price deflation. There can
be no assurance that one or more of such factors will not have a material
adverse affect the Company's business, financial condition or results of
operations. See "Business--Competition."
The wholesale food distribution industry is undergoing change as producers,
manufacturers, distributors and retailers seek to lower costs and increase
services in an increasingly competitive environment of relatively static
over-all demand, resulting in increasing pressure on the industry's already low
profit margins. Alternative format food stores (such as warehouse stores and
supercenters) have gained market share at the expense of traditional supermarket
operators, including independent operators, many of whom are customers of the
Company. Vendors, seeking to ensure that more of their promotional dollars are
used by retailers to increase sales volume, increasingly direct promotional
dollars to large self-distributing chains. The Company believes that these
changes have led to reduced margins and lower profitability among many of its
customers and at the Company itself. In response to these changes, the Company
is pursuing a multi-faceted strategy that includes various cost savings and
value added initiatives, growth through strategic acquisitions and alliances,
and the development and implementation of the HORIZONS enterprise management and
financial information system. The Company believes that its ultimate success
will depend on its ability to pursue and execute these strategic initiatives,
and on the effectiveness of these strategic initiatives in reducing costs of
operations and enhancing operating margins. Any significant delay or failure in
the implementation of these strategic initiatives could result in diminished
sales and operating margins. No assurance can be given that the Company's
strategic initiatives, if implemented, will result in increased sales or
enhanced profit margins.
ACQUISITION STRATEGY
Partly in response to changes in the wholesale food distribution industry
discussed above, the Company has for several years pursued a strategy of
aggressive growth through acquisitions in the wholesale food distribution
market, including both general and military distribution operations, and in
retail store operations. The Company intends to continue to pursue strategic
acquisition opportunities in these business segments, both in existing and new
geographic markets. In pursuing this acquisition strategy, the Company faces
risks commonly encountered with growth through acquisitions, including completed
acquisitions. These risks include, but are not limited to, incurring
significantly higher than anticipated capital expenditures and operating
expenses, failing to assimilate the operations and personnel of acquired
businesses, failing to install and integrate all necessary systems and controls,
losing customers, entering markets in which the Company has no or limited
experience, disrupting the Company's ongoing business and dissipating the
Company's management resources. Realization of the anticipated benefits of a
strategic acquisition may take several years or may not occur at all. The
Company's acquisition strategy has placed, and will continue to place, a
significant strain on the Company's management, operational, financial and other
resources. The success of the Company's acquisition strategy will depend on many
factors, including the ability of the Company to (i) identify suitable
acquisition opportunities, (ii) successfully close acquisition opportunities at
valuations that will provide superior returns on invested capital, (iii)
successfully integrate acquired operations quickly and effectively in order to
realize operating synergies, and (iv) obtain necessary financing on satisfactory
terms. There can be no assurance that the Company will be able to successfully
execute and manage its acquisition strategy, and any failure to do so could have
a material adverse effect on the Company's business, financial condition and
results of operations.
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NEW INFORMATION SYSTEM; YEAR 2000 SOFTWARE
Over the last two years, the Company has invested significant financial and
other resources in pursuing the development and implementation of HORIZONS. The
Company currently expects to spend approximately $76 million between 1996 and
2004 on the design and installation of, and training for, the HORIZONS project,
approximately half of which has been spent through the end of fiscal 1997. No
assurance can be given that the Company will be able to successfully develop and
implement the HORIZONS system or that, if successfully implemented, the HORIZONS
system will result in any operating efficiencies or competitive advantages. The
primary elements of the HORIZONS system have not yet been activated, and the
continuing development and implementation of the HORIZONS system can be expected
to require substantial additional financial and other resources and may be
subject to unforeseen delays or interruptions in development or implementation.
The HORIZONS system has been designed and is being developed by a team
consisting of outside vendors and Company business personnel and management
information systems personnel. The loss of a key vendor to the HORIZONS project
or the loss of key Company personnel involved in the HORIZONS project could
result in a significant loss of expertise and delays in the implementation of
the HORIZONS system. Any significant delay or failure in the implementation of
the HORIZONS system could have a material adverse effect on the Company's
business, financial condition and results of operations.
Although the Company expects that HORIZONS will address Year 2000 software
issues, the Company also plans to develop a contingency system in the event of
any significant delays in implementation of HORIZONS. Nonetheless, the Company
could still encounter significant business risks from the failure of any of its
vendors or customers, or the failure of governmental agencies, to adequately
address Year 2000 software issues. Any material failure of information systems
on the part of such vendors, customers or governmental agencies, or the
Company's contingency system in the event HORIZONS is not implemented by 2000,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
POTENTIAL CREDIT LOSSES FROM LOANS TO RETAILERS
From time to time, the Company extends secured loans to independent
retailers, often in conjunction with the establishment or expansion of supply
arrangements with such retailers. Such loans are generally extended to small
businesses which are unrated, and such loans are highly illiquid. The
acquisition of Super Food included a large loan and trade receivable portfolio
that resulted from a credit policy different from the policy historically used
by the Company. As a result, the Company has taken additional reserves against
certain receivables of Super Food. Provisions for doubtful accounts, including
reserves for losses from receivables and loans to independent retailers, were
approximately $26.2 million at March 28, 1998, approximately $26.7 million at
January 3, 1998 and approximately $28.0 million at December 28, 1996. The
Company's portfolio of loans to independent retailers had an aggregate balance
of approximately $39.4 million at March 28, 1998, approximately $39.0 million at
January 3, 1998 and approximately $37.3 million at December 28, 1996. See Notes
4 and 10 of Notes to the Consolidated Financial Statements. The Company also
from time to time provides financial assistance to independent retailers by
guaranteeing loans from financial institutions and leases entered into directly
with lessors. As of March 28, 1998, the Company guaranteed approximately $28.2
million of loans and leases of its independent retailers. The Company intends to
continue, and possibly increase, the amount of loans and guarantees to
independent retailers, and there can be no assurance that credit losses from
existing or future loans or commitments will not have a material adverse effect
on the Company's business, financial condition and results of operations.
MILITARY COMMISSARY SALES
Approximately 23.6% of the Company's sales in fiscal 1997 resulted from
distribution of products to domestic and foreign U.S. military commissaries and
ships afloat. No assurance can be given that the U.S. military commissary system
will not undergo significant changes in the foreseeable future, such as further
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base closings, privatization of the military commissary system or a reduction in
the number of persons having access to such commissaries. Such changes could
result in disruptions to existing supply arrangements or reductions in volumes
of purchases and could have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION
The food marketing and distribution industry is highly competitive. The
Company faces competition from national, regional and local food distributors on
the basis of price, quality, breadth and availability of products offered,
strength of private label brands offered, schedules and reliability of
deliveries and the range and quality of services provided. In addition, food
wholesalers compete based on willingness to invest capital in their customers.
Such investments present substantial risks as described above under the caption
"--Potential Credit Losses from Loans to Retailers." The Company also competes
with retail supermarket chains that provide their own distribution function,
purchasing directly from producers and distributing products to their
supermarkets for sale to consumers.
In its retail operations, the Company competes with other food outlets on
the basis of price, quality and assortment, store location and format, sales
promotions, advertising, availability of parking, hours of operation and store
appeal. Traditional mass merchandisers have gained a growing market share with
alternative store formats, such as warehouse stores and supercenters, which
depend on concentrated buying power and low-cost distribution technology. Market
share of stores with alternative formats is expected to continue to grow in the
future. To meet the challenges of a rapidly changing and highly competitive
retail environment, the Company must maintain operational flexibility and
develop effective strategies across many market segments. The inability to adapt
to changing environments could have a material adverse effect on the Company's
business, financial condition and results of operations.
Some of the Company's competitors have greater financial and other resources
than the Company. In addition, consolidation in the industry, heightened
competition among the Company's suppliers, new entrants and trends toward
vertical integration could create additional competitive pressures that reduce
margins and adversely affect the Company's business, financial condition and
results of operations. There can be no assurance that the Company will be able
to continue to compete effectively in its industry. See "Business--Competition."
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 markets with respect to attracting and retaining
qualified employees. The labor market is currently very tight and 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
business, financial condition and results of operations.
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 will be able to find
replacements with equivalent skills or experience at acceptable salaries.
Generally, the Company does
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not have employment contracts with its executive officers, other than agreements
providing certain benefits upon certain changes in control of the Company.
RISK OF ENVIRONMENTAL LIABILITY
The Company is subject to increasingly stringent 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 facilities and the
land on which its facilities are situated, regardless of whether the Company
leases or owns the facilities 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 facilities or raw land, there can be no
assurance that known or unknown environmental conditions relating to prior,
existing or future facility sites or the activities of the Company or its
predecessor in interest will not have a material adverse effect on the Company.
It is difficult to predict future environmental costs as the costs of
environmental compliance vary significantly depending on the extent, source and
location of the contamination, geological and hydrological conditions, available
reimbursement by state agencies, the enforcement policies of regulatory agencies
and other factors.
ADVERSE PUBLICITY; PRODUCT LIABILITY
The packaging, marketing and distribution of food products entails an
inherent risk of product liability, product recall and resultant adverse
publicity. There can be no assurance that such claims will not be asserted
against the Company or that the Company will not be obligated to perform such a
recall in the future. While the Company as a general practice receives
indemnification guarantees from its suppliers whereby the supplier agrees to
indemnify the Company from such claims and obligations, there can be no
assurance that such indemnification will be sufficient or that such claims or
obligations will not create adverse publicity that will have a material adverse
effect on the Company's ability to successfully market its products and on the
Company's business, financial condition and results of operations.
POTENTIAL FAILURE TO MAKE PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Company to purchase all or a portion of such holder's Notes at 101%
of the principal amount of the Notes, together with accrued and unpaid interest,
if any, to the date of purchase. In such circumstances, each of the Company and
the Guarantors may be required to (i) repay all or a portion of the outstanding
principal of, and pay any accrued interest on, its indebtedness, including
indebtedness under the Bank Credit Facilities 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 Notes, which will constitute
an Event of Default under the Indenture. There can be no assurance that the
Company or the Guarantors will have sufficient funds available at the time of
any Change of Control to make any debt payment (including purchases of Notes) as
described above or that the Company or the Guarantors will be able to refinance
their respective outstanding indebtedness in order to permit it to repurchase
the Notes or, if such refinancing were to occur, that such financing will be on
terms favorable to the Company and the Guarantors. See "Description of the
Exchange Notes-- Change of Control."
The events that constitute a Change of Control under the Indenture may also
be events of default under the Bank Credit Facilities or other borrowings. Such
events may permit the holders under such debt
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instruments to reduce the borrowing base thereunder or accelerate the debt and,
if the debt is not paid, to commence litigation that could ultimately result in
a sale or liquidation of certain assets of the Company, thereby limiting the
Company's ability to purchase the Notes and receive the special benefit of the
offer to purchase provisions to the holders of the Notes.
LACK OF PRIOR MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Series A Notes.
The Series A Notes were offered and sold in April 1998 pursuant to Rule 144A and
Regulation S under the Securities Act and are eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market.
The Exchange Notes will be new securities for which there currently is 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. Although the Initial
Purchasers have informed the Company that they currently intend to make a market
in the Exchange Notes, the Initial Purchasers are not obligated to do so, and
any such market-making may be discontinued at anytime without notice. In
addition, such market-making activity will be subject to limits imposed by the
Securities Act and the Securities Exchange Act of 1934, as amended (together
with the rules and regulations promulgated thereunder, the "Exchange Act"), and
may be further limited during the Exchange Offer and the pendency of any Shelf
Registration Statement (as defined herein). Although it is anticipated that the
Exchange Notes will be eligible for trading in the PORTAL market, there can be
no assurance as to the development of any market or the liquidity of any market
that may develop. The liquidity of any market for the Exchange Notes will depend
upon the number of holders of the Exchange Notes, the interest of securities
dealers in making a market in the Exchange Notes and other factors. 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 upon prevailing interest rates, the market for similar securities, the
performance of the Company and certain other factors. The liquidity of, and
trading markets for, the Exchange Notes may also be adversely affected by
general declines in the market for non-investment grade debt. Such declines may
adversely affect the liquidity of, and trading markets for, the Exchange Notes,
independent of the financial performance of or prospects for the Company.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Exchange Notes. There can be no assurance that the market, if
any, for the Exchange Notes will not be subject to similar disruptions. Any such
disruptions may have an adverse effect on the holders of the Exchange Notes.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes for Series A Notes pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of such
Series A Notes, a properly completed, duly executed Letter of Transmittal and
all other required documents. Therefore, Holders desiring to tender their Series
A 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 Series A Notes for exchange. Any
Series A 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 on 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 Series A Notes,
where such Series A
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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 Series A 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 Series A 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 Series A
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
Series A Notes for Exchange Notes in the Exchange Offer will receive Exchange
Notes that are freely transferable under the Securities Act. 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 Series
A Notes for resale under the Securities Act. See "Prospectus Summary--The
Exchange Offer" and "Exchange Offer; Registration Rights."
The Series A 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 Series A Notes are tendered and accepted in the Exchange
Offer, the trading market for the untendered and tendered but unaccepted Series
A Notes could be adversely affected.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including
statements regarding (i) anticipated trends in the Company's industry, (ii)
future expenditures for capital projects, and (iii) the Company's strategic
initiatives. Such forward-looking statements can be identified by the use of
forward-looking terminology, such as "believes," "expects," "may," "will,"
"should," "estimates," or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
Such statements are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from those
that are expressed or implied from such forward-looking statements. 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 forward-looking statements. As a result, no assurance is
given that future results expressed or implied from such 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
expressed or implied by forward-looking statements contained 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, (ii) unanticipated costs related to the
implementation of the Company's growth and operating strategies,
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(iii) loss or retirement of key members of management, (iv) inability to
negotiate favorable terms with customers and suppliers, (v) increases in
interest rates or the Company's cost of borrowing or a default under any
material debt agreements, (vi) inability of the Company to achieve its cost
savings initiatives, to achieve synergies from acquisitions or to strengthen its
retail store base, (vii) inability of the Company to achieve the objectives of
the Horizons project, (viii) prolonged labor disruption, (ix) deterioration in
general or regional economic conditions, (x) adverse state or federal
legislation or regulation that increases the costs of compliance, or adverse
findings by a regulator with respect to existing operations, (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 Company's cost savings
initiatives, and (xiii) the unavailability of funds for capital expenditures.
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
Letter 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 Series A Notes pursuant to the Purchase
Agreement, dated April 20, 1998 (the "Purchase Agreement"), between the Company
and the Initial Purchasers, the Initial Purchasers became entitled to the
benefits of 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 April 24, 1998, the date the Series A Notes
were issued (the "Issue Date"), (b) cause such registration statement to become
effective under the Securities Act within 90 days of the Issue Date, (c) keep
such registration statement effective until the closing of the Exchange Offer
and (d) cause the 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 Series
A Notes the opportunity to exchange any and all of the outstanding Series A
Notes held by such Holder for Exchange Notes in an aggregate principal amount
equal to the aggregate principal amount of Series A 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 the obligations of the Company under the Registration Rights Agreement
described above. In such event, any Series A Notes that are not tendered in the
Exchange Offer or not accepted for exchange by the Company under the terms of
the Exchange Offer would remain outstanding and would continue to accrue
interest, but would not retain any rights under the Registration Rights
Agreement. Holders of Series A Notes seeking liquidity in their investment would
have to register the Series A Notes, or otherwise transfer the Series A Notes
pursuant to an exemption, under applicable 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 Series A 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 Series A Notes, the principal
amount of Series A Notes tendered and exchanged in the Exchange Offer will
reduce the principal amount of Series A Notes outstanding. Following the
consummation of the Exchange Offer, Holders who did not tender their Series A
Notes generally will not have any further registration rights under the
Registration Rights Agreement, and such Series A Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the
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liquidity of the market for such Series A Notes could be adversely affected. 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
Series A 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 Series A Notes accepted in the Exchange Offer. Holders may tender
some or all of their Series A Notes pursuant to the Exchange Offer.
The form and terms of the Exchange Notes are the same as the form and terms
of the Series A Notes except that (i) the issuance of the Exchange Notes will
have been registered under the Securities Act and, therefore, the Exchange Notes
will not bear legends restricting the transfer thereof and (ii) the holders of
Exchange Notes generally will not be entitled to certain 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 Series A Notes and will be entitled to the benefits of the
Indenture.
Holders of Series A 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 Series A 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 Series A Notes for the purposes of receiving the Exchange Notes from the
Company and delivering Exchange Notes to such Holders.
If any tendered Series A 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 Series A Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders of Series A 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
Series A 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 , 1998,
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 Series A Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept
Series A 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,
24
<PAGE>
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 10 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 10 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 May 1 and
November 1 of each year at the rate of 8 1/2% per annum. The Exchange Notes will
bear interest from April 24, 1998, the date of issuance of the Series A Notes,
or the most recent interest payment date to which interest on such Series A
Notes has been paid, whichever is later. Accordingly, Holders of Series A Notes
that are accepted for exchange will not receive interest that is accrued but
unpaid on the Series A Notes at the time of tender, but such interest will be
payable in respect of the Exchange Notes delivered in exchange for such Series A
Notes on the first interest payment date after the Expiration Date.
PROCEDURES FOR TENDERING
Only a Holder of Series A Notes may tender such Series A 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 Series A 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 Series A 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 Series A 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 SERIES A 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 SERIES A 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 Series A 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 behalf of such beneficial holder.
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 the Series A Notes, either make appropriate
arrangements to register ownership of the Series A Notes in such holder's name
or
25
<PAGE>
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 Series A 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 Series A Notes listed therein, such Series A Notes must be
endorsed or accompanied by appropriate bond powers and a proxy which authorizes
such person to tender the Series A Notes on behalf of the registered holder, in
each case signed as the name of the registered holder or holders appears on the
Series A Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Series A 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
Series A Notes at the DTC for the purpose of facilitating the 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 Series A Notes by
causing the DTC to transfer such Series A Notes into the Exchange Agent's
account with respect to the Series A Notes in accordance with the DTC's
procedures for such transfer. Although delivery of the Series A 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 Series A Notes and withdrawal of the tendered
Series A 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 Series A Notes not properly tendered or any Series A 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 Series A 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 Series A 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 Series A Notes, nor shall any of them incur any
liability for failure to give such notification. Tenders of Series A Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Series A 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
26
<PAGE>
Holders of Series A 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 Series A Notes and (i) whose Series A Notes
are not immediately available, or (ii) who cannot deliver their Series A 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:
(i) the tender is made through an Eligible Institution;
(ii) 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 Series A Notes, the
certificate or registration number or numbers of such Series A Notes and the
principal amount of Series A 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 Series A Notes to be
tendered in proper form for transfer (or a confirmation of book-entry
transfer of such Series A 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
(iii) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Series A 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.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A 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 Series A 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 Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A Notes to be withdrawn (including the
certificate or registration number(s) and principal amount of such Series A
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 Series A Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee (as defined herein) register the transfer of such Series A
Notes into the name of the Depositor withdrawing the tender, (iv) specify the
name in which any such Series A 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 Series A 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 Series A 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 Series A Notes so withdrawn are validly rendered. Any Series A 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 Series A Notes may be retendered by following
27
<PAGE>
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
Series A Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Series A 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 Series A
Notes and return all tendered Series A Notes to the tendering Holders, (ii)
extend the Exchange Offer and retain all Series A Notes tendered prior to the
expiration of the Exchange Offer subject, however, to the rights of Holders to
withdraw such Series A Notes (see "--Withdrawals of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Series A 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 10 business days if the
Exchange Offer would otherwise expire during such five to 10 business-day
period.
EXCHANGE AGENT
U.S. Bank Trust National Association 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>
<S> <C> <C>
By Mail By Facsimile By Hand or Overnight
(registered or certified Transmission: Courier:
mail recommended): (612) 244-1537 180 East 5th Street
180 East 5th Street Saint Paul, MN 55101
Saint Paul, MN 55101 Attention:Specialized
Attention:Specialized Finance
Finance Fourth Floor Fourth Floor
</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
28
<PAGE>
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 Series A Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Series A 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 Series
A Notes tendered, or if tendered Series A 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 Series A 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 Series
A Notes, which is the aggregate principal amount of the Series A 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 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 Series A Notes, where such Series A 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
29
<PAGE>
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 Series A Notes who do not tender their Series A 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
Series A Notes for Exchange Notes will continue to hold the untendered Series A
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 Series A Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Series A
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 Series A Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a Qualified Institutional
Buyer (as defined in Rule 144A) 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 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 Series A 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 Series A Notes that are not tendered in the
Exchange Offer or to file a registration statement to permit resales of any
untendered Series A 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.
30
<PAGE>
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 Series A 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 Series A Note should
consult his, her or its own tax advisor as to the particular tax consequences of
exchanging such Holder's Series A 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 Series A 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 Series A Notes upon receipt
of the Exchange Notes, and ownership of the Exchange Notes will be considered a
continuation of ownership of the Series A 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 Series A Notes exchanged therefor. A Holder's holding period for the
Exchange Notes should include the Holder's holding period for the Series A 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
Series A Notes exchanged therefor.
See also "Description of Certain Federal Income Tax Consequences of an
Investment in the Exchange Notes."
USE OF PROCEEDS
There will be no net 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 Series A Notes were approximately $159.7 million. The Company
used the net proceeds from the offering of the Series A Notes to repay
outstanding borrowings under the Revolving Credit Facility, which may be
reborrowed for general corporate purposes. Since January 3, 1998, the Company
has increased the amount outstanding under the Revolving Credit Facility to
repay (i) approximately $106.3 million in principal amount of senior unsecured
indebtedness, including $30.0 million in principal amount of 8.38% senior notes
that were due 2006, $25.0 million in principal amount of 9.20% senior notes that
were due 2000, $15.0 million in principal amount of 10.00% senior notes that
were due 2001, $5.3 million in principal amount of 10.90% senior notes that were
due 2004, $23.0 million in principal amount of 8.54% senior notes that were due
2008 and $8.0 million in principal amount of 9.98% senior notes that were due
2002 (collectively, the "Senior Notes"), and (ii) approximately $9.4 million of
related prepayment premiums (together with the Senior Notes, the "Prepayments").
See "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of Certain Other
Indebtedness."
31
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
28, 1998 (i) on an actual basis and (ii) as adjusted to give effect to the
offering of the Series A Notes and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and the Company's Consolidated Financial
Statements and the related notes thereto included elsewhere in this Offering
Memorandum.
<TABLE>
<CAPTION>
AS OF MARCH 28, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term notes payable to banks........................................................ $16,155 $16,155
---------- -----------
---------- -----------
Long-term liabilities, including current portion (a):
Brinson Trust Company Master Note (b).................................................. $65,000 $65,000
Revolving Credit Facility (b).......................................................... 249,000 89,300
8.38% Senior Notes..................................................................... -- --
8.54% Senior Notes..................................................................... -- --
9.20% Senior Notes..................................................................... -- --
9.55% Senior Notes..................................................................... 1,250 1,250
9.98% Senior Notes..................................................................... -- --
10.00% Senior Notes.................................................................... -- --
10.90% Senior Notes.................................................................... -- --
Industrial development bonds........................................................... 4,220 4,220
Mortgage loans......................................................................... 5,833 5,833
Capitalized lease obligations.......................................................... 39,726 39,726
Series A Notes......................................................................... -- 165,000
---------- -----------
Total long-term liabilities.......................................................... 365,029 370,329
Total stockholders' equity (c)........................................................... 220,970 220,970
---------- -----------
Total capitalization................................................................. $585,999 $591,299
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(a) For information regarding the Company's long-term liabilities, see Note 5 of
Notes to Consolidated Financial Statements.
(b) The Company has an aggregate of $510.0 million of borrowing availability,
subject to the satisfaction of certain conditions, under the $350.0 million
Revolving Credit Facility and under the $160.0 million of Other Bank Credit
Facilities (which include facilities with Brinson Trust Company and Norwest
Bank Minnesota, N.A.).
(c) Reflects approximately $9.5 million of prepayment premiums incurred on March
28, 1998 in connection with the Prepayments and the write-off of deferred
financing costs related thereto, net of tax benefits.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data of the
Company. The annual historical data have been derived from the Company's
Consolidated Financial Statements. The summary consolidated financial data for
the fiscal quarters ended March 28, 1998 and March 22, 1997 are derived from the
Unaudited Consolidated Financial Statements of the Company included elsewhere in
this Prospectus. Such Unaudited 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 condition and results of operations of the Company for such periods
and as of such dates. The 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 Financial Statements of the
Company and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED YEAR ENDED (A)
------------------------ ------------------------------------------------------------------
MARCH 28, MARCH 22, JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1,
1998 1997 1998 1996 1995 1994 1994
----------- ----------- ----------- ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues................... $ 937,101 $ 947,832 $4,391,602 $3,375,485 $2,888,836 $2,832,000 $2,723,535
Cost of sales.................... 820,360 825,189 3,826,377 2,932,709 2,469,841 2,410,292 2,325,249
----------- ----------- ----------- ------------ ------------ ------------ -----------
Gross profit..................... 116,741 122,643 565,225 442,776 418,995 421,708 398,286
Selling, general and
administrative, and other
operating expenses (b)......... 94,310 99,158 453,645 359,456 350,201 352,683 332,349
Special charges (c).............. -- -- 31,272 -- -- -- --
Depreciation and amortization.... 11,078 10,905 47,697 34,759 29,406 31,831 29,145
Interest expense................. 6,860 7,321 32,845 14,894 10,793 11,384 10,114
----------- ----------- ----------- ------------ ------------ ------------ -----------
Income before income taxes and
extraordinary charge........... 4,493 5,259 (234) 33,667 28,595 25,810 26,678
Income taxes..................... 1,865 2,203 994 13,635 11,181 10,330 10,804
Extraordinary charge (d)......... (5,569) -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------ -----------
Net income (loss)................ $(2,941) $3,056 $(1,228 ) $20,032 $17,414 $15,480 $15,874
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
Net income (loss) per share:
Basic.......................... (.26 ) .27 (.11 ) 1.83 1.60 1.42 1.46
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
Diluted........................ (.26 ) .27 (.11 ) 1.81 1.60 1.42 1.46
----------- ----------- ----------- ------------ ------------ ------------ -----------
----------- ----------- ----------- ------------ ------------ ------------ -----------
BALANCE SHEET DATA:
Working capital.................. $186,114 $247,394 $199,931 $228,508 $104,002 $89,457 $79,904
Total assets..................... 912,423 935,806 904,883 945,477 514,260 531,604 521,654
Total debt, including capitalized
leases......................... 381,185 433,527 383,270 427,617 95,889 143,045 140,167
Stockholders' equity............. 220,970 234,566 225,618 232,861 215,313 206,269 199,264
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges (e).................... 1.46 x 1.53 x 1.00 x 2.34 x 2.49 x 2.28 x 2.35 x
Capital expenditures (f)......... $13,474 $7,939 $67,725 $51,333 $33,264 $34,965 $36,382
</TABLE>
- ------------------------------
(a) Fiscal year operating results include 52 weeks for each year except fiscal
1997, which includes 53 weeks.
(b) Includes expenses incurred in connection with HORIZONS estimated to be $1.8
million in the first quarter of fiscal 1998, $5.5 million for fiscal 1997
and $1.6 million for fiscal 1996. See "Business -- Information Systems."
(c) Includes $14.5 million for the consolidation of selected warehouses, $2.5
million of integration costs associated with the acquisition of the business
and assets of United-A.G. Cooperative, Inc. in Omaha, Nebraska, $5.2 million
from closing or consolidating underperforming retail stores, a $5.4 million
asset impairment charge relating to seven retail stores, a $1.0 million
asset impairment charge relating to the Company's produce marketing
operations, a $0.9 million write-off of current systems software being
replaced by HORIZONS and a $0.6 million loss relating to the sale of the
Company's investment in a Hungarian food wholesaler.
(d) Reflects prepayment premiums from early extinguishment of debt, net of
income tax benefits. See "Use of Proceeds."
(e) For purposes of computing the ratios, earnings represent income 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.
(f) Includes approximately $5.8 million, $2.1 million, $20.0 million and $8.1
million of capital expenditures incurred in connection with HORIZONS in the
first quarter of fiscal 1998, the first quarter of fiscal 1997, fiscal 1997
and fiscal 1996, respectively.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE COMPANY'S RESULTS OF OPERATIONS AND
FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS REGISTRATION STATEMENT.
GENERAL
Nash Finch Company, organized in 1921 as the successor to a business founded
in 1885, is engaged in the wholesale and retail distribution of groceries and
related products primarily in the Midwestern and Southeastern regions of the
United States.
In January 1996, the Company acquired substantially all of the business and
assets of Military Distributors of Virginia, Inc. ("MDV"), a Virginia
corporation based in Norfolk, Virginia. MDV was engaged in the business of
distributing groceries and related products to military commissaries in the
eastern United States and Europe. The operations of MDV have been consolidated
with the Company's existing military distribution operations in Baltimore,
Maryland, and Chesapeake, Virginia, into a single military division with
distribution centers in Norfolk and Baltimore.
In July 1996, the Company acquired T. J. Morris Company ("T. J. Morris"), a
Georgia-based grocery wholesaler. Following the acquisition of T. J. Morris, the
Company closed its distribution center in Macon, Georgia and consolidated its
operations with the T. J. Morris warehouse in Statesboro, Georgia.
In November 1996, the Company completed the acquisition of all of the
outstanding shares of capital stock of Super Food based in Dayton, Ohio. Super
Food was incorporated in 1957 and, prior to the acquisition by the Company, was
ranked as the 14th largest grocery wholesaler in the United States, with sales
for its fiscal year ended August 31, 1996 of approximately $1.2 billion. Super
Food services independent stores, including IGA stores, across six states,
including primarily Ohio, Michigan and Kentucky. Super Food had four
distribution centers located in Bellefontaine, Ohio, Cincinnati, Ohio,
Bridgeport, Michigan, and Lexington, Kentucky, each providing a full line of
groceries and related products, other than produce. The Company closed the
Lexington distribution center and consolidated its operations with Super Food's
Cincinnati, Ohio and the Company's Bluefield, Virginia distribution centers in
March 1998. The distribution center in Bellefontaine, Ohio also has a portion of
its space dedicated to distributing general merchandise to Super Food's other
distribution centers, the Company's distribution centers in the Southeast and to
outside customers. Since the completion of the acquisition, the Company has
been, and continues to be, engaged in the process of coordinating the
distribution operations of Super Food with existing distribution operations of
the Company, addressing accounting system and control issues raised by the
integration of Super Food's financial reporting systems with those of the
Company and consolidating the general and administrative functions of Super Food
with the general and administrative functions of the Company in Edina,
Minnesota.
In June 1997, the Company acquired the assets of United-A.G. Cooperative,
Inc. ("United-A.G"), a cooperative based in Omaha, Nebraska. The Company
subsequently consolidated the operations of the Company's Lincoln, Nebraska
distribution center with the United-A.G. distribution center in Omaha and has
closed the Lincoln distribution center and intends to sell the property.
34
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Q1 Q1
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenues..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin....................................... 12.5 12.9 12.9 13.1 14.5
Selling, general and administrative, and other
operating expenses............................... 10.1 10.5 10.3 10.7 12.1
Special charges.................................... -- -- 0.7 -- --
Depreciation and amortization...................... 1.2 1.2 1.1 1.0 1.0
Interest expense................................... 0.7 0.8 0.7 0.4 0.4
Earnings before income taxes and extraordinary
charge........................................... 0.5 0.6 -- 1.0 1.0
Income taxes....................................... 0.2 0.2 -- 0.4 0.4
Net earnings (loss)................................ (0.3) 0.3 -- 0.6 0.6
</TABLE>
REVENUES
Total revenues for the first quarter 1998 were $937.1 million compared to
$947.8 million last year, a decrease of 1.1%. The decline related to both the
wholesale and retail segments of the Company.
Although wholesale revenues for the quarter were positively impacted by
sales resulting from the acquisition of the business and assets of United-A.G.
in June 1997, overall wholesale segment revenues declined. Lower revenues were
attributed to the planned consolidation of a distribution center in Lexington,
Kentucky, and soft market conditions in certain areas of the Midwest. Also, the
military division reported lower revenues compared to last year, when such
revenues were exceptionally high. This reflected reduced sales to European
commissaries as well as somewhat lower sales by military commissaries along the
East Coast.
Retail segment revenues were impacted by the closing or sale of 12
under-performing stores since the first quarter of fiscal 1997. Same store sales
declined 1.2% as a result of continuing competitive market conditions in several
market areas in the upper Midwest.
Total revenues increased 30.1% during fiscal 1997 to $4.392 billion compared
to $3.375 billion in 1996 and $2.889 billion in 1995. The increase in 1997 is
largely attributed to the acquisition of Super Food, which took place during
fiscal 1996 (see Note 2 of Notes to Consolidated Financial Statements), the
addition of new independent retail accounts and an additional week of operations
in 1997.
Wholesale segment revenues increased 41.9% to $3.503 billion from $2.469
billion in 1996, primarily due to the acquisitions of Super Food and T. J.
Morris in 1996 and the business and certain assets of United-A.G. in fiscal
1997. Wholesale revenues include an additional week of business and reflect a
full year's volume from Sunshine Food Markets, a seven-store chain which the
Company began servicing in November 1996, following its acquisition by a joint
venture, 50% of which is owned by the Company. Fiscal 1996 revenues increased
25.4% over 1995 because of the expansion of business from acquisitions, in
particular MDV which occurred in January 1996.
Retail segment revenues declined 3.3% from $850.4 million in fiscal 1996 to
$822.2 million in 1997. The decline is attributed to a net reduction of nine
stores. During the year, the Company closed eight under-performing stores, sold
four other units to non-affiliated retailers and opened three stores to
strengthen existing market areas in South Dakota and North Carolina. Same store
sales, expressed on an equivalent 52-week basis, declined 0.9% compared to last
year. This decline is indicative of competitive market conditions in certain
market areas and little or no food price inflation. Retail revenues during 1996
decreased 1.1% from 1995, again due to the closing or selling of stores not
meeting performance expectations.
35
<PAGE>
GROSS MARGINS
Gross margins for the first quarter of 1998 were 12.5% compared to 12.9%
last year. The decline is partially attributed to the growing proportion of
lower margin wholesale business. During the quarter, wholesale segment business
represented 81.3% of the Company's consolidated revenues compared to 79.9% for
the same period last year. Food price deflation during the period resulted in a
LIFO credit of $.5 million compared to $.25 million last year. Retail margins
were flat compared to last year. Gains in dry grocery were offset by greater
promotional activities in the perishables departments, primarily produce and
dairy products. Margins compared to last year were also negatively affected by
the timing of religious holidays which occurred later in the second quarter this
year.
Gross margins were 12.9% in 1997, compared to 13.1% in 1996 and 14.5% in
1995. The decline over the three-year period results from the growth of
wholesale revenues which achieve lower margins than retail. Wholesale operations
represented 80.0% of combined segment revenues in 1997, compared to 73.3% and
68.4% in 1996 and 1995, respectively. During 1997, wholesale margins increased
as a result of three initiatives: (i) regionalizing procurement functions for
the Company's Midwest and Southeast distribution centers, (ii) implementing more
efficient logistical systems for handling of variety or specialty food products
through the Company's distribution centers, and (iii) improving coordination
with suppliers to optimize ordering and delivery of product. These initiatives
have contributed to improved operating efficiencies and lower product costs.
Retail margins for the year were flat. Improvements which resulted from a
continued trend of sales of higher margin prepared foods, specialty products and
services were offset by competitive pricing pressures which continued to
intensify in certain market areas.
Margins for fiscal 1995 reflect a greater proportion of retail segment
business which achieves higher margins.
OPERATING EXPENSES
Operating expenses for the quarter as a percent of revenues were 10.1%
compared to 10.5% last year. Expense levels continue to be positively affected
by the increased wholesale business, which operates at lower expense levels than
retail. The Company changed accounting procedures when it adopted Statement of
Position (SOP) 98-1 which resulted in $1.5 million of internal development costs
related to the HORIZONS project (described below) being capitalized during the
quarter. Previously these costs had been expensed as incurred.
During the quarter, the Company continued to execute its strategic plan to
consolidate selected warehouses by closing its distribution center in Lexington,
Kentucky, and transferring a substantial portion of that facility's volume to
the Company's Cincinnati, Ohio and Bluefield, Virginia distribution centers.
Although costs associated with the closing had been provided for through the
special charges recorded in 1997, certain expenses totaling approximately $.7
million associated with transferring the business were incurred during the
quarter. Some unaccrued expenses may continue until shutdown is complete, but
these are not expected to have a material impact on the second quarter.
Selling, general and administrative expenses as a percent of total revenues
were 10.3% in 1997 compared to 10.7% in 1996 and 12.1% in 1995. The decline in
expense levels as a percent of revenues is due to the increasing proportion of
wholesale business which operates at lower expense levels than retail.
For fiscal 1997, operating expenses includes costs associated with a project
involving new business information systems technology, which the Company has
named HORIZONS. Although the project began in fiscal 1996, incremental expenses
associated with HORIZONS were of greater significance throughout 1997 as costs
associated with system design, software configuration and installation of
hardware across the Company were incurred. Operating expenses related to the
Company's management information systems were $3.2 million higher in 1997
compared to 1996, substantially all of which related to HORIZONS. This
36
<PAGE>
incremental expenditure is expected to continue through 1998 and into 1999 as
the Company implements HORIZONS in substantially all operating units and trains
associates in the optimal use of the system. Because HORIZONS is anticipated to
become an integral part of the future of the Company's business, incremental
technology-related spending is anticipated to continue beyond 1999 although at a
lesser rate.
The Company expects benefits from the project to begin to accrue as the
system becomes operational unit by unit, and to reach more significant levels
beyond 1999 when the system is in place in substantially all operating units.
The project represents a major strategic investment for the Company's future and
is expected to provide greater flexibility to ultimately change business
processes, thereby improving efficiency and effectiveness.
Bad debt expense in 1997 was $5.1 million compared to $1.9 million in 1996.
The increase is attributed to maintaining adequate reserve levels consistent
with the growth, through acquisition, of customer receivables. Fiscal 1995
expense of $4.0 million included additional provisions primarily for grower
accounts and notes at the Company's produce marketing subsidiary.
SPECIAL CHARGES
During 1997, the Company accelerated its strategic plan relative to
strengthening its competitive position for the future. Coincident with the
implementation of the plan, the Company recorded special charges, totaling $31.3
million, during the third quarter relating to all three operating segments of
its business.
The aggregate special charges include $14.5 million for the consolidation of
selected warehouses. This charge contains provisions for non-cancelable lease
obligations, expected losses on disposals of tangible assets, and other
continuing occupancy costs. Also included are employee severance costs
consistent with existing practices and the unamortized portion of goodwill for
one of the locations.
Also, related to wholesale operations, the special charges include $2.5
million of integration costs, incurred in the third quarter, associated with the
acquisition of the business and certain assets of United-A.G. early in the third
quarter. These expenses resulted from incremental labor costs due to a
substantial turnover in workforce, training and other start-up activities.
Stabilization of the workforce improved substantially during the fourth quarter,
lowering expenses from levels experienced just after the acquisition.
In retail operations, the strategic plan involves the closing or
consolidation of fourteen, primarily leased stores. The special charges include
a $5.2 million provision for the continuing non-cancelable lease obligations,
anticipated losses on disposals of tangible assets, abandonment of certain
leaseholds and the write-off of intangibles. The time frame for individual store
closings will vary but should be completed by the first quarter of fiscal 1999.
In some instances, closed stores are expected to be consolidated with other
retail locations in the same relative market area, thereby minimizing the loss
of wholesale volume.
Continued operating losses through the dates of closing are unpredictable
and were not included in the special charges. For 1997, the retail units
included in the provision had aggregate sales and pretax losses of $82.9 million
and $2.7 million, respectively, compared with $88.3 million and $1.8 million for
1996.
The aggregate special charges contain a provision of $5.4 million for asset
impairment of seven retail stores. Declining market share due to increasing
competition, deterioration of operating performance in the third quarter, and
forecasted future results that were less than previously planned, were the
factors leading to the impairment determination. The impaired assets covered by
the charge primarily include real estate, leasehold improvements and, to a
lesser extent, goodwill related to two of the stores.
37
<PAGE>
An asset impairment charge of $1.0 million relating to agricultural assets
was also recorded against several farming operations of the Company's produce
marketing subsidiary. The impairment determination was based on recent downturns
in the market for certain varieties of fruit. The impairment resulted from
anticipated future operating losses and inadequate projected cash flows from
agricultural production of these products.
Other special charges aggregating $2.8 million consist primarily of $0.9
million related to the abandonment of current system software which is being
replaced by the Company's HORIZONS project, and a loss of $0.6 million realized
on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a
Hungarian food wholesaler. Negotiations for the sale were substantially
completed during the third quarter, and the transaction was completed in the
fourth quarter. The remaining special charges relate principally to writing down
idle real estate held for resale to current market values.
The consolidations of wholesale and retail operations, as well as the
impairment adjustment to the assets identified, will favorably impact earnings
in the future due to reduced depreciation and amortization expenses and the
elimination of losses from certain affected operations. However, such amounts
are expected to be substantially offset by continuing costs related to HORIZONS.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased 1.6% in the first quarter of
1998 compared to last year. The increase reflects capital additions placed in
service since last year, offset by the reduction in depreciable assets resulting
from the sale of retail stores, and lower depreciation resulting from the write
down of impaired assets recorded as part of the special charges in 1997.
Amortization of goodwill and other intangibles for the current and prior year
quarter was $1.5 million. Depreciation expense is expected to increase during
1998 as implementation of HORIZONS continues, and greater portions of the
developed software are ready for use.
Depreciation and amortization expense increased 37.2% from 1996 to $47.7
million in 1997. The increase was primarily due to a full year of amortization
of goodwill and depreciation of property, plant and equipment associated with
acquisition of Super Food which occurred in 1996.
In addition, capital expenditures related to the HORIZONS project resulted
in increased depreciation expense of $2.0 million compared to last year. The
increase in 1996 compared to 1995 is the result of acquisitions occurring in
1996, partially offset by lower depreciation expenses resulting from sale or
closing of several retail stores.
INTEREST EXPENSE
Interest expense decreased from $7.3 million in the prior year quarter, to
$6.9 million this year, a decline of 6.3%. The reduction is attributable to
lower debt levels brought about by the sale of receivables at the end of 1997
and improved asset management. While the Company reduced its long-term borrowing
rates through refinancing, interest expense is expected to increase because a
greater portion of total debt is now based on a fixed interest rate which is
higher than the revolving debt rate it replaced.
Interest expense increased from $14.9 million in 1996 to $32.8 million in
1997 largely due to the full year debt costs related to financing the Super Food
acquisition in November 1996. The acquisition of the business and certain assets
of United-A.G. also contributed to higher interest expense in 1997. Interest
expense as a percent of revenues was 0.75%, 0.44% and 0.37% for 1997, 1996 and
1995, respectively.
The increase in interest expense in 1996 compared to 1995 was primarily due
to financing the acquisition of MDV early in 1996.
38
<PAGE>
EARNINGS (LOSS) BEFORE INCOME TAXES
Earnings before extraordinary charge were $2.6 million or $.23 per share for
the first quarter of 1998, compared to $3.1 million or $.27 per share last year.
The change in accounting for direct software development costs resulted in an
after tax benefit of $.8 million, or $.08 per share. Conversely, costs
associated with the transfer of business from Lexington, Kentucky to other
facilities adversely affected after tax earnings by $.4 million, or $.04 per
share.
In conjunction with the offering of the Series A Notes, the Company prepaid
$106.3 million of senior notes, and paid prepayment premiums and wrote off
related deferred financing costs totaling $9.5 million, all with drawings under
the Company's revolving credit facility. This transaction resulted in an
extraordinary charge of $5.6 million or $.49 per share after income tax benefits
of $4.0 million in the first quarter of 1998.
Including the special charges, the Company reported a pretax loss of
$234,000 for 1997 compared to pretax earnings of $33.7 million in 1996 and $28.6
million in 1995. Each segment of the Company's business was negatively affected
by these charges (see Note 14 of Notes to Consolidated Financial Statements).
Operating profit of $26.2 million in 1997 declined 44.1% from $46.9 million in
1996, while 1996 improved 28.2% compared to $36.6 million in 1995.
Excluding special charges, wholesale segment operating profit would have
been $50.8 million, or 1.45% of segment sales and other operating revenues,
compared to $37.1 million, or 1.50% of such revenues a year ago. The lower
margin reflects a decline in earnings as a percent of revenues for the existing
and newly acquired wholesale operations, where independent retail customers were
affected by a weak sales environment, somewhat offset by increases in earnings
contributions of the military division.
Retail segment operating profit before special charges would have been $5.8
million compared to $7.7 million last year. The decline resulted from
competitive pricing pressures in certain markets throughout the year, and the
loss of sales volume due to the sale or closure of certain underperforming
stores.
Nash-DeCamp Company, the Company's produce marketing subsidiary, would have
reported operating profit of $934,000 before special charges in 1997, compared
to $2.1 million and $2.4 million in 1996 and 1995, respectively. The weak
performance resulted from poor market prices caused by a surplus of available
product, particularly tree fruit.
INCOME TAXES
The effective tax rate for 1998 is estimated at 41.5%, compared to 41.9% in
1997. The effective income tax rate for 1997 is influenced by a number of
factors that do not allow for a meaningful comparison to prior years. The tax
provision substantially results from the nondeductibility of goodwill relating
to the acquisitions of Super Food and T. J. Morris, partially offset by other
items as shown in tax rate tables in Note 6 of Notes to Consolidated Financial
Statements.
YEAR 2000 COMPLIANCE
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the Year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company uses a significant number of computer software programs and
embedded operating systems that are essential to its business. The Company's
resolution to the Year 2000 issue is substantially incorporated in the system
design of the HORIZONS project. In addition, since all segments of the Company
39
<PAGE>
will not be initially impacted by HORIZONS, the Company has been actively
engaged in a process designed to mitigate any detrimental effects from the Year
2000 to any of these segments.
The Company has also initiated communications with its significant suppliers
and large customers with whom the Company's systems interface, exchange data or
are dependent upon, for the purpose of coordinating efforts to minimize its
vulnerability resulting from third parties' failure to resolve their own Year
2000 issues. However, there can be no guarantee that the systems of such third
parties will be timely corrected and would not have an adverse effect on the
Company's system. The Company expects to be completed with Year 2000 compliance
in mid-1999 and believes that with the HORIZONS project and modifications of its
existing software and systems, Year 2000 compliance will not pose significant
operating problems. However, the Company's business, results of operations or
financial condition could be adversely affected by the failure of its system, or
others' systems, to operate properly beyond 1999. Wherever possible, the Company
will be developing and executing contingency plans designed to allow continued
operation in the event of failure of the Company's or other third party systems.
Costs associated with a substantial portion of Year 2000 compliance coincide
with the new software and system design of the HORIZONS project. The cost of
Year 2000 compliance for business operations not affected by HORIZONS is not
expected to have a material effect on results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital needs through a
combination of internal and external sources. These sources include cash flow
from operations, short-term bank borrowings, various types of long-term debt,
lease and equity financing.
Operating activities generated positive net cash flows of $27.1 million
during the first quarter of 1998 compared to $5.0 million a year ago. The
increase is primarily due to higher accounts payable and accrued expenses and
lower accounts receivable. Working capital was $186.1 million at the end of the
quarter, a reduction of $13.8 million during the quarter. The current ratio
decreased from 1.68 at the end of fiscal 1997 to 1.59 at the end of the first
quarter.
At March 28, 1998, the Company had $16.2 million in short-term debt compared
to $11.3 million at the end of 1997.
As part of a plan to extend the maturity of the Company's outstanding
indebtedness and to provide the Company with greater financial and operating
flexibility, on March 27, 1998, the Company prepaid approximately $106.3 million
of Senior Notes. The Prepayments (including related prepayment premiums of $9.4
million) were financed with borrowings under the Revolving Credit Facility. The
net proceeds from the issuance of the Series A Notes were used to reduce such
borrowings, effectively extending the maturity of the Company's outstanding
indebtedness.
Other transactions affecting liquidity during the quarter include capital
expenditures of $13.4 million, of which approximately $4.0 million related to
HORIZONS, and payment of a cash dividend of $.18 per share on March 13, 1998 to
shareholders of record on February 27, 1998.
Cash provided from operating activities was $87.7 million in 1997 compared
to $32.9 million in 1996. The increase is attributed to the improvements in
operating profit before special charges and depreciation and amortization
expenses.
Working capital at January 3, 1998 declined to $199.9 million compared to
$228.5 million at the end of 1996, reflecting the reduction in current assets.
The current ratio was 1.68 in 1997 compared to 1.77 in 1996.
At January 3, 1998, the Company had $11.3 million in short-term debt
compared to $16.2 million at fiscal year-end 1996. As of January 3, 1998, the
Company had uncommitted lines of credit totaling $25.0 million with two banks,
under which a total of $13.7 million was unused. The Revolving Credit
40
<PAGE>
Facility provides for borrowings of up to $360.0 million, under which a total of
$204.0 million was outstanding at year-end. An agreement with a trust company
provides for borrowings of up to $150.0 million, under which $10.0 million was
borrowed at year-end. During the year, the Company utilized the existing
revolving agreements to finance the acquisition of United-A.G. and capital
outlays related to HORIZONS.
During fiscal 1997, the Company provided financial assistance in the form of
secured loans totaling $18.8 million to new or existing independent retailers.
These loans are generally used to maintain and expand their businesses. In
addition, the Company sold $37.0 million of trade accounts receivable and used
proceeds from the sale to reduce long-term debt.
Of the $31.3 million pretax special charges, approximately $13.6 million
involve cash outflows, while the balance are non-cash. On an after tax basis,
the cash impact is estimated to be $8.5 million, to be funded primarily from
internally generated funds.
Capital projects designed to maintain operating capacity, expand operations
or improve efficiency totaled $67.7 million in 1997 compared to $51.3 million in
1996. Included in 1997 and 1996 expenditures are approximately $20.0 million and
$8.1 million, respectively, related to the HORIZONS project. Total cash outlay
for the design, installation of, and training for HORIZONS is projected to be
about $76 million over the period of 1996 through 2004. Approximately half of
such amount had been expended as of January 3, 1998. Of the $76 million, $58.7
million is expected to be capitalized. A majority of the remaining projected
capital expenditures relating to HORIZONS are expected to be made in 1998.
Subsequent to the completion of the offering of the Series A Notes and the
application of the net proceeds thereof, the Company will continue to have
available approximately $339.2 million of additional borrowing capacity under
the Bank Credit Facilities. The Company believes that borrowings under the Bank
Credit Facilities, cash flow 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.
41
<PAGE>
BUSINESS
Nash Finch Company, organized in 1921 as the successor to a business founded
in 1885, is the third largest publicly traded wholesale food distributor in the
United States (based on 1997 estimates), serving primarily the Midwestern and
Southeastern regions of the United States. In addition, the Company operates 97
conventional and warehouse supermarkets in 13 states. The Company's wholesale
operations, which include 21 distribution centers serving approximately 2,250
affiliated and independent supermarkets, U.S. military commissaries and other
customers in approximately 30 states, accounted for 79.8% of the Company's total
revenues in fiscal 1997, while its retail operations accounted for 18.7%. In
fiscal 1997, the Company had total revenues of $4.4 billion and EBITDA (as
defined herein) of $113.1 million.
The Company's wholesale operations serve two primary markets: (i)
supermarkets (70.4% of wholesale revenues in fiscal 1997), where the Company
combines a wide offering of national brand and private label products with
comprehensive support services to develop strong relationships with customers;
and (ii) military commissaries (29.6% of wholesale revenues in fiscal 1997),
where the Company believes it is currently the largest distributor of groceries
and related products to such facilities in the United States. The Company's
broad product offering includes dry groceries, fresh fruits and vegetables,
frozen foods, fresh and processed meat products and dairy products, as well as a
wide variety of non-food products, including health and beauty care, tobacco,
paper products, cleaning supplies and small household items. Private label
products are branded primarily under the Our Family trademark, a long-standing
private label of the Company, and Fame, a trademark acquired in the acquisition
of Super Food in November 1996. The Company offers a wide range of support
services to its independent retailers to help them compete more effectively in
their markets and to build customer loyalty, including supermarket merchandising
support, accounting services, price management systems, retail technology
support, advertising and promotional programs, training and human resource
development services, market research and store development services.
The Company's retail stores, as well as many of the retail outlets supplied
by the Company's wholesale operations, are located primarily in small to
midsized markets and rural areas. The Company's retail operations consist of 66
conventional supermarkets, averaging approximately 23,300 square feet in size,
operating principally under the Sun Mart, Easter Foods and Food Folks trade
names; 27 warehouse stores, averaging approximately 42,900 square feet in size,
operating principally under the Econofoods trade name; and four combination
general merchandise/food stores averaging approximately 43,000 square feet in
size, operating under the Family Thrift Center trade name.
COMPANY STRENGTHS
LEADING WHOLESALE FOOD DISTRIBUTOR. Through recent acquisitions, the
Company has become the third largest publicly traded wholesale food distributor
in the United States (based on 1997 estimates) with geographically dispersed
operations serving primarily the Midwestern and Southeastern regions of the
United States. The Company serves a diversified group of approximately 2,250
affiliated and independent supermarkets, U.S. military commissaries and other
customers, none of which accounted for more than 2.5% of the Company's total
revenues in fiscal 1997. The Company believes it is the largest wholesale
distributor of groceries and related products to military commissaries in the
United States. The Company derives increased purchasing power and economies of
scale from its large sales volume and distribution network.
INTEGRATED AND EFFICIENT DISTRIBUTION NETWORK. The Company has and
continues to develop a highly integrated and efficient distribution network by
realizing synergies from acquisitions and implementing innovative logistical
techniques. The Company continues to pursue opportunities to increase volume
through strategic acquisitions and to realize greater efficiencies in its
distribution network through consolidation of distribution centers. The Company
believes it is an industry leader in the development of advanced information
systems and the application of innovative logistics, such as port of entry
purchasing
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in full truck load quantities, cross docking and redistribution, which have
resulted in price and freight savings and operating efficiencies.
EXPERTISE IN PRIVATE LABEL PRODUCTS AND PERISHABLES. The Company has
developed extensive expertise in marketing and distributing a wide range of
private label products, including approximately 1,600 SKUs under the Our Family
private label and approximately 1,300 SKUs under the Fame private label. The
Company's private labels enjoy strong brand name recognition in the Company's
markets. Sales and transfers of private label products accounted for 9.8% of the
Company's non-military wholesale revenues in fiscal 1997. The Company has also
developed significant expertise in handling, marketing and distributing
perishables, including produce and dairy products. The Company's commitment to
distributing perishables enables it to provide a full spectrum of quality
products to customers. The Company believes that offering high quality private
label products and perishables provides it with certain competitive advantages
in attracting and retaining independent retailers and consumers. Private label
products and perishables generally result in higher margins than branded
products and other food categories.
STRONG RETAIL STORE BASE. The Company's 97 retail stores serve primarily
small to midsized markets and rural areas. The Company believes that
approximately 70% of the Company's stores are in markets where the Company is
first or second in market share. The Company believes its strong market share
positions result primarily from offering a variety of store formats and retail
concepts targeted to different geographical markets under several store names,
including Sun Mart, Easter Foods, Food Folks, Econofoods and Food Bonanza. In
addition, the Company believes its retail store base enhances the Company's
wholesale operations by enabling it to (i) better understand the needs of
independent retailers, thereby improving customer service; and (ii) test retail
concepts and innovations, including advertising and promotional programs, in the
Company's stores before they are rolled out to independent retailers. The
Company's retail stores are typically located close to distribution centers,
thereby creating certain operating efficiencies and logistical savings.
LEADING DISTRIBUTOR TO DOMESTIC MILITARY COMMISSARIES. The Company believes
that it is the largest wholesale distributor of groceries and related products
to domestic military commissaries. The Company's military distribution centers
also provide products for distribution to U.S. military commissaries in Europe
and to ships afloat. The Company serves as a third party distributor to
commissaries, contracting with a variety of food producers and other
manufacturers to procure and warehouse products for distribution to
commissaries. The Company's military distribution operations generally result in
higher net margins than the Company's civilian distribution operations due
primarily to lower operating expenses.
REPUTATION FOR SUPERIOR CUSTOMER SERVICE. The Company's 113 year operating
history, centered on the theme "CUSTOMER SATISFACTION IS ALWAYS FIRST!", has
resulted in strong relationships with long-standing customers. To further
enhance its reputation and strengthen customer relationships, the Company offers
a wide range of support services to customers to help them compete more
effectively in their markets, including supermarket merchandising support,
accounting services, price management systems, retail technology support,
advertising and promotional programs, training and human resource development
services, market research and store development services.
EXPERIENCED MANAGEMENT TEAM. The Company is led by a strong and experienced
executive management team, the members of which have on average 20 years with
the Company and 24 years of industry expertise across all facets of wholesale
distribution, marketing, merchandising and retail operations.
COMPANY STRATEGY
Management believes that the role of the distributor will continue to change
from the warehousing of goods toward a greater emphasis on the strategic
facilitation of goods and services for customers in a manner that provides
greater efficiencies. In addition the Company believes that food retailers will
be required to offer a wider variety of goods and services at attractive prices
to compete effectively.
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Accordingly, the Company's goals are to (i) profitably build the competitive
strength of the Company's wholesale customers by being a reliable cost-effective
provider of superior products and services, and (ii) achieve critical mass of
profitable Company retail stores in target markets. To achieve these goals, the
Company has adopted the following strategic initiatives:
COST SAVINGS AND VALUE ADDED INITIATIVES. The Company has implemented and
will continue to focus on a wide range of cost savings and value added
initiatives, including (i) maximizing the Company's substantial purchasing power
through centralized buying; (ii) consolidating operations and distribution
centers to achieve operating efficiencies and economies of scale; (iii) reducing
the Company's investment in working capital through strategic partnerships with
suppliers and more aggressive management of receivables; (iv) implementing
innovations in logistics and supply chain management to reduce procurement
costs, freight charges, inventory levels and delivery lead times; (v)
emphasizing greater cost consciousness among the Company's workforce; and (vi)
identifying under-performing assets and adopting an aggressive "fix, sell or
close" approach.
IMPLEMENTATION OF HORIZONS INFORMATION SYSTEM. The Company, working in
conjunction with SAP America and a number of other vendors and consultants, has
committed significant resources over the last two years to develop and implement
HORIZONS, a client server based enterprise management and financial information
system. The HORIZONS system will be a fully integrated and scalable system that
management believes will provide the Company with competitive advantages that
can be aggressively marketed to independent retailers. Implementation of the
HORIZONS system is scheduled to be substantially completed in 1999 and is
expected to provide (i) a solution to the Company's Year 2000 software issues,
(ii) greater flexibility for the changing business environment, (iii) greater
connectivity opportunities with customers and suppliers, (iv) the ability to
integrate and standardize information systems throughout the Company, (v) timely
and easy-to-use information, (vi) greater business process and workflow
efficiencies, and (vii) more powerful decision-making and analysis tools. To
parallel the development and implementation of the HORIZONS project, management
has led a cultural change and training initiative designed to prepare the
Company's workforce for changes in the industry and in the use of the HORIZONS
system to address these changes.
GROWTH THROUGH STRATEGIC ACQUISITIONS AND ALLIANCES. The Company has grown
significantly in recent years through strategic acquisitions that have (i)
enhanced the Company's purchasing power, (ii) expanded the Company's geographic
scope and breadth of product offering, (iii) increased the volume and efficiency
of several of the Company's distribution centers, (iv) significantly enhanced
the Company's presence in the military commissary market, and (v) added retail
stores in the Company's target markets. The Company will continue to strive to
achieve additional synergies through further integration of recent acquisitions.
In addition, the Company will continue to seek new opportunities for strategic
acquisitions and alliances that will provide a superior return on investment and
achieve one or more of the criteria described above.
STRENGTHEN RETAIL STORE BASE. The Company will continue to focus on
improving the profitability and contribution of the Company's retail store base
by investing to achieve critical mass and market dominance in the Company's key
retail markets, including seeking acquisition opportunities that provide
synergies, constructing new stores, remodeling and expanding existing stores and
remodeling, selling or closing underperforming stores. In the past two years,
the Company has acquired seven stores, remodeled 16 stores, sold seven stores
and closed 16 stores. In addition, the Company has and will continue to develop
and utilize a number of different retail formats in its retail stores. The
Company believes that multiple retail formats enable the Company to more
effectively respond to competition in the varied markets in which it operates.
Addressing each market individually has resulted in the strong market position
the Company enjoys in the majority of the Company's retail markets. Multiple
formats also allow the Company to test different concepts prior to extending
such concepts to independent retail customers.
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WHOLESALE OPERATIONS
The Company distributes and sells a full line of food products, including
dry groceries, fresh fruits and vegetables, frozen foods, fresh and processed
meat products and dairy products, and a variety of non-food products, including
health and beauty care, tobacco, paper products, cleaning supplies and small
household items. The Company primarily distributes and sells nationally
advertised brand products and a number of unbranded products (principally meats
and produce) purchased directly from various manufacturers, processors and
suppliers or through manufacturers' representatives and brokers. The Company
also distributes and sells private label products using the Company's own
trademarks, including principally the Our Family private label that the Company
has owned and developed over many years, and the Fame private label that the
Company acquired in the acquisition of Super Food. A wide variety of grocery,
dairy, packaged meat, frozen foods, health and beauty care products, paper and
household products, beverages, and other packaged products are manufactured or
processed by others for the Company and sold under the Company's private labels.
As of January 3, 1998, the Company distributed food and non-food products,
on a wholesale basis, to approximately 2,250 affiliated and independent
supermarkets, U.S. military commissaries and other customers. The Company's
wholesale customers are primarily self-service supermarkets that carry a wide
variety of grocery products, health and beauty care products and general
merchandise. Many stores also have one or more specialty departments such as
delicatessens, in-store bakeries, restaurants, pharmacies and flower shops.
Stores served by the Company's wholesale operations range in size from small
stores to large warehouse stores of over 100,000 square feet.
The Company offers to affiliated independent retailers a broad range of
services, including promotional, advertising and merchandising programs, the
installation of computerized ordering, receiving and scanning systems, the
establishment and supervision of computerized retail accounting, budgeting and
payroll systems, personnel management assistance and employee training, consumer
and market research, store development services and insurance programs. The
Company's retail counselors and other Company personnel advise and counsel
affiliated independent retailers, and directly provide many of the above
services. Separate charges are made for some of these services. Other
independent stores are charged for services on a negotiated basis. The Company
also provides retailers with marketing and store upgrade services, many of which
have been developed in connection with Company owned stores. For example, the
Company assists retailers in installing and operating delicatessens and other
specialty food sections. Rather than offering a single program for the services
it provides, the Company has developed multiple, flexible programs to serve the
needs of most affiliated independent retailers, whether rural or urban, large or
small.
The Company's assistance to affiliated independent retailers in store
development provides a means of continued growth for the Company through the
development of new retail store locations and the enlargement or remodeling of
existing retail stores. Services provided include site selection, marketing
studies, building design, store layout and equipment planning and procurement.
The Company assists wholesale customers in securing existing supermarkets that
are for sale from time to time in market areas served by the Company and,
occasionally, acquires existing stores for resale to wholesale customers.
The Company also provides financial assistance to its independent retailers
generally in connection with new store development and the upgrading or
expansion of existing stores. The Company makes secured loans to some of its
independent retailers, generally repayable over a period of five or seven years,
for inventories, store fixtures and equipment, working capital and store
improvements. Loans are secured by liens on inventory or equipment or both, by
personal guarantees and by other types of security. As of January 3, 1998, the
Company had approximately $39.0 million outstanding of such secured loans to 147
independent retailers. In addition, the Company may provide such assistance to
independent retailers by guarantying loans from financial institutions and
leases entered into directly with lessors. The Company
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also uses its credit strength to lease supermarket locations for sublease to
independent retailers, at rates that are at least as high as the rent paid by
the Company.
The Company currently distributes products from 21 distribution centers
located in Colorado, Georgia, Iowa, Kansas, Maryland, Michigan, Minnesota,
Nebraska (2), North Carolina (2), North Dakota (2), Ohio (3), South Dakota (2),
Virginia (2), and Wisconsin. The Company's distribution centers are located at
strategic points to efficiently serve Company owned stores, independent
customers and military commissaries. The distribution centers are equipped with
modern materials handling equipment for receiving, storing and shipping goods
and merchandise and are designed for high-volume operations at low unit costs.
Distribution centers serve as central sources of supply for Company owned
and independent stores, military commissaries and other institutional customers
within their operating areas. Generally, the distribution centers maintain
complete inventories containing most national brand grocery products sold in
supermarkets and a wide variety of high-volume private label items. In addition,
distribution centers provide full lines of perishables, including fresh meats
and poultry, fresh fruits and vegetables (except Super Food distribution
centers), dairy and delicatessen products and frozen foods. Health and beauty
care products, general merchandise and specialty grocery products are
distributed from a dedicated area of a distribution center located in
Bellefontaine, Ohio, and from the distribution center located in Sioux Falls,
South Dakota. Retailers order their inventory requirements at regular intervals
through direct linkage with the Company's computers. Deliveries are made
primarily by the Company's transportation fleet. The frequency of deliveries
varies, depending upon customer needs. The Company currently has a modern fleet
of approximately 500 tractors and 1,200 semi-trailers, most of which are owned
by the Company. In addition, many types of meats, dairy products, bakery and
other products are sold by the Company but are delivered by the suppliers
directly to retail food stores.
Virtually all of the Company's wholesale sales to independent retailers are
made on a market price-plus-fee and freight basis, with the fee based on the
type of commodity and quantity purchased. Selling prices are changed promptly,
based on the latest market information.
The Company distributes groceries and related products directly to military
commissaries in the U.S., and distribution centers also provide products for
distribution to U.S. military commissaries in Europe and to ships afloat. These
distribution services are provided primarily under contractual arrangements with
the manufacturers of those products. The Company provides storage, handling and
transportation services for the manufacturers and, as products ordered from the
Company by the commissaries are delivered to the commissaries, the Company
invoices the manufacturers for the cost of the merchandise delivered plus
negotiated fees.
RETAIL OPERATIONS
As of January 3, 1998, the Company owned and operated 97 retail outlets,
including 66 supermarkets, 27 warehouse stores and four combination general
merchandise/food stores. The Company has devoted considerable resources in
recent years to acquire, construct, enlarge and modernize its stores. By
constructing new stores or expanding existing stores, the Company seeks to add
either larger conventional supermarkets (at least 30,000 square feet) or
warehouse stores (at least 45,000 square feet), as appropriate. The Company's
stores use a number of automated systems to provide inventory control at
delivery and checkout points, reduce shrinkage and increase labor efficiency.
The Company operates 66 conventional supermarkets principally under the
names Sun Mart, Easter Foods and Food Folks. These stores, 12 of which the
Company owns (the remainder are leased), range in size up to approximately
46,000 square feet. These stores are primarily self-service supermarkets that
carry a wide variety of grocery products, health and beauty care products and
general merchandise. Many stores also have one or more specialty departments
such as delicatessens, in-store bakeries, restaurants, pharmacies and floral
departments.
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The Company operates 27 warehouse stores, principally under the name
Econofoods. These stores, six of which the Company owns (the remainder are
leased), range in size up to approximately 106,000 square feet. The Company's
warehouse stores offer a wide variety of high quality groceries, fresh fruits
and vegetables, dairy products, frozen foods, fresh fish, fresh and processed
meat and health and beauty care products, all at lower prices. Many have
specialty departments such as delicatessens, bakeries, pharmacies, banks and
floral and video departments. These stores appeal to quality and price-conscious
customers who want broad selection and availability of convenience foods, but
are willing, in some cases, to forgo standard supermarket services. The stores
offer lower prices due to increased business volume as well as the limited
services available.
The Company also operates four combination general merchandise/food stores
under the name Family Thrift Center. These stores, two of which are owned, range
in size up to approximately 60,000 square feet. In addition to traditional
supermarket food departments, these stores have expanded general merchandise and
health and beauty care products departments and pharmacies, and some also have
sit-down restaurants, full-service floral departments and book departments.
PRODUCE MARKETING OPERATIONS
Through a wholly owned subsidiary, Nash-DeCamp Company ("Nash-DeCamp"), the
Company grows, packs, ships and markets fresh fruits and vegetables from
locations in California and the countries of Chile and Mexico to customers in
the United States, Canada and overseas. For regulatory reasons, the amount of
business between Nash-DeCamp and the Company is limited. The Company owns and
operates three modern packing, shipping and/or cold storage facilities that ship
fresh grapes, plums, peaches, nectarines, apricots, pears, persimmons, kiwi
fruit and other products. The Company also acts as marketing agent for other
packers of fresh produce in California and in the countries of Chile and Mexico.
For the above services, the Company receives, in addition to a selling
commission, a fee for packing, handling and shipping produce. The Company also
owns vineyards and orchards for the production of table grapes, tree fruit, kiwi
and citrus.
INFORMATION SYSTEMS
The Company, working in conjunction with SAP America and a number of other
vendors and consultants, has committed substantial resources over the last two
years to the development and implementation of HORIZONS, a client server based
enterprise management and financial information system. The Company currently
expects to spend approximately $76 million between 1996 and 2004 on the design
and installation of, and training for, the HORIZONS project, approximately half
of which has been spent through the end of fiscal 1997. The HORIZONS system will
be a fully integrated and scalable system that management believes will provide
the Company with competitive advantages that can be aggressively marketed to
retail customers. Implementation of the HORIZONS system is scheduled to be
substantially completed in 1999, and is expected to provide (i) a solution to
the Company's Year 2000 software issues, (ii) greater flexibility for the
changing business environment, (iii) greater connectivity opportunities with
customers and suppliers; (iv) the ability to integrate and standardize
information systems throughout the Company, (v) timely and easy-to-use
information, (vi) greater business process and workflow efficiencies, and (vii)
more powerful decision-making and analysis tools. To parallel the development
and implementation of the HORIZONS project, management has led a cultural change
and training initiative designed to prepare the Company's workforce for changes
in the industry and in the use of the HORIZONS system to address these changes.
PROPERTIES
The principal executive offices of the Company are located in Edina,
Minnesota, and consist of approximately 68,000 square feet of office space in a
building owned by the Company. In addition to the executive offices, the Company
leases an additional 15,275 square feet of office space in Edina, Minnesota. The
locations and sizes of the Company's distribution centers, as of January 3,
1998, are listed below (all of
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which are owned, except as indicated). The distribution center facilities which
are leased have varying terms, all with remaining terms of less than 20 years.
<TABLE>
<CAPTION>
APPROX. SIZE
LOCATION (SQUARE FEET)
- ------------------------------------------------------------------ -------------
<S> <C>
Midwest/West:
Denver, Colorado(a)............................................. 335,800
Cedar Rapids, Iowa.............................................. 351,900
Liberal, Kansas................................................. 177,000
St. Cloud, Minnesota............................................ 329,000
Grand Island, Nebraska.......................................... 177,700
Omaha, Nebraska(a).............................................. 530,000
Lincoln, Nebraska(b)............................................ 226,300
Fargo, North Dakota............................................. 288,800
Minot, North Dakota............................................. 185,200
Rapid City, South Dakota........................................ 187,100
Sioux Falls, South Dakota(c).................................... 271,100
Appleton, Wisconsin............................................. 430,900
Southeast:
Statesboro, Georgia(a)(d)....................................... 287,800
Baltimore, Maryland(a).......................................... 350,500
Lumberton, North Carolina(a)(e)................................. 256,600
Rocky Mount, North Carolina(a).................................. 191,800
Bluefield, Virginia............................................. 186,400
Norfolk, Virginia(a)(f)......................................... 543,600
Super Food Services, Inc.:
Bellefontaine, Ohio(g).......................................... 863,000
Cincinnati, Ohio................................................ 445,600
Bridgeport, Michigan(a)......................................... 581,300
Lexington, Kentucky(a)(h)....................................... 334,700
-------------
Total Square Footage.............................................. 7,532,100
-------------
-------------
</TABLE>
- ------------------------
(a) Leased facility.
(b) The operations of the Lincoln distribution center have been consolidated
with the operations of the Company's distribution center in Omaha, Nebraska,
and the Company has closed the Lincoln distribution center and intends to
sell the property.
(c) Includes 79,300 square feet that are leased by the Company.
(d) Includes 46,400 square feet that are owned by the Company.
(e) Includes 16,100 square feet of produce warehouse space located in
Wilmington, North Carolina which is leased by the Company.
(f) Includes 52,800 square feet that are owned by the Company.
(g) Includes 197,000 square feet that are leased by the Company. General
Merchandise Services, an operating unit of Super Food, utilizes
approximately 487,800 square feet of the total space (owned and leased) for
the distribution of health and beauty care products, general merchandise and
specialty grocery products.
(h) The Company closed the Lexington distribution center in March 1998, having
consolidated its operations with the Cincinnati, Ohio and Bluefield,
Virginia distribution centers.
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The following table shows the number and aggregate size of Company operated
conventional supermarkets and warehouse stores at January 3, 1998:
<TABLE>
<S> <C>
Conventional Supermarkets:
Number of stores............................................... 66
Total square feet.............................................. 1,459,532
Warehouse Stores:
Number of stores............................................... 27
Total square feet.............................................. 1,168,875
Combination General Merchandise/Food:
Number of stores............................................... 4
Total square feet.............................................. 180,399
Totals:
Number of stores............................................... 97
Total square feet.............................................. 2,808,806
</TABLE>
Nash-DeCamp has executive offices comprising approximately 11,600 square
feet of leased space in an office building located in Visalia, California.
Nash-DeCamp owns and operates three packing, shipping and/or cold storage
facilities in California in connection with its produce marketing operations,
with total space of approximately 174,000 square feet. In addition to such
storage facilities, Nash-DeCamp also owns approximately 879 acres for the
production of table grapes, 40 acres for the production of kiwi fruit, 796 acres
for the production of peaches, plums, apricots and nectarines, 245 acres for the
production of citrus, and 194 acres of open ground for future development, all
in the San Joaquin Valley of California. Nash-DeCamp also leases 236 acres for
the production of tree fruit located in the San Joaquin Valley and, through a
99% owned Chilean subsidiary, approximately 740 acres in Chile for the
production of table grapes.
COMPETITION
All segments of the Company's business are highly competitive. The Company
competes directly at the wholesale level with a number of wholesalers that
supply independent retailers, including "cooperative" wholesalers that are owned
by their retail customers and "voluntary" wholesalers who, like the Company, are
not owned by their retail customers but sponsor a program under which
single-unit or multi-unit independent retailers may affiliate under a common
name. Certain of these competing wholesalers may also engage in distribution to
military commissaries. The Company also competes indirectly with the warehouse
and distribution operations of the large integrated chains, which consist of
single entities owning both wholesale and retail operations. At the wholesale
level, the principal methods of competition are price, quality, breadth and
availability of products offered, strength of private label brands offered,
schedules and reliability of deliveries and the range and quality of services
offered, such as store financing and use of store names, and the services
offered to manufacturers of products sold to military commissaries. The success
of the Company's wholesale business also depends upon the ability of its retail
store customers to compete successfully with other retail food stores.
The Company competes on the retail level in a fragmented market with many
organizations of various sizes, ranging from national chains and voluntary or
cooperative groups to local chains and privately owned unaffiliated stores.
Depending on the product and location involved, the principal methods of
competition at the retail level include price, quality and assortment, store
location and format, sales promotions, advertising, availability of parking,
hours of operation and store appeal.
The Company competes directly in its produce marketing operations with a
large number of other firms that pack, ship and market produce, and competes
indirectly with larger, integrated firms that grow,
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pack, ship and market produce. The principal methods of competition in this
segment are service provided to growers and the ability to sell produce at the
most favorable prices.
EMPLOYEES
As of January 3, 1998, the Company employed approximately 12,200 persons,
approximately 5,400 of which were employed on a part-time basis. All employees
are non-union, except approximately 774 employees in a variety of functions who
are unionized under various collective bargaining agreements. The Company
considers its employee relations to be good.
LEGAL PROCEEDINGS
The Company is a party to various litigation, claims and disputes, some of
which are for substantial amounts, arising in the ordinary course of its
business. While the ultimate effect of such actions cannot be predicted with
certainty, the Company expects that the outcome of these matters will not result
in a material adverse effect on its consolidated financial position or results
of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages and the
offices held as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------
<S> <C> <C>
Alfred N. Flaten(1)................. 63 Director, President and Chief Executive
Officer
William E. May, Jr.................. 49 Executive Vice President and Chief
Operating Officer
David J. Richards(2)................ 49 Vice President, Corporate Retail Stores
Norman R. Soland.................... 57 Vice President, Secretary and General
Counsel
Charles F. Ramsbacher............... 55 Vice President, Marketing
Clarence T. Walters................. 61 Vice President, Management Information
Systems
Steven L. Lumsden................... 52 Vice President, Warehouse and
Transportation
Gerald D. Maurice................... 64 Vice President, Store Development
Charles M. Seiler................... 50 Vice President, Corporate Retail
Operations
John R. Scherer..................... 47 Vice President and Chief Financial
Officer
Edgar F. Timberlake................. 50 Vice President, Human Resources
John M. McCurry..................... 49 Vice President, Independent Store
Operations
Thomas W. Struck.................... 47 Vice President, Supply Chain Management
Lawrence A. Wojtasiak............... 52 Controller
Suzanne S. Allen.................... 33 Treasurer
Carole F. Bitter.................... 52 Director
Richard A. Fisher................... 68 Director
Jerry L. Ford....................... 57 Director
Allister P. Graham.................. 61 Director
John H. Grunewald................... 61 Director
Richard G. Lareau................... 69 Director
Don E. Marsh........................ 60 Director
Donald R. Miller.................... 70 Director; Board Chair
Robert F. Nash...................... 64 Director
Jerome O. Rodysill.................. 69 Director
</TABLE>
- ------------------------
(1) Mr. Flaten has announced his retirement as a director and officer of the
Company effective as of June 1, 1998. The Board of Directors has elected Mr.
Ron Marshall (age 44) as President and Chief Executive Officer effective as
of June 1, 1998. The Board of Directors further intends to elect Mr.
Marshall to fill the vacancy on the Board of Directors following the
resignation of Mr. Flaten as of June 1, 1998.
(2) Mr. Richards resigned effective as of May 15, 1998.
There are no family relationships between or among any of the executive
officers or directors of the Company. The Company's directors are divided into
three classes of as nearly equal size as possible. The term of each class of
directors is three years, and the term of one class expires each year in
rotation. Executive officers of the Company are elected by the Board of
Directors for one-year terms, commencing with their election at the first
meeting of the Board of Directors immediately following the annual meeting of
stockholders and continuing until the next such meeting of the Board of
Directors.
Mr. Flaten has been a director of the Company since May 1990. He was elected
President in November 1991 and Chief Executive Officer in November 1994. He also
served as Chief Operating Officer from November 1991 to January 1998. Previously
he served as Executive Vice President, Sales and
51
<PAGE>
Operations from February 1991 to November 1991. Prior to that, Mr. Flaten was
employed by the Company in a variety of functions beginning in June 1961.
Mr. Marshall was elected by the Board of Directors to serve as President and
Chief Executive Officer and as a director effective as of June 1, 1998. Prior to
joining the Company, Mr. Marshall served as Executive Vice President and Chief
Financial Officer of Pathmark Stores, Inc., a grocery retailer serving the
mid-Atlantic states, since 1994. From 1991 through 1994, Mr. Marshall served as
Senior Vice President and Chief Financial Officer of Dart Group Corporation, a
retailer of groceries, auto parts and books. Prior to that, he was Vice
President and Chief Financial Officer of Barnes & Noble Bookstores, Inc.
Mr. May's election as Executive Vice President and Chief Operating Officer
was effective in January 1998. He previously served as Vice President, Strategic
Technology Programs and Marketing Services from July 1996 to January 1998, after
joining the Company in June 1996. He was previously employed by Spartan Stores,
Inc., a wholesale food distribution company, serving in various executive and
officer capacities from July 1988 to June 1996.
Mr. Richards was elected as Vice President, Corporate Retail Stores in July
1996. He previously served as operating Vice President, Southeast Division from
December 1994 to June 1996, when he assumed his current functional
responsibilities. Prior to joining the Company, he was employed by Scrivner,
Inc., a wholesale and retail food distribution company, serving as its Senior
Vice President, Store Development from July 1993 to August 1994 and its
Executive Vice President, Corporate Stores from January 1992 to July 1993.
Mr. Soland has served as Vice President, Secretary and General Counsel since
May 1988, and as Secretary and General Counsel since January 1986.
Mr. Ramsbacher has served as Vice President, Marketing since May 1991.
Mr. Walters has served as Vice President, Management Information Systems
since May 1988.
Mr. Lumsden has served as Vice President, Warehouse and Transportation since
May 1992.
Mr. Maurice was elected Vice President, Store Development in May 1993. He
previously served as operating Vice President, Central Division for more than
five years.
Mr. Seiler was elected as Vice President, Corporate Retail Operations
effective as of October 1994. He previously served as operating Vice President,
Iowa Division from May 1993 to October 1994 and Iowa Division Manager from June
1991 to May 1993.
Mr. Scherer was appointed as Chief Financial Officer in November 1995. His
election as Vice President was effective in December 1994, and he served as Vice
President, Planning and Financial Services from December 1994 to November 1995.
He previously served as Director of Strategic Planning and Financial Services
from April 1994 to December 1994, and Director of Planning and Budgets from
January 1988 through April 1994.
Mr. Timberlake was elected as Vice President, Human Resources in November
1995. He previously served as Director of Human Resources from January 1993 to
November 1995.
Mr. McCurry was elected as Vice President, Independent Store Operations in
May 1996. He previously served as Director of Independent Store Operations from
August 1993 to May 1996 and as Distribution Center Manager, Sioux Falls, South
Dakota, from January 1991 to August 1993.
Mr. Struck was elected as Vice President, Supply Chain Management effective
as of January 1998. He previously served as Director, Future Business Systems in
the Company's HORIZONS project from March 1997 to January 1998, and as
Distribution Center Manager, Cedar Rapids, Iowa from August 1988 to March 1997.
Mr. Wojtasiak has served as Controller since May 1990.
52
<PAGE>
Ms. Allen was elected as Treasurer effective as of January 1996. She
previously served as Assistant Treasurer from May 1995 to January 1996 and
Treasury Manager from January 1993 to May 1995.
Dr. Bitter has been a director of the Company since November 1993. She is
President and Chief Executive Officer of Harold Friedman, Inc., an operator of
retail supermarkets, a position she has held for more than five years.
Mr. Fisher has been a director of the Company since May 1984. He retired in
December 1992 as Vice President--Finance and Treasurer of Network Systems
Corporation, a position he had held for more than five years.
Mr. Ford has been a director of the Company since May 1997. He served as an
executive of Comdisco Network Services, a division of Comdisco, Inc. from June
1994 to April 1998. He previously served as Executive Director and Chief
Operating Officer of Lindquist & Vennum, a law firm, for more than five years.
Mr. Graham has been a director of the Company since May 1992. He is the
Chairman of the Board and Chief Executive Officer of The Oshawa Group Limited, a
food and pharmaceutical distributor in Canada, a position he has held for more
than five years. Mr. Graham also serves as a director of Dylex Limited (Canada).
Mr. Grunewald has been a director of the Company since September 1992. He
retired in January 1997 as Executive Vice President, Finance and Administration
of Polaris Industries, Inc., a position he had held since September 1993. He
previously served as Executive Vice President, Chief Financial Officer and
Secretary of Pentair, Inc. for more than five years. Mr. Grunewald also serves
as a director of Advantage Learning Systems, Inc. and Kinnard Investments Inc.
Mr. Lareau has been a director of the Company since May 1984. He has been a
partner in the law firm of Oppenheimer Wolff & Donnelly LLP for over 30 years.
Oppenheimer Wolff & Donnelly has provided and is expected to continue to provide
legal services to the Company. Mr. Lareau also serves as a director of Merrill
Corporation, Mesabi Trust, Northern Technologies International Corporation and
Ceridian Corporation.
Mr. Marsh has been a director of the Company since June 1995. He is the
Chairman of the Board, President and Chief Executive Officer of Marsh
Supermarkets, Inc., a supermarket and convenience store chain, positions he has
held for more than five years. Mr. Marsh also serves as a director of Indiana
Energy Incorporated and National City Bank, Indiana.
Mr. Miller has been a director of the Company since February 1978, and has
served as Board Chair since May 1995. He has been an independent management
consultant for more than five years. Mr. Miller also serves as a director of
Michael Anthony Jewelers, Inc.
Mr. Nash has been a director of the Company since May 1968. He retired in
January 1996 as Vice President and Treasurer of the Company, a position he had
held for more than five years.
Mr. Rodysill has been a director of the Company since May 1974. He retired
in January 1994 as Senior Vice President, Store Development and Construction of
the Company, a position he had held for more than five years.
53
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation earned
during the fiscal years ending January 3, 1998, December 28, 1996 and December
30, 1995, by the Chief Executive Officer and the four other most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------------------
AWARDS
ANNUAL COMPENSATION -------------------------- PAYOUTS
RESTRICTED SECURITIES -----------
---------------------- STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS(A) AWARDS(B) OPTIONS(C) PAYOUTS(D) COMPENSATION(E)
- ------------------------------- ----------- --------- ----------- ----------- ------------- ----------- -------------------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred N. Flaten .............. 1997 470,091 127,187 -- -- 73,024 3,331
PRESIDENT, CHIEF EXECUTIVE 1996 368,985 114,700 69,996 48,693 165,956 5,318
OFFICER AND DIRECTOR 1995 279,232 130,000 -- -- -- 5,081
William T. Bishop(f) .......... 1997 215,408 47,216 -- -- 24,437 3,331
SENIOR VICE PRESIDENT, SALES 1996 179,506 43,200 29,998 20,868 50,478 --
AND LOGISTICS 1995 149,588 50,000 -- -- -- --
William E. May, Jr.(g) ........ 1997 1996 208,370 57,400 -- -- -- --
EXECUTIVE VICE PRESIDENT AND 1995 101,288 30,000 -- -- -- --
CHIEF OPERATING OFFICER -- -- -- -- -- --
David J. Richards ............. 1997 207,353 53,040 -- -- 20,364 3,331
VICE PRESIDENT, CORPORATE 1996 153,425 55,000 -- -- 37,836 --
RETAIL STORES 1995 124,657 25,000 -- -- -- --
Norman R. Soland .............. 1997 177,876 36,000 -- -- 17,612 3,331
VICE PRESIDENT, SECRETARY AND 1996 139,616 34,720 21,597 15,024 39,247 5,318
GENERAL COUNSEL 1995 107,704 47,000 -- -- -- 4,398
</TABLE>
- ------------------------------
(a) Cash bonuses for services rendered have been included as compensation for
the year earned, even though bonuses were actually paid in the following
year.
(b) These amounts reflect the value of the 25% discount related to the purchase
by certain executive officers of shares of the Company's Common Stock (the
"Common Stock") that are restricted and subject to a risk of forfeiture for
an aggregate purchase price equal to 75% of the fair market value of the
Common Stock on January 31, 1996. Pursuant to this program (the "Management
Restricted Stock Purchase Program"), which was implemented under the Nash
Finch 1994 Stock Incentive Plan (the "1994 Stock Incentive Plan"), 10% of
the aggregate purchase price was paid by such executive officer in cash and
the remainder was paid by delivery of a promissory note secured by a pledge
of the shares. Interest on the promissory note, at a rate of 5.61% per annum
(120% of the then applicable federal rate), is payable quarterly, with
principal amounts payable commencing two years from issuance of the
promissory note and due in full on February 28, 2001. The forfeiture
restrictions on the shares generally will lapse on February 28, 2001,
although the shares will remain pledged as collateral for the promissory
note until repayment of the promissory note or the Company otherwise
releases such shares. If, however, the executive officer's employment is
terminated by reason of death, disability, retirement, or a change in
control of the Company occurs, as defined in the 1994 Stock Incentive Plan,
the forfeiture restrictions will lapse. If the executive officer's
employment is terminated prior to the lapsing of forfeiture restrictions for
any other reason, such restricted shares will be repurchased by the Company
at the lesser of the purchase price paid or an amount equal to the then fair
market value of the shares divided by 0.75. Although ordinary cash dividends
on such restricted shares will be paid to such executive officers, any other
dividends or distributions on such restricted shares will be subject to the
same security interest and forfeiture restrictions as the shares to which
they relate. As of January 3, 1998, the number and fair market value of
restricted shares held by each of the named executive officers participating
in the Management Restricted Stock Purchase Program was as follows: (i) Mr.
Flaten's shares (16,231) had a fair market value of $312,447; and (ii) Mr.
Soland's shares (5,008) had a fair market value of $96,404.
(c) These amounts reflect the grant of options under the 1994 Stock Incentive
Plan.
(d) For fiscal 1996, these amounts reflect (i) the fair market value ($20.125
per share) of shares of Common Stock issued for performance units earned for
fiscal 1996 pursuant to awards granted under the 1994 Stock Incentive Plan,
and (ii) cash payments representing dividends declared on an equivalent
number of shares ("dividend equivalents") from January 1, 1996 through March
1, 1997, the date the shares were issued. For fiscal 1997, the amounts
reflect (i) the fair market value ($19.625 per share) of shares of Common
Stock issued for performance units earned for fiscal 1995-1997 pursuant to
awards granted under the 1994 Stock Incentive Plan and (ii) cash payments
representing dividend equivalents from January 1, 1995 through March 1,
1998, the date the shares were issued. Fair market value of the shares was
determined as of the dates that the issuance of the shares was approved by
the Compensation Committee of the Board of Directors, which were February
10, 1997 and February 16, 1998, respectively. These shares have been
included as payouts for the year in which they were earned, even though the
shares were not issued, and dividend equivalents paid, until the following
year (e.g., shares earned in fiscal 1997 were actually paid in fiscal 1998).
(e) "All Other Compensation" consists of contributions by the Company in fiscal
1995, fiscal 1996 and fiscal 1997 to the Nash Finch Profit Sharing Plan.
(f) Mr. Bishop resigned from the Company effective as of January 4, 1998.
(g) Mr. May joined the Company in June 1996.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth in the following table is information, as of March 1, 1998 unless
otherwise indicated, pertaining to (a) the individual ownership of the Company's
Common Stock (the "Common Stock") by directors and executive officers named in
the Summary Compensation Table, and (b) the ownership of Common Stock by
directors and executive officers as a group.
<TABLE>
<CAPTION>
TOTAL SHARES OF COMMON
STOCK BENEFICIALLY
OWNED(A)(B)(C)
------------------------
NUMBER OF NUMBER OF NUMBER OF PERCENT
NAME OF BENEFICIAL OWNER SHARES(A) OPTIONS(B) SHARE UNITS(C) AMOUNT OF CLASS
- ------------------------------------------------------ ----------- ------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Carole F. Bitter...................................... 1,000 1,000 926 2,926 *
Richard A. Fisher..................................... 2,000(d) 1,000 966 3,966(d) *
Alfred N. Flaten...................................... 33,030(e) 5,600 N/A 38,630(e) *
Jerry L. Ford......................................... 1,000 500 197 1,697 *
Allister P. Graham.................................... 1,000 1,500 1,114 3,614 *
John H. Grunewald..................................... 2,500(f) 1,500 613 4,613(f) *
Richard G. Lareau..................................... 3,948(g) 1,500 -0- 5,448(g) *
Don E. Marsh.......................................... 640 500 627 1,767 *
Donald R. Miller...................................... 2,015 1,500 -0- 3,515 *
Robert F. Nash........................................ 99,800(h) 1,000 511 101,311(h) *
Jerome O. Rodysill.................................... 21,015(i) 1,500 151 22,666(i) *
William T. Bishop(j).................................. 1,110 -0- N/A 1,110 *
William E. May, Jr.................................... -0- 1,280 N/A 1,280 *
David J. Richards..................................... 4,322 -0- N/A 4,322 *
Norman R. Soland...................................... 11,043(k) 2,400 N/A 13,443(k) *
All Directors and Executive Officers as a Group (26
persons)............................................ 215,210(l) 36,540 5,105 256,855(l) 2.27%
</TABLE>
- ------------------------------
* Less than 1%.
(a) Unless otherwise noted, all of the shares shown are held by individuals or
entities possessing sole voting and investment power with respect to such
shares.
(b) Includes shares of Common Stock that may be acquired upon exercise of
options within 60 days of March 1, 1998 by the persons and group identified
in this table under the 1994 Stock Incentive Plan and the Nash Finch 1995
Director Stock Option Plan.
(c) Share Units represent shares of Common Stock payable to non-employee
directors upon termination of service on the Board under the Nash Finch 1997
Non-Employee Director Stock Compensation Plan.
(d) Includes 500 shares owned beneficially by Mr. Fisher's wife as to which he
may be deemed to share voting and investment power, but as to which he
disclaims any beneficial interest.
(e) Includes 1,000 shares owned beneficially by Mr. Flaten's wife as to which he
may be deemed to share voting and investment power, but as to which he
disclaims any beneficial interest.
(f) Includes 500 shares owned beneficially by a trust for which Mr. Grunewald's
wife serves as a trustee. As a result, Mr. Grunewald may be deemed to share
voting and investment power for such shares, but he disclaims any beneficial
interest in such shares.
(g) Includes 1,800 shares owned beneficially by Mr. Lareau's wife as to which he
may be deemed to share voting and investment power, but as to which he
disclaims any beneficial interest.
(h) Includes 28,082 shares owned beneficially by Mr. Nash's wife as to which he
may be deemed to share voting and investment power, but as to which he
disclaims any beneficial interest.
(i) Includes 12,860 shares held by a trust for the benefit of Mr. Rodysill's
wife, of which Mr. Rodysill is a co-trustee with his son and as to which he
shares voting and investment power.
(j) Mr. Bishop resigned from the Company effective as of January 4, 1998.
(k) Includes 3,371 shares that are owned beneficially by Mr. Soland and his wife
jointly and as to which he shares voting and investment power.
(l) Includes 48,413 shares as to which voting and investment power are shared or
may be deemed to be shared.
55
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth in the following table is information pertaining to persons known
to the Company, as of March 1, 1998, to be the beneficial owners of more than
five percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS
- ----------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc........................................ 620,138(a) 5.5%
767 Fifth Avenue
New York, NY 10153
Franklin Resources, Inc................................................ 785,000(b) 6.9%
777 Mariners Island Blvd.
San Mateo, CA 94404
</TABLE>
- ------------------------
(a) Sanford C. Bernstein & Co., Inc. has reported in a Schedule 13G dated
February 4, 1998 that, as of December 31, 1997, it was the beneficial owner
of all of such shares, possessing sole investment power with respect to all
such shares, sole voting power with respect to 523,100 shares and shared
voting power with respect to 15,863 shares. Sanford C. Bernstein & Co., Inc.
has also reported that the filing was made in its capacities as an
investment adviser and broker/dealer, and that its beneficial ownership of
such shares is on behalf of certain accounts of its discretionary clients.
These clients have the right to receive dividends from and the proceeds of
the sale of such securities.
(b) Franklin Resources, Inc. has reported in a Schedule 13G dated January 30,
1998 that, as of December 31, 1997, it was the beneficial owner of all of
such shares, possessing sole investment power and sole voting power with
respect to all such shares. Franklin Resources, Inc. has also reported that
the filing was made in its capacities as a holding company of direct and
indirect investment advisory subsidiaries. Such subsidiaries advise various
open or closed-end investment companies or other managed accounts pursuant
to advisory contracts. The advisory contracts grant to such subsidiaries all
voting and investment power over the securities owned by the advisory
clients, and as a result, such subsidiaries may be deemed as the beneficial
owners of such shares. These clients have the right to receive dividends
from and the proceeds of the sale of such securities.
56
<PAGE>
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The following summary of the instruments and agreements governing certain
other indebtedness of the Company 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 specified in the
agreement to which each of the following sections relate, unless the context
requires otherwise.
THE REVOLVING CREDIT FACILITY
The Company entered into the Revolving Credit Facility as of October 8,
1996, with Harris Trust and Savings Bank, as Administrative Agent, and various
other lending institutions, which originally provided for a $500.0 million
revolving line of credit, the proceeds of which were available to finance and
pay various transaction costs relating to the Company's acquisition of the
shares of Super Food and are available to pay various other indebtedness of the
Company and Super Food, and provide working capital to the Company and its
subsidiaries. On March 2, 1998, the credit available under the Revolving Credit
Facility was reduced to $360.0 million, and was reduced to $350.0 million upon
consummation of the offering of the Series A Notes. The Revolving Credit
Facility also includes a letter of credit facility of up to $25.0 million, and a
$25.0 million swing line facility, each of which reduces to the extent used, the
amount otherwise available under the revolving line of credit. The Revolving
Credit Facility is guaranteed by all the significant operating subsidiaries of
the Company. Interest on amounts outstanding under the Revolving Credit Facility
may be calculated, at the Company's option, at either a base rate (i.e., the
greater of the prime commercial rate or the Fed Funds rate plus 0.50%) or an
Adjusted LIBOR rate plus a margin which may be adjusted depending on the rating
assigned to the Company's outstanding senior unsecured non-credit enhanced
long-term indebtedness by Standard & Poor's Ratings Services Group and/or
Moody's Investors Services, Inc. (the "Company's Debt Rating"). The Revolving
Credit Facility also provides the Company with the right to request interest on
loans outstanding thereunder to be set pursuant to a bid procedure which may be
responded to by the lenders thereunder, at their sole discretion. The Company is
obligated to pay a facility fee ranging from 0.10% to 0.30 % of the total
commitments depending on the Company's Debt Rating, certain agents' fees and
other administrative fees.
The Revolving Credit Facility, as amended in connection with the offering of
the Series A Notes, contains numerous covenants, including: (i) the Company must
maintain a Current Ratio of at least 1.25 to 1.00; (ii) the Company's Tangible
Net Worth must be at least $125.0 million plus 50% of its consolidated Net
Income (if positive) for the fiscal quarter ending March 23, 1997, and for each
fiscal quarter thereafter; (iii) the Company's ratio of Total Funded Debt to
EBITDA (excluding the effect of the Company's extraordinary charge to earnings
in the third quarter of fiscal 1997) for any four quarter period on the last day
of each fiscal quarter may not be more than 4.75 to 1.00 as of the end of second
quarter of fiscal 1998, declining to 4.50 to 1.00 by the end of the fourth
quarter of fiscal 1998, declining to 4.25 to 1.00 as of the end of the second
quarter of fiscal 1999 and declining to 4.00 to 1.00 as of the end of the second
quarter of fiscal 2000 and thereafter; (iv) the Company may not allow its ratio
of EBITDA (excluding the effect of the Company's extraordinary charge to
earnings in the third quarter of fiscal 1997) to Interest Expense for any four
quarter period to be less than 2.50 to 1.00 from the first fiscal quarter of
1998 through the first quarter of fiscal 2000, increasing to 2.75 to 1.00 for
each fiscal quarter thereafter; (v) the Company's ratio of Senior Funded Debt to
EBITDA (excluding the effect of the Company's extraordinary charge to earnings
in the third quarter of fiscal 1997) for any four quarter period may not be more
than 3.50 to 1.00 as of the end of the second quarter of fiscal 1998 and
decreasing to 3.25 to 1.00 as of the end of the second quarter of fiscal 1999
and further decreasing to 3.00 to 1.00 at the end of the second quarter of
fiscal 2000 and thereafter; (vi) none of the Long-Term Debt of the Company or
its Subsidiaries may have a Weighted Average Life to Maturity of less than seven
years; (vii) the Company and each Subsidiary may not permit to exist any liens
on any of their property other than certain specified permitted liens; (viii)
the Company's Subsidiaries may not incur Indebtedness (other than certain
intercompany Indebtedness,
57
<PAGE>
guarantees by the Subsidiaries of the Company's obligations under the Revolving
Credit Facility and the Notes, and liabilities incurred in connection with
permitted securitization transactions) in excess of 5% of the Total Assets of
the Company and its Subsidiaries; (ix) the Company and each Subsidiary may not
make any investments or loans or advances, or acquire as an entirety the assets
or business of any other Person or become liable on any Guaranty, other than
with respect to investments in certain commercial paper, certificates of
deposit, investments in Subsidiaries (up to $25.0 million in Foreign
Subsidiaries), U.S. obligations, travel advances to employees and sales
representatives, loans and advances to customers up to $135.0 million (as of
January 4, 1998) in aggregate amount (such amount to increase by $10.0 million
as of the first day of each fiscal year thereafter) investments in stock,
obligations or securities received in settlement of ordinary course debts owing
to the Company and acquisitions in lines of business the same as or similar to
the Company's business, certain other minor exceptions and up to $100.0 million
in other such transactions not specifically otherwise excepted; (x) the Company
and each Subsidiary may not consolidate or merge into another Person or sell
substantially all of its assets except for certain permitted intercompany and
financing transactions, and transactions which do not exceed a certain size or
are otherwise not material; (xi) the Company and the Company's subsidiaries may
not make any payments of principal, interest or premium, if any, on the Notes
prior to the scheduled maturity thereof or other times required for payment
thereof, except that the Company may use up to 50% of the proceeds of an
underwritten public offering to redeem not more than 35% of the Notes then
outstanding (if at the time of such payment no default or event of default shall
occur or be continuing under the Revolving Credit Facility) and the Company may
redeem Notes to the extent permitted by the Indenture from the proceeds of Asset
Sales (as defined herein); and (xii) the Company may not change the general
nature of its business in any material respect. In addition, the definition of
"change of control" will be revised to include each similar event as defined in
the Indenture that will entitle holders of the Notes to accelerate the Notes.
The Company is required to prepay amounts outstanding under the Revolving Credit
Facility with 100% of the proceeds of (a) indebtedness for borrowed money
incurred by the Company or any Subsidiary (other than such indebtedness which
does not exceed $5.0 million in any calendar year or $10.0 million in the
aggregate and, subject to the effectiveness of the amendment to the Revolving
Credit Facility described below, other than the Notes), and (b) the sale in any
securitization of accounts receivable of the Company.
The Company is also required to prepay amounts outstanding under the
Revolving Credit Facility, if the Required Banks so notify the Borrower within
30 days after they receive notice of a change of control (which includes the
acquisition by a person or group of 25% of the Common Stock) in which case the
Commitments and Swing Line Commitment under the Revolving Credit Facility
terminate.
The Revolving Credit Facility includes a number of events of default,
including events related to payment defaults, covenant defaults, pension
shortfalls, cross defaults on $10.0 million of other indebtedness, inaccurate
representations and warranties, judgments in excess of $15.0 million, and
certain bankruptcy events.
THE OTHER BANK CREDIT FACILITIES
BRINSON TRUST COMPANY NOTE AGREEMENT. The Company has entered into a Master
Note Agreement (the "Brinson Agreement") dated as of May 16, 1997 pursuant to
which Brinson Trust Company ("Brinson") may, in its sole discretion, offer to
make demand loans to the Company of up to $150.0 million. Both principal and
accrued interest on such loans are payable within five days of demand by
Brinson. Interest accrues on amounts outstanding under the Brinson Agreement at
weekly LIBOR plus 0.25%. The Brinson Agreement does not impose any restrictive
covenants on the Company. The Brinson Agreement may be terminated at any time by
either party. As of March 28, 1998, $65.0 million was outstanding under the
Brinson Agreement.
NORWEST BANK MINNESOTA LINE OF CREDIT. The Company has a conditional line
of credit from Norwest Bank Minnesota, N.A. ("Norwest") dated as of June 24,
1997. Under this arrangement Norwest may, in its sole discretion, advance up to
$10.0 million. Such borrowings are payable on demand, but in no event later
58
<PAGE>
than 30 days after any loan is made. Interest accrues at the rate designated at
the time of borrowing and is generally based on the Fed Funds rate, plus a
margin. This line of credit expires May 31, 1998. As of March 28, 1998, $10.0
million was outstanding under the Norwest line of credit.
WACHOVIA BANK OF GEORGIA. The Company has a $15.0 million line of credit
from Wachovia Bank of Georgia, N.A. ("Wachovia") dated as of December 17, 1996.
Under this line of credit Wachovia may, in its sole discretion, advance up to
$15.0 million upon a request by the Company. Although the Company and Wachovia
may set a payment schedule on any loan under the line of credit, all borrowings
are payable on demand. Interest accrues at the rate designated at the time of
borrowing and is generally based on the Fed Funds rate, plus a margin. This line
of credit expires on June 9, 1998. As of March 28, 1998, $6.2 million was
outstanding under the Wachovia line of credit.
59
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes offered hereby will be issued, and the Series A Notes
were issued, under an Indenture dated April 24, 1998 (the "Indenture"), by and
among the Issuers and U.S. Bank Trust National Association, as trustee (the
"Trustee"). For purposes of this section, references to the "Company" mean only
Nash Finch Company and not any of its subsidiaries. Upon the issuance of the
Exchange Notes, the Indenture will be subject to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The following summary of the
material provisions of the Exchange Notes and the Indenture does not purport to
be complete and is subject to, and qualified by, reference to the provisions of
the Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture Act,
as in effect on the date of the Indenture. Copies of the Indenture are available
to prospective participants in the Exchange Offer upon request to the Company.
The term "Notes" as used in the following summary refers to all of the
outstanding Series A Notes and the Exchange Notes. The definition of certain
other terms used in the following summary are set forth below under "--Certain
Definitions."
GENERAL
The Exchange Notes will be general unsecured senior subordinated obligations
of the Company limited to $165,000,000 aggregate principal amount. The Exchange
Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the Exchange Notes are payable, and the Exchange Notes
are 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 the
corporate trust office of the Trustee); PROVIDED, HOWEVER, that payment of
interest may be made at the option of the Company by check mailed to the Person
entitled thereto as shown on the security register. No service charge will be
made for any registration of transfer, exchange or redemption of the Exchange
Notes, except in certain circumstances for any tax or other governmental charge
that may be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Exchange Notes will mature on May 1, 2008. Interest on the Exchange
Notes will accrue at the rate of 8 1/2% per annum and will be payable
semi-annually on each May 1 and November 1, commencing November 1, 1998, to the
holders of record of Exchange Notes at the close of business on the April 15 and
October 15, respectively, immediately preceding such interest payment date.
Interest on the Exchange Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
As discussed under "Exchange Offer; Registration Rights," pursuant to the
Registration Rights Agreement, the Company has filed with the Commission the
Exchange Offer Registration Statement and has agreed to offer to the holders of
Series A Notes who make certain representations the opportunity to exchange
their Series A Notes for Exchange Notes. In the event that the Company is not
permitted to file the Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or, in certain other circumstances, including if for any other
reason the Exchange Offer is not consummated within 120 days after the Issue
Date, the Company will file with the Commission the Shelf Registration Statement
with respect to resales of the Series A Notes by the holders thereof. The
interest rate on the Notes is subject to increase under certain circumstances if
the Company is not in compliance with its obligations under the Registration
Rights Agreement. See "Exchange Offer; Registration Rights."
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 1, 2003, at the
redemption prices (expressed as percentages of principal
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amount) set forth below, plus accrued and unpaid interest thereon, if any, to
the date of redemption, if redeemed during the 12-month period beginning on May
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ----------------------------------------------------------- ----------------
<S> <C>
2003....................................................... 104.250%
2004....................................................... 102.833
2005....................................................... 101.417
2006 and thereafter........................................ 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to May 1,
2001, the Company may, at its option, use the net proceeds of a Public Equity
Offering to redeem up to 35% of the originally issued aggregate principal amount
of the Notes, at a redemption price in cash equal to 108.5% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; PROVIDED, HOWEVER, that at least $107.25 million in aggregate
principal amount of Notes is outstanding following such redemption. Notice of
any such redemption must be given not later than 60 days after the consummation
of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means any
underwritten public offering of Capital Stock (other than Redeemable Capital
Stock) of the Company made on a primary basis by the Company pursuant to a
registration statement filed with and declared effective by the Commission in
accordance with the Securities Act.
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of Notes for redemption shall be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not listed
on a national securities exchange, on a PRO RATA basis, by lot or by such method
as the Trustee will deem fair and appropriate; PROVIDED, HOWEVER,that no Notes
of a principal amount of $1,000 or less shall be redeemed in part; PROVIDED,
FURTHER, HOWEVER, that any such redemption made with the net proceeds of a
Public Equity Offering shall be made on a PRO RATA basis or on as nearly a PRO
RATA basis as practicable (subject to the procedures of The Depository Trust
Company or any other depositary). Notice of redemption will be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
will state the portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original Note.
On and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption so long as the Company has deposited with
the paying agent for the Notes funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
CHANGE OF CONTROL
The Indenture provides that, following the occurrence of a Change of Control
(the date of such occurrence being the "Change of Control Date"), the Company
will be obligated, within 20 business days after the Change of Control Date, to
make an offer to purchase (a "Change of Control Offer") all of the then
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the purchase date. The Company will be required to
purchase all Notes properly tendered into the Change of Control Offer and not
withdrawn.
In order to effect such Change of Control Offer, the Company will, not later
than the 20th business day after the Change of Control Date, be obligated to
mail to each holder of Notes notice of the Change of Control Offer, which notice
will govern the terms of the Change of Control Offer and will state, among other
things, the procedures that holders must follow to accept the Change of Control
Offer. The Change of Control Offer will be required to be kept open for a period
of at least 20 business days.
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If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of Notes seeking to accept the
Change of Control Offer. If the Company fails to repurchase all of the Notes
tendered for purchase, such failure will constitute an Event of Default under
the Indenture. See "--Events of Default" below.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act, and any other applicable securities laws or
regulations and any applicable requirements of any securities exchange on which
the Notes are listed, in connection with the repurchase of Notes pursuant to a
Change of Control Offer, and any violation of the provisions of the Indenture
relating to such Change of Control Offer occurring as a result of such
compliance shall not be deemed a Default.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the Issue Date or incurred thereafter. The Indenture permits the
Company and its Restricted Subsidiaries to incur additional Indebtedness,
including Senior Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness."
The Indenture provides 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, relating to the Company, or
any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary, or any assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company, all Senior
Indebtedness of the Company must be paid in full before any payment,
distribution, repurchase or redemption (excluding any payment or distribution
of, or repurchase or redemption in exchange for, certain permitted equity or
subordinated securities) is made on account of the principal of, premium, if
any, or interest on the Notes.
During the continuance of any default in the payment of any Designated
Senior Indebtedness pursuant to which the maturity thereof may immediately be
accelerated beyond any applicable grace period and after receipt by the Trustee
from representatives of holders of such Designated Senior Indebtedness of
written notice of such default, no payment or distribution of any assets of the
Company of any kind or character (excluding any payment or distribution of
certain permitted equity or subordinated securities) shall be made on account of
the principal of, premium, if any, or interest on, or the purchase, redemption
or other acquisition of, the Notes unless and until such default has been cured
or waived or has ceased to exist or such Designated Senior Indebtedness shall
have been discharged or paid in full.
During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may
immediately be accelerated (a "Non-payment Default") and (x) after the receipt
by the Trustee from the representatives of holders of such Designated Senior
Indebtedness of a written notice of such Non-payment Default or (y) if the
Non-payment Default results from the acceleration of the Notes, from the date of
such acceleration, no payment or distribution of any assets of the Company of
any kind or character (excluding any payment or distribution of certain permit-
ted equity or subordinated securities) shall be made by the Company on account
of the principal of, premium, if any, or interest on, or the purchase,
redemption or other acquisition of, the Notes for the period specified below
(the "Payment Blockage Period").
The Payment Blockage Period will commence upon (x) the receipt of notice of
a Non-payment Default by the Trustee from the representatives of holders of
Designated Senior Indebtedness or (y) if the Non-payment Default results from
the acceleration of the Notes, upon such acceleration, and will end on the
earliest to occur of the following events: (i) 179 days shall have elapsed (A)
since the receipt of such notice of a Non-payment Default or (B) if the
Non-payment Default results from the acceleration of the Notes, since such
acceleration (in each case, provided that such Designated Senior Indebtedness
shall not theretofore have been accelerated and the Company has not defaulted
with respect to the payment of such
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Designated Senior Indebtedness), (ii) such default is cured or waived or ceases
to exist or such Designated Senior Indebtedness is discharged or (iii) such
Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the representatives of holders of Designated Senior
Indebtedness initiating such Payment Blockage Period. After the end of any
Payment Blockage Period the Company shall promptly resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding anything in the subordination provisions of the Indenture or the
Notes to the contrary, (x) in no event shall a Payment Blockage Period extend
beyond 179 days from the date such Payment Blockage Period was commenced, (y)
there shall be a period of at least 186 consecutive days in each 365-day period
when no Payment Blockage Period is in effect and (z) not more than one Payment
Blockage Period with respect to the Notes may be commenced within any period of
365 consecutive days. A Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period cannot 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 and subsequently recurs.
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 ac-celerate the
maturity thereof. See "--Events of Default."
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 Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full in
cash or Cash Equivalents, and the Company may be unable to meet its obligations
fully with respect to the Notes.
As of March 28, 1998 on a PRO FORMA basis after giving effect to the
Prepayments, the sale of the Notes and the application of the net proceeds
therefrom, the Issuers would have had outstanding an aggregate of $221.5 million
of Senior Indebtedness (without duplication as to any obligation of any such
party which is a guarantor of Senior Indebtedness owed primarily by another such
party). The Indenture limits, but does not prohibit, the incurrence by the
Company of additional Indebtedness which is senior to the Notes, but prohibits
the incurrence of any Indebtedness contractually subordinated in right of
payment to any other Indebtedness of the Company and senior in right of payment
to the Notes. See "Risk Factors-- Subordination of the Notes and the Guarantees;
Asset Encumbrances."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed by the Guarantors. The obligations of each Guarantor under
its Guarantee will be unconditional and absolute, irrespective of any
invalidity, illegality, unenforceability of any Note or the Indenture or any
extension, compromise, waiver or release in respect of any obligation of the
Company or any other Guarantor under any Note or the Indenture, or any
modification or amendment of or supplement to the Indenture.
The obligations of any Guarantor under its Guarantee will be subordinated,
to the same extent as the obligations of the Company in respect of the Notes, to
the prior payment in full in cash or, to the extent permitted under the
agreements governing the Senior Indebtedness being prepaid, Cash Equivalents, of
all Senior Indebtedness of such Guarantor, which will include any guarantee
issued by such Guarantor of any Senior Indebtedness. The obligations of each
Guarantor under its Guarantee will be limited to the extent necessary to provide
that such Guarantee does not constitute a fraudulent conveyance under applicable
law. Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor so long as the
exercise of such right does not impair the rights of holders of Notes under any
Guarantee. See "Risk Factors--Dependence on Operations of Subsidiaries;
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Possible Invalidity of Guarantees; Potential Release of Guarantees." A Guarantor
shall be released and discharged from its obligations under its Guarantee under
certain limited circumstances. See "--Certain Covenants--Limitation on Issuances
of Guarantees by Restricted Subsidiaries" and "--Consolidation, Merger, Sale of
Assets, Etc."
CERTAIN COVENANTS
The Indenture provides that the covenants set forth herein will be
applicable to the Company and the Restricted Subsidiaries; PROVIDED, HOWEVER,
that if no Default or Event of Default has occurred and is continuing, after the
ratings assigned to the Notes by both Rating Agencies are equal to or higher
than BBB- and Baa3, or the equivalents thereof, respectively (the "Investment
Grade Ratings"), and notwithstanding that the Notes may later cease to have an
Investment Grade Rating, the Company and the Restricted Subsidiaries will not be
subject to the provisions of the Indenture described under "Limitation on
Indebtedness," "Limitation on Restricted Payments," "Limitation on Sale of
Assets," clauses (ii) and (iii) of the first and fourth paragraphs of
"Limitations on Unrestricted Subsidiaries," "Limitation on Preferred Stock of
Restricted Subsidiaries," "Limitation on Transactions with Affiliates,"
"Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries" and clauses (iii) and (iv) of the first paragraph of
"Consolidation, Merger, Sale of Assets, Etc."
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, issue, guarantee or in any manner become liable for or with respect to,
contingently or otherwise (in each case, to "incur"), the payment of any
Indebtedness (including any Acquired Indebtedness), PROVIDED, HOWEVER, that (i)
the Company or a Guarantor may incur Indebtedness (including Acquired
Indebtedness) and (ii) a Restricted Subsidiary (which is not a Guarantor) may
incur Acquired Indebtedness, if, in either case, immediately after giving PRO
FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio of the
Company is at least equal to 2.00:1.
Notwithstanding the foregoing, the Company and, to the extent specifically
set forth below, the Guarantors and the Restricted Subsidiaries may incur each
and all of the following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company or any Guarantor (without duplication)
under the Revolving Credit Facility or any other Bank Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed $500.0
million, less any permanent reductions made pursuant to the provision
described in the second paragraph under "--Limitation on Sale of Assets";
(ii) Indebtedness of the Company pursuant to the Notes and Indebtedness
of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness (other than Indebtedness under the Revolving Credit
Facility, the Notes and the Guarantees) of the Company or any Restricted
Subsidiary outstanding on the date of the Indenture, except Indebtedness to
be repaid as described under "Use of Proceeds";
(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 Guarantor owing to and held by the Company or
another Guarantor; 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 Guarantor) shall be
deemed to be an incurrence of such Indebtedness by the obligor not permitted
by this clause (v), and (b) any
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transaction pursuant to which any Guarantor, which has Indebtedness owing to
the Company or any other Guarantor, ceases to be a Guarantor shall be deemed
to be the incurrence of Indebtedness by such Guarantor that is not permitted
by this clause (v);
(vi) guarantees by any Restricted Subsidiary incurred in compliance with
the provisions of the covenant described under "--Limitation on Issuances of
Guarantees by Restricted Subsidiaries";
(vii) Indebtedness of the Company or any Restricted Subsidiary under
Interest Rate Agreements covering Indebtedness of the Company or such
Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating
interest rates and (b) is otherwise permitted to be incurred under this
covenant) to the extent the notional principal amount of the obligations
under such Interest Rate Agreements does not exceed the principal amount of
the Indebtedness to which such obligations relate;
(viii) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements or Commodity Price Protection Agreements relating to (a)
Indebtedness of the Company or such Restricted Subsidiary and/or (b)
obligations to purchase or sell assets or properties, in each case, incurred
in the ordinary course of business of the Company; PROVIDED, HOWEVER, that
such Currency Agreements or Commodity Price Protection Agreements, as the
case may be, do not increase the Indebtedness or other obligations of the
Company outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(ix) Indebtedness of the Company or any Guarantor represented by
Capitalized 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 (ix) not to exceed $10.0 million per year;
PROVIDED that, immediately after any such incurrence pursuant to this clause
(ix), the aggregate amount of Indebtedness outstanding pursuant to this
clause (ix) shall not exceed 2.0% of the Consolidated Net Sales of the
Company in the most recent four full fiscal quarters for which financial
statements of the Company are available; PROVIDED, FURTHER, that the
principal amount of any Indebtedness permitted under this clause (ix) 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;
(x) reimbursement obligations under letters of credit and letters of
credit, in each case, to support (A) workers compensation obligations not to
exceed $10.0 million in the aggregate at any time outstanding and (B)
bankers acceptances, performance bonds, surety bonds, performance guarantees
and supplier obligations not to exceed $10.0 million in the aggregate at any
time outstanding, in the case of each of such clause (A) and (B) of the
Company or any Guarantor, in each case, in the ordinary course of business
consistent with past practice;
(xi) guarantees by the Company of Indebtedness of any Guarantor;
PROVIDED that such Indebtedness of such Guarantor is permitted by the terms
of the Indenture;
(xii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (i), (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 subordinated to the
Notes at least to the same extent as the
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Indebtedness being refinanced and (B) such refinancing does not reduce the
Average Life to Stated Maturity or the Stated Maturity of such Indebtedness;
(xiii) guarantees which are permitted under clause (ix) of paragraph (b)
described under the covenant "Limitation on Restricted Payments"; and
(xiv) Indebtedness of the Company or any Guarantor in addition to that
described in clauses (i) through (xiii) 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
$35.0 million outstanding at any one time.
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 or make any other distribution or
payment on or in respect of Capital Stock of the Company or any payment to
the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company (other than dividends or distributions payable solely
in shares of Qualified Capital Stock of the Company or in options, warrants
or other rights to acquire shares of such Qualified Capital Stock); or
(ii) purchase, redeem, defease or otherwise acquire or retire for value,
directly or indirectly, any Capital Stock of the Company (other than any
such Capital Stock owned by the Company or any Wholly-Owned Restricted
Subsidiary) or options, warrants or other rights to acquire such Capital
Stock; or
(iii) make any principal payment on, or purchase, repurchase, redeem,
defease, retire or otherwise acquire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to and held by the Company or a Guarantor); or
(iv) make any Investment (other than any Permitted Investment) in any
Person (other than in the Company, any Restricted Subsidiary or a Person
that becomes a Restricted Subsidiary, or is merged with or into or
consolidated with the Company or a Restricted Subsidiary (provided the
Company or a Restricted Subsidiary is the survivor), as a result of or in
connection with such Investment)
(any of the foregoing actions described in clauses (i) through (iv), 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, shall be the Fair Market Value of the asset(s) proposed to be transferred
by the Company or such Restricted Subsidiary, as the case may be, in each case,
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; (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 Issue Date, does not exceed $5.0 million
plus the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of the
Company during the period (treated as one accounting period) beginning on
the first day of the fiscal quarter beginning after the Issue Date 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 deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received after the Issue Date by the
Company from the issuance or sale (other than to any of the Restricted
Subsidiaries) of Qualified Capital Stock of the Company or from the exercise
of any options, warrants or rights to purchase such Qualified Capital
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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 in clause (ii) or (iii) of paragraph (b) below and
excluding the net cash proceeds from any issuance and sale of Capital Stock
or from any such exercises, in each case, financed, directly or indirectly,
using funds borrowed from the Company or any Restricted Subsidiary until and
to the extent such borrowing is repaid);
(C) the aggregate Net Cash Proceeds received after the Issue Date 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, without duplication, the
aggregate of Net Cash Proceeds from their original issuance, less any
principal and sinking fund payments made thereon;
(D) in the case of the disposition or repayment of any Investment (other
than an Investment made pursuant to clause (viii) of paragraph (b) below)
constituting a Restricted Payment made after the Issue Date, an amount (to
the extent not included in Consolidated Net Income) equal to the lesser of
the return of capital with respect to such Investment and the initial amount
of such Investment which was treated as a Restricted Payment, in either
case, less the cost of disposition of such Investment and net of taxes; and
(E) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after the
Issue Date in accordance with "--Limitations on Unrestricted Subsidiaries"
below, the Fair Market Value of the interest of the Company and the
Restricted Subsidiaries in such Subsidiary, provided that such amount shall
not in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation.
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(viii) below, so long as no Default or Event of Default shall have occurred and
be continuing or would arise therefrom, 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 (A) at such date of declaration such payment was
permitted by the provisions of the Indenture and (B) 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 to any Person (other than
to a Restricted Subsidiary) of, 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 (B) 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 out of the Net Cash Proceeds of a substantially concurrent
issuance and sale for cash to any Person (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 (B) of paragraph (a) of
this Section;
(iv) the repurchase, redemption, defeasance, retirement, acquisition for
value or payment of principal of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for, or out of the Net Cash Proceeds
of a substantially concurrent issuance and sale for cash to any Person
(other than to a Restricted Subsidiary) of, new Subordinated Indebtedness of
such person; PROVIDED
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that any such new Subordinated Indebtedness (1) shall be in a principal
amount that does not exceed the principal amount so repurchased, redeemed,
defeased, retired, acquired or paid (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
repurchase, redemption, defeasance, retirement, acquisition or payment
pursuant to the terms of the Indebtedness being repurchased, redeemed,
defeased, retired, acquired or paid or (II) the amount of premium or other
payment actually paid at such time to repurchase, redeem, defease, retire,
acquire or pay the Indebtedness, plus, in either case, the amount of
expenses of the Company incurred in connection with such repurchase,
redemption, defeasance, retirement, acquisition or payment; (2) has an
Average Life to Stated Maturity equal to or greater than the Average Life to
Stated Maturity of the Subordinated Indebtedness being repurchased,
redeemed, defeased, retired, acquired or paid; (3) has no Stated Maturity
earlier 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
repurchased, redeemed, defeased, retired, acquired or paid;
(v) the repurchase of any Pari Passu Indebtedness (x) at a purchase
price not greater than 101% of the principal amount of such Pari Passu
Indebtedness in the event of a Change of Control (as defined below) pursuant
to a provision similar to the provision described under "--Change of
Control"; PROVIDED that prior to, or contemporaneously with, such repurchase
the Company has made the Change of Control Offer if required by, and as
provided under, "--Change of Control" and has repurchased all Notes validly
tendered for payment in connection with such Change of Control Offer and (y)
at a purchase price not greater than 100% of the principal amount of such
Pari Passu Indebtedness in the event of an Asset Sale (as defined below)
pursuant to a provision similar to the provision described under
"--Limitation on Sale of Assets"; PROVIDED that prior to such repurchase the
Company has made an Asset Sale Offer if required by, and as provided under,
"--Limitation on Sale of Assets" and has repurchased all Notes validly
tendered for payment in connection with such Asset Sale Offer;
(vi) the purchase of restricted stock from employees of the Company upon
the termination of employment of such employees, pursuant to the terms of a
restricted stock plan approved by the Company's board of directors, in an
amount not to exceed $1.0 million in any fiscal year;
(vii) the payment of cash dividends on the Company's Common Stock of up
to $3.0 million in the aggregate in any fiscal quarter;
(viii) Investments by the Company or a Restricted Subsidiary in any Person
established by the Company or a Restricted Subsidiary in conjunction with
customers or suppliers of the Company which Person is engaged in the
distribution and sale of food and related products or the facilitation of
goods and services in the food industry such that, immediately after the
making of any such Investment pursuant to this clause (viii), the aggregate
outstanding amount of all such Investments made pursuant to this clause
(viii) shall not exceed 1.0% of the Consolidated Net Sales of the Company
for the most recent four fiscal quarters for which financial statements are
available; and
(ix) guarantees of obligations of, or loans to, customers in the
ordinary course of business consistent with past practice, such that
immediately after the issuing of any such guarantee or the making of any
such loan pursuant to this clause (ix), the aggregate amount of all such
guarantees or loans made under this clause (ix) that are outstanding would
not exceed 4.0% of the Consolidated Net Sales of the Company for the most
recent four full fiscal quarters for which financial statements of the
Company are available; PROVIDED that renewals of loans made in compliance
with this clause (ix) shall be permitted.
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(c) In computing the amount of Restricted Payments previously made for
purposes of clause (3) of paragraph (a) of this Section, Restricted Payments
under clauses (i) (as described in subclause (B) of such clause), (v), (vi),
(vii), (viii) and (ix) of paragraph (b) of this Section shall be included.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not cause or permit any of the Restricted Subsidiaries to, directly or
indirectly, conduct any business or enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with, or
for the benefit of, any Affiliate of the Company or of a Restricted Subsidiary
(other than the Company or a Guarantor) 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
and (b) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5.0 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 such transaction or
series of transactions has been approved by a majority of the Board of Directors
of the Company, including a majority of the Disinterested Directors of the
Company or, in the event there is only one Disinterested Director, by such
Disinterested Director; PROVIDED the Company or any Restricted Subsidiary need
not comply with the preceding clause (b) if the Company delivers to the Trustee
a written opinion of an Independent Financial Advisor 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); PROVIDED that such transaction has been approved in the manner
described in clause (b) above, (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 with any
Securitization Subsidiary made in the ordinary course of business on terms
customary for such transactions.
Under Delaware law, the Disinterested Directors' fiduciary obligations
require that they act in good faith in a manner which they reasonably believe to
be in the best interests of the Company and its stockholders, which may not
necessarily be the same as those of the holders of the Notes.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume, suffer
to exist or affirm any Lien of any kind securing any (a) Pari Passu Indebtedness
or Subordinated Indebtedness (including any assumption, guarantee or other
liability with respect thereto by any Restricted Subsidiary) upon any of its
property or assets (including any intercompany notes), whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds, income or profits
therefrom, or assign or convey any right to receive proceeds, 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 became Indebtedness pursuant to a
transaction permitted under "--Consolidation, Merger, Sale of Assets, Etc." 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 the covenant
described under "--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
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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 the Restricted Subsidiaries or (b) any Senior Indebtedness
which is not incurred in compliance with the terms of the Indenture.
LIMITATION ON INCURRENCE OF 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 or junior 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 or junior, in right of payment to the Notes or such
Guarantee at least to the same extent as the Notes or such Guarantee are
subordinate or junior in right of payment to Senior Indebtedness or Senior
Indebtedness of such Guarantor, as the case may be.
LIMITATION ON SALE OF ASSETS. The Company will not, and will not cause or
permit any Restricted Subsidiary to, directly or indirectly, consummate an Asset
Sale unless (i) at least 80% of the consideration from such Asset Sale is
received in cash or Cash Equivalents 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. Notwithstanding
the foregoing, the Company need not comply with the preceding clause (i) in
connection with any Asset Sale involving stores (and related fixtures and
inventory) to a customer in exchange for a secured note on a basis consistent
with past practice so long as the aggregate outstanding amount of all such notes
does not exceed 4.0% of Consolidated Tangible Assets immediately after giving
effect to any such Asset Sale.
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 which is
required to be prepaid, or if no such Indebtedness under the Senior Indebtedness
is then outstanding, the Company or such Restricted 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 Issue Date or in
businesses reasonably related thereto; PROVIDED that the Net Cash Proceeds of
any Asset Sale in the case of a sale of a store or stores or warehouse or
warehouses shall be deemed to have been applied to the extent of any capital
expenditures made to acquire or construct a replacement store or acquire,
construct or expand a warehouse, in each case within 180 days preceding the date
of such Asset Sale; PROVIDED FURTHER that with respect to the sale of a store or
stores, the replacement store shall be in the general vicinity of the store or
stores being replaced.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied, or the Company determines not to so apply such Net Cash Proceeds,
within 365 days of such Asset Sale as described in the immediately preceding
paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the
Company shall, within 20 days after such 365th day or at any earlier time after
such Asset Sale, make an offer to purchase (the "Asset Sale Offer") all
outstanding Notes and any Pari Passu Indebtedness the terms of which require
such an offer to be made up to a maximum principal amount (expressed as a
multiple of $1,000) of Notes and such Pari Passu Indebtedness equal to such
Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date; PROVIDED, HOWEVER, that the Asset Sale Offer may be deferred
until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of
$10.0 million, at which time the entire amount of such Unutilized Net Cash
Proceeds, and not just the amount in excess of $10.0 million,
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shall be applied as required pursuant to this paragraph. An Asset Sale Offer
will be required to be kept open for a period of at least 20 business days.
With respect to any Asset Sale Offer effected pursuant to this covenant,
among the Notes and such Pari Passu Indebtedness, to the extent the aggregate
principal amount of Notes and such Pari Passu Indebtedness tendered pursuant to
such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be applied to
the repurchase thereof, such Notes and such Pari Passu Indebtedness shall be
purchased PRO RATA based on the aggregate principal amount of such Notes and
such Pari Passu Indebtedness tendered. To the extent the Unutilized Net Cash
Proceeds exceed the aggregate amount of Notes and such Pari Passu Indebtedness
tendered pursuant to such Asset Sale Offer, the Company may retain and utilize
any portion of the Unutilized Net Cash Proceeds not applied to repurchase the
Notes and such Pari Passu Indebtedness for any purpose consistent with the other
terms of the Indenture and such excess amount of Unutilized Net Cash Proceeds
shall not be included in any future determination of Unutilized Net Cash
Proceeds.
In the event that the Company makes an Asset Sale Offer, the Company shall
comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act, and any other applicable securities laws or regulations and any
applicable requirements of any securities exchange on which the Notes are
listed, and any violation of the provisions of the Indenture relating to such
Asset Sale Offer occurring as a result of such compliance shall not be deemed a
Default.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES. (a) The
Company will not cause or 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 cause or 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 the covenant described under "--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 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, but subject to the requirements described
under "--Consolidation, Merger, Sale of Assets, Etc.," 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 (including, but not limited to,
the covenant described under "--Limitation on Sale of Assets" above) and such
Restricted Subsidiary is released from
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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). The Company may, at any time, cause a Subsidiary to become a
Guarantor by executing and delivering a supplemental indenture providing for the
guarantee of payment of the Notes by such Subsidiary on the basis provided in
the Indenture.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not sell and will not cause or permit any Restricted Subsidiary of the Company
to issue, sell or transfer any Preferred Stock of any Restricted Subsidiary
(other than to the Company or to a Wholly-Owned Restricted Subsidiary) 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 Restricted
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).
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective or enter into any agreement with any Person that would
cause to become effective, any consensual encumbrance or restriction of any
kind, on the ability of any Restricted Subsidiary to (i) pay dividends, in cash
or otherwise, or make any other distribution on or in respect of its Capital
Stock or any other interest or participation in, or measured by, its profits, to
the Company or any other Restricted Subsidiary, (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 encumbrance or restriction existing under any agreement in effect
on the Issue Date; (b) any encumbrance or restriction, with respect to a
Subsidiary that is not a Restricted Subsidiary of the Company on the Issue Date,
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; PROVIDED, HOWEVER, that such encumbrances and
restrictions are not applicable to the Company or any other Restricted
Subsidiary, or the properties or assets of the Company or any other Restricted
Subsidiary; (c) customary provisions restricting the subletting or assignment of
any lease or the assignment of any other contract to which the Company or any
Restricted Subsidiary is a party, which lease or contract is entered into in the
ordinary course of business consistent with past practice; (d) any encumbrance
or restriction contained in contracts for sales of assets permitted by the
covenant described under "--Limitation on Sale of Assets"; PROVIDED that such
encumbrance or restriction relates only to assets being sold pursuant to the
contract containing such encumbrance or restriction; (e) any encumbrance or
restriction customarily contained in any security agreement or mortgage which
security agreement or mortgage creates a Lien permitted under the Indenture;
PROVIDED that such encumbrance or restriction relates only to assets subject to
such Lien; and (f) 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), (b), (c), (d) and
(e), or in this clause (f), 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.
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LIMITATIONS ON UNRESTRICTED SUBSIDIARIES. The Company may designate after
the Issue Date any Subsidiary (other than a Guarantor) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the effectiveness
of such Designation) pursuant to the provision described under paragraph (a)
of "--Limitation on Restricted Payments" above in an amount (the
"Designation Amount") equal to the Fair Market Value of the Company's
interest in such Subsidiary on such date; and
(iii) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "--Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support for or subject any of its
property or assets (other than the Capital Stock of any Unrestricted Subsidiary)
to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Capital Stock of an
Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any time guarantee
or otherwise provide credit support for any obligation of the Company or any
Restricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall
automatically be deemed to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture;
and
(iii) any transaction (or series of related transactions) between such
Subsidiary and any of its Affiliates that occurred while such Subsidiary was
an Unrestricted Subsidiary would be permitted by the covenant described
under "--Limitation on Transactions with Affiliates" above as if such
transaction (or series of related transactions) had occurred at the time of
such Revocation.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
PROVISION OF FINANCIAL STATEMENTS. The Indenture provides that for so long
as the Notes are outstanding, whether or not the Company or any Guarantor is
subject to Section 13(a) or 15(d) of the Exchange Act, or any successor
provision thereto, the Company will, to the extent permitted by Commission
practice
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and applicable law and regulations, 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), or any successor provision thereto, 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 Dates") 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, whether or not permitted or
required to be filed with the Commission, (i) transmit or cause to be
transmitted by mail to all holders of Notes, 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, or any
successor provision thereto, 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. In addition, for so long as any Notes
remain outstanding, the Company will furnish to the holders of Notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Notes, if not obtainable from
the Commission, information of the type that would be filed with the Commission
pursuant to the foregoing provisions, upon the request of any such holder. If
any Guarantor's or other 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.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture provides that the Company shall not, in any transaction or
series of related transactions, merge or consolidate with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to, any Person or Persons, and the
Company shall not permit any of the Restricted 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 other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries), to any Person or Persons, unless at the time and after giving
effect thereto (i) either (A)(1) if the transaction or transactions is a merger
or consolidation involving the Company, the Company shall be the Surviving
Person of such merger or consolidation or (2) if the transaction or transactions
is a merger or consolidation involving a Restricted Subsidiary, such Restricted
Subsidiary shall be the Surviving Person of such merger or consolidation, or
(B)(1) the Surviving Person shall be a corporation organized and existing under
the laws of the United States of America, any State thereof or the District of
Columbia and (2)(x) in the case of a transaction involving the Company, the
Surviving Person shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture and the
Registration Rights Agreement, and in each case, the Indenture, the Notes and
the Registration Rights Agreement shall remain in full force and effect, or (y)
in the case of a transaction involving a Restricted Subsidiary that is a
Guarantor, the Surviving Person shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of such Restricted Subsidiary under its Guarantee
and the Indenture and the Registration Rights Agreement, and in each case, such
Indenture, Guarantee and the Registration Rights Agreement shall remain in full
force and effect; (ii) immediately after giving effect to such transaction or
series of
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related transactions on a PRO FORMA basis, no Default or Event of Default shall
have occurred and be continuing; (iii) to the extent the covenant described
under "--Certain Covenants--Limitation on Indebtedness" is still applicable, the
Company, or the Surviving Person, as the case may be, immediately after giving
effect to such transaction or series of related transactions on a PRO FORMA
basis (including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or series of
transactions), could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant described above under "--Certain
Covenants--Limitation on Indebtedness;" and (iv) 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
described under "--Certain Covenants--Limitation on Liens" are complied with.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of its Guarantee and the Indenture as provided in
paragraph (c) under "--Certain Covenants--Limitation on Issuances of Guarantees
by Restricted Subsidiaries" above) shall, in any transaction or series of
related transactions, consolidate with or merge with or into another Person,
whether or not such Person is affiliated with such Guarantor and whether or not
such Guarantor is the Surviving Person, unless (i) the Surviving Person (if
other than such Guarantor) is a corporation organized and validly existing under
the laws of the United States, any State thereof or the District of Columbia;
(ii) the Surviving Person (if other than such Guarantor) expressly assumes by a
supplemental indenture all the obligations of such Guarantor under its Guarantee
and the performance and observance of every covenant of the Indenture and the
Registration Rights Agreement to be performed or observed by such Guarantor; and
(iii) immediately after giving effect to such transaction or series of related
transactions on a PRO FORMA basis, no Default or Event of Default shall have
occurred and be continuing.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under the
Indenture. In addition, each Guarantor, in the case of a transaction described
in the first paragraph hereunder, unless it is the other party to the
transaction or unless its Guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Guarantee will continue to apply to
the obligations of the Company or the Surviving Person under the Indenture.
Upon any consolidation or merger of the Company or any Guarantor or any
transfer of all or substantially all of the assets of the Company in accordance
with the foregoing, in which the Company or a Guarantor is not the Surviving
Person, the Surviving Person shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture and the Notes
and the Registration Rights Agreement or such Guarantor under the Indenture, the
Guarantee of such Guarantor and the Registration Rights Agreement, as the case
may be, with the same effect as if such successor corporation had been named as
the Company or Guarantor, as the case may be, therein; and thereafter, except in
the case of (a) a lease or (b) any sale, assignment, conveyance, transfer, lease
or other disposition to a Restricted Subsidiary of the Company or such
Guarantor, the Company shall be discharged from all obligations and covenants
under the Indenture, the Notes and the Registration Rights Agreement and such
Guarantor shall be discharged from all obligations and covenants under the
Indenture, the Guarantee of such Guarantor and the Registration Rights
Agreement, as the case may be.
The Indenture provides that for all purposes of the Indenture and the Notes
(including the provision of this covenant and the covenants described under
"--Certain Covenants--Limitation on Indebtedness," "--Certain
Covenants--Limitation on Restricted Payments" and "--Certain
Covenants--Limitation on Liens"), Subsidiaries of any Surviving Person shall,
upon such transaction or series of related transactions, become Restricted
Subsidiaries unless and until designated as Unrestricted Subsidiaries pursuant
to and in accordance with the provisions described under "--Certain
Covenants--Limitations on Unrestricted
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Subsidiaries" and all Indebtedness, and all Liens on property or assets, of the
Company and the Restricted Subsidiaries in existence immediately prior to such
transaction or series of related transactions will be deemed to have been
incurred upon such transaction or series of related transactions.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, acceleration, required purchase, sinking fund, scheduled
principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, continued for 30 days or more; or
(iii) the Company or any Guarantor fails to comply with any of its
obligations described under "--Consolidation, Merger, Sale of Assets, Etc.,"
"--Change of Control" or "--Certain Covenants-- Limitation on Sale of
Assets"; or
(iv) the Company or any Guarantor fails to perform or observe any other
term, covenant or agreement contained in the Notes, the Guarantees or the
Indenture (other than a default specified in (i), (ii) or (iii) above) for a
period of 30 days after written notice of such failure requiring the Company
to remedy the same shall have been given (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 Notes then outstanding; or
(v) default or defaults under one or more agreements, indentures or
instruments under which the Company, any Guarantor or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $17.5 million
individually or in the aggregate and either (a) such Indebtedness is already
due and payable in full or (b) such default or defaults result in the
acceleration of the maturity of such Indebtedness; or
(vi) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee, or gives notice to such effect (other than by reason of
the termination of the Indenture or the release of any such Guarantee in
accordance with "--Certain Covenants--Limitation on Issuance of Guarantees
by Restricted Subsidiaries"); or
(vii) one or more judgments, orders or decrees of any court or regulatory
or administrative agency for the payment of money in excess of $17.5 million
(in excess of the coverage under applicable insurance policies (after giving
effect to any deductibles) under which a financially sound and reputable
insurer has admitted liability) either individually or in the aggregate
shall have been rendered against the Company, any Guarantor or any
Restricted Subsidiary or any of their respective properties and shall not
have been 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, order or decree, by reason of a pending appeal
or otherwise, shall not be in effect; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company, any Guarantor or any Material Subsidiary of the
Company shall have occurred; or
(ix) any holder of at least $17.5 million in aggregate principal amount
of Indebtedness of the Company, any Guarantor or any Restricted Subsidiary
shall commence judicial proceedings to foreclose upon assets of the Company,
any Guarantor or any of its Restricted Subsidiaries having a Fair Market
Value, individually or in the aggregate, in excess of $17.5 million or shall
have exercised
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any right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure.
If an Event of Default (other than as specified in clause (viii) with
respect to the Company) shall occur and be continuing, the Trustee, by notice to
the Company, or the holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice to the Trustee and the Company, may declare
the principal of, premium, if any, and accrued interest on all of the
outstanding Notes due and payable immediately, upon which declaration all such
amounts payable in respect of the Notes will become and be immediately due and
payable. If an Event of Default specified in clause (viii) above with respect to
the Company occurs and is continuing, then the principal of, premium, if any,
and accrued interest on all of the outstanding Notes will IPSO FACTO become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Notes.
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 the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration 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, (iii) the principal of and
premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the 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, premium, if any, and interest on the
Notes that has become due solely by such declaration of acceleration, have been
cured or waived as provided in the Indenture.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such notice
and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
under the Indenture is not under any obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the holders
unless such holders shall have offered to the Trustee reasonable security or
indemnity. Subject to certain provisions concerning the rights of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee under the Indenture.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five
business days of any event which is, or after notice or lapse of time or both
would become, an Event of Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (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 terminate
the obligations of the Company and any Guarantor with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"--Certain Covenants" above, and any omission to comply with such obligations
will not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance"). 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.
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, to pay and discharge the principal of, premium,
if any, and interest on the outstanding Notes at maturity; (ii) 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 defeasance or 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 defeasance or covenant defeasance had not occurred (in the case
of defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default shall have occurred and be continuing on the date of such
deposit or insofar as clause (viii) under the first paragraph under "--Events of
Default" is concerned, at any time during the period ending on the 91st day
after the date of deposit; (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of the Company or any Guarantor; (v) such defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under, any
material agreement or instrument to which the Company or any Guarantor is a
party or by which it is bound; (vi) 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; (vii) the Company shall 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; (viii) 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; (ix) 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 Notes on the date of such deposit or at any time ending on the
91st day after the date of such deposit; and (x) the Company shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent under the Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied with.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company or any Guarantor has paid all other sums payable under the Indenture
by the Company and the Guarantors; and (iii) the Company and each of the
Guarantors have delivered to the Trustee an officers' certificate and an opinion
of independent counsel each stating that (a) all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with and (b) 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.
AMENDMENTS AND WAIVERS
Amendments and modifications of the Indenture or the Notes may be made by
the Company, the Guarantors and the Trustee with the consent of the holders of
not less than a majority of the aggregate principal amount of the outstanding
Notes; PROVIDED, HOWEVER, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) change
the maturity of the principal of, or any installment of interest on, any such
Note or alter the optional redemption or repurchase provisions of any such Note
or the Indenture in a manner adverse to the Holders of the Notes; (ii) reduce
the principal amount of (or the premium of) any such Note; (iii) reduce the rate
of or extend the time for payment of interest on any such Note; (iv) change the
place or currency of payment of principal of (or premium) or interest on any
such Note; (v) modify any provisions of the Indenture relating to the waiver of
past defaults (other than to add sections of the Indenture or the Notes subject
thereto) or the right of the holders of Notes to institute suit for the
enforcement of any payment on or with respect to any such Note or any Guarantee
or the modification and amendment provisions of the Indenture and the Notes
(other than to add sections of the Indenture or the Notes which may not be
amended, supplemented or waived without the consent of each Holder therein
affected); (vi) reduce the percentage of the principal amount of outstanding
Notes necessary for amendment to or waiver of compliance with any provision of
the Indenture or the Notes or for waiver of any Default in respect thereof;
(vii) waive a default in the payment of principal of, premium, if any, or
interest on, or redemption payment with respect to, the Notes (except a
rescission of acceleration of the Notes by the holders thereof as provided in
the Indenture and a waiver of the payment default that resulted from such
acceleration); (viii) modify the ranking or priority of any Note or the
Guarantee of any Guarantor; (ix) following the occurrence of a Change of Control
or Asset Sale, modify the provisions of any covenant (or the related
definitions) in the Indenture requiring the Company to make and consummate a
Change of Control Offer in respect of such Change of Control or Asset Sale Offer
in respect of an Asset Sale or modify any of the provisions or definitions with
respect thereto in a manner materially adverse to the Holders of Notes affected
thereby; or (x) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the Indenture.
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Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, the Guarantors and the Trustee may modify or amend the
Indenture (a) to evidence the succession of another Person to the Company or any
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, Etc."; (b) to add
to the covenants of the Company or any Guarantor for the benefit of the holders
of the Notes, or to surrender any right or power herein conferred upon the
Company or any Guarantor in the Indenture, in the Notes or in any Guarantee; (c)
to cure any ambiguity, to correct or supplement any provision in the Indenture
which may be defective or inconsistent with any other provision in the
Indenture, in the Notes or in any Guarantee; (d) to comply with the requirements
of the Commission in order to maintain the qualification of the Indenture under
the Trust Indenture Act of 1939, as amended; (e) to secure the Notes or add a
Guarantor under the Indenture; (f) to evidence and provide the acceptance of the
appointment of a successor Trustee under the Indenture; or (g) to make any other
provisions with respect to matters or questions arising under the Indenture, the
Notes or any Guarantee; PROVIDED that, in the case of clause (b), (c) or (g),
such provisions shall not adversely affect the interests of any of the holders
of the Notes and the Company has delivered to the Trustee an Opinion of Counsel
(as such term is defined in the Indenture) to such effect.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
and the Guarantors with certain restrictive provisions of the Indenture. Subject
to certain rights of the Trustee, as provided in the Indenture, the holders of a
majority in aggregate principal amount of the Notes, on behalf of all holders of
the Notes, may waive any past default under the Indenture (including any such
waiver obtained in connection with a tender offer or exchange offer for the
Notes), except a default in the payment of principal, premium or interest or a
default arising from failure to purchase any Notes tendered pursuant to an offer
to purchase pursuant thereto, or a default in respect of a provision that under
the Indenture cannot be modified or amended without the consent of the Holder of
each Note that is affected.
GOVERNING LAW
The Indenture and the Notes and the Guarantees are governed by the internal
laws of the State of New York, without regard to the principles of conflicts of
law.
CERTAIN DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) assumed in
connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other than
any Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Restricted Subsidiary). 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, 10% or more of such specified Person's Capital Stock or
any officer, director or employee 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 no more remote than first cousin; or
(iii) any other Person 10% 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.
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"ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person will become a
Restricted Subsidiary or will be merged or consolidated with or into the Company
or any Restricted Subsidiary or (ii) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of the assets of such Person, or any division or line of business of such
Person, or which is otherwise outside of the ordinary course of business.
"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 "--Consolidation, Merger,
Sale of Assets, Etc."; PROVIDED, HOWEVER, that any transaction consummated in
compliance with "--Consolidation, Merger, Sale of Assets, Etc." above involving
a transfer of less than all of the properties or assets of the Company shall be
deemed to be an Asset Sale with respect to the properties or assets of the
Company that are not so transferred in such transaction, (b) that is by the
Company to any Guarantor, or by any Subsidiary to the Company or any Restricted
Subsidiary in accordance with the terms of the Indenture, (c) that is of
obsolete equipment in the ordinary course of business, (d) to any Securitization
Subsidiary (on a "true sale" non-recourse basis) of any accounts receivable or
customer loans receivable of the Company or any Restricted Subsidiary in the
ordinary course of business on terms customary for such transactions, but only
to the extent that the aggregate amount of such accounts receivable or loans
held by all such Securitization Subsidiaries which remain uncollected at any one
time does not exceed $125.0 million, or (e) the Fair Market Value of any such
Asset Sale not otherwise described in clause (a) through (d) above which in the
aggregate does not exceed $10.0 million.
"ASSET SALE OFFER" has the meaning set forth under "--Limitation on Sale of
Assets."
"AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (b) the amount
of each such principal payment by (ii) the sum of all such principal payments.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock, whether now outstanding or issued after the
date of the Indenture.
"CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"CASH EQUIVALENTS" means, at any time, (i) any evidence of Indebtedness with
a maturity of not more than one year issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of not more than one year of any financial institution that is a member
of the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) commercial paper with a maturity of
not more than one year issued by a corporation that is not an Affiliate of the
Company organized under
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the laws of any state of the United States or the District of Columbia and rated
at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's
Investors Service, Inc.; and (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (i)
and (ii) above entered into with any financial institution meeting the
qualifications specified in clause (ii) above.
"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) 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 securities 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 35% or more of the total voting power of
the then outstanding Voting Stock of the Company; (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 sells,
assigns, conveys, transfers, leases or otherwise disposes of 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 solely 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"), (B) no "person" or "group" owns immediately
after such transaction, directly or indirectly, 35% or more of the total
outstanding Voting Stock of the surviving corporation and (C) the holders of the
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the total voting power of the then
outstanding Voting Stock of the surviving or transferee corporation immediately
after such transaction; or (iv) any order, judgment or decree shall be entered
against the Company decreeing the dissolution or split up of the Company and
such order shall remain undischarged or unstayed for a period in excess of sixty
days.
"CHANGE OF CONTROL OFFER" has the meaning set forth under "--Change of
Control."
"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.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period,
(i) the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d)
to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense
less (ii) other non-cash items increasing Consolidated Net Income for such
period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of the Company for
the four full fiscal quarters immediately
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preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio for which
consolidated financial information of the Company is available (such four full
fiscal quarter period being referred to herein as the "Four Quarter Period") to
the aggregate amount of Consolidated Fixed Charges of the Company for such Four
Quarter Period. For purposes of this definition, "Consolidated Cash Flow
Available for Fixed Charges" and "Consolidated Fixed Charges" will be
calculated, without duplication, after giving effect on a PRO FORMA basis for
the period of such calculation to (i) the incurrence of any Indebtedness of the
Company or any of the Restricted Subsidiaries during the period commencing on
the first day of the Four Quarter Period to and including the Transaction Date
(the "Reference Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation, as if such
incurrence occurred on the first day of the Reference Period, except that with
respect to the calculation of Consolidated Interest Expense in the determination
of Consolidated Fixed Charges, 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 Reference Period, (ii) an adjustment to
eliminate or include, as applicable, the Consolidated Cash Flow Available for
Fixed Charges and Consolidated Fixed Charges of the Company directly
attributable to assets which are the subject of any Asset Sale or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period and (iii)
the retirement of Indebtedness during the Reference Period which cannot
thereafter be reborrowed occurring as if retired on the first day of the
Reference Period. In calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter will be deemed to accrue at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date shall be deemed to have been in
effect during the Reference Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by Interest Rate Agreements, will be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements. If the Company or any Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the above definition will give effect
to the incurrence of such guaranteed Indebtedness as if the Company or any
Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of, without
duplication, the amounts for such period of (i) Consolidated Interest Expense;
and (ii) the aggregate amount of cash dividends and other distributions paid or
accrued during such period in respect of Redeemable Capital Stock and Preferred
Stock of the Company.
"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision for
federal, state, local and foreign income taxes payable by the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without duplication,
the sum of (a) the interest expense of the Company and the Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, (i) any amortization of debt discount
attributable to such period, (ii) the net cost under or otherwise associated
with Interest Rate Agreements, Currency Agreements and Commodity Price
Protection Agreements (in each case, including any amortization of discounts),
(iii) the interest portion of any deferred payment obligation, (iv) all
commissions,
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discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (v) all capitalized interest and all accrued
interest, and (b) all but the principal component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the Company
and the Restricted Subsidiaries during such period and as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net income
(or loss) of the Company and the 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 all fees and expenses
relating thereto), (ii) the portion of net income (or loss) of the Company and
its Restricted Subsidiaries on a consolidated basis allocable to minority
interests in unconsolidated Persons, except to the extent that cash dividends or
distributions are actually received by the Company or a Restricted Subsidiary,
(iii) income of the Company and the Restricted Subsidiaries derived from or in
respect of Investments in Unrestricted Subsidiaries, except to the extent that
cash dividends or distributions are actually received by the Company or a
Restricted Subsidiary, (iv) net income (or loss) of any Person combined with the
Company or any of the Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (v) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (vi) net gains (or losses), net of taxes, less all fees and
expenses relating thereto, in respect of any Asset Sales by the Company or a
Restricted Subsidiary, (vii) 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, (viii) any restoration to income of
any contingency reserve except to the extent provision for such reserve was made
out of income accrued at any time following the Issue Date, (ix) any gain,
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness of the Company, (x) the net gain or loss resulting
from the Prepayments (as defined in the Offering Memorandum relating to the sale
of the Notes) and (xi) the net non-cash compensation expense incurred in
connection with the issuance or exercise of any employee stock options the
issuance of which was approved by the board of directors of the Company.
"CONSOLIDATED NET SALES" means, for any period, the consolidated net sales
of the Company and the Restricted Subsidiaries as determined in accordance with
GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period (other
than any non-cash item requiring an accrual or reserve for cash disbursements in
any future period), determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total assets, less
goodwill and other intangibles, of the Company and the Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP as of the most recent
date for which a consolidated balance sheet of the Company is available.
"COVENANT DEFEASANCE" has the meaning set forth under "--Defeasance or
Covenant Defeasance of Indenture."
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or its Restricted Subsidiaries against fluctuations in currency values.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"DEFEASANCE" has the meaning set forth under "--Defeasance or Covenant
Defeasance of Indenture."
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"DESIGNATED SENIOR INDEBTEDNESS" means (a) all Senior Indebtedness
outstanding under the Revolving Credit Facility and (b) any other Senior
Indebtedness which, at the time of determination, is specifically designated in
the instrument governing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"DESIGNATION" has the meaning set forth under "--Certain
Covenants--Limitations on Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "--Certain
Covenants--Limitations on Unrestricted Subsidiaries."
"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 set forth under "--Events of Default."
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length transaction, for cash, between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair Market Value shall be determined
by the Board of Directors of the Company acting in good faith evidenced by a
board resolution thereof delivered to the Trustee.
"FOUR QUARTER PERIOD" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to maintain or preserve any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"GUARANTEE" means the guarantee by any Guarantor of the Company's
obligations under the Indenture and the Notes pursuant to a guarantee given in
accordance with the Indenture.
"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 executes or is required after the date of the Indenture to execute a
guarantee of the Notes pursuant to the covenant described under "--Certain
Covenants--Limitations on Liens" or "--Certain Covenants--Limitation on
Issuances of Guarantees by Restricted Subsidiaries" 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.
"INCUR" has the meaning set forth in "--Certain Covenants--Limitation on
Indebtedness." "Incurrence," "incurred" and "incurring" shall have the meanings
correlative to the foregoing.
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"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 incurred or 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, bankers acceptance or other
similar credit transaction and in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person, or any warrants, rights or options to acquire such Capital Stock,
now or hereafter 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 Capitalized Lease
Obligations of such Person, (v) all Indebtedness referred to in clauses (i)
through (iv) above of other persons and all dividends of other Persons, to the
extent 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, (vi) all
guarantees of Indebtedness by such Person, (vii) except for purposes of the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments," 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, (viii) all obligations under Interest Rate
Agreements, Currency Agreements or Commodity Price Protection Agreements of such
Person (net of any payments owed to such Person thereunder to the extent such
Person's obligations thereunder are subject to offset by the amount of payments
owed to such Person thereunder), 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 shall be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized accounting,
appraisal or investment banking firm (i) which does not, and whose directors,
officers and employees or Affiliates do not have, a direct or indirect financial
interest in the Company and (ii) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and qualified to perform the
task for which it is to be engaged.
"INTEREST RATE AGREEMENTS" means one or more of the following agreements
which shall be entered into by one or more financial institutions: obligations
of any Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or a floating rate of interest on the
same notional amount or any other arrangement involving payments by or to such
Person based upon fluctuations in interest rates (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, any direct or indirect
advance, loan or other extension of credit (including by means of a guarantee)
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 otherwise), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person and all other items that would
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be classified as investments on a balance sheet prepared in accordance with
GAAP. Investments shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices. In addition to the
foregoing, any Currency Agreement, Interest Rate Agreement, Commodity Price
Protection Agreement or similar agreement shall constitute an Investment in the
net amount required to be set forth on such Person's balance sheet in accordance
with GAAP. Upon the sale of any portion of the Capital Stock of any Restricted
Subsidiary by the Company or any other Restricted Subsidiary, the Company or
such other Restricted Subsidiary shall be deemed to have made an Investment in
the amount of its remaining Investment, if any, in such Person.
"ISSUE DATE" means the original issue date of the Notes under the Indenture.
"LIEN" means any mortgage or deed of trust, charge, pledge, lien (statutory
or other), privilege, security interest, hypothecation, cessation and transfer,
lease of real property, assignment for security, claim, deposit arrangement, or
preference or 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), whether real, personal or mixed, movable or immovable,
now owned or hereafter acquired. A Person shall be deemed to own subject to a
Lien any property which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"MATERIAL SUBSIDIARY" means each Restricted Subsidiary of the Company that
is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under
the Securities Act and the Exchange Act (as such regulation is in effect on the
Issue Date).
"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 Cash Equivalents 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 Cash Equivalents (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 legal 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 or having
a Lien on the assets subject to the Asset Sale and (v) appropriate amounts to be
provided by the Company or any Restricted 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 (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve), all as
reflected in an officers' certificate delivered to the Trustee and (b) with
respect to any issuance or sale of shares of Capital Stock that have been
converted into or exchanged for shares of 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 Cash Equivalents 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 Cash Equivalents (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 the
Guarantee of such Guarantor.
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"PERMITTED INDEBTEDNESS" has the meaning set forth under "--Certain
Covenants--Limitation on Indebtedness."
"PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees and sales representatives made in the ordinary course of
business not to exceed $1.0 million in the aggregate at any one time
outstanding; (d) Interest Rate Agreements, Currency Agreements and Commodity
Price Protection Agreements permitted under clause (vii) or (viii) of the second
paragraph under "--Certain Covenants--Limitation on Indebtedness"; (e)
Investments represented by accounts receivable created or acquired in the
ordinary course of business; (f) loans or advances to vendors in the ordinary
course of business in an amount not to exceed $10.0 million at any time; (g)
Investments existing on the Issue Date and any renewal or replacement thereof on
terms and conditions no less favorable in any respect than that existing on the
Issue Date; (h) any Investment to the extent that the consideration therefor is
Qualified Capital Stock of the Company; (i) bonds, notes, debentures or other
securities or other non-cash proceeds received in connection with an Asset Sale
permitted under "--Certain Covenants--Limitation on Sale of Assets," not to
exceed 20% of the total consideration in such Asset Sale; (j) Investments in the
form of the sale (on a "true sale" non-recourse basis) or the servicing of
receivables transferred from the Company or any Guarantor, or transfer of cash,
to a Securitization Subsidiary as a capital contribution or in exchange for
Indebtedness of such Securitization Subsidiary in the ordinary course of
business consistent with past practice on terms customary for such
transactions); (k) Indebtedness permitted under clauses (iv), (v) and (vi) of
the second paragraph under "--Certain Covenants--Limitation on Indebtedness";
and (l) Investments in any of the Notes or any other debt securities of the
Company not otherwise prohibited by the Indenture.
"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, Capital Stock of any
class or, classes (however designated) of such Person 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 Capital Stock of any other class of such Person.
"PUBLIC EQUITY OFFERING" has the meaning set forth under "--Optional
Redemption--Optional Redemption upon Public Equity Offering."
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of the Company and the 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 is constructed, such Purchase Money
Security Agreement may be entered into within 180 days after the substantial
completion of such supermarket, (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 accessions thereto and except in
respect of 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 90% 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.
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"QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"RATING AGENCIES" means (i) Standard & Poor's Ratings Group and (ii) Moody's
Investors Service, Inc. or (iii) if Standard & Poor's Ratings Group or Moody's
Investors Service, Inc. or both shall not make a rating of the Notes publicly
available, a nationally recognized securities rating agency or agencies, as the
case may be, selected by the Company, which shall be substituted for Standard &
Poor's Ratings Group, Moody's Investors Service, Inc. or both, as the case may
be.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock to the
extent that, either by its terms, by the terms of any security into which it is
convertible or exchangeable, or by contract 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 such Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
Stated Maturity.
"REFERENCE PERIOD" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."
"RESTRICTED PAYMENT" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments."
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a board resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "--Certain Covenants-- Limitations
on Unrestricted Subsidiaries." Any such designation may be revoked by a board
resolution of the Board of Directors of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"REVOCATION" has the meaning set forth under "--Certain
Covenants--Limitations on Unrestricted Subsidiaries."
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the Commission thereunder.
"SECURITIZATION SUBSIDIARY" means any Unrestricted Subsidiary of the Company
which engages in no business, activity or transaction other than (i) acquiring
accounts or customer loans receivable of the Company or any Restricted
Subsidiary, (ii) incurring Indebtedness which is without credit recourse and
which is secured solely by, or selling (on a "true sale" non-recourse basis)
interests in, such accounts or customer loans receivable and (iii) immediately
paying all of the proceeds of such Indebtedness or sale of interests to the
Company or such Restricted Subsidiary as payment for accounts or customer loans
receivable of the Company or such Restricted Subsidiary.
"SENIOR INDEBTEDNESS" means, with respect to the Company or any Guarantor,
as applicable, the principal of, premium, if any, and interest on any
Indebtedness of the Company or such Guarantor, as the case may be, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
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
Indebtedness of the Company or such Guarantor, as the case may be. Without
limiting the generality of the foregoing, "Senior Indebtedness" will include the
principal of, premium, if any, and interest (including interest that would
accrue but for the filing of a petition initiating any proceeding under any
state or federal bankruptcy laws, whether or not such claim is allowable in such
proceeding) on all obligations of every nature of the Company or such Guarantor,
as the case may be, from time to time owed to the lenders under the Revolving
Credit Facility, including, without limitation, principal of and interest on,
and all fees and expenses payable under the Revolving Credit Facility.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include, to the
extent constituting Indebtedness, (i) Indebtedness evidenced by the Notes or the
Guarantors, (ii) Indebtedness that is subordinate or junior in right of payment
to any Indebtedness of the Company or any Guarantor, (iii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse
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to the Company or any Guarantor, (iv) Indebtedness which is represented by
Redeemable Capital Stock, (v) Indebtedness for goods, materials or services
purchased in the ordinary course of business or Indebtedness consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the Revolving Credit Facility or the current portion of any long-term
Indebtedness which would constitute Senior Indebtedness but for the operation of
this clause (v)), (vi) Indebtedness of or amounts owed by the Company or any
Guarantor for compensation to employees or for services rendered to the Company
or such Guarantor, (vii) any liability for federal, state, local or other taxes
owed or owing by the Company or any Guarantor, (viii) Indebtedness of the
Company or any Guarantor to a Subsidiary of the Company, and (ix) that portion
of any Indebtedness which at the time of issuance is issued in violation of the
Indenture.
"STATED MATURITY" means, with respect to any Note or any installment of
interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to the Company, Indebtedness
of the Company which is expressly subordinated in right of payment to the Notes
or, with respect to any Guarantor, Indebtedness of such Guarantor which is
expressly subordinated in right of payment to the Guarantee of such Guarantor.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of which
the outstanding shares of Voting Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (b) any other Person of which at
least a majority of the shares of Voting Stock are at the time, directly or
indirectly, owned by such first named Person.
"SURVIVING PERSON" means, with respect to any Person involved in any
consolidation or merger, or any sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of its properties and assets as an
entirety, the Person formed by or surviving such merger or consolidation or the
Person to which such sale, assignment, conveyance, transfer or lease is made.
"TRANSACTION DATE" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."
"UNRESTRICTED SUBSIDIARY" means (i) each Securitization Subsidiary and its
Subsidiaries and (ii) each Subsidiary of the Company (other than a Guarantor)
designated as such pursuant to and in compliance with the covenant described
under "--Certain Covenants--Limitations on Unrestricted Subsidiaries," and each
Subsidiary of each such Subsidiary of the Company. Any such designation may be
revoked by a board resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"UNUTILIZED NET CASH PROCEEDS" has the meaning set forth under "--Certain
Covenants--Limitation on Sale of Assets."
"VOTING STOCK" means any class or classes of Capital Stock 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
any Person (irrespective of whether or not, at the time, 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 any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares shall be disregarded in determining the ownership
of a Restricted Subsidiary.
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DESCRIPTION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE NOTES
The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of the Series A 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 Series A 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 Series A 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 Series A 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.
ANY PERSON CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF EXCHANGE NOTES
SHOULD CONSULT SUCH PERSON'S OWN TAX ADVISOR CONCERNING THE U.S. FEDERAL INCOME
TAX CONSEQUENCES IN LIGHT OF SUCH PERSON'S PARTICULAR SITUATION AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION.
As used herein, the term "United States Holder" means a beneficial owner of
the Series A Notes or the Exchange Notes that is (i) a citizen or resident of
the United States for U.S. 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 U.S. federal income tax on
a net income tax basis in respect of income derived from the Series A 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 Series A 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 Series
A Note for which such Exchange Note was exchanged pursuant to the Exchange
Offer, subject to any tax basis adjustments required under the Code. A United
States Holder generally will recognize gain or loss on the sale, exchange,
retirement, redemption or other disposition of a Series A 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 adjusted tax basis in the Series
A Note or the Exchange Note (or portion thereof). Except to the extent
attributable to accrued but unpaid interest (which will be treated as ordinary
income), gain or loss recognized on such disposition of a Series A Note or an
Exchange Note will be long-term capital gain or loss if such Series A Note or
Exchange Note were held for more than one year. For individual United States
Holders, the most favorable tax rates on long-term capital gains will only apply
if such Series A Note or Exchange Note were
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held for more than 18 months as of the date of any sale or exchange thereof. Any
such gain will generally be U.S. source gain.
ORIGINAL ISSUE DISCOUNT
The Series A Notes were offered and sold on April 24, 1998 at a price of
$992 per $1,000 principal amount of the Series A Notes. Although issued at a
discount, for federal income tax purposes the amount of "original issue
discount" on the Series A Notes is considered to be DE MINIMIS and is treated as
zero. These rules will find a discount on issuance to be DE MINIMIS where the
discount on issuance is less than 1/4 of one percent (.25%) of the Series A
Note's stated redemption price at the maturity thereof, multiplied by the number
of complete years to maturity.
BOND PREMIUM
If a United States Holder acquires an Exchange Note (other than pursuant to
this Exchange Offer) or has acquired a Series A Note, in each case, for an
amount more than its redemption price, the Holder may elect to amortize and
deduct from federal taxable income 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 excludable from gross income) held by the United States
Holder at the beginning of the first taxable year to which the election applies
or which are thereafter acquired by the United States Holder, unless the IRS
consents to a revocation of the election. The basis of a Series A Note or
Exchange Note must be reduced by any amortizable bond premium taken as a
deduction after the acquisition thereof.
MARKET DISCOUNT
The purchase of an Exchange Note or the purchase of a Series A 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 Series A 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 (or its predecessor Series A
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 Series A 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. Similar to the DE MINIMIS rule discussed
above with respect to "original issue discount," market discount arising upon an
acquisition of a Series A Note or Exchange Note will be considered to be zero if
the discount upon acquisition is less than 1/4 of one percent (.25%) of the
stated redemption price of the Note multiplied by the number of complete years
to maturity (after the United States Holder acquired the Series A Note or
Exchange Note). Market discount generally will accrue ratably during the period
from the date of acquisition to the maturity date of the Series A Note or
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 (or, where applicable, a predecessor Series A 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 Series A 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 to
include accrued market discount during such taxable year and in all subsequent
taxable
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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 adjusted tax basis of an Exchange Note (or, where
applicable, a predecessor Series A 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 will generally
be required to defer deductions for interest on borrowings, if any, allocable to
such Exchange Note 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 or original issue
discount, if any) and principal on, and the proceeds of sale or other
disposition of the Series A Notes or the Exchange Notes payable to a United
States Holder may be subject to United States information reporting
requirements. In addition, backup withholding at a rate of 31% may apply to such
payments where a United States Holder fails (i) to provide an accurate taxpayer
identification number or (ii) to report all interest and dividends required to
be shown on its federal income tax returns. Certain United States Holders
(including, among others, corporations) may not be 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.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuers entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Issuers agreed to file with the Commission the
Exchange Offer Registration Statement on an appropriate form under the
Securities Act with respect to the Exchange Offer for the Exchange Notes and to
offer to the holders of Series A Notes who are able to make certain
representations the opportunity to exchange their Notes for Exchange Notes. If
(i) the Issuers are not permitted to file the Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy, (ii) the Exchange Offer is not
for any other reason consummated within 120 days after the Issue Date, (iii) any
holder of Series A Notes notifies the Company within a specified time period
that (a) due to a change in law or policy it is not entitled to participate in
the Exchange Offer, (b) due to a change in law or policy it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder or (c) it is a broker-dealer and owns Series A Notes acquired directly
from the Issuers or an affiliate of an Issuer or (iv) the holders of a majority
of the Series A Notes may not resell the Exchange Notes acquired by them in the
Exchange Offer to the public without restriction under the Securities Act and
without restriction under applicable blue sky or state securities laws, the
Issuer will file with the Commission the Shelf Registration Statement to cover
resales of the Transfer Restricted Notes (as defined herein) by the holders
thereof. The Issuers will use their best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted Notes" means
each Note until (i) the date on which such Note has been exchanged by a person
other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Series A
Note for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement, (iv) the date on which such Note is distributed to the
public pursuant to Rule 144(k) under the Securities Act (or any similar
provision then in force, but not Rule 144A under the Securities Act), (v) such
Note shall have been otherwise transferred by the holder thereof and a new Note
not bearing a legend restricting further transfer shall have been delivered by
the Issuers and
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subsequent disposition of such Note shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(vi) such Note ceases to be outstanding.
Under existing Commission interpretations, the Exchange Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; PROVIDED, HOWEVER, that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act must be delivered upon resale by such
broker-dealers in connection with resales of the Exchange Notes. The Issuers
have agreed, for a period of 180 days after consummation of the Exchange Offer,
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).
Each holder of Series A Notes that wishes to exchange such Series A Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes, (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of any Issuer, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable and (iv) it is not a broker-dealer tendering Series A Notes
which it acquired directly from the Issuers for its own account.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
The Issuers have agreed to pay all expenses incident to the Exchange Offer
and will indemnify the Initial Purchasers against certain liabilities, including
liabilities under the Securities Act.
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Issuers
will file the Exchange Offer Registration Statement with the Commission on or
prior to 30 days after the Issue Date, (ii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Issuers will use their
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 90 days after the Issue Date, (iii)
unless the Exchange Offer would not be permitted by applicable law or Commission
policy, the Issuers will commence the Exchange Offer and use their best efforts
to issue, on or prior to 30 days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, Exchange Notes
in Exchange for all Notes tendered prior thereto in the Exchange Offer and (iv)
if obligated to file the Shelf Registration Statement, the Issuers will use
their best efforts to file prior to the later of (a) 30 days after the Issue
Date or (b) 30 days after such filing obligation arises and use their best
efforts to cause the Shelf Registration Statement to be declared effective by
the Commission on or prior to 60 days after such obligation arises; PROVIDED,
HOWEVER, that if the Issuers have not consummated the Exchange Offer within 120
days of the Issue Date, then the Issuers will file the Shelf Registration
Statement with the Commission on or prior to the 121st day after the Issue Date.
The Issuers shall use their best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended until the second
anniversary of the effective date of the Shelf Registration Statement or such
shorter period that will terminate when all the Transfer Restricted Notes
covered by the Shelf Registration Statement have been sold pursuant thereto.
If (i) the Issuers fail to file any of the registration statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (ii) any of such registration statements are not
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declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), subject to certain limited
exceptions, (iii) the Issuers fail to consummate the Exchange Offer within 30
days of the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement, or (iv) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter, subject to
certain limited exceptions, ceases to be effective or usable in connection with
the Exchange Offer or resales of Transfer Restricted Notes, as the case may be,
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (i) through (iv) above, a "Registration Default"),
then the Issuers will pay liquidated damages ("Liquidated Damages") in cash to
each holder of Transfer Restricted Notes, with respect to the first 90-day
period (or portion thereof) while a Registration Default is continuing
immediately following the occurrence of such Registration Default in an amount
equal to 0.25% per annum of the principal amount of the Series A Notes. The
amount of Liquidated Damages will increase by an additional 0.25% per annum of
the principal amount of the Series A Notes for each subsequent 90-day period (or
portion thereof) while a Registration Default is continuing until all
Registration Defaults have been cured, up to a maximum amount of 1.00% of the
principal amount of the Series A Notes. Following the cure of a particular
Registration Default, the accrual of Liquidated Damages with respect to such
Registration Default will cease.
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 will be made available to prospective participants in
the Exchange Offer upon request to the Company.
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BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be represented by a single, permanent global note in
definitive, fully registered book-entry form (the "Global Security") which will
be registered in the name of a nominee of DTC and deposited on behalf of holders
of the Exchange Notes represented thereby with a custodian for DTC for credit to
the respective accounts of the purchasers (or to such other accounts as they may
direct) at DTC.
Holders of Exchange Notes who elect to take physical delivery of their
certificates instead of holding their interest through the Global Security (and
which are thus ineligible to trade through DTC) (collectively referred to herein
as the "Non-Global Purchasers") will be issued in registered form ("Certificated
Securities"). Upon the transfer of any Certificated Security, such Certificated
Security will, unless the transferee requests otherwise or the Global Security
has previously been exchanged in whole for Certificated Securities, be exchanged
for an interest in the Global Security upon delivery of appropriate
certifications to the Trustee.
THE GLOBAL SECURITY. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Security, DTC or its custodian
will credit on its internal system portions of the Global Security which shall
be comprised of the corresponding respective amount of the Global Security to
the respective accounts of persons who have accounts with such depositary and
(b) ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its nominee
(with respect to interests of Participants (as defined below) and the records of
Participants (with respect to interests of persons other than Participants).
Ownership of beneficial interests in the Global Security will be limited to
persons who have accounts with DTC ("Participants") or persons who hold
interests through Participants. Holders of Exchange Notes may hold their
interests in the Global Security 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 any of
the Exchange Notes, DTC or such nominee will be considered the sole owner or
holder of such Exchange Notes represented by such Global Security for all
purposes under the Indenture and under the Exchange Notes represented thereby.
No beneficial owner of an interest in the Global Security will be able to
transfer such interest except in accordance with the applicable procedures of
DTC in addition to those provided for under the Indenture.
Payments of the principal of or premium and interest (including Liquidated
Damages) on the Exchange Notes represented by the Global Security will be made
to DTC or its nominee, as the case may be, as the registered owner thereof. None
of the Company, the Trustee or any paying agent under the Indenture 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
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of or premium and interest (including Liquidated Damages) on the
Exchange Notes represented by the Global Security, will credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the Global Security as shown on the records of DTC or its nominee.
The Company also expects that payments by Participants to owners of beneficial
interests in the Global Security held through such Participants will be governed
by standing instructions and customary practice as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payment will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Security for any reason, including
to sell Notes to persons in states which require physical delivery of such
securities or
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to pledge such securities, such holder must transfer its interest in the Global
Security in accordance with the normal procedures of DTC and in accordance with
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 Security are
credited and only in respect of the aggregate principal amount 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
Security for Certificated Securities, which it will distribute to its
Participants.
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 member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants 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").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Security among Participants of
DTC, DTC is under no obligation to perform such procedures, and such procedures
may be discontinued at any time. None of the Company, the Trustee or the Paying
Agent will have any responsibility for the performance by DTC or its direct or
indirect Participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED SECURITIES. Interests in the Global Security will be exchanged
for Certificated Securities if (i) DTC is at any time unwilling or unable to
continue as depositary for the Global Security, or DTC ceases to be a "Clearing
Agency" registered under the Exchange Act, and a successor depositary is not
appointed by the Company within 90 days or (ii) an Event of Default has occurred
and is continuing with respect to the Exchange Notes. Upon the occurrence of any
of the events described in the preceding sentence, the Company will cause the
appropriate Certificated Securities to be delivered to the record holders
thereof.
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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 Series A Notes where such Series A 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 , 1998 (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 with respect to the legality of the issuance of the
Exchange Notes offered hereby will be passed upon for the Company by Oppenheimer
Wolff & Donnelly LLP, Minneapolis, Minnesota. Richard G. Lareau, a partner of
Oppenheimer Wolff & Donnelly LLP, serves on the Board of Directors of the
Company.
EXPERTS
The consolidated financial statements of the Company and subsidiaries for
each of the three years in the period ended January 3, 1998, 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.
98
<PAGE>
NASH-FINCH COMPANY
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 Earnings/Loss for the Three Years Ended January
3, 1998................................................................. F-3
Consolidated Balance Sheets as of January 3, 1998 and December 28, 1996... F-4
Consolidated Statements of Cash Flows for the Three Years Ended January 3,
1998.................................................................... F-6
Consolidated Statements of Stockholders' Equity for the Three Years Ended
January 3, 1998......................................................... F-7
Notes to Consolidated Financial Statements................................ F-8
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statements of Earnings (Loss) for the Twelve Weeks
Ended March 28, 1998 and March 22, 1997................................. F-27
Condensed Consolidated Balance Sheets as of March 28, 1998 and March 22,
1997.................................................................... F-28
Condensed Consolidated Statements of Cash Flows for the Twelve Weeks Ended
March 28, 1998 and March 22, 1997....................................... F-29
Condensed Consolidated Statements of Stockholders' Equity for the Twelve
Weeks Ended March 28, 1998 and March 22, 1997........................... F-30
Notes to Condensed Consolidated Financial Statements...................... F-31
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Nash Finch Company:
We have audited the accompanying consolidated balance sheets of Nash Finch
Company and subsidiaries as of January 3, 1998 and December 28, 1996, and the
related consolidated statements of earnings/loss, stockholders' equity, and cash
flows for each of the three years in the period ended January 3, 1998. 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 Nash Finch
Company and subsidiaries at January 3, 1998 and December 28, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 3, 1998, in conformity with generally
accepted accounting principles.
[LOGO]
Minneapolis, Minnesota
March 26, 1998
F-2
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS/LOSS
FISCAL YEARS ENDED JANUARY 3, 1998,
DECEMBER 28, 1996 AND DECEMBER 30, 1995.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
53 WEEKS 52 WEEKS 52 WEEKS
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Net sales............................................................. $ 4,319,095 3,322,666 2,831,114
Other revenues........................................................ 72,507 52,819 57,722
------------ ------------ ------------
Total revenues...................................................... 4,391,602 3,375,485 2,888,836
COST AND EXPENSES:
Cost of sales......................................................... 3,826,377 2,932,709 2,469,841
Selling, general and administrative, and other operating expenses..... 453,645 359,456 350,201
Special charges....................................................... 31,272 -- --
Depreciation and amortization......................................... 47,697 34,759 29,406
Interest expense...................................................... 32,845 14,894 10,793
------------ ------------ ------------
Total costs and expenses............................................ 4,391,836 3,341,818 2,860,241
Earnings (loss) before income taxes................................. (234) 33,667 28,595
Income taxes............................................................ 994 13,635 11,181
------------ ------------ ------------
Net earnings (loss)..................................................... $ (1,228) 20,032 17,414
------------ ------------ ------------
Basic earnings (loss) per share......................................... $ (0.11) 1.83 1.60
------------ ------------ ------------
Diluted earnings (loss) per share....................................... $ (0.11) 1.81 1.60
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1998 AND DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 933 921
Accounts and notes receivable, net........................ 173,962 206,062
Inventories............................................... 287,801 293,458
Prepaid expenses.......................................... 22,582 20,492
Deferred tax assets....................................... 9,072 4,663
--------- --------
Total current assets.................................... 494,350 525,596
Investments in affiliates................................... 7,679 10,300
Notes receivable, noncurrent................................ 23,092 21,652
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 31,229 33,753
Buildings and improvements................................ 137,070 148,227
Furniture, fixtures and equipment......................... 306,762 295,147
Leasehold improvements.................................... 60,578 54,925
Construction in progress.................................. 28,485 7,543
Assets under capitalized leases........................... 25,048 26,105
--------- --------
589,172 565,700
Less accumulated depreciation and amortization............ (312,939) (293,845)
--------- --------
Net property, plant and equipment....................... 276,233 271,855
Intangible assets, net...................................... 70,732 80,312
Investment in direct financing leases....................... 19,094 22,011
Deferred tax asset, net..................................... 2,622 4,076
Other assets................................................ 11,081 9,675
--------- --------
Total assets............................................ $ 904,883 945,477
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Outstanding checks........................................ $ 36,271 32,492
Short-term debt payable to banks.......................... 11,300 16,171
Current maturities of long-term debt and capitalized lease
obligations............................................. 7,964 7,795
Accounts payable.......................................... 177,548 183,501
Accrued expenses.......................................... 60,599 54,130
Income taxes.............................................. 737 2,999
--------- --------
Total current liabilities............................... 294,419 297,088
Long-term debt.............................................. 325,489 361,819
Capitalized lease obligations............................... 38,517 41,832
Deferred compensation....................................... 6,768 7,476
Other....................................................... 14,072 4,401
STOCKHOLDERS' EQUITY:
Preferred stock--no par value
Authorized 500 shares; none issued...................... -- --
Common stock of $1.66 2/3 par value
Authorized 25,000 shares; issued shares (1997--11,575;
1996--11,574).......................................... 19,292 19,290
Additional paid-in capital................................ 17,648 16,816
Foreign currency translation adjustment--net of a $633
deferred tax benefit.................................... -- (950)
Restricted stock.......................................... (391) (500)
Retained earnings......................................... 190,984 200,322
--------- --------
227,533 234,978
Less cost of 252 shares and 307 shares of common stock in
treasury, respectively.................................... (1,915) (2,117)
--------- --------
Total stockholders' equity.............................. 225,618 232,861
--------- --------
Total liabilities and stockholders' equity.............. $ 904,883 945,477
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED JANUARY 3, 1998,
DECEMBER 28, 1996 AND DECEMBER 30, 1995.
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss)............................... $ (1,228) 20,032 17,414
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Special charges................................. 28,749 -- --
Depreciation and amortization................... 47,697 34,759 29,406
Provision for bad debts......................... 5,055 1,893 3,997
Provision for (recovery from) losses on closed
lease locations................................ 1,722 (458) 1,361
Deferred income taxes........................... (2,955) (2,278) (4,187)
Deferred compensation........................... (708) (149) (901)
Loss of equity investments...................... 469 616 (501)
Other........................................... 2,003 326 (157)
Changes in operating assets and liabilities:
Accounts and notes receivable................... (3,744) (12,544) 8,115
Inventories..................................... 19,821 14,021 14,680
Prepaid expenses................................ (1,201) (349) (3,441)
Accounts payable and outstanding checks......... (3,174) (24,245) 15,339
Accrued expenses................................ (2,512) 2,219 2,160
Income taxes.................................... (2,262) (967) 2,508
-------- -------- -------
Net cash provided by operating activities..... 87,732 32,876 85,793
-------- -------- -------
INVESTING ACTIVITIES:
Dividends received.............................. 1,600 -- 890
Disposals of property, plant and equipment,
net............................................ 16,721 9,169 14,858
Additions to property, plant and equipment,
excluding capital leases....................... (67,725) (51,333) (33,264)
Businesses acquired, net of cash acquired....... (17,863) (257,868) --
Investment in an affiliate...................... -- (2,500) (1,379)
Loans to customers.............................. (18,816) (4,997) (9,199)
Payments from customers on loans................ 14,080 4,713 8,788
Sale of receivables............................. 37,000 3,402 13,744
Other........................................... (739) (2,896) (137)
-------- -------- -------
Net cash used in investing activities......... (35,742) (302,310) (5,699)
-------- -------- -------
FINANCING ACTIVITIES:
Proceeds from long-term debt.................... -- 30,000 352
(Payments) proceeds from revolving debt......... (30,000) 244,000 --
Dividends paid.................................. (8,110) (8,288) (8,048)
Payments of short-term debt..................... (4,871) 1,171 (41,400)
Payments of long-term debt...................... (6,009) (21,946) (5,568)
Payments of capitalized lease obligations....... (3,467) (717) (540)
Other........................................... 479 111 56
-------- -------- -------
Net cash (used in) provided by financing
activities................................... (51,978) 244,331 (55,148)
-------- -------- -------
Net increase (decrease) cash.................. $ 12 (25,103) 24,946
-------- -------- -------
-------- -------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 3, 1998,
DECEMBER 28, 1996 AND DECEMBER 30, 1995.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY TREASURY STOCK TOTAL
--------------- PAID-IN RETAINED TRANSLATION RESTRICTED ---------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK SHARES AMOUNT EQUITY
------ ------- ---------- -------- ---------- ---------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994... 11,224 $18,706 11,977 179,212 (572) -- (349) $(3,054) 206,269
Net earnings................... -- -- -- 17,414 -- -- -- -- 17,414
Dividend declared of $.74 per
share........................ -- -- -- (8,048) -- -- -- -- (8,048)
Treasury stock issued upon
exercise of options.......... -- -- 36 -- -- -- 3 20 56
Foreign currency translation
adjustment--net of a $252
deferred tax benefit......... -- -- -- -- (378) -- -- -- (378)
------ ------- ---------- -------- --- --- ------ ------- -------------
BALANCE AT DECEMBER 30, 1995... 11,224 18,706 12,013 188,578 (950) -- (346) (3,034 ) 215,313
Net earnings................... -- -- -- 20,032 -- -- -- -- 20,032
Dividend declared of $.75 per
share........................ -- -- -- (8,288) -- -- -- -- (8,288)
Shares issued in connection
with acquisition of a
business..................... 350 584 5,064 -- -- -- -- 5,648
Treasury stock issued upon
exercise of options.......... -- -- 47 -- -- 6 42 89
Issuance of restricted stock... -- -- (308) -- -- (524) 40 995 163
Amortized compensation under
restricted stock plan........ -- -- -- -- -- 24 -- -- 24
Treasury stock purchased....... -- -- -- -- -- -- (7) (120 ) (120)
------ ------- ---------- -------- --- --- ------ ------- -------------
BALANCE AT DECEMBER 28, 1996... 11,574 19,290 16,816 200,322 (950) (500) (307) (2,117 ) 232,861
Net earnings (loss)............ -- -- -- (1,228) -- -- -- -- (1,228)
Dividend declared of $.72 per
share........................ -- -- -- (8,110) -- -- -- -- (8,110)
Treasury stock issued upon
exercise of options.......... -- -- 354 -- -- -- 29 143 497
Amortized compensation under
restricted stock plan........ -- -- -- -- -- 29 -- -- 29
Repayment of notes receivable
from holders of restricted
stock........................ -- -- -- -- -- 80 -- -- 80
Distribution of stock pursuant
to performance awards........ -- -- 460 -- -- -- 30 148 608
Treasury stock purchased....... -- -- -- -- -- -- (4) (89 ) (89)
Foreign currency translation
adjustment................... -- -- -- -- 950 -- -- -- 950
Other.......................... 1 2 18 -- -- -- -- -- 20
------ ------- ---------- -------- --- --- ------ ------- -------------
BALANCE AT JANUARY 3, 1998..... 11,575 $19,292 17,648 190,984 -- (391) (252) $(1,915) 225,618
------ ------- ---------- -------- --- --- ------ ------- -------------
------ ------- ---------- -------- --- --- ------ ------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES
FISCAL YEAR
Nash Finch Company's fiscal year ends on the Saturday nearest to December
31. Fiscal year 1997 consisted of 53 weeks, while 1996 and 1995 consisted of 52
weeks.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Nash Finch
Company (the Company), its majority-owned subsidiaries and the Company's share
of net earnings or losses of 50% or less owned companies. All material
intercompany accounts and transactions have been eliminated in the consolidated
financial statements. Certain reclassifications were made to prior year amounts
to conform with 1997 presentation.
CASH AND CASH EQUIVALENTS
In the accompanying financial statements, and for purposes of the statements
of cash flows, cash and cash equivalents include cash on hand and short-term
investments with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. At both January 3,
1998 and December 28, 1996, approximately 85% of the Company's inventories are
valued on the last-in, first-out (LIFO) method. During fiscal 1997, the Company
recorded a LIFO charge of $1.5 million compared to $1.6 million in 1996. The
remaining inventories are valued on the first-in, first-out (FIFO) method. If
the FIFO method of accounting for inventories had been used, inventories would
have been $43.1 million and $41.6 million higher at January 3, 1998 and December
28, 1996, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Assets under capitalized
leases are recorded at the present value of future lease payments or fair market
value, whichever is lower. Expenditures which improve or extend the life of the
respective assets are capitalized while maintenance and repairs are expensed as
incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
An impairment loss is recognized whenever events or changes in circumstances
indicate that the carrying amount of an asset is not recoverable. In applying
Statement of Financial Accounting Standards ("SFAS") No. 121, assets are grouped
and evaluated at the lowest level for which there are identifiable cash flows
that are largely independent of the cash flows of other groups of assets. The
Company has generally identified this lowest level to be individual stores;
however, there are limited circumstances where, for evaluation purposes, stores
are considered with the distribution center they support. The Company considers
historical performance and future estimated results in its evaluation of
potential impairment. If the carrying amount of the asset exceeds estimated
expected undiscounted future cash flows, the Company measures the amount of the
impairment by comparing the carrying amount of the asset to its fair value,
generally measured by discounting expected future cash flows at the rate the
Company utilizes to evaluate potential investments.
F-7
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets consist primarily of covenants not to compete and
goodwill, and are carried at cost less accumulated amortization. Costs are
amortized over the estimated useful lives of the related assets ranging from
2-25 years. Amortization expense charged to operations for fiscal years ended
January 3, 1998, December 28, 1996, and December 30, 1995 was $5.9 million, $5.2
million and $1.8 million, respectively. The accumulated amortization of
intangible assets was $13.5 million and $10.1 million at January 3, 1998 and
December 28, 1996, respectively. The carrying value of intangible assets is
reviewed for impairment annually and/or when factors indicating impairment are
present using an undiscounted cash flow assumption.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are depreciated on a straight-line basis over
the estimated useful lives of the assets which generally range from 10-40 years
for buildings and improvements and 3 to 10 years for furniture, fixtures and
equipment. Leasehold improvements and capitalized leases are amortized to
expense on a straight-line basis over the term of the lease.
ADVERTISING
Advertising costs included in selling, general and administrative, and other
operating expenses, are expensed as incurred and were $5.0 million, $5.9 million
and $8.5 million in 1997, 1996 and 1995, respectively.
INCOME TAXES
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128, EARNINGS PER SHARE. SFAS No. 128 replaced the previously reported primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, contingent, and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the SFAS No. 128
requirements.
STOCK OPTION PLANS
In accordance with the provisions of SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, the Company has chosen to continue to apply Accounting
Principles Board Opinion No. 25, (APB 25) ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES and related interpretations in accounting for its stock option plans,
and, accordingly, does not recognize compensation costs, if the option price
equals or exceeds market price at date of grant. Note (7) of Notes to
Consolidated Financial Statements contains a summary
F-8
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) ACCOUNTING POLICIES (CONTINUED)
of the pro forma effects to reported net income and earnings per share had the
Company elected to recognize compensation costs as encouraged by SFAS No. 123.
FOREIGN CURRENCY TRANSLATION
Adjustments resulting from the translation of assets and liabilities of a
foreign investment are included in stockholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME
and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION. SFAS No. 130 establishes standards for the reporting and
presentation of comprehensive income and its components. SFAS No. 131
establishes standards for defining operating segments and the reporting of
certain information regarding operating segments. Because these statements only
impact how financial information is disclosed in interim and annual reports, the
adoption will have no impact to the Company's financial condition or results of
operations.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. The SOP is effective for
the Company beginning on January 1, 1999, however, early adoption is permitted.
The SOP will require the capitalization of certain costs incurred after the date
of adoption in connection with developing or obtaining software for internal
use. Some, but not all, of the costs that are required to be capitalized by the
SOP are currently being expensed by the Company. The Company has not yet
assessed what the impact of the SOP will be on the Company's future earnings or
financial position.
(2) ACQUISITIONS
The following acquisitions have been accounted for by the purchase method of
accounting and accordingly, the operating results of the newly acquired
businesses have been included in the consolidated operating results of the
Company since their respective dates of acquisition.
On June 9, 1997, the Company acquired the business and certain assets from
United-A.G., a cooperative wholesale grocery distributor located in Omaha, for
approximately $17.9 million in cash. Real estate which was not included in the
purchase price, is being leased under a five-year agreement from a third party.
This operating lease contains an option to purchase the property at fair market
value, or a renewal option for an additional five years at the end of the
initial lease term. In addition, the Company has guaranteed a residual value for
the leased real estate. United-A.G., with pre-acquisition annual revenues of
approximately $200 million, served stores in Nebraska, Kansas, Iowa, Colorado
and South Dakota.
F-9
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS (CONTINUED)
On November 7, 1996, the Company completed a tender offer to purchase the
outstanding shares of common stock of Super Food for $15.50 per share in cash,
with 10.6 million shares tendered at that date, representing approximately 96
percent of the outstanding common stock of Super Food. Super Food is a wholesale
grocery distributor based in Dayton, Ohio with annual revenues of approximately
$1.2 billion. The fair value of the assets acquired, including goodwill, was
$321.9 million, and liabilities assumed totaled $150.0 million. Goodwill of
$29.8 million and other intangibles of $7.1 million are being amortized over 25
years on a straight line basis.
On August 5, 1996, the Company acquired all of the outstanding stock of T.
J. Morris, a full line food wholesaler located in Statesboro, Georgia, with
annual revenues of $110.0 million. In exchange for the T. J. Morris stock, the
Company issued 350,764 shares of its common stock, valued at approximately $5.7
million, of which 25,002 shares are held in escrow at January 3, 1998. Such
shares were issued January 8, 1998. The excess of purchase price over fair value
of the assets acquired resulted in goodwill of approximately $3.1 million which
is being amortized on a straight line basis over a 15-year period.
On January 2, 1996, the Company acquired substantially all of the business
and assets of MDV located in Norfolk, Virginia for approximately $56.0 million
in cash and the assumption of certain liabilities totaling approximately $54.0
million. MDV, with revenues of approximately $350.0 million, is a major
distributor of grocery products to military commissaries in the eastern United
States and Europe. The purchase price exceeded the fair value of the net assets
acquired by approximately $43 million. The resulting goodwill is being amortized
on a straight line basis over 15 years.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if the above operations had been acquired
as of the beginning of the periods presented, after including the impact of
certain adjustments such as amortization of intangibles, increased interest
expense on acquisition debt and related income tax effects:
PRO FORMA INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net revenues................................. $4,499,543 4,713,664 4,589,362
Earnings (loss) before income taxes.......... (36) 23,790 32,291
Net income (loss)............................ (247) 14,120 19,060
Basic earnings (loss) per share.............. $ (.02) 1.28 1.70
---------- --------- ---------
---------- --------- ---------
</TABLE>
The pro forma information is provided for informational purposes only. It is
based on historical information and does not necessarily reflect results that
would have occurred had the acquisitions been made as of those dates or results
which may occur in the future.
(3) SPECIAL CHARGES
During the third quarter of 1997, the Company recorded special charges
totaling $31.3 million consisting of $12.6 million in asset writedowns and $6.5
million and $9.7 million classified as accrued expenses and other noncurrent
liabilities, respectively.
F-10
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) SPECIAL CHARGES (CONTINUED)
The aggregate special charges include $14.5 million for the consolidation of
selected warehouses. This charge contains provisions for non-cancelable lease
obligations, expected losses on disposals of tangible assets, and other
continuing occupancy costs. Also included are employee severance costs
consistent with existing practices and the unamortized portion of goodwill for
one of the locations.
Also, related to wholesale operations, the special charges include $2.5
million of integration costs, incurred in the third quarter, associated with the
acquisition of the business and certain assets from United-A.G.
In retail operations, the special charges relate to the closing or
consolidation of fourteen, primarily leased stores. The special charges include
a $5.2 million provision for continuing non-cancelable lease obligations,
anticipated losses on disposals of tangible assets, abandonment of certain
leaseholds and the write-off of intangibles. The time frame for individual store
closings will vary but should be completed by the first quarter of fiscal 1999.
For 1997, the retail units included in the provision had aggregate sales and
pretax losses of $82.9 million and $2.7 million, respectively, compared with
$88.3 million and $1.8 million for 1996.
The aggregate special charges contain a provision of $5.4 million for asset
impairment of seven retail stores. Declining market share due to increasing
competition, deterioration of operating performance in the third quarter, and
forecasted future results that were less than previously planned were the
factors leading to the impairment determination. The impaired assets covered by
the charge primarily include real estate, leasehold improvements and, to a
lesser extent, goodwill related to two of the stores.
An asset impairment charge of $1.0 million relating to agricultural assets
was also recorded against several farming operations of Nash DeCamp, the
Company's produce marketing subsidiary. The impairment determination was based
on recent downturns in the market for certain varieties of fruit. The impairment
resulted from anticipated future operating losses and insufficient projected
cash flows from agricultural production of these products.
Other special charges aggregating $2.8 million consist primarily of $.9
million related to the abandonment of current system software which is being
replaced by the Company's HORIZONS project, and a loss of $.6 million realized
on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a
Hungarian food wholesaler. The remaining special charges relate principally to
the write down of idle real estate held for sale to current market values.
During the fourth quarter of 1997, rents totaling $198,000 were charged to
reserves established as a result of the special charges recorded in the third
quarter. Reserves related to the closing or consolidation of wholesale and
retail operations in the amount of $6.3 million and $9.7 million are included in
accrued expense and other liabilities, respectively, on the balance sheet at
January 3, 1998.
F-11
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable at the end of fiscal years 1997 and 1996 are
comprised of the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Customer notes receivable--current portion.................... $ 9,256 8,090
Customer accounts receivable.................................. 157,737 197,336
Other receivables............................................. 26,970 21,158
Allowance for doubtful accounts............................... (20,001) (20,522)
-------- -------
Net current accounts and notes receivable..................... $173,962 206,062
-------- -------
-------- -------
Noncurrent customer notes receivable.......................... 29,759 29,223
Allowance for doubtful accounts............................... (6,667) (7,571)
-------- -------
Net noncurrent notes receivable............................... $ 23,092 21,652
-------- -------
-------- -------
</TABLE>
Operating results include bad debt expense totaling $5.1 million, $1.9
million and $4.0 million during fiscal years 1997, 1996 and 1995, respectively.
On January 1, 1997, the Company adopted the requirements of SFAS No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCED ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. SFAS No. 125 establishes accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on the application of a financial components approach which focuses on
control of the assets and extinguishments of liabilities that exist after the
transfer. The implementation of SFAS No. 125 did not have a material effect on
the Company's 1997 consolidated financial statements.
On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was
executed by the Company, Nash Finch Funding Corporation (NFFC), a wholly-owned
subsidiary of the Company, and a certain third party purchaser (the "Purchaser")
pursuant to a securitization transaction. On this date the Company sold $44.6
million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0
million of its undivided interest in such receivables to the Purchaser, subject
to specified collateral requirements. NFFC maintains a variable undivided
interest in these receivables and is subject to losses on its share of the
receivables and, accordingly, maintains an allowance for doubtful accounts. In
applying the provisions of SFAS No. 125, no gain or loss resulted on the
transaction. The Agreement is a five-year $50 million revolving receivable
purchase facility allowing the Company to sell additional receivables to NFFC,
and NFFC to sell, from time to time, variable undivided interests in these
receivables to the Purchaser.
In 1995, the Company entered into an agreement with a financial institution
which allowed the Company to sell on a revolving basis customer notes
receivable. Although the agreement lapsed on December 28, 1996, the notes, which
have maturities through the year 2002, were sold at face value with recourse. As
a result, the Company continues to be responsible for collection of the notes
and remits the principal plus a floating rate of interest to the purchaser on a
monthly basis. Proceeds from the sale of the notes receivable were used to fund
working capital requirements.
The remaining balances of such sold notes receivable totaled $9.1 million
and $14.0 million at January 3, 1998 and December 28, 1996, respectively. The
Company is contingently liable should these notes become uncollectible.
F-12
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) ACCOUNTS AND NOTES RECEIVABLE (CONTINUED)
Substantially all notes receivable are based on floating interest rates
which adjust to changes in market rates. As a result, the carrying value of
notes receivable approximates market value.
(5) LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt at the end of the fiscal years 1997 and 1996 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Variable rate--revolving credit agreement.................... $214,000 244,000
Industrial development bonds, 5.4% to 7.8% due in various
installments through 2009.................................. 4,370 4,885
Term loans, 7.5% to 9.9% due in various installments through
2008....................................................... 107,528 112,250
Notes payable and mortgage notes, 9.3% to 12.0% due in
various installments through 2003.......................... 5,975 6,747
-------- --------
$331,873 367,882
Less current maturities...................................... 6,384 6,063
-------- --------
$325,489 361,819
-------- --------
-------- --------
</TABLE>
During 1997, the Company entered into four swap agreements, with separate
financial institutions. The agreements which are based on a notional amount of
$30.0 million each, call for an exchange of interest payments with the Company
receiving payments based on a London Interbank Offered Rate (LIBOR) floating
rate and making payments based on a fixed rate, ranging from 6.21% to 6.54%,
without an exchange of the notional amount upon which the payments are based.
The differential to be paid or received from counter-parties as interest rates
change is included in other liabilities or assets, with the corresponding amount
accrued and recognized as an adjustment of interest expense related to the debt.
The Company is exposed to credit loss in the event of non-performance by
counter-parties to these financial instruments, but it does not expect any
counter-party to fail to meet its obligations. The amount of such credit
exposure is generally the unrealized gains in such contracts. To manage credit
risks, the Company selects counter-parties based on credit ratings, limits
exposure to a single counter-party and monitors the market position with each
counter-party.
The fair values of the swap agreements are not material and have not been
recognized in the financial statements at January 3, 1998. Gains and losses on
terminations of interest rate swap agreements are deferred as an adjustment to
the carrying amount of the outstanding debt and amortized as an adjustment to
the interest expense related to the debt over the remaining term of the original
contract life of the terminated swap agreement. In the event of the early
extinguishment of a designated debt obligation, any realized or unrealized gain
or loss from the swap would be recognized in income coincident with the
extinguishment. Any swap agreements that are not designated with outstanding
debt are recorded as an asset or liability at fair value, with changes in fair
value recorded in other income or expense.
On October 8, 1996, the Company entered into a $500 million senior unsecured
revolving credit facility (the "Revolving Credit Facility") with two lead banks.
The agreement calls for a scheduled reduction of the facility within two years,
to $400 million, with the remaining balance maturing five years from closing.
During 1997, the Company exercised its right to reduce the Revolving Credit
Facility to
F-13
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED)
$360 million. Borrowings under this agreement bear interest at variable rates
equal to LIBOR plus .30%. In addition, the Company pays commitment fees of .175%
on the entire facility both used and unused. The average borrowing rate during
the period was 6.0%.
The Revolving Credit Facility contains covenants which, among other matters,
limits the Company's ability to incur indebtedness, buy and sell assets, and
requires compliance to predetermined ratios related to net worth, debt to equity
and interest coverage.
At January 3, 1998, land, buildings and other assets pledged to secure
outstanding mortgage notes and obligations under industrial development bond
issues have a depreciated cost of approximately $4.8 million and $4.3 million,
respectively.
Aggregate annual maturities of long-term debt for the five fiscal years
after January 3, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1998................................................................... $ 6,384
1999................................................................... 1,844
2000................................................................... 33,576
2001................................................................... 240,394
2002 and thereafter.................................................... $ 49,675
</TABLE>
Interest paid was $31.6 million, $14.3 million and $11.4 million, for the
fiscal years 1997, 1996 and 1995, respectively.
In addition, the Company maintains informal lines of credit at various
banks. At January 3, 1998, unused uncommitted lines of credit amounted to $13.7
million.
Based on borrowing rates currently available to the Company for long-term
financing with similar terms and average maturities, the fair value of long-term
debt, including current maturities, utilizing discounted cash flows is $340.3
million.
(6) INCOME TAXES
Income tax expense for fiscal years 1997, 1996 and 1995 is made up of the
following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Current:
Federal............................................... $ 3,293 12,125 12,244
State................................................. 692 2,354 2,872
Deferred:
Federal............................................... (2,644) (576) (3,145)
State................................................. (347) (268) (790)
------- ------ ------
Total............................................... $ 994 13,635 11,181
------- ------ ------
------- ------ ------
</TABLE>
F-14
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES (CONTINUED)
Total income tax expense represents effective tax rates of 425.4%, 40.5% and
39.1% for the fiscal years 1997, 1996 and 1995, respectively. The reasons for
differences compared with the U.S. federal statutory tax rate (expressed as a
percentage of pretax income) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. (35.0)% 35.0% 35.0%
Items affecting federal income tax rate:
State taxes, net of federal income tax benefit.............. 96.0 4.3 4.9
Foreign equity earnings..................................... (27.6) -- --
Dividends received deduction on domestic stock of under 80%
owned companies........................................... (191.7) -- --
Non-deductible goodwill..................................... 700.1 .2 --
Non-deductible meals and entertainment...................... 94.6 .6 .8
Adjustment to valuation allowance and other income tax
accruals.................................................. (198.0) .4 (.6)
Other net................................................... (13.0) -- (1.0)
------- ---- ----
Effective tax rate........................................ 425.4% 40.5% 39.1%
------- ---- ----
------- ---- ----
</TABLE>
Income taxes paid were $8.9 million, $12.4 million and $10.8 million during
fiscal years 1997, 1996 and 1995, respectively.
F-15
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at January 3,
1998, December 28, 1996, and December 30, 1995, are presented below (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Deferred tax assets:
Accounts and notes receivable, principally due to
allowance for doubtful accounts....................... $ 5,891 7,625 1,964
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax
Reform Act of 1986.................................... 3,405 2,956 1,654
Health care claims, principally due to accrual for
financial reporting purposes.......................... 2,668 2,991 1,073
Deferred compensation, principally due to accrual for
financial reporting purposes.......................... 2,546 2,376 3,173
Compensated absences, principally due to accrual for
financial reporting purposes.......................... 3,086 2,286 1,379
Compensation and casualty loss, principally due to
accrual for financial reporting purposes.............. 1,780 1,959 2,135
Purchased intangibles................................... -- -- 1,958
Closed locations........................................ 10,612 3,126 1,110
Other................................................... 731 2,236 1,193
------- ------ ------
Total gross deferred tax assets......................... 30,719 25,555 15,639
Less valuation allowance................................ -- -- --
------- ------ ------
Net deferred tax assets............................... 30,719 25,555 15,639
------- ------ ------
Deferred tax liabilities:
Purchased intangibles................................... 231 1,055 --
Plant and equipment, principally due to differences in
depreciation.......................................... 9,704 6,511 5,978
Inventories, principally due to differences in LIFO
basis................................................. 7,686 7,230 2,070
Other................................................... 1,404 2,020 1,082
------- ------ ------
Total gross deferred tax liabilities.................... 19,025 16,816 9,130
------- ------ ------
Net deferred tax asset................................ $11,694 8,739 6,509
------- ------ ------
------- ------ ------
</TABLE>
Since it is more likely than not that the deferred tax asset of $30,719,
$25,555 and $15,639 at January 3, 1998, December 28, 1996 and December 30, 1995,
respectively, will be realized through carry back to taxable income in prior
years, future reversals of existing taxable temporary differences, future
taxable income and tax planning strategies, the Company has determined that
there is no need to establish a valuation allowance for the deferred tax asset
at January 3, 1998 and December 28, 1996 as required by SFAS No. 109, ACCOUNTING
FOR INCOME TAXES.
F-16
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) STOCK RIGHTS AND OPTIONS
Under the Company's 1996 Stockholder Rights Plan, one right is attached to
each outstanding share of common stock. Each right entitles the holder to
purchase, under certain conditions, one-half share of common stock at a price of
$30.00 ($60.00 per full share). The rights are not yet exercisable and no
separate rights certificates have been distributed. All rights expire on March
31, 2006.
The rights become exercisable 20 days after a "flip-in event" has occurred
or 10 business days (subject to extension) after a person or group makes a
tender offer for 15% or more of the Company's outstanding common stock. A
flip-in event would occur if a person or group acquires (1) 15% of the Company's
outstanding common stock, or (2) an ownership level set by the Board of
Directors at less than 15% if the person or group is deemed by the Board of
Directors to have interests adverse to those of the Company and its
stockholders. The rights may be redeemed by the Company at any time prior to the
occurrence of a flip-in event at $.01 per right. The power to redeem may be
reinstated within 20 days after a flip-in event occurs if the cause of the
occurrence is removed.
Upon the rights becoming exercisable, subject to certain adjustments or
alternatives, each right would entitle the holder (other than the acquiring
person or group, whose rights become void) to purchase a number of shares of the
Company's common stock having a market value of twice the exercise price of the
right. If the Company is involved in a merger or other business combination, or
certain other events occur, each right would entitle the holder to purchase
common shares of the acquiring company having a market value of twice the
exercise price of the right. Within 30 days after the rights become exercisable
following a flip-in event, the Board of Directors may exchange shares of Company
common stock or cash or other property for exercisable rights.
The Company follows APB 25 and related interpretations in accounting for its
employee stock options. Under APB 25, when the exercise price of employee stock
options equals the market price of the underlying stock on the date of the
grant, no compensation expense is recognized.
Under the Company's 1994 Stock Incentive Plan, as amended (the "1994 Plan"),
a total of 845,296 shares were reserved for the granting of stock options,
restricted stock awards and performance unit awards. Stock options are granted
at not less than 100% of fair market value at date of grant and are exercisable
over a term which may not exceed 10 years from date of grant. Restricted stock
awards are subject to restrictions on transferability and such conditions for
vesting, including continuous employment for specified periods of time, as may
be determined at the date of grant. Performance unit awards are grants of rights
to receive shares of stock if certain performance goals or criteria, determined
at the time of grant, are achieved in accordance with the terms of the grants.
Under the 1995 Director Stock Option Plan (the "Director Plan"), for which a
total of 40,000 shares were reserved, annual grants of options to purchase 500
shares are made automatically to each eligible non-employee director following
each annual meeting of stockholders. The stock options are granted at 100% of
fair market value at date of grant, become exercisable six months following the
date of grant and may be exercised over a term of five years from the date of
grant.
At January 3, 1998, under the 1994 Plan, options to purchase 280,380 shares
of common stock of the Company at an average price of $17.23 per share and
exercisable over terms of five to seven years from the dates of grant, have been
granted and are outstanding. In February 1996, certain members of management
exercised rights to purchase restricted stock from the Company at a 25% discount
to fair market value pursuant to grants awarded in January 1996 under the terms
of the 1994 Plan. The purchase required a minimum of 10% payment in cash with
the remaining balance evidenced by a five-year promissory note to
F-17
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) STOCK RIGHTS AND OPTIONS (CONTINUED)
the Company. Unearned compensation equivalent to the excess of market value of
the shares purchased over the price paid by the recipient at the date of grant,
and the unpaid balance of the promissory note have been charged to stockholders'
equity; amortization of compensation expense was not significant. At January 3,
1998, 32,832 shares of restricted stock have been issued and are outstanding.
Performance unit awards having a maximum potential payout of 340,071 shares have
also been granted and are outstanding.
Reserved for the granting of future stock options, restricted stock awards
and performance unit awards are 120,254 shares.
At January 3, 1998 under the Director Plan, options to purchase 12,000
shares of common stock of the Company, at an average price of $17.47 per share
and exercisable over a term of five years from the date of grant, have been
granted and are outstanding. Reserved for the granting of future stock options
are 26,000 shares.
Changes in outstanding options during the three fiscal years ended January
3, 1998 are summarized as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTION PRICE PER
SHARES SHARE
------ ----------------
<S> <C> <C>
Options outstanding December 31 1994................... 291 $16.86
Exercised............................................ (3) 16.72
Forfeited............................................ (36) 16.88
Granted.............................................. 4 16.06
------ ------
Options outstanding December 30 1995................... 256 16.85
Exercised............................................ (4) 16.77
Forfeited............................................ (45) 17.05
Granted.............................................. 142 17.72
------ ------
Options outstanding December 28, 1996.................. 349 17.18
Exercised............................................ (29) 16.82
Forfeited............................................ (33) 17.08
Granted.............................................. 5 18.38
------ ------
Options outstanding January 3, 1998.................... 292(a) 17.24
------ ------
------ ------
</TABLE>
- ------------------------
(a) Remaining average contractual life of options outstanding at January 3, 1998
was 2.5 years.
<TABLE>
<S> <C> <C>
Options exercisable at:
January 3, 1998...................................... 164 $17.09
December 28, 1996.................................... 147 16.95
</TABLE>
The weighted average fair value of options granted during 1997, 1996 and
1995 are $2.62, $2.40 and $2.26, respectively. The fair value of each option
grant is estimated as of the date of grant using the Black-Scholes single
option-pricing model assuming a weighted average risk-free interest rate of
6.0%, an expected dividend yield of 4.0%, expected lives of two and one-half
years and volatility of 22.1%. Had compensation expense for stock options been
determined based on the fair value method (instead of intrinsic value method) at
the grant dates for awards, the Company's 1997 and 1996 net earnings (loss) and
F-18
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) STOCK RIGHTS AND OPTIONS (CONTINUED)
earnings (loss) per share would have been impacted by less than 1%. The effects
of applying the fair value method of measuring compensation expense for 1997 is
likely not representative of the effects for future years in part because the
fair value method was applied only to stock options granted after December 31,
1994.
(8) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Numerator:
Net earnings (loss)................................... $(1,228) 20,032 17,414
------- ------ ------
Denominator:
Denominator for basic earnings per share; weighted
average shares...................................... 11,270 10,947 10,875
Effect of dilutive securities:
Employee stock options................................ -- 8 20
Contingent shares..................................... 46 138 --
------- ------ ------
Dilutive common shares.................................. 46 146 20
Denominator for diluted earnings per share; adjusted
weighted average shares............................... 11,316 11,093 10,895
------- ------ ------
------- ------ ------
Basic earnings (loss) per share......................... $ (0.11) 1.83 1.60
------- ------ ------
------- ------ ------
Diluted earnings (loss) per share....................... $ (0.11) 1.81 1.60
------- ------ ------
------- ------ ------
</TABLE>
(9) LEASE AND OTHER COMMITMENTS
A substantial portion of the store and warehouse properties of the Company
are leased. The following table summarizes assets under capitalized leases (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Buildings and improvements.................................... $ 25,048 26,105
Less accumulated amortization................................. (10,243) (10,147)
-------- -------
Net assets under capitalized leases........................... $ 14,805 15,958
-------- -------
-------- -------
</TABLE>
F-19
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) LEASE AND OTHER COMMITMENTS (CONTINUED)
At January 3, 1998, future minimum rental payments under non-cancelable
leases and subleases are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- --------
<S> <C> <C>
1998........................................................ $ 29,877 $ 6,006
1999........................................................ 26,186 6,168
2000........................................................ 23,488 6,035
2001........................................................ 20,548 5,934
2002 and thereafter......................................... 117,400 57,161
--------- --------
Total minimum lease payments(a)............................. $ 217,499 81,304
Less imputed interest (rates ranging from 7.8% to 16.0%).... (41,207)
--------
Present value of net minimum lease payments................. 40,097
Less current maturities..................................... (1,580)
--------
Capitalized lease obligations............................... $ 38,517
--------
--------
</TABLE>
- ------------------------
(a) Future minimum payments for operating and capital leases have not been
reduced by minimum sublease rentals receivable under non-cancelable
subleases. Total future minimum sublease rentals related to operating and
capital lease obligations as of January 3, 1998 are $91.8 million and $41.7
million, respectively.
Total rental expense under operating leases for fiscal years 1997, 1996 and
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------ ------
<S> <C> <C> <C>
Total rentals.......................................... $ 42,584 33,316 27,533
Less real estate taxes, insurance and other occupancy
costs................................................ (2,731) (2,070) (2,095)
-------- ------ ------
Minimum rentals........................................ 39,853 31,246 25,438
Contingent rentals..................................... 244 183 312
Sublease rentals....................................... (13,744) (9,449) (7,964)
-------- ------ ------
$ 26,353 21,980 17,786
-------- ------ ------
-------- ------ ------
</TABLE>
Most of the Company's leases provide that the Company pay real estate taxes,
insurance and other occupancy costs applicable to the leased premises.
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities. Operating leases
often contain renewal options. Management expects that, in the normal course of
business, leases that expire will be renewed or replaced by other leases.
The Company has guaranteed certain lease and promissory note obligations of
customers aggregating approximately $28.6 million.
F-20
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) LEASE AND OTHER COMMITMENTS (CONTINUED)
In addition, the Company had outstanding letters of credit in the amounts of
$9.1 million and $9.0 million at January 3, 1998 and December 28, 1996,
respectively, primarily supporting workers' compensation obligations.
(10) CONCENTRATION OF CREDIT RISK
The Company provides financial assistance in the form of secured loans to
some of its independent retailers for inventories, store fixtures and equipment,
working capital and store improvements. Loans are secured by liens on inventory
or equipment or both, by personal guarantees and by other types of collateral.
In addition, the Company may guarantee lease and promissory note obligations of
customers.
As of January 3, 1998, the Company has guaranteed outstanding promissory
note obligations of one customer in the amount of $8.4 million and of another
customer in the amount of $7.1 million.
In the normal course of business, the Company's produce marketing operation
in California makes cash advances to produce growers during various product
growing seasons to fund production costs. Such advances are repayable at the end
of the respective growing seasons. Unpaid advances are generally secured by
liens on real estate and in certain instances, on crops yet to be harvested. At
January 3, 1998, $9.2 million in notes and growers advances were outstanding.
The Company establishes allowances for doubtful accounts based upon the
credit risk of specific customers, historical trends and other information.
Management believes that adequate provisions have been made for any doubtful
accounts.
(11) PROFIT SHARING PLAN
The Company has a profit sharing plan covering substantially all employees
meeting specified requirements. Contributions, determined by the Board of
Directors, are made to a noncontributory profit sharing trust based on profit
performances. Profit sharing expense for 1997, 1996 and 1995 was $2.5 million,
$4.1 million and $3.8 million, respectively.
Certain officers and key employees are participants in a deferred
compensation plan providing fixed benefits payable in equal monthly installments
upon retirement. Annual increments to the deferred compensation plan are charged
to earnings. No annual contribution was made in 1997.
(12) PENSION
Super Food has a qualified noncontributory retirement plan to provide
retirement income for eligible full-time employees who are not covered by union
retirement plans. Pension benefits under the plan are based on length of service
and compensation. The Company contributes amounts necessary to meet minimum
funding requirements.
During 1997, the Company formalized a curtailment plan affecting all
participants under the age of 55. The plan, effective January 1, 1998, did not
result in a material effect on the Company's financial position or results of
operations. All employees impacted by the curtailment will be transferred into
the Company's existing defined contribution plan.
F-21
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) PENSION (CONTINUED)
The plan's funded status at January 3, 1998 was (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits............................................. $ 36,772 28,979
Nonvested benefits.......................................... -- 388
-------- -------
Accumulated benefit obligation............................ 36,772 29,367
Additional benefits based on future salary levels............. 874 3,193
-------- -------
Projected benefit obligation................................ 37,646 32,560
Plan assets at fair value, principally listed securities.... (36,261) (34,274)
-------- -------
Plan assets (over) under projected benefit obligation....... 1,385 (1,714)
Unrecognized net (gain) loss.................................. 2,098 (911)
-------- -------
Net prepaid pension cost.................................. $ 713 (803)
-------- -------
-------- -------
</TABLE>
Assumptions used in the determination of the above amounts, in conjunction
with the recording of the Super Food acquisition, include the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discount rate for determining estimated obligations and interest
cost............................................................... 7.25% 8.5%
Expected aggregate average long-term change in compensation.......... 5.0% 4.5%
Expected long-term return on assets.................................. 8.0% 8.5%
</TABLE>
Approximately 49% of Super Food employees are covered by
collectively-bargained, multi-employer pension plans. Contributions are
determined in accordance with the provisions of negotiated union contracts and
generally are based on the number of hours worked. The Company does not have the
information available to determine its share of the accumulated plan benefits or
net assets available for benefits under the multi-employer plans.
Aggregate cost for the Company's retirement plans includes the following
components (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Defined benefit plan:
Service cost benefits earned during the year.................. $ 660 237
Interest cost on projected benefit obligation................. 2,663 882
Return on assets.............................................. (3,587) (1,855)
Net amortization and deferral................................. 730 931
------- ------
Net pension expense............................................. 466 195
Multi-employer plans............................................ 2,166 370
------- ------
Total pension and retirement plan expense................... $ 2,632 565
------- ------
------- ------
</TABLE>
Fiscal 1996 costs reflect the two month period following the acquisition of
Super Food.
F-22
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides certain health care benefits for retired employees.
Substantially all of the Company's employees not subject to collective
bargaining agreements, become eligible for those benefits when they reach normal
retirement age and who meet minimum age and service requirements. Health care
benefits for retirees are provided under a self-insured program administered by
an insurance company.
The estimated future cost of providing postretirement health costs is
accrued over the active service life of the employee. The periodic
postretirement benefit costs were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- ----
<S> <C> <C> <C>
Service costs................................................ $ 354 260 273
Interest costs............................................... 576 403 382
Amortization of unrecognized transition obligation........... 235 248 249
------ ---- ----
Net postretirement costs..................................... $1,165 911 904
------ ---- ----
------ ---- ----
</TABLE>
The actuarial present value of benefit obligations at January 3, 1998,
December 28, 1996 and December 30, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Retirees eligible for benefits............................ $3,092 1,969 1,903
Active employees fully eligible........................... 617 428 493
Active employees not fully eligible....................... 4,895 3,204 3,147
------ ------ -----
$8,604 5,601 5,543
------ ------ -----
------ ------ -----
</TABLE>
The assumed annual rate of future increases in per capita cost of health
care benefits was 10.5% in fiscal 1997 declining at a rate of .5% per year to
6.5% in 2005 and thereafter. Increasing the health care cost trend rate by 1% in
each year would increase the accumulated benefit obligation by $475,000 at
January 3, 1998 and the service and interest costs by $77,000 for fiscal 1997.
The discount rate used in determining the accumulated benefit obligation was
6.75%.
(14) SEGMENT INFORMATION
The Company and its subsidiaries sell and distribute food and nonfood
products that are typically found in supermarkets. The Company's wholesale
distribution segment sells to independently owned retail food stores,
institutional and military customers while the retail distribution segment sells
directly to the consumer. Produce marketing includes farming, packing and
marketing operations. The Company's market areas are in the Midwest, West,
Mid-Atlantic and Southeastern United States.
Operating profit is net sales and other revenues, less operating expenses.
In computing operating profit, none of the following items have been added or
deducted: general corporate expenses, interest expense, interest income, income
taxes and earnings from equity investments. Wholesale distribution operating
profits on sales through Company-owned stores have been allocated to the retail
segment.
Identifiable assets are those used exclusively by that industry segment or
an allocated portion of assets used jointly by two industry segments. Corporate
assets are principally cash and cash equivalents, notes receivable, corporate
office facilities and equipment.
F-23
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) SEGMENT INFORMATION (CONTINUED)
MAJOR SEGMENTS OF BUSINESS
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales and other operating revenues:
Wholesale distribution............................... $3,502,822 2,468,695 1,968,982
Retail distribution.................................. 822,178 850,404 859,956
Produce marketing and other.......................... 50,949 50,410 48,154
---------- ---------- ----------
Total net sales and other operating revenues....... $4,375,949 3,369,509 2,877,092
---------- ---------- ----------
---------- ---------- ----------
Operating profit (loss):
Wholesale distribution............................... $ 32,576 37,115 30,047
Retail distribution.................................. (6,041) 7,709 4,143
Produce marketing and other.......................... (303) 2,124 2,439
---------- ---------- ----------
Total operating profit............................. 26,232 46,948 36,629
Interest income...................................... 6,379 1,613 2,759
Interest expense..................................... (32,845) (14,894) (10,793)
---------- ---------- ----------
Earnings (loss) before income taxes................ $ (234) 33,667 28,595
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Wholesale distribution............................... 620,644 649,470 205,288
Retail distribution.................................. 171,326 203,217 201,493
Produce marketing and other.......................... 47,191 41,948 45,662
Corporate............................................ 65,722 50,842 61,817
---------- ---------- ----------
$ 904,883 945,477 514,260
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Wholesale distribution............................... $ 18,245 15,511 8,704
Retail distribution.................................. 23,246 19,795 15,517
Produce marketing and other.......................... 4,166 2,234 5,259
Corporate............................................ 22,068 13,793 3,784
---------- ---------- ----------
$ 67,725 51,333 33,264
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Wholesale distribution............................... $ 25,148 14,996 11,121
Retail distribution.................................. 16,158 15,791 14,454
Produce marketing and other.......................... 1,481 1,511 1,597
Corporate............................................ 4,910 2,461 2,234
---------- ---------- ----------
$ 47,697 34,759 29,406
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Fiscal 1997 operating profit before the effects of the special charges for
the wholesale, retail and produce marketing segments would have been $50.8
million, $5.8 million and $.9 million, respectively.
F-24
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) SUBSEQUENT EVENT
During the first quarter of 1998, and in conjunction with a planned $150
million unregistered subordinated debt offering, the Company prepaid $106.3
million of senior notes and paid prepayment premiums totaling $9.4 million, all
with drawings under the Revolving Credit Facility. As a result, the Company
recorded an extraordinary charge of $5.5 million, net of $4.0 million in taxes,
consisting of prepayment premiums and the write-off of deferred financing costs
related to early extinguishment of debt.
(16) SUBSIDIARY GUARANTEES
The following table presents summarized combined financial information for
certain wholly owned subsidiaries which guarantee on a full, unconditional and
joint and several basis, $165.0 million of Senior Subordinated Notes due May 1,
2008, which were offered and sold on April 24, 1998 by the Company:
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------------ --------- ---------
<S> <C> <C> <C>
Operating revenues......................................... $ 1,068,857 269,090 43,785
Operating expenses......................................... 1,058,695 266,386 45,364
------------ --------- ---------
Operating income (loss).................................. 10,162 2,703 (1,579)
Other income............................................... 4,168 1,108 1,101
------------ --------- ---------
Income (loss) before income tax.......................... 14,330 3,812 (478)
Income tax expense (benefit)............................... 5,621 1,524 (158)
------------ --------- ---------
Net income (loss)........................................ $ 8,709 2,288 (320)
------------ --------- ---------
------------ --------- ---------
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Current assets......................................................... $ 160,125 176,813
Non-current assets..................................................... 117,698 140,613
Current liabilities.................................................... 57,862 78,670
Long-term debt and obligations......................................... 27,152 60,263
Deferred credits and other liabilities................................. $ 14,452 17,254
</TABLE>
The following table sets forth summarized combined financial information
relating to non-wholly owned subsidiaries which have on a full, unconditional
and joint and several basis, guaranteed the aforementioned debt of the Company.
F-25
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(16) SUBSIDIARY GUARANTEES (CONTINUED)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues.............................................. $ 34,929 36,695 33,342
Operating expenses.............................................. 33,075 35,370 31,675
--------- --------- ---------
Operating income.............................................. 1,854 1,325 1,667
Other income.................................................... 276 240 186
--------- --------- ---------
Income before income tax...................................... 2,130 1,565 1,583
Income tax expense.............................................. 773 564 669
--------- --------- ---------
Net income.................................................... $ 1,357 1,001 1,184
--------- --------- ---------
--------- --------- ---------
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current assets.............................................................. $ 3,129 3,545
Non-current assets.......................................................... 3,289 3,343
Current liabilities......................................................... 2,524 2,190
Long-term debt and obligations.............................................. $ 447 621
</TABLE>
Non-guarantor subsidiaries, all of which are wholly owned, are
inconsequential.
F-26
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
----------------------
MARCH 28, MARCH 22,
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Net sales............................................................................... $ 925,958 935,997
Other revenues.......................................................................... 11,143 11,835
---------- ----------
Total revenues........................................................................ 937,101 947,832
Cost and expenses:
Cost of sales........................................................................... 820,360 825,189
Selling, general and administrative and other operating expenses........................ 94,310 99,158
Depreciation and amortization........................................................... 11,078 10,905
Interest expense........................................................................ 6,860 7,321
---------- ----------
Total costs and expenses.............................................................. 932,608 942,573
Earnings before income taxes and extraordinary charge................................. 4,493 5,259
Income taxes.............................................................................. 1,865 2,203
---------- ----------
Earnings before extraordinary charge.................................................. 2,628 3,056
Extraordinary charge from early extinguishment of debt, net of income tax benefit of
$3,951 (5,569) --
---------- ----------
Net earnings (loss)................................................................... $ (2,941) 3,056
---------- ----------
---------- ----------
Basic and diluted earnings (loss) per share:
Earnings before extraordinary charge.................................................. $ .23 .27
Extraordinary charge from early extinguishment of debt................................ (.49) --
---------- ----------
Net earnings (loss)................................................................... $ (.26) .27
---------- ----------
---------- ----------
Weighted average number of common and common equivalent shares outstanding
Basic................................................................................. 11,301 11,193
Diluted............................................................................... 11,362 11,321
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 3,
1998
MARCH 28, -----------
1998
-----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................... $ 773 933
Accounts and notes receivable, net..................................................... 176,634 173,962
Inventories............................................................................ 287,991 287,801
Prepaid expenses....................................................................... 23,742 22,582
Deferred tax assets.................................................................... 12,340 9,072
----------- -----------
Total current assets............................................................... 501,480 494,350
Investments in affiliates................................................................ 7,681 7,679
Notes receivable, noncurrent............................................................. 23,600 23,092
Property, plant and equipment:
Land................................................................................... 30,548 31,229
Buildings and improvements............................................................. 136,591 137,070
Furniture, fixtures and equipment...................................................... 307,285 306,762
Leasehold improvements................................................................. 61,003 60,578
Construction in progress............................................................... 36,906 28,485
Assets under capitalized leases........................................................ 24,878 25,048
----------- -----------
597,211 589,172
Less accumulated depreciation and amortization......................................... (319,203) (312,939)
Net property, plant and equipment.................................................. 278,008 276,233
Intangible assets, net................................................................... 69,305 70,732
Investment in direct financing leases.................................................... 18,901 19,094
Deferred tax asset--net.................................................................. 2,622 2,622
Other assets............................................................................. 10,826 11,081
----------- -----------
Total assets....................................................................... $ 912,423 904,883
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks..................................................................... $ 22,110 36,271
Short-term debt payable to banks....................................................... 16,155 11,300
Current maturities of long-term debt and capitalized lease obligations................. 2,769 7,964
Accounts payable....................................................................... 203,246 177,548
Accrued expenses....................................................................... 71,086 60,599
Income taxes........................................................................... -- 737
----------- -----------
Total current liabilities............................................................ 315,366 294,419
Long-term debt........................................................................... 324,145 325,489
Capitalized lease obligations............................................................ 38,116 38,517
Deferred compensation.................................................................... 6,682 6,768
Other.................................................................................... 7,144 14,072
Stockholders' equity:
Preferred stock--no par value
Authorized 500 shares; none issued................................................... -- --
Common stock of $1.66 2/3 par value
Authorized 25,000 shares, issued 11,575 shares issued in 1998 and 1997 19,292 19,292
Additional paid-in capital............................................................. 17,908 17,648
Restricted stock....................................................................... (384) (391)
Retained earnings...................................................................... 186,005 190,984
----------- -----------
222,821 227,533
Less cost of 237 shares and 252 shares of common stock in treasury, respectively....... (1,851) (1,915)
----------- -----------
Total stockholders' equity......................................................... 220,970 225,618
----------- -----------
Total liabilities and stockholders' equity......................................... $ 912,423 904,883
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-28
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net earnings (loss).............................................................. $ (2,941) 3,056
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Provision for (use of) special charge........................................ (850) --
Depreciation and amortization................................................ 11,078 10,905
Provision for bad debts...................................................... 160 1,293
Provision for (use of) losses on closed lease locations...................... (680) (153)
Extraordinary charge--write off deferred financing costs..................... 142 --
Deferred income taxes........................................................ (3,268) (1,618)
Deferred compensation........................................................ (86) (311)
Earnings (loss) of equity investments........................................ (220) (377)
Other........................................................................ 108 773
Changes in operating assets and liabilities:
Accounts and notes receivable................................................ 9,127 12,056
Inventories.................................................................. (190) 2,251
Prepaid expenses............................................................. (1,160) (5,908)
Accounts payable and outstanding checks...................................... 11,537 (29,145)
Accrued expenses............................................................. 5,037 8,849
Income taxes................................................................. (737) 3,311
-------------- -------
Net cash provided by operating activities.................................. 27,057 4,982
-------------- -------
Investing activities:
Dividends received............................................................. -- 800
Disposals of property, plant and equipment, net................................ 2,189 1,292
Additions to property, plant and equipment excluding capital leases............ (13,474) (7,939)
Loans to customers............................................................. (5,389) (4,632)
Payments from customers on loans............................................... 5,035 1,485
Sale (repurchase) of receivables............................................... (11,700) --
Other.......................................................................... (30) 28
-------------- -------
Net cash used in investing activities...................................... (23,369) (8,966)
-------------- -------
Financing activities:
Proceeds from revolving debt................................................... 100,000 15,000
Dividends paid................................................................. (2,038) (2,015)
Payments of short-term debt.................................................... 4,855 (6,550)
Payments of from long-term debt................................................ (106,570) (2,264)
Payments of capitalized lease obligations...................................... (370) (275)
Other.......................................................................... 275 53
-------------- -------
Net cash (used in) provided by financing activities........................ (3,848) 3,949
-------------- -------
Net decrease in cash..................................................... $ (160) (35)
-------------- -------
-------------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL PERIOD ENDED MARCH 28, 1998,
JANUARY 3, 1998 AND DECEMBER 28, 1996
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
------------------------ PAID-IN RETAINED TRANSLATION RESTRICTED
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK
----------- ----------- ----------- ----------- --------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1995............ 11,224 $ 18,706 12,013 188,578 (950) --
Net earnings............................ -- -- -- 20,032 -- --
Dividend declared of $.75 per share..... -- -- -- (8,288) -- --
Shares issued in connection with
acquisition of a business............. 350 584 5,064 -- --
Treasury stock issued upon exercise of
options............................... -- -- 47 -- --
Issuance of restricted stock............ -- -- (308) -- -- (524)
Amortized compensation under restricted
stock plan............................ -- -- -- -- -- 24
Treasury stock purchased................ -- -- -- -- -- --
----------- ----------- ----------- ----------- --- ---
Balance at December 28, 1996............ 11,574 19,290 16,816 200,322 (950) (500)
Net earnings (loss)..................... -- -- -- (1,228) -- --
Dividend declared of $.72 per share..... -- -- -- (8,110) -- --
Treasury stock issued upon exercise of
options............................... -- -- 354 -- -- --
Amortized compensation under restricted
stock plan............................ -- -- -- -- -- 29
Repayment of notes receivable from
holder of restricted stock............ -- -- -- -- 80
Distribution of stock pursuant to
performance awards.................... -- -- 460 -- -- --
Treasury stock purchased................ -- -- -- -- -- --
Foreign currency translation
adjustment............................ -- -- -- -- 950 --
Other................................... 1 2 18 -- -- --
----------- ----------- ----------- ----------- --- ---
Balance at January 3, 1998.............. 11,575 19,292 17,648 190,984 -- (391)
Net earnings (loss)..................... -- -- -- (2,941) -- --
Dividend declared of $.18 per share..... -- -- -- (2,038) -- --
Treasury stock issued upon exercise of
options............................... -- -- 33 -- -- --
Amortized compensation under restricted
stock plan............................ -- -- -- -- -- 7
Distribution of stock pursuant to
performance awards.................... -- -- 226 -- -- --
Treasury stock purchased................ -- -- -- -- -- --
Foreign currency translation
adjustment............................ -- -- -- -- -- --
Other................................... -- -- -- -- -- --
-- -- 1 -- -- --
----------- ----------- ----------- ----------- --- ---
Balance at March 28, 1998 (unaudited) 11,575 $ 19,292 17,908 186,005 -- (384)
----------- ----------- ----------- ----------- --- ---
----------- ----------- ----------- ----------- --- ---
<CAPTION>
TREASURY STOCK TOTAL
------------------------ STOCKHOLDERS'
SHARES AMOUNT EQUITY
----------- ----------- -------------
<S> <C> <C> <C>
Balance at December 30, 1995............ (346) $ (3,034) 215,313
Net earnings............................ -- -- 20,032
Dividend declared of $.75 per share..... -- -- (8,288)
Shares issued in connection with
acquisition of a business............. -- 5,648
Treasury stock issued upon exercise of
options............................... 6 42 89
Issuance of restricted stock............ 40 995 163
Amortized compensation under restricted
stock plan............................ -- -- 24
Treasury stock purchased................ (7) (120) (120)
--- ----------- -------------
Balance at December 28, 1996............ (307) (2,117) 232,861
Net earnings (loss)..................... -- -- (1,228)
Dividend declared of $.72 per share..... -- -- (8,110)
Treasury stock issued upon exercise of
options............................... 29 143 497
Amortized compensation under restricted
stock plan............................ -- -- 29
Repayment of notes receivable from
holder of restricted stock............ -- -- 80
Distribution of stock pursuant to
performance awards.................... 30 148 608
Treasury stock purchased................ (4) (89) (89)
Foreign currency translation
adjustment............................ -- -- 950
Other................................... -- -- 20
--- ----------- -------------
Balance at January 3, 1998.............. (252) (1,915) 225,618
Net earnings (loss)..................... -- -- (2,941)
Dividend declared of $.18 per share..... -- -- (2,038)
Treasury stock issued upon exercise of
options............................... 3 15 48
Amortized compensation under restricted
stock plan............................ -- -- 7
Distribution of stock pursuant to
performance awards.................... 13 65 291
Treasury stock purchased................ -- -- --
Foreign currency translation
adjustment............................ -- -- --
Other................................... -- -- --
(1) (16) (15)
--- ----------- -------------
Balance at March 28, 1998 (unaudited) (237) $ (1,851) 220,970
--- ----------- -------------
--- ----------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 28, 1998
NOTE 1
The accompanying financial statements include all adjustments which are, in
the opinion of management, necessary to present fairly the financial position of
the Company and its subsidiaries at March 28, 1998 and January 3, 1998, and the
results of operations for the 12-weeks ending March 28, 1998 and March 22, 1997,
and the changes in cash flows for the 12-week periods ending March 28, 1998 and
March 22, 1997, respectively. All material intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
Results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2
The Company uses the LIFO method for valuation of a substantial portion of
inventories. If the FIFO method had been used, inventories would have been
approximately $42.6 million and $43.1 million higher at March 28, 1998 and at
January 3, 1998, respectively.
NOTE 3
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. Although the SOP is
effective beginning on January 1, 1999, the Company has chosen early adoption as
of January 4 1998. The SOP requires the capitalization of certain costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. Certain costs that are required to be capitalized by the SOP
were previously being expensed as incurred by the Company. As a result of this
change in accounting, during the quarter the Company capitalized $1.5 million in
payroll and payroll-related costs for employees who are directly involved with
and devote time to internal-use software development projects.
NOTE 4
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE, the weighted average shares used in computing basic
and diluted earnings per share (EPS) are as follows:
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
------------------------
MARCH 29, MARCH 23,
1998 1997
----------- -----------
(IN THOUSANDS OF SHARES)
<S> <C> <C>
Shares for computation of basic EPS.................................... 11,301 11,193
Effect of assumed option exercises..................................... 35 45
Effect of contingent shares............................................ 26 83
----------- -----------
Shares for computation of diluted EPS.................................. 11,362 11,321
----------- -----------
----------- -----------
</TABLE>
F-31
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 28, 1998
NOTE 5
On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was
executed by the Company, Nash Finch Funding Corporation ("NFFC"), a wholly-owned
subsidiary of the Company, and a certain third party purchaser (the "Purchaser")
pursuant to a securitization transaction. On this date the Company sold $44.6
million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0
million of its undivided interest in such receivables to the Purchaser, subject
to specified collateral requirements. NFFC maintains a variable undivided
interest in these receivables and is subject to losses on its share of the
receivables and, accordingly, maintains an allowance for doubtful accounts. The
Agreement is a five-year $50 million revolving receivable purchase facility
allowing the Company to sell additional receivables to NFFC, and NFFC to sell,
from time to time, variable undivided interests in these receivables to the
Purchaser. At March 28, 1998, the balance of receivables sold under the
revolving agreement was $25.3 million.
On September 8, 1995, the Company entered into an agreement with a financial
institution which allowed the Company to sell on a revolving basis customer
notes receivable. Although the agreement lapsed on December 28, 1996, the notes,
which have maturities through the year 2002, were sold at face value with
recourse. As a result, the Company is contingently liable should these notes
become uncollectible. The remaining balances of such sold notes receivable
totaled $8.4 million and $9.1 million at March 28, 1998 and January 3, 1998,
respectively.
NOTE 6
During the third quarter of 1997, the Company recorded special charges,
totaling $31.3 million relative to asset impairment and consolidation of certain
warehouses and retail stores. During the first quarter the Company closed
distribution facilities in Lexington, Kentucky and Lincoln, Nebraska and closed
or sold a total of four retail stores. Costs totaling $.9 million dollars
incurred as a result of the shut down of these units were charged to accrued
expenses. At March 28, 1998, accrued liabilities established for purposes of the
special charges total $15.2 million.
F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE 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 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, IN 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..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 14
The Exchange Offer........................................................ 23
Use of Proceeds........................................................... 31
Capitalization............................................................ 32
Selected Consolidated Financial Data...................................... 33
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 34
Business.................................................................. 42
Management................................................................ 51
Principal Stockholders.................................................... 55
Description of Certain Other Indebtedness................................. 57
Description of the Exchange Notes......................................... 60
Description of Certain Federal Income Tax Consequences of an Investment in
the Notes............................................................... 91
Exchange Offer; Registration Rights....................................... 93
Book Entry; Delivery and Form............................................. 96
Plan of Distribution...................................................... 98
Legal Matters............................................................. 98
Experts................................................................... 98
Index to Consolidated and Unaudited Condensed Consolidated Financial
Statements.............................................................. F-1
</TABLE>
[LOGO]
OFFER TO EXCHANGE
$165,000,000
8 1/2 SENIOR SUBORDINATED
NOTES DUE 2008, SERIES B
FOR
8 1/2% SENIOR SUBORDINATED
NOTES DUE 2008, SERIES A
----------------------------
PRELIMINARY PROSPECTUS
----------------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or another enterprise if serving at the request of the corporation. Depending on
the character of the proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person indemnified acted in good faith and in a manner he
reasonably believed to be in or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
by or in the right of the corporation, no indemnification may be made in respect
of any claim, issue or matter as to which such person shall have been judged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnification for such expenses which the court shall
deem proper. Section 145 further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Article V of the Company's Amended and Restated Certificate of Incorporation
provides for the indemnification of directors, officers and other authorized
representatives of the Company to the maximum extent permitted by the Delaware
General Corporation Law.
The Company has entered into Indemnification Agreements with its directors
and officers which may provide for indemnification against other liabilities. In
addition, the Company maintains directors' and officers' liability insurance
which may cover certain liabilities of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
- --------- ---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1985 (File No. 0-785).
3.2 Amendment to Restated Certificate of Incorporation Incorporated by reference to Exhibit 19.1 to the
of the Company, effective May 29, 1986 Company's Quarterly Report on Form 10-Q for the
period ended October 4, 1986 (File No. 0-785).
3.3 Amendment to Restated Certificate of Incorporation Incorporated by reference to Exhibit 4.5 to the
of the Company, effective May 15, 1987 Company's Registration Statement on Form S-3 (File
No. 33-14871).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
- --------- ---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
3.4 Bylaws of the Company as amended, effective November Incorporated by reference to Exhibit 3.4 to the
21, 1995 Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995 (File No. 0-785).
4.1 Stockholder Rights Agreement, dated February 13, Incorporated by reference to Exhibit 4 to the
1996, between the Company and Norwest Bank Company's Current Report on Form 8-K dated February
Minnesota, National Association 13, 1996 (File No. 0-785).
4.2 Indenture dated as of April 24, 1998 between the Filed herewith.
Company, the Guarantors, and U.S. Bank Trust
National Association
4.3 Form of Company's 8.5% Senior Subordinated Notes due Contained in the Indenture filed as Exhibit 4.2.
2008, Series A
4.4 Form of Company's 8.5% Senior Subordinated Notes due Contained in the Indenture filed as Exhibit 4.2.
2008, Series B
5.1 Opinion of Oppenheimer Wolff & Donnelly re: legality Filed herewith.
10.1 Credit Agreement dated as of October 8, 1996 among Incorporated by reference to Exhibit 10.2 to the
the Company, NFC Acquisition Corp., Harris Trust and Company's Quarterly Report on Form 10-Q for the
Savings Bank, as Administrative Agent, and Bank of period ended October 5, 1996 (File No. 0-785).
Montreal and PNC Bank, N.A., as Co-Syndication
Agents ('Credit Agreement')
10.2 First Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.15 to the
December 18, 1996 Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996 (File No. 0-785).
10.3 Second Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.16 to the
November 10, 1997 Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (File No. 0-785).
10.4 Third Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.1 to the
March 24, 1998 Company's Quarterly Report on Form 10-Q for the
period ended March 28, 1998 (File No. 0-785).
10.5 Nash Finch Profit Sharing Plan - 1994 Revision and Incorporated by reference to Exhibit 10.6 to the
Nash Finch Profit Sharing Trust Agreement (as Company's Annual Report on Form 10-K for the fiscal
restated effective January 1, 1994) year ended January 1, 1994 (File No. 0-785).
10.6 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.7 to the
Revision--First Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (File No. 0-785).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
- --------- ---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
10.7 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.10 to the
Revision--Second Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995 (File No. 0-785).
10.8 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.22 to the
Revision--Third Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (File No. 0-785).
10.9 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.23 to the
Revision--Fourth Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (File No. 0-785).
10.10 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.24 to the
Revision--Fifth Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (File No. 0-785).
10.11 Nash Finch Executive Incentive Bonus and Deferred Incorporated by reference to Exhibit 10.7 to the
Compensation Plan (as amended and restated effective Company's Annual Report on Form 10-K for the fiscal
December 31, 1993) year ended January 1, 1994 (File No. 0-785).
10.12 Excerpts from minutes of Board of Directors Incorporated by reference to Exhibit 10.9 to the
regarding Nash Finch Pension Plan, as amended Company's Annual Report on Form 10-K for the fiscal
effective January 2, 1966 year ended January 3, 1987 (File No. 0-785).
10.13 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.13 to the
regarding Nash Finch Pension Plan, as amended Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995 (File No. 0-785).
10.14 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.22 to the
regarding director compensation Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996 (File No. 0-785).
10.15 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.23 to the
regarding director compensation Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996 (File No. 0-785).
10.16 Form of Letter Agreement Specifying Benefits in the Incorporated by reference to Exhibit 10.20 to the
Event of Termination of Employment Following a Company's Annual Report on Form 10-K for the fiscal
Change in Control of Nash Finch year ended December 29, 1990 (File No. 0-785).
10.17 Nash Finch Income Deferral Plan Incorporated by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 (File No. 0-785).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
- --------- ---------------------------------------------------- ----------------------------------------------------
<C> <S> <C>
10.18 Nash Finch 1994 Stock Incentive Plan, as amended Incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the
period ended June 14, 1997 (File No. 0-785).
10.19 Nash Finch 1995 Director Stock Option Plan Incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the
period ended June 17, 1995 (File No. 0-785).
10.20 Nash Finch 1997 Non-Employee Director Stock Incorporated by reference to Exhibit 10.1 to the
Compensation Plan Company's Quarterly Report on Form 10-Q for the
period ended June 14, 1997 (File No. 0-785).
10.21 Purchase Agreement dated April 20, 1998 between the Filed herewith.
Company, the Guarantors, Merrill Lynch & Co.,
Merrill, Lynch, Pierce, Fenner & Smith,
Incorporated, Nesbitt Burns Securities, Inc., and
Piper Jaffray Inc. for $165,000,000 Senior
Subordinated Notes due 2008
10.22 Registration Rights Agreement dated as of April 24, Filed herewith.
1998 between the Company, the Guarantors, Merrill
Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith,
Incorporated, Nesbitt Burns Securities, Inc., and
Piper Jaffray Inc.
12.1 Statement regarding the Computation of Ratios Filed herewith.
21.1 Subsidiaries of the Company Incorporated by reference to Exhibit 21.1 to the
Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998 (File No. 0-785).
23.1 Consent of Ernst & Young, LLP Filed herewith.
23.2 Consent of Oppenheimer Wolff & Donnelly LLP Contained in their opinion filed as Exhibit 5.1.
24.1 Powers of Attorney Included on signature pages.
25.1 Form T-1 Statement of Eligibility under the Trust Filed herewith.
Indenture Act of 1939 of U.S. Bank Trust National
Association
99.1 Form of Letter of Transmittal Filed herewith.
99.2 Form of Notice of Guaranteed Delivery Filed herewith.
99.3 Guidelines for Certification of Taxpayer Filed herewith.
Identification Number on Substitute Form W-9
</TABLE>
II-4
<PAGE>
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% 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, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(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
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on May 22, 1998.
<TABLE>
<S> <C> <C>
NASH-FINCH COMPANY
By: /s/ ALFRED N. FLATEN
-----------------------------------------
ALFRED N. FLATEN, PRESIDENT & CEO
FORREST TRANSPORTATION SERVICE, INC.
By: /s/ C. MICHAEL OLSEN
-----------------------------------------
C. MICHAEL OLSEN, PRESIDENT
GILLETTE DAIRY OF THE BLACK HILLS, INC.
By: /s/ DAVID DICKSON
-----------------------------------------
DAVID DICKSON, PRESIDENT
GTL TRUCK LINES, INC.
By: /s/ FRANCIS G. SCHNEIDER
-----------------------------------------
FRANCIS G. SCHNEIDER, PRESIDENT
NASH-DECAMP COMPANY
By: /s/ STEPHEN C. BISWELL
-----------------------------------------
STEPHEN C. BISWELL, PRESIDENT
NEBRASKA DAIRIES, INC.
By: /s/ DAVID DICKSON
-----------------------------------------
DAVID DICKSON, PRESIDENT
</TABLE>
II-7
<PAGE>
<TABLE>
<S> <C> <C>
PIGGLY WIGGLY NORTHLAND CORPORATION
By: /s/ ALFRED N. FLATEN
-----------------------------------------
ALFRED N. FLATEN, PRESIDENT
SUPER FOOD SERVICES, INC.
By: /s/ JAMES K. BUCHANAN
-----------------------------------------
JAMES K. BUCHANAN, PRESIDENT
T. J. MORRIS COMPANY
By: /s/ ALFRED N. FLATEN
-----------------------------------------
ALFRED N. FLATEN, PRESIDENT
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below
hereby appoints Norman R. Soland and John R. Scherer, and each of them, his or
her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her 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 by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ ALFRED N. FLATEN
----------------------------------------------
ALFRED N. FLATEN,
President, CEO & Director--Nash Finch Company
Director--GTL Truck Lines, Inc.
Director--Nash-DeCamp Company
President & Director--Piggly Wiggly Northland
Corporation
Director--Super Food Services, Inc.
President & Director--T. J. Morris Company
May 20, 1998
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C>
/s/ JOHN R. SCHERER
----------------------------------------------
JOHN R. SCHERER
Chief Financial Officer--Nash Finch Company
Treasurer & Director--Gillette Dairy of the
Black Hills, Inc.
Treasurer & Director--GTL Truck Lines, Inc.
Treasurer & Director--Nebraska Dairies, Inc.
Treasurer & Director--Piggly Wiggly Northland
Corporation
Treasurer & Director--Super Food Services, Inc.
Treasurer & Director--T. J. Morris Company
May 21, 1998
/s/ LAWRENCE A. WOJTASIAK
----------------------------------------------
LAWRENCE A. WOJTASIAK
Chief Accounting Officer--Nash Finch Company
May 21, 1998
/s/ CAROLE F. BITTER
----------------------------------------------
CAROLE F. BITTER
Director--Nash Finch Company
May 20, 1998
/s/ RICHARD A. FISHER
----------------------------------------------
RICHARD A. FISHER
Director--Nash Finch Company
May 20, 1998
/s/ JERRY L. FORD
----------------------------------------------
JERRY L. FORD
Director--Nash Finch Company
May 19, 1998
/s/ ALLISTER P. GRAHAM
----------------------------------------------
ALLISTER P. GRAHAM
Director--Nash Finch Company
May 19, 1998
</TABLE>
II-9
<PAGE>
<TABLE>
<S> <C>
/s/ JOHN H. GRUNEWALD
----------------------------------------------
JOHN H. GRUNEWALD
Director--Nash Finch Company
May 19, 1998
/s/ RICHARD G. LAREAU
----------------------------------------------
RICHARD G. LAREAU
Director--Nash Finch Company
May 20, 1998
/s/ DON E. MARSH
----------------------------------------------
DON E. MARSH
Director--Nash Finch Company
May 20, 1998
/s/ DONALD R. MILLER
----------------------------------------------
DONALD R. MILLER
Director--Nash Finch Company
May 20, 1998
/s/ ROBERT F. NASH
----------------------------------------------
ROBERT F. NASH
Director--Nash Finch Company
May 20, 1998
/s/ JEROME O. RODYSILL
----------------------------------------------
JEROME O. RODYSILL
Director--Nash Finch Company
May 20, 1998
/s/ STEPHEN C. BISWELL
----------------------------------------------
STEPHEN C. BISWELL
Director--Forrest Transportation Service, Inc.
President & Director--Nash-DeCamp Company
May 19, 1998
</TABLE>
II-10
<PAGE>
<TABLE>
<S> <C>
/s/ STEPHEN W. MILLER
----------------------------------------------
STEPHEN W. MILLER
Treasurer & Director--Forrest Transportation
Service, Inc.
Treasurer & Director--Nash-DeCamp Company
May 19, 1998
/s/ FRANKLIN GINDICK
----------------------------------------------
FRANKLIN GINDICK
Director--Forrest Transportation Service, Inc.
Director--Nash-DeCamp Company
May 19, 1998
/s/ C. MICHAEL OLSEN
----------------------------------------------
C. MICHAEL OLSEN
President & Director--Forrest Transportation
Service, Inc.
Director--Nash-DeCamp Company
May 19, 1998
/s/ DAVID DICKSON
----------------------------------------------
DAVID DICKSON
President & Director--Gillette Dairy of the
Black Hills, Inc.
President & Director--Nebraska Dairies, Inc.
May 19, 1998
/s/ WILLIAM BARNHART
----------------------------------------------
WILLIAM BARNHART
Director--Gillette Dairy of the Black Hills,
Inc.
Director--Nebraska Dairies, Inc.
May 19, 1998
/s/ LESLIE K. CHAFFIN
----------------------------------------------
LESLIE K. CHAFFIN
Director--Gillette Dairy of the Black Hills,
Inc.
Director--Nebraska Dairies, Inc.
May 19, 1998
</TABLE>
II-11
<PAGE>
<TABLE>
<S> <C>
----------------------------------------------
WILLIAM E. MAY, JR.
Director--Gillette Dairy of the Black Hills,
Inc.
Director--Nebraska Dairies, Inc.
May , 1998
----------------------------------------------
CHARLES F. RAMSBACHER
Director--Gillette Dairy of the Black Hills,
Inc.
Director--Nebraska Dairies, Inc.
May , 1998
/s/ NORMAN R. SOLAND
----------------------------------------------
NORMAN R. SOLAND
Director--Gillette Dairy of the Black Hills,
Inc.
Director--GTL Truck Lines, Inc.
Director--Nebraska Dairies, Inc.
Director--Piggly Wiggly Northland Corporation
Director--Super Food Services, Inc.
Director--T. J. Morris Company
May 20, 1998
/s/ FRANCIS G. SCHNEIDER
----------------------------------------------
FRANCIS G. SCHNEIDER
President--GTL Truck Lines, Inc.
May 19, 1998
/s/ STEVEN L. LUMSDEN
----------------------------------------------
STEVEN L. LUMSDEN
Director--GTL Truck Lines, Inc.
May 21, 1998
/s/ THOMAS DOSS
----------------------------------------------
THOMAS DOSS
Director--Nash-DeCamp Company
May 19, 1998
</TABLE>
II-12
<PAGE>
<TABLE>
<S> <C>
/s/ DARRELL FULMER
----------------------------------------------
DARRELL FULMER
Director--Nash-DeCamp Company
May 19, 1998
/s/ JAMES K. BUCHANAN
----------------------------------------------
JAMES K. BUCHANAN
President--Super Food Services, Inc.
May 19, 1998
</TABLE>
II-13
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO REGISTRATION STATEMENT
ON FORM S-4
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
ITEM NO. ITEM METHOD OF FILING PAGE
- --------- --------------------------------------------- --------------------------------------------- -----------------
<C> <S> <C> <C>
3.1 Restated Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 to
Company the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1985 (File
No. 0-785).
3.2 Amendment to Restated Certificate of Incorporated by reference to Exhibit 19.1 to
Incorporation of the Company, effective May the Company's Quarterly Report on Form 10-Q
29, 1986 for the period ended October 4, 1986 (File
No. 0-785).
3.3 Amendment to Restated Certificate of Incorporated by reference to Exhibit 4.5 to
Incorporation of the Company, effective May the Company's Registration Statement on Form
15, 1987 S-3 (File No. 33-14871).
3.4 Bylaws of the Company as amended, effective Incorporated by reference to Exhibit 3.4 to
November 21, 1995 the Company's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995 (File
No. 0-785).
4.1 Stockholder Rights Agreement, dated February Incorporated by reference to Exhibit 4 to the
13, 1996, between the Company and Norwest Company's Current Report on Form 8-K dated
Bank Minnesota, National Association February 13, 1996 (File No. 0-785).
4.2 Indenture dated as of April 24, 1998 between Filed herewith.
the Company, the Guarantors, and U.S. Bank
Trust National Association
4.3 Form of Company's 8.5% Senior Subordinated Contained in the Indenture filed as Exhibit
Notes due 2008, Series A 4.2.
4.4 Form of Company's 8.5% Senior Subordinated Contained in the Indenture filed as Exhibit
Notes due 2008, Series B 4.2.
5.1 Opinion of Oppenheimer Wolff & Donnelly re: Filed herewith.
legality
10.1 Credit Agreement dated as of October 8, 1996 Incorporated by reference to Exhibit 10.2 to
among the Company, NFC Acquisition Corp., the Company's Quarterly Report on Form 10-Q
Harris Trust and Savings Bank, as for the period ended October 5, 1996 (File
Administrative Agent, and Bank of Montreal No. 0-785).
and PNC Bank, N.A., as Co-Syndication Agents
('Credit Agreement')
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
ITEM NO. ITEM METHOD OF FILING PAGE
- --------- --------------------------------------------- --------------------------------------------- -----------------
<C> <S> <C> <C>
10.2 First Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.15 to
of December 18, 1996 the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1996 (File
No. 0-785).
10.3 Second Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.16 to
of November 10, 1997 the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998 (File
No. 0-785).
10.4 Third Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.1 to
of March 24, 1998 the Company's Quarterly Report on Form 10-Q
for the period ended March 28, 1998 (File No.
0-785).
10.5 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.6 to
Revision and Nash Finch Profit Sharing Trust the Company's Annual Report on Form 10-K for
Agreement (as restated effective January 1, the fiscal year ended January 1, 1994 (File
1994) No. 0-785).
10.6 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.7 to
Revision--First Declaration of Amendment the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (File
No. 0-785).
10.7 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.10 to
Revision--Second Declaration of Amendment the Company's Annual Report on Form 10-K for
the fiscal year ended December 30, 1995 (File
No. 0-785).
10.8 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.22 to
Revision--Third Declaration of Amendment the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998 (File
No. 0-785).
10.9 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.23 to
Revision--Fourth Declaration of Amendment the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998 (File
No. 0-785).
10.10 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.24 to
Revision--Fifth Declaration of Amendment the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998 (File
No. 0-785).
10.11 Nash Finch Executive Incentive Bonus and Incorporated by reference to Exhibit 10.7 to
Deferred Compensation Plan (as amended and the Company's Annual Report on Form 10-K for
restated effective December 31, 1993) the fiscal year ended January 1, 1994 (File
No. 0-785).
10.12 Excerpts from minutes of Board of Directors Incorporated by reference to Exhibit 10.9 to
regarding Nash Finch Pension Plan, as amended the Company's Annual Report on Form 10-K for
effective January 2, 1966 the fiscal year ended January 3, 1987 (File
No. 0-785).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
ITEM NO. ITEM METHOD OF FILING PAGE
- --------- --------------------------------------------- --------------------------------------------- -----------------
<C> <S> <C> <C>
10.13 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.13 to
Directors regarding Nash Finch Pension Plan, the Company's Annual Report on Form 10-K for
as amended the fiscal year ended December 30, 1995 (File
No. 0-785).
10.14 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.22 to
Directors regarding director compensation the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1996 (File
No. 0-785).
10.15 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.23 to
Directors regarding director compensation the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1996 (File
No. 0-785).
10.16 Form of Letter Agreement Specifying Benefits Incorporated by reference to Exhibit 10.20 to
in the Event of Termination of Employment the Company's Annual Report on Form 10-K for
Following a Change in Control of Nash Finch the fiscal year ended December 29, 1990 (File
No. 0-785).
10.17 Nash Finch Income Deferral Plan Incorporated by reference to Exhibit 10.17 to
the Company's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994 (File
No. 0-785).
10.18 Nash Finch 1994 Stock Incentive Plan, as Incorporated by reference to Exhibit 10.2 to
amended the Company's Quarterly Report on Form 10-Q
for the period ended June 14, 1997 (File No.
0-785).
10.19 Nash Finch 1995 Director Stock Option Plan Incorporated by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q
for the period ended June 17, 1995 (File No.
0-785).
10.20 Nash Finch 1997 Non-Employee Director Stock Incorporated by reference to Exhibit 10.1 to
Compensation Plan the Company's Quarterly Report on Form 10-Q
for the period ended June 14, 1997 (File No.
0-785).
10.21 Purchase Agreement dated April 20, 1998 Filed herewith.
between the Company, the Guarantors, Merrill
Lynch & Co., Merrill, Lynch, Pierce, Fenner &
Smith, Incorporated, Nesbitt Burns
Securities, Inc., and Piper Jaffray Inc. for
$165,000,000 Senior Subordinated Notes due
2008
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
ITEM NO. ITEM METHOD OF FILING PAGE
- --------- --------------------------------------------- --------------------------------------------- -----------------
<C> <S> <C> <C>
10.22 Registration Rights Agreement dated as of Filed herewith.
April 24, 1998 between the Company, the
Guarantors, Merrill Lynch & Co., Merrill,
Lynch, Pierce, Fenner & Smith, Incorporated,
Nesbitt Burns Securities, Inc., and Piper
Jaffray Inc.
12.1 Statement regarding the Computation of Ratios Filed herewith.
21.1 Subsidiaries of the Company Incorporated by reference to Exhibit 21.1 to
the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998 (File
No. 0-785).
23.1 Consent of Ernst & Young, LLP Filed herewith.
23.2 Consent of Oppenheimer Wolff & Donnelly LLP Contained in their opinion filed as Exhibit
5.
24.1 Powers of Attorney Included on signature pages.
25.1 Form T-1 Statement of Eligibility under the Filed herewith.
Trust Indenture Act of 1939 of U.S. Bank
Trust National Association
99.1 Form of Letter of Transmittal Filed herewith.
99.2 Form of Notice of Guaranteed Delivery Filed herewith.
99.3 Guidelines for Certification of Taxpayer Filed herewith.
Identification Number on Substitute Form W-9
</TABLE>
<PAGE>
Exhibit 4.2
NASH-FINCH COMPANY,
as Issuer
THE SUBSIDIARY GUARANTORS named herein,
as Guarantors
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
---------------------
INDENTURE
Dated as of April 24, 1998
--------------------
$165,000,000
8-1/2% Senior Subordinated Notes due 2008, Series A
8-1/2% Senior Subordinated Notes due 2008, Series B
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939,as amended, and
Indenture, dated as of April 24, 1998
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- -------------- ----------
<S> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . 6.09
(a)(2) . . . . . . . . . . . . . . . . . . . 6.09
(a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . 6.08, 6.10
Section 311 (a). . . . . . . . . . . . . . . . . . . . . 6.13
(b). . . . . . . . . . . . . . . . . . . . . 6.13
(c). . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 312 (a). . . . . . . . . . . . . . . . . . . . . 3.06, 7.01
(b). . . . . . . . . . . . . . . . . . . . . 7.02
(c). . . . . . . . . . . . . . . . . . . . . 7.02
Section 313 (a). . . . . . . . . . . . . . . . . . . . . 7.03
(b). . . . . . . . . . . . . . . . . . . . . 7.03
(c). . . . . . . . . . . . . . . . . . . . . 7.03
(d). . . . . . . . . . . . . . . . . . . . . 7.03
Section 314 (a). . . . . . . . . . . . . . . . . . . . . 7.04
(a)(4) . . . . . . . . . . . . . . . . . . . 10.13
(b). . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c)
(c)(2) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c)
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d). . . . . . . . . . . . . . . . . . . . . Not Applicable
(e). . . . . . . . . . . . . . . . . . . . . 1.04
Section 315 (a). . . . . . . . . . . . . . . . . . . . . 6.01(a)
(b). . . . . . . . . . . . . . . . . . . . . 6.02
(c). . . . . . . . . . . . . . . . . . . . . 6.01(b)
(d). . . . . . . . . . . . . . . . . . . . . 6.01(c)
(e). . . . . . . . . . . . . . . . . . . . . 5.14
Section 316 (a) (last sentence) . . . . . . . . . . . . 3.14
(a)(1)(A). . . . . . . . . . . . . . . . . . 5.12
(a)(1)(B). . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . 5.08
(c). . . . . . . . . . . . . . . . . . . . . 9.07
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . 5.03
(a)(2) . . . . . . . . . . . . . . . . . . . 5.04
(b). . . . . . . . . . . . . . . . . . . . . 10.03
Section 318 (a). . . . . . . . . . . . . . . . . . . . . 1.08
</TABLE>
_________________
<PAGE>
Note: This Cross-Reference Table shall not, for any purpose, be deemed a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . 24
Section 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . 24
Section 1.04. Form of Documents Delivered to Trustee.. . . . . . . . . . 25
Section 1.05. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . 26
Section 1.06. Notices, etc., to the Trustee,
the Company and the Guarantors.. . . . . . . . . . . . . . 26
Section 1.07. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . 27
Section 1.08. Conflict with Trust Indenture Act. . . . . . . . . . . . . 27
Section 1.09. Effect of Headings and Table of Contents.. . . . . . . . . 28
Section 1.10. Successors and Assigns.. . . . . . . . . . . . . . . . . . 28
Section 1.11. Separability Clause. . . . . . . . . . . . . . . . . . . . 28
Section 1.12. Benefits of Indenture. . . . . . . . . . . . . . . . . . . 28
Section 1.13. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 28
Section 1.14. No Recourse Against Others.. . . . . . . . . . . . . . . . 28
Section 1.15. Independence of Covenants. . . . . . . . . . . . . . . . . 29
Section 1.16. Exhibits.. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 1.17. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . 29
Section 1.18. Duplicate Originals. . . . . . . . . . . . . . . . . . . . 29
ARTICLE TWO NOTE AND GUARANTEE FORMS
Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE THREE THE NOTES
Section 3.01. Title and Terms. . . . . . . . . . . . . . . . . . . . . . 30
Section 3.02. Optional Redemption. . . . . . . . . . . . . . . . . . . . 31
Section 3.03. Registrar and Paying Agent.. . . . . . . . . . . . . . . . 31
Section 3.04. Execution and Authentication.. . . . . . . . . . . . . . . 31
Section 3.05. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . 33
-i-
<PAGE>
Page
----
Section 3.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . 34
Section 3.07. Mutilated, Destroyed, Lost and Stolen Notes. . . . . . . . 35
Section 3.08. Payment of Interest; Interest Rights Preserved.. . . . . . 35
Section 3.09. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . 36
Section 3.10. Cancellation.. . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.11. Legal Holidays.. . . . . . . . . . . . . . . . . . . . . . 37
Section 3.12. CUSIP and CINS Numbers.. . . . . . . . . . . . . . . . . . 38
Section 3.13. Paying Agent To Hold Money in Trust. . . . . . . . . . . . 38
Section 3.14. Treasury Notes.. . . . . . . . . . . . . . . . . . . . . . 38
Section 3.15. Deposits of Monies.. . . . . . . . . . . . . . . . . . . . 39
Section 3.16. Book-Entry Provisions for Global Notes.. . . . . . . . . . 39
Section 3.17. Special Transfer Provisions. . . . . . . . . . . . . . . . 40
ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Company's Option To Effect Defeasance or Covenant
Defeasance.. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.02. Defeasance and Discharge.. . . . . . . . . . . . . . . . . 43
Section 4.03. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . 44
Section 4.04. Conditions to Defeasance or Covenant Defeasance. . . . . . 44
Section 4.05. Deposited Money and U.S. Government Obligations To
Be Held in Trust; Other Miscellaneous Provisions.. . . . . 47
Section 4.06. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE FIVE REMEDIES
Section 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . 48
Section 5.02. Acceleration of Maturity; Rescission and Annulment.. . . . 50
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee.. . . . . . . . . . . . . . . . . . 51
Section 5.04. Trustee May File Proofs of Claims. . . . . . . . . . . . . 52
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.. . 53
Section 5.06. Application of Money Collected.. . . . . . . . . . . . . . 53
Section 5.07. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 54
Section 5.08. Unconditional Right of Holders To Receive Principal,
Premium and Interest.. . . . . . . . . . . . . . . . . . . 54
Section 5.09. Restoration of Rights and Remedies.. . . . . . . . . . . . 54
Section 5.10. Rights and Remedies Cumulative.. . . . . . . . . . . . . . 55
Section 5.11. Delay or Omission Not Waiver.. . . . . . . . . . . . . . . 55
Section 5.12. Control by Majority. . . . . . . . . . . . . . . . . . . . 55
Section 5.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 56
Section 5.14. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 56
Section 5.15. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . 56
-ii-
<PAGE>
ARTICLE SIX THE TRUSTEE
Page
----
Section 6.01. Certain Duties and Responsibilities. . . . . . . . . . . . 57
Section 6.02. Notice of Defaults.. . . . . . . . . . . . . . . . . . . . 58
Section 6.03. Certain Rights of Trustee. . . . . . . . . . . . . . . . . 58
Section 6.04. Trustee Not Responsible for Recitals, Dispositions
of Notes or Application of Proceeds Thereof. . . . . . . . 59
Section 6.05. Trustee and Agents May Hold Notes; Collections; Etc. . . . 60
Section 6.06. Money Held in Trust. . . . . . . . . . . . . . . . . . . . 60
Section 6.07. Compensation and Indemnification of Trustee
and Its Prior Claim. . . . . . . . . . . . . . . . . . . . 60
Section 6.08. Conflicting Interests. . . . . . . . . . . . . . . . . . . 61
Section 6.09. Corporate Trustee Required; Eligibility. . . . . . . . . . 61
Section 6.10. Resignation and Removal; Appointment of Successor Trustee. 61
Section 6.11. Acceptance of Appointment by Successor.. . . . . . . . . . 63
Section 6.12. Merger, Conversion, Amalgamation, Consolidation or
Succession to Business.. . . . . . . . . . . . . . . . . . 64
Section 6.13. Preferential Collection of Claims Against Company
and Guarantors.. . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company To Furnish
Trustee Names and Addresses of Holders.. . . . . . . . . . 65
Section 7.02. Communications of Holders. . . . . . . . . . . . . . . . . 65
Section 7.03. Reports by Trustee.. . . . . . . . . . . . . . . . . . . . 65
Section 7.04. Reports by Company and Each Guarantor. . . . . . . . . . . 66
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. Company May Consolidate, etc., Only on Certain Terms.. . . 66
Section 8.02. Successor Substituted. . . . . . . . . . . . . . . . . . . 68
ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01. Supplemental Indentures, Agreements and Waivers
Without Consent of Holders.. . . . . . . . . . . . . . . . 69
Section 9.02. Supplemental Indentures, Agreements and Waivers with
Consent of Holders.. . . . . . . . . . . . . . . . . . . . 70
Section 9.03. Execution of Supplemental Indentures, Agreements
and Waivers. . . . . . . . . . . . . . . . . . . . . . . . 72
-iii-
<PAGE>
Page
----
Section 9.04. Effect of Supplemental Indentures. . . . . . . . . . . . . 72
Section 9.05. Conformity with Trust Indenture Act. . . . . . . . . . . . 72
Section 9.06. Reference in Notes to Supplemental Indentures. . . . . . . 72
Section 9.07. Record Date. . . . . . . . . . . . . . . . . . . . . . . . 73
Section 9.08. Revocation and Effect of Consents. . . . . . . . . . . . . 73
ARTICLE TEN COVENANTS
Section 10.01. Payment of Principal, Premium and Interest. . . . . . . . 73
Section 10.02. Maintenance of Office or Agency.. . . . . . . . . . . . . 73
Section 10.03. Money for Note Payments To Be Held in Trust.. . . . . . . 74
Section 10.04. Corporate Existence.. . . . . . . . . . . . . . . . . . . 76
Section 10.05. Payment of Taxes and Other Claims.. . . . . . . . . . . . 76
Section 10.06. Maintenance of Properties.. . . . . . . . . . . . . . . . 76
Section 10.07. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.08. Books and Records.. . . . . . . . . . . . . . . . . . . . 77
Section 10.09. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.10. Provision of Financial Statements.. . . . . . . . . . . . 77
Section 10.11. Change of Control.. . . . . . . . . . . . . . . . . . . . 78
Section 10.12. Limitation on Indebtedness. . . . . . . . . . . . . . . . 81
Section 10.13. Statement by Officers as to Default.. . . . . . . . . . . 84
Section 10.14. Limitation on Restricted Payments.. . . . . . . . . . . . 84
Section 10.15. Limitation on Transactions with Affiliates. . . . . . . . 89
Section 10.16. Limitation on Sale of Assets. . . . . . . . . . . . . . . 90
Section 10.17. Limitation on Liens.. . . . . . . . . . . . . . . . . . . 93
Section 10.18. Limitation on Issuances of Guarantees by
Restricted Subsidiaries.. . . . . . . . . . . . . . . . . 94
Section 10.19. Limitation on Preferred Stock of Restricted Subsidiaries. 96
Section 10.20. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries. . . . . . 96
Section 10.21. Limitations on Unrestricted Subsidiaries. . . . . . . . . 97
Section 10.22. Compliance Certificates and Opinions. . . . . . . . . . . 99
Section 10.23. Limitation on Incurrence of Senior Subordinated
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 99
Section 10.24. Application of Fall-Away Covenants. . . . . . . . . . . . 100
ARTICLE ELEVEN SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture.. . . . . . . . . 100
Section 11.02. Application of Trust Money. . . . . . . . . . . . . . . . 101
-iv-
<PAGE>
ARTICLE TWELVE GUARANTEE OF NOTES
Page
----
Section 12.01. Unconditional Guarantee.. . . . . . . . . . . . . . . . . 101
Section 12.02. Subordination of Guarantees.. . . . . . . . . . . . . . . 103
Section 12.03. Execution and Delivery of Guarantee.. . . . . . . . . . . 103
Section 12.04. Additional Guarantors.. . . . . . . . . . . . . . . . . . 103
Section 12.05. Release of a Guarantor. . . . . . . . . . . . . . . . . . 104
Section 12.06. Waiver of Subrogation.. . . . . . . . . . . . . . . . . . 104
Section 12.07. Reliance on Judicial Order or Certificate of Liquidating
Agent Regarding Dissolution, etc. of Guarantors.. . . . . 105
Section 12.08. Article Twelve Applicable to Paying Agents. . . . . . . . 105
Section 12.09. No Suspension of Remedies.. . . . . . . . . . . . . . . . 105
Section 12.10. Limitation of Subsidiary Guarantor's Liability. . . . . . 105
Section 12.11. Contribution from Other Guarantors. . . . . . . . . . . . 106
Section 12.12. Obligations Reinstated. . . . . . . . . . . . . . . . . . 106
Section 12.13. No Obligation To Take Action Against the Company. . . . . 106
Section 12.14. Dealing with the Company and Others.. . . . . . . . . . . 106
ARTICLE THIRTEEN REDEMPTIONS AND OFFERS TO PURCHASE
Section 13.01. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . 107
Section 13.02. Selection of Notes to Be Redeemed or Purchased.. . . . . . 108
Section 13.03. Notice of Redemption.. . . . . . . . . . . . . . . . . . . 108
Section 13.04. Effect of Notice of Redemption.. . . . . . . . . . . . . . 109
Section 13.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . 109
Section 13.06. Notes Redeemed in Part.. . . . . . . . . . . . . . . . . . 110
Section 13.07. Optional Redemption. . . . . . . . . . . . . . . . . . . . 110
Section 13.08. Procedures Relating to Mandatory Offers. . . . . . . . . . 111
ARTICLE FOURTEEN SUBORDINATION
Section 14.01. Agreement to Subordinate. . . . . . . . . . . . . . . . . 112
Section 14.02. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . 112
Section 14.03. Default on Designated Senior Indebtedness.. . . . . . . . 113
Section 14.04. Acceleration of Notes.. . . . . . . . . . . . . . . . . . 115
Section 14.05. When Distributions Must Be Paid Over. . . . . . . . . . . 115
Section 14.06. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 115
Section 14.07. Subrogation.. . . . . . . . . . . . . . . . . . . . . . . 116
Section 14.08. Relative Rights.. . . . . . . . . . . . . . . . . . . . . 116
Section 14.09. The Company and Holders May Not Impair Subordination. . . 117
Section 14.10. Distribution or Notice to Representative. . . . . . . . . 118
-v-
<PAGE>
Page
----
Section 14.11. Rights of Trustee and Paying Agent. . . . . . . . . . . . 118
Section 14.12. Authorization to Effect Subordination.. . . . . . . . . . 118
Section 14.13. Payment.. . . . . . . . . . . . . . . . . . . . . . . . . 119
</TABLE>
ARTICLE I TERMS OF INTERCOMPANY NOTE
ARTICLE III MISCELLANEOUS
-vi-
<PAGE>
Exhibit A-1 - Form of Series A Note
Exhibit A-2 - Form of Series B Note
Exhibit B - Form of Legend for Book-Entry Securities
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit D - Form of Guarantee
Exhibit E - Form of Intercompany Note
_______________
Note: This Table of Contents shall not, for any purpose, be deemed a part of
the Indenture.
-vii-
<PAGE>
INDENTURE, dated as of April 24, 1998, among NASH-FINCH COMPANY, a
Delaware corporation (the "Company"), as issuer, the Subsidiary Guarantors named
herein (the "Guarantors"), as guarantors, and U.S. BANK TRUST NATIONAL
ASSOCIATION, as trustee (the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of (i) 8-1/2%
Senior Subordinated Notes due 2008, Series A (the "Initial Notes") and (ii)
8-1/2% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes") to be
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement (as defined herein). The Initial Notes, the Exchange Notes and the
Private Exchange Notes (as defined herein), if any, are collectively referred to
as the "Notes" and are treated as a single class of securities under this
Indenture. To provide therefor, the Company has duly authorized the execution
and delivery of this Indenture.
The Guarantors have duly authorized their senior subordinated
guarantees of the Notes and to provide therefor, the Guarantors have duly
authorized the execution and delivery of this Indenture and their Guarantees (as
defined herein) under the terms set forth herein.
All things necessary have been done to make the Notes and the
Guarantees, when executed by the Company and the Guarantors, respectively, and
authenticated and delivered hereunder and duly issued by the Company and the
Guarantors, respectively, the valid obligations of the Company and the
Guarantors and to make this Indenture a valid agreement of each of the Company,
the Guarantors and the Trustee in accordance with the terms hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders (as hereinafter defined) of the Notes, as
follows:
<PAGE>
-2-
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) assumed
in connection with an Asset Acquisition from such Person or (ii) existing at the
time such Person becomes a Restricted Subsidiary of any other Person (other than
any Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a Restricted Subsidiary). 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, 10% or more of such specified Person's
Capital Stock or any officer, director or employee 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 no more remote than
first cousin; or (iii) any other Person 10% 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 ACQUISITION" means (i) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.
"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 ordi-
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nary 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 of Section 8.01; PROVIDED, HOWEVER, that any
transaction consummated in compliance with Section 8.01 involving a transfer of
less than all of the properties or assets of the Company shall be deemed to be
an Asset Sale with respect to the properties or assets of the Company that are
not so transferred in such transaction, (b) that is by the Company to any
Guarantor, or by any Subsidiary to the Company or any Restricted Subsidiary in
accordance with the terms of this Indenture, (c) that is of obsolete equipment
in the ordinary course of business, (d) to any Securitization Subsidiary (on a
"true sale" non-recourse basis) of any accounts receivable or customer loans
receivable of the Company or any Restricted Subsidiary in the ordinary course of
business on terms customary for such transactions, but only to the extent that
the aggregate amount of such accounts receivable or loans held by all such
Securitization Subsidiaries which remain uncollected at any one time does not
exceed $125,000,000, or (e) the Fair Market Value of any such Asset Sale not
otherwise described in clause (a) through (d) above which in the aggregate does
not exceed $10,000,000.
"ASSET SALE OFFER" has the meaning set forth in Section 10.16.
"ASSET SALE OFFER PURCHASE DATE" has the meaning set forth in
Section 10.16.
"AVERAGE LIFE TO STATED MATURITY" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
"BANK CREDIT FACILITIES" means the following credit facilities of
the Company: (i) Master Note Agreement with Brinson Trust Company dated as of
May 16, 1997, (ii) a conditional line of credit from Norwest Bank Minnesota,
N.A. dated as of June 24, 1997 and (iii) a line of credit from Wachovia Bank of
Georgia, N.A. dated as of December 17, 1996, and, with respect to each,
including related notes, guarantees and other agreements executed in connection
therewith.
"BANKRUPTCY LAW" means Title 11, United States Code or any similar
federal or state law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or the law of any
other jurisdiction 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.
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"BANKRUPTCY ORDER" means any court order made in a proceeding
pursuant to or within the meaning of any Bankruptcy Law, containing an
adjudication of bankruptcy or insolvency, or providing for liquidation,
receivership, winding-up, dissolution, "concordate" or reorganization, or
appointing a Custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"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 its respective Board of Directors and to be
in full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York or Minneapolis, Minnesota are authorized or obligated by law,
regulation or executive order to close.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock, whether now outstanding or issued after
the date of this Indenture.
"CAPITALIZED LEASE OBLIGATION" means any obligation under a lease
of (or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means, at any time, (i) any evidence of
Indebtedness with a maturity of not more than one year issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of not more than one year of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of not more than one year issued by a
corporation that is not an Affiliate of the Company organized under the laws of
any state of the United States or the District of Columbia and rated at least
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A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors
Service, Inc.; and (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (i) and
(ii) above entered into with any financial institution meeting the
qualifications specified in clause (ii) above.
"CEDEL" means Cedel Bank, SOCIETE ANONYME.
"CHANGE OF CONTROL" means the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company):
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) 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 securities 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 35% or more of the total voting power of
the then outstanding Voting Stock of the Company; (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 sells,
assigns, conveys, transfers, leases or otherwise disposes of 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 solely 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 in Section 10.14 (and such amount shall be treated as a
Restricted Payment subject to the provisions of Section 10.14), (B) no "person"
or "group" owns immediately after such transaction, directly or indirectly, 35%
or more of the total outstanding Voting Stock of the surviving corporation and
(C) the holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the total
voting power of the then outstanding Voting Stock of the surviving or transferee
corporation immediately after such transaction; or (iv) any order, judgment or
decree shall be entered against the
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Company decreeing the dissolution or split up of the Company and such order
shall remain undischarged or unstayed for a period in excess of sixty days.
"CHANGE OF CONTROL OFFER" has the meaning set forth in Section
10.11.
"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.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or
order signed in the name of the Company by any one of its Chief Executive
Officer, its President or a Vice President, and by its Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer or its chief financial
officer, and delivered to the Trustee.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for
any period, (i) the sum of, without duplication, the amounts for such period,
taken as a single accounting period, of (a) Consolidated Net Income, (b) to the
extent reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to
the extent reducing Consolidated Net Income, Consolidated Interest Expense, and
(d) to the extent reducing Consolidated Net Income, Consolidated Income Tax
Expense less (ii) other non-cash items increasing Consolidated Net Income for
such period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the
aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the
Company for the four full fiscal quarters immediately preceding the date of the
transaction (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio for which consolidated financial
information of the Company is available (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of the Company for such Four Quarter Period. For
purposes of this definition, "Consolidated Cash Flow Available for Fixed
Charges" and "Consolidated Fixed Charges" will be calculated, without
duplication, after giving effect on a PRO FORMA basis for the period of such
calculation to (i) the incurrence of any Indebtedness of the Company or
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any of the Restricted Subsidiaries during the period commencing on the first day
of the Four Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such incurrence occurred
on the first day of the Reference Period, except that with respect to the
calculation of Consolidated Interest Expense in the determination of
Consolidated Fixed Charges, 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 Reference Period, (ii) an adjustment to
eliminate or include, as applicable, the Consolidated Cash Flow Available for
Fixed Charges and Consolidated Fixed Charges of the Company directly
attributable to assets which are the subject of any Asset Sale or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period and (iii)
the retirement of Indebtedness during the Reference Period which cannot
thereafter be reborrowed occurring as if retired on the first day of the
Reference Period. In calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter will be deemed to accrue at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date shall be deemed to have been in
effect during the Reference Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by Interest Rate Agreements, will be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements. If the Company or any Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the above definition will
give effect to the incurrence of such guaranteed Indebtedness as if the Company
or any Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of,
without duplication, the amounts for such period of (i) Consolidated Interest
Expense; and (ii) the aggregate amount of cash dividends and other distributions
paid or accrued during such period in respect of Redeemable Capital Stock and
Preferred Stock of the Company.
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"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (i) any amortization of
debt discount attributable to such period, (ii) the net cost under or otherwise
associated with Interest Rate Agreements, Currency Agreements and Commodity
Price Protection Agreements (in each case, including any amortization of
discounts), (iii) the interest portion of any deferred payment obligation, (iv)
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and (v) all capitalized
interest and all accrued interest, and (b) all but the principal component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Restricted Subsidiaries during such period and as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated
net income (or loss) of the Company and the 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 all fees and
expenses relating thereto), (ii) the portion of net income (or loss) of the
Company and its Restricted Subsidiaries on a consolidated basis allocable to
minority interests in unconsolidated Persons, except to the extent that cash
dividends or distributions are actually received by the Company or a Restricted
Subsidiary, (iii) income of the Company and the Restricted Subsidiaries derived
from or in respect of Investments in Unrestricted Subsidiaries, except to the
extent that cash dividends or distributions are actually received by the Company
or a Restricted Subsidiary, (iv) net income (or loss) of any Person combined
with the Company or any of the Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(v) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan, (vi) net gains (or losses), net of taxes, less
all fees and expenses relating thereto, in respect of any Asset Sales by the
Company or a Restricted Subsidiary, (vii) 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,
(viii) any restoration to income of any contingency reserve except to the extent
provision for such reserve was made out of income accrued at any time following
the Issue Date, (ix) any gain, arising from the acquisition of any securities,
or the extinguishment, under GAAP, of any Indebtedness of the Company,
<PAGE>
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(x) the net gain or loss resulting from the Prepayments (as defined in the
Offering Memorandum relating to the sale of the Notes) and (xi) the net non-cash
compensation expense incurred in connection with the issuance or exercise of any
employee stock options the issuance of which was approved by the board of
directors of the Company.
"CONSOLIDATED NET SALES" means, for any period, the consolidated
net sales of the Company and the Restricted Subsidiaries as determined in
accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, for any period, the
aggregate depreciation, amortization and other non-cash expenses of the Company
and the Restricted Subsidiaries reducing Consolidated Net Income for such period
(other than any non-cash item requiring an accrual or reserve for cash
disbursements in any future period), determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total
assets, less goodwill and other intangibles, of the Company and the Restricted
Subsidiaries determined on a consolidated basis in accordance with GAAP as of
the most recent date for which a consolidated balance sheet of the Company is
available.
"CONSOLIDATION" means, with respect to any Person, the
consolidation of the accounts of its Restricted Subsidiaries with those of such
Person, all in accordance with GAAP; PROVIDED, HOWEVER, that "consolidation"
will not include consolidation of the accounts of any Unrestricted Subsidiary
with the accounts of such Person. The term "consolidated" has a correlative
meaning to the foregoing.
"CONTROL" means, with respect to any specified Person, the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at First Trust Center, 180 East Fifth Street, Saint Paul, Minnesota, Attention:
Richard Prokosch/Corporate Trust Administration.
"COVENANT DEFEASANCE" has the meaning set forth in Section 4.03.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or its Restricted Subsidiaries against fluctuations in currency values.
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"CUSTODIAN" means any receiver, interim receiver, receiver and
manager, receiver-manager, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law or any other law respecting secured
creditors and the enforcement of their security or any other Person with like
powers whether appointed judicially or out of court and whether pursuant to an
interim or final appointment.
"DEFAULT" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"DEFEASANCE" has the meaning set forth in Section 4.02.
"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.
"DESIGNATED SENIOR INDEBTEDNESS" means (a) all Senior Indebtedness
outstanding under the Revolving Credit Facility and (b) any other Senior
Indebtedness which, at the time of determination, is specifically designated in
the instrument governing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"DESIGNATION" has the meaning set forth in Section 10.21.
"DESIGNATION AMOUNT" has the meaning set forth in Section 10.21.
"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.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System.
"EVENT OF DEFAULT" has the meaning set forth in Section 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder.
"EXCHANGE NOTES" means the 8-1/2% Senior Subordinated Notes due
2008, Series B, to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement.
"EXCHANGE OFFER" shall have the meaning specified in the
Registration Rights Agreement.
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"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length transaction, for cash,
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. Fair Market Value shall
be determined by the Board of Directors of the Company acting in good faith
evidenced by a Board Resolution thereof delivered to the Trustee.
"FOUR QUARTER PERIOD" has the meaning set forth in the definition
of "Consolidated Fixed Charge Coverage Ratio."
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"GLOBAL NOTES" means one or more Regulation S Global Notes and
144A Global Notes.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"GUARANTEE" means the guarantee by any Guarantor of both the
Company's obligations under this Indenture and the Notes pursuant to a guarantee
given in accordance with this Indenture.
"GUARANTOR" means (i) each of Nash DeCamp Company, T.J. Morris
Company, Super Food Services, Inc., Forrest Transportation Services, Inc., GTL
Truck Lines, Inc., Piggly Wiggly Northland Corporation, Gillette Dairy of the
Black Hills, Inc. and Nebraska Dairies, Inc. and their respective successors and
(ii) any Person that executes or is required after the Issue Date to execute a
guarantee of the Notes pursuant to this Indenture until a successor replaces
such party pursuant to the applicable provisions of this 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.
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"HOLDER" or "NOTEHOLDER" means a Person in whose name a Note is
registered in the Note Register.
"INCUR" has the meaning set forth in Section 10.12. "Incurrence,"
"incurred" and "incurring" shall have the meanings correlative to the foregoing.
"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 incurred or 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, bankers
acceptance or other similar credit transaction and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter 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
Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to
in clauses (i) through (iv) above of other Persons and all dividends of other
Persons, to the extent 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,
(vi) all guarantees of Indebtedness by such Person, (vii) except for purposes of
Section 10.14, 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, (viii) all obligations under Interest Rate
Agreements, Currency Agreements or Commodity Price Protection Agreements of such
Person (net of any payments owed to such Person thereunder to the extent such
Person's obligations thereunder are subject to offset by the amount of payments
owed to such Person thereunder), 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
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Fair Market Value shall be determined in good faith by the board of directors of
the issuer of such Redeemable Capital Stock.
"INDENTURE" means this instrument as originally executed
(including all exhibits and schedules hereto) 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 Notes, to pay principal of,
premium, if any, and interest on the Notes when due and payable, whether at
maturity, by acceleration, call for redemption or repurchase or otherwise, and
all other amounts due or to become due under or in connection with this
Indenture, the Notes or the Guarantees and the performance of all other
obligations to the Trustee (including, but not limited to, payment of all
amounts due the Trustee under Section 6.07 hereof) and the Holders of the Notes
under this Indenture, the Notes and the Guarantees, according to the terms
thereof.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized
accounting, appraisal or investment banking firm (i) which does not, and whose
directors, officers and employees or Affiliates do not have, a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INITIAL NOTES" means the 8-1/2% Senior Subordinated Notes due
2008, Series A, of the Company.
"INITIAL PURCHASERS" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nesbitt Burns Securities Inc., and Piper Jaffray Inc.
"INTEREST" means, when used with respect to any Note, the amount
of all interest accruing on such Note, including all additional interest payable
on the Notes pursuant to the Registration Rights Agreement and all interest
accruing subsequent to the occurrence of any events specified in Sections
5.01(h), (i) and (j) or which would have accrued but for any such event, whether
or not such claims are allowable under applicable law.
"INTEREST PAYMENT DATE" means, when used with respect to any Note,
the Stated Maturity of an installment of interest on such Note, as set forth in
such Note.
"INTEREST RATE AGREEMENTS" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
obligations of any Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such
<PAGE>
-14-
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or a floating rate of interest on the same notional amount or
any other arrangement involving payments by or to such Person based upon
fluctuations in interest rates (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, any direct or
indirect advance, loan or other extension of credit (including by means of a
guarantee) 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 otherwise), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person and all other items that would be
classified as investments on a balance sheet prepared in accordance with GAAP.
Investments shall exclude extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices. In addition to the foregoing,
any Currency Agreement, Interest Rate Agreement, Commodity Price Protection
Agreement or similar agreement shall constitute an Investment in the net amount
required to be set forth on such Person's balance sheet in accordance with GAAP.
Upon the sale of any portion of the Capital Stock of any Restricted Subsidiary
by the Company or any other Restricted Subsidiary, the Company or such other
Restricted Subsidiary shall be deemed to have made an Investment in the amount
of its remaining Investment, if any, in such Person.
"INVESTMENT GRADE RATING" means a rating of BBB- and Baa3 or
higher, in each case by the applicable Rating Agency, or the equivalents
thereof.
"ISSUE DATE" means the original issue date of the Notes hereunder.
"LIEN" means any mortgage or deed of trust, charge, pledge, lien
(statutory or other), privilege, security interest, hypothecation, cessation and
transfer, lease of real property, assignment for security, claim, deposit
arrangement, or preference or 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), whether real, personal or mixed,
movable or immovable, now owned or hereafter acquired. A Person shall be deemed
to own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
<PAGE>
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"MATERIAL SUBSIDIARY" means each Restricted Subsidiary of the
Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act (as such regulation is in
effect on the Issue Date).
"MATURITY DATE" means, with respect to any Note, the date on which
any principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase 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 Cash Equivalents 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 Cash Equivalents (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 legal 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 or
having a Lien on the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted 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 (provided that the amount of any
such reserves shall be deemed to constitute Net Cash Proceeds at the time such
reserves shall have been released or are not otherwise required to be retained
as a reserve), all as reflected in an Officers' Certificate delivered to the
Trustee and (b) with respect to any issuance or sale of shares of Capital Stock
that have been converted into or exchanged for shares of Capital Stock as
referred to Section 10.14, the proceeds of such issuance or sale in the form of
cash or Cash Equivalents 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 Cash Equivalents (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.
"NON-U.S. PERSON" has the meaning assigned to such term in
Regulation S.
<PAGE>
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"NOTES" shall have the meaning specified in the Recitals of this
Indenture.
"OFFER" means a Change of Control Offer made pursuant to Section
10.11 or an Asset Sale Offer made pursuant to Section 10.16.
"OFFERING MEMORANDUM" means the Offering Memorandum dated
April 20, 1998 pursuant to which the Notes and the Guarantees were offered, and
any supplement thereto.
"OFFICER" means, with respect to the Company or any Guarantor, the
Chief Executive Officer, the President, a Vice President, the Secretary, an
Assistant Secretary, the Treasurer, an Assistant Treasurer, or the Chief
Financial Officer.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chief
Executive Officer, the President, the Chief Financial Officer or a Vice
President, and by the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer of the Company or any Guarantor, as the case may be, and
delivered to the Trustee.
"144A GLOBAL NOTE" means a permanent global note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Rule 144A under the Securities Act.
"OPINION OF COUNSEL" means a written opinion of counsel who may be
counsel for the Company, a Guarantor, or the Trustee, and who shall be
reasonably acceptable to the Trustee.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company or any Guarantor or
any Affiliate thereof) in trust or set aside and segregated in trust by
the Company or any Guarantor or any Affiliate thereof (if the Company or
such Guarantor or Affiliate shall act as Paying Agent) for the Holders of
such Notes; PROVIDED, HOWEVER, that if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture
or provision therefor satisfactory to the Trustee has been made;
<PAGE>
-17-
(iii) Notes with respect to which the Company has effected
defeasance or covenant defeasance as provided in Article Four, to the
extent provided in Sections 4.02 and 4.03; and
(iv) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture, other than
any such Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona fide
purchaser in whose hands the Notes are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company, any Guarantor or any other obligor upon the Notes 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 Notes that a Responsible Officer of
the Trustee knows to be so owned shall be so disregarded. The Company shall
notify the Trustee, in writing, when it repurchases or otherwise acquires Notes,
of the aggregate principal amount of such Notes so repurchased or otherwise
acquired. Notes so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act as a Holder with respect to such Notes and that the
pledgee is not the Company, any Guarantor or any other obligor upon the Notes or
any Affiliate of the Company, any Guarantor or such other obligor. If the
Paying Agent holds, in its capacity as such, on any Maturity Date or on any
optional redemption date money sufficient to pay all accrued interest and
principal with respect to such Notes payable on that date and is not prohibited
from paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Notes cease to be Outstanding and
interest on them ceases to accrue. Notes may also cease to be outstanding to
the extent expressly provided in Article Four.
"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 the Guarantee of such Guarantor.
"PERMITTED INDEBTEDNESS" has the meaning set forth in Section
10.12.
"PERMITTED INVESTMENTS" means (a) Cash Equivalents;
(b) Investments in prepaid expenses, negotiable instruments held for collection
and lease, utility and workers' compensation, performance and other similar
deposits; (c) loans and advances to employees and sales representatives made in
the ordinary course of business not to exceed $1,000,000 in the aggre-
<PAGE>
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gate at any one time outstanding; (d) Interest Rate Agreements, Currency
Agreements and Commodity Price Protection Agreements permitted under clause
(vii) or (viii) of the second paragraph of Section 10.12, (e) Investments
represented by accounts receivable created or acquired in the ordinary course of
business; (f) loans or advances to vendors in the ordinary course of business in
an amount not to exceed $10,000,000 at any time; (g) Investments existing on the
Issue Date and any renewal or replacement thereof on terms and conditions no
less favorable in any respect than that existing on the Issue Date; (h) any
Investment to the extent that the consideration therefor is Qualified Capital
Stock of the Company; (i) bonds, notes, debentures or other securities or other
non-cash proceeds received in connection with an Asset Sale permitted under
Section 10.16 not to exceed 20% of the total consideration in such Asset Sale;
(j) Investments in the form of the sale (on a "true sale" non-recourse basis) or
the servicing of receivables transferred from the Company or any Guarantor, or
transfer of cash, to a Securitization Subsidiary as a capital contribution or in
exchange for Indebtedness of such Securitization Subsidiary in the ordinary
course of business consistent with past practice on terms customary for such
transactions); (k) Indebtedness permitted under clauses (iv), (v) and (vi) of
the second paragraph of Section 10.12; and (l) Investments in any of the Notes
or any other debt securities of the Company not otherwise prohibited by this
Indenture.
"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 NOTE" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 3.07 hereof in exchange for a
mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"PREFERRED STOCK" means, with respect to any Person, Capital Stock
of any class or, classes (however designated) of such Person 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 Capital Stock of any other class of such Person.
"PRIVATE EXCHANGE SECURITIES" shall have the meaning specified in
the Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" shall mean the first paragraph of the
legend initially set forth in the Securities in the form set forth on Exhibit
A-1.
"PUBLIC EQUITY OFFERING" has the meaning set forth in Section
13.07.
<PAGE>
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"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a
Lien on assets related to the business of the Company and the 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 is
constructed, such Purchase Money Security Agreement may be entered into within
180 days after the substantial completion of such supermarket, (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
accessions thereto and except in respect of 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 90% 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.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"RATING AGENCIES" means (i) Standard & Poor's Ratings Group and
(ii) Moody's Investors Service, Inc. or (iii) if Standard & Poor's Ratings Group
or Moody's Investors Service, Inc. or both shall not make a rating of the Notes
publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which shall be
substituted for Standard & Poor's Ratings Group, Moody's Investors Service, Inc.
or both, as the case may be.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital
Stock to the extent that, either by its terms, by the terms of any security into
which it is convertible or exchangeable, or by contract 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 such Stated Maturity, or
is convertible into or exchangeable for debt securities at any time prior to
such Stated Maturity.
<PAGE>
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"REFERENCE PERIOD" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"REGISTRABLE SECURITIES" shall have the meaning specified in the
Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of April 24, 1998 by and among the Company, the Guarantors
and the Initial Purchasers, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"REGULAR RECORD DATE" means the Regular Record Date specified in
the Notes.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S GLOBAL NOTE" means a permanent global note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S under the Securities Act.
"REORGANIZATION SECURITIES" means , with respect to any insolvency
or liquidation proceeding involving the Company, Capital Stock or other
securities of the Company as reorganized or readjusted (or Capital Stock or any
other securities of any other Person provided for by a plan of reorganization or
readjustment) that are subordinated, at least to the same extent as the Notes,
to the payment of all outstanding Senior Indebtedness after giving effect to
such plan of reorganization or readjustment; PROVIDED, HOWEVER, that if debt
securities such securities shall not provide for amortization (including sinking
fund and mandatory prepayment provisions) commencing prior to three months
following the final scheduled maturity of all Senior Debt of the Company (as
modified by such plan of reorganization or readjustment).
"RESPONSIBLE OFFICER" means, with respect to the Trustee, the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to whom
any corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
<PAGE>
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"RESTRICTED NOTE" means a Note that constitutes a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act;
PROVIDED, HOWEVER, that the Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Note.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that
is not an Unrestricted Subsidiary.
"REVOCATION" has the meaning set forth in Section 10.21.
"REVOLVING CREDIT FACILITY" means the Credit Agreement dated as of
October 8, 1996, as amended, among the Company, Harris Trust and Savings Bank,
as administrative agent, and the other financial institutions signatory thereto,
as in effect on the Issue Date, and includes related notes, guarantees and other
agreements executed in connection therewith.
"RULE 144A" means Rule 144A under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"SECURITIZATION SUBSIDIARY" means any Unrestricted Subsidiary of
the Company which engages in no business, activity or transaction other than
(i) acquiring accounts or customer loans receivable of the Company or any
Restricted Subsidiary, (ii) incurring Indebtedness which is without credit
recourse and which is secured solely by, or selling (on a "true sale"
non-recourse basis) interests in, such accounts or customer loans receivable and
(iii) immediately paying all of the proceeds of such Indebtedness or sale of
interests to the Company or such Restricted Subsidiary as payment for accounts
or customer loans receivable of the Company or such Restricted Subsidiary.
"SENIOR INDEBTEDNESS" means, with respect to the Company or any
Guarantor, as applicable, the principal of, premium, if any, and interest on any
Indebtedness of the Company or such Guarantor, as the case may be, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
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
Indebtedness of the Company or such Guarantor, as the case may be. Without
limiting the generality of the foregoing, "Senior Indebtedness" will include the
principal of, premium, if any, and interest (including interest that would
accrue but for the filing of a petition initiating any proceeding under any
state or federal bankruptcy laws, whether or not such claim is allowable in such
proceeding) on all obligations of every nature of the Company or such Guarantor,
as the case may be, from time to time owed to the lenders under the Revolving
Credit Facility, in-
<PAGE>
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cluding, without limitation, principal of and interest on, and all fees and
expenses payable under the Revolving Credit Facility. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include, to the extent constituting
Indebtedness, (i) Indebtedness evidenced by the Notes or the Guarantors,
(ii) Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of the Company or any Guarantor, (iii) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to the Company or any Guarantor,
(iv) Indebtedness which is represented by Redeemable Capital Stock,
(v) Indebtedness for goods, materials or services purchased in the ordinary
course of business or Indebtedness consisting of trade payables or other current
liabilities (other than any current liabilities owing under the Revolving Credit
Facility or the current portion of any long-term Indebtedness which would
constitute Senior Indebtedness but for the operation of this clause (v)),
(vi) Indebtedness of or amounts owed by the Company or any Guarantor for
compensation to employees or for services rendered to the Company or such
Guarantor, (vii) any liability for federal, state, local or other taxes owed or
owing by the Company or any Guarantor, (viii) Indebtedness of the Company or any
Guarantor to a Subsidiary of the Company, and (ix) that portion of any
Indebtedness which at the time of issuance is issued in violation of this
Indenture.
"SPECIAL RECORD DATE" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.08 hereof.
"STATED MATURITY" means, with respect to any Note or any
installment of interest thereon, the dates specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest, is
due and payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor
which is expressly subordinated in right of payment to the Guarantee of such
Guarantor.
"SUBSIDIARY" means, with respect to any Person, (a) any
corporation of which the outstanding shares of Voting Stock having at least a
majority of the votes entitled to be cast in the election of directors shall at
the time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of the shares of Voting Stock are at the
time, directly or indirectly, owned by such first named Person.
"SURVIVING PERSON" means, with respect to any Person involved in
any consolidation or merger, or any sale, assignment, conveyance, transfer,
lease or other disposition of
<PAGE>
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all or substantially all of its properties and assets as an entirety, the Person
formed by or surviving such merger or consolidation or the Person to which such
sale, assignment, conveyance, transfer or lease is made.
"TRANSACTION DATE" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of
1939, as amended.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"UNRESTRICTED NOTES" means one or more Notes that do not and are
not required to bear the Private Placement Legend in the form set forth in
Exhibit A, including, without limitation, the Exchange Notes.
"UNRESTRICTED SUBSIDIARY" means (i) each Securitization Subsidiary
and its Subsidiaries and (ii) each Subsidiary of the Company (other than a
Guarantor) designated as such pursuant to and in compliance with Section 10.21,
and each Subsidiary of each such Subsidiary of the Company. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such Section 10.21.
"UNUTILIZED NET CASH PROCEEDS" has the meaning set forth in
Section 10.16.
"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 at any
time prior to the Stated Maturity of the Notes, 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, HOWEVER, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
<PAGE>
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"VOTING STOCK" means any class or classes of Capital Stock
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 any Person (irrespective of whether or not, at the time,
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 any Restricted
Subsidiary of which 100% of the outstanding Capital Stock is owned by the
Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this
definition, any directors' qualifying shares shall be disregarded in determining
the ownership of a Restricted Subsidiary.
Section 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" 1.05
"Affiliate Transaction" 10.15
"Agent Member" 3.16
"Change of Control Date" 10.11
"Change of Control Purchase Date" 10.11
"Change of Control Purchase Price" 10.11
"Defaulted Interest" 3.08
"Defeased Notes" 4.01
"insolvent Person" 4.04
"Non-payment Default" 14.03
"Note Register" 3.06
"Registrar" 3.03
"Paying Agent" or "Agent" 3.03
"Payment Blockage Period" 14.03
"Physical Notes" 3.04
"Required Filling Dates" 10.10
"Restricted Payments" 10.14
"Restricted Period" 3.17
</TABLE>
Section 1.03. RULES OF CONSTRUCTION.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
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(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 "$" or "dollars" refer to the lawful
currency of the United States of America; and
(f) the words "include," "included" and "including" as used
herein are deemed in each case to be followed by the phrase "without
limitation."
Section 1.04. 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 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 or any
Guarantor 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 or any
Guarantor stating that the information with respect to such factual matters is
in the possession of the Company or any Guarantor, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this
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Indenture, they may, but need not, be consolidated, with proper identification
of each matter covered therein, and form one instrument.
Section 1.05. 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 (as provided below in
subsection (b) of this Section 1.05) of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind every
future Holder of the same Note or the Holder of every Note issued upon the
transfer thereof or in exchange therefor or in lieu thereof to the same extent
as the original Holder, in respect of anything done, suffered or omitted to be
done by the Trustee, any Paying Agent or the Company or any Guarantor in
reliance thereon, whether or not notation of such action is made upon such Note.
Section 1.06. NOTICES, ETC., TO THE TRUSTEE, THE COMPANY AND THE GUARANTORS.
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
shall be sufficient for every purpose hereunder if made, given, furnished
or filed, in writing, to or with the Trustee at First Trust Center, 180
East Fifth Street, St. Paul, MN 55101, Attention: Richard Prokosch
(Assistant Vice President) or at any other address previ-
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ously furnished in writing to the Holders, the Company and the Guarantors
by the Trustee; or
(b) the Company or a Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose (except as otherwise expressly
provided herein) hereunder if in writing and mailed, first-class postage
prepaid, to the Company or such Guarantor addressed to it at Nash-Finch
Company, P.O. Box 355, Minneapolis, MN 55440-0355, Attention: Chief
Executive Officer, or at any other address previously furnished in
writing to the Trustee by the Company.
Section 1.07. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise expressly provided
herein) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at the address of such Holder as it appears in the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice 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 satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.08. 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, such provision or requirement of the Trust Indenture Act shall
control.
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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
excluded, as the case may be.
Section 1.09. 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 1.10. 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 1.11. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Notes or any
Guarantee issued pursuant hereto 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 1.12. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes or in any Guarantee
issued pursuant hereto, express or implied, shall give to any Person (other than
the parties hereto and their successors hereunder, any Paying Agent and the
Holders) any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 1.13. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 1.14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the
Company or of a Guarantor shall not have any liability for any obligations of
the Company or a Guarantor under the Notes, the Guarantee or this Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation.
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Section 1.15. 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 of 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 if such action is taken or condition exists.
Section 1.16. EXHIBITS.
All exhibits attached hereto are by this reference made a part
hereof with the same effect as if herein set forth in full.
Section 1.17. COUNTERPARTS.
This Indenture may be executed in any number of counterparts and
by telecopier, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
Section 1.18. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
ARTICLE TWO
NOTE AND GUARANTEE FORMS
Section 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication with
respect thereto and the Guarantees shall be in substantially the forms set
forth, or referenced, in Exhibit A-1, Exhibit A-2 and Exhibit D, respectively,
annexed hereto, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any applicable law
or with the rules of the Depository, any clearing agency or any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Notes and Guarantees, as evidenced by their execution thereof.
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The definitive Notes and Guarantees shall be printed, typewritten,
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 Notes and such Guarantees may be listed, all as determined
by the officers executing such Notes and Guarantees, as evidenced by their
execution of such Notes and Guarantees.
Each Note shall be dated the date of its issuance and shall show
the date of its authentication. The terms and provisions contained in the Notes
shall constitute, and are expressly made, a part of this Indenture.
ARTICLE THREE
THE NOTES
Section 3.01. TITLE AND TERMS.
PRINCIPAL AMOUNT. The aggregate principal amount of Notes which
may be authenticated and delivered under this Indenture is limited to
$165,000,000 in aggregate principal amount of Notes, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 3.04, 3.05, 3.06, 3.07,
9.06, 10.11, 10.16 or 13.06
MATURITY AND INTEREST. The Notes will mature on May 1, 2008.
Interest on the Notes will accrue at the rate of 8-1/2% per annum and will be
payable semi-annually on each May 1 and November 1, commencing November 1, 1998,
to the holders of record of Notes at the close of business on the April 15 and
October 15, respectively, immediately preceding such interest payment date.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the Issue Date. Interest
on the Notes shall be computed on the basis of a 360-day year of twelve 30-day
months.
Pursuant to the Registration Rights Agreement, the interest rate
on the Notes is subject to increase under certain circumstances if the Company
is not in compliance with its obligations under the Registration Rights
Agreement.
At the election of the Company, the entire Indebtedness on the
Notes or certain of the Company's obligations and covenants and certain Events
of Default thereunder may be defeased as provided in Article Four.
The terms and provisions contained in the Notes annexed hereto as
Exhibits A-1 and A-2 (including the Guarantees annexed hereto as Exhibit D)
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Com-
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pany, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 3.02. OPTIONAL REDEMPTION.
The Notes will be redeemable at the option of the Company as set
forth in the Notes and in Article Thirteen.
Section 3.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), an office or agency (which shall be located in the Borough of
Manhattan in The City of New York, State of New York) where Notes may be
presented for payment (the "Paying Agent" or "Agent") and an office or agency
where notices and demands to or upon the Company in respect of the Notes, the
Guarantees and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-registrars and one or more additional paying agents. The term
"Paying Agent" or "Agent" includes any additional paying agent. The Company may
act as its own Paying Agent, except for the purposes of payments on account of
principal on the Notes pursuant to Sections 10.11 and 10.16 hereof.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the Trust Indenture Act. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 6.07 hereof.
The Company initially appoints the Trustee as the Registrar and
Paying Agent and agent for service of notices and demands in connection with the
Notes.
Section 3.04. EXECUTION AND AUTHENTICATION.
The Initial Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Exchange Notes
and the Trustee's certificate of authentication relating thereto shall be
substantially in the form of Exhibit A-2 hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company shall approve the form of the Notes and any notation, legend or en-
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dorsement thereon. Each Note shall be dated the date of issuance and shall show
the date of its authentication. Each Note shall have an executed Guarantee from
each of the Guarantors endorsed thereon substantially in the form of Exhibit D
hereto.
Notes offered and sold in reliance on Rule 144A and Notes offered
and sold in reliance on Regulation S shall be issued initially in the form of
one or more Global Notes, substantially in the form set forth in Exhibit A-1,
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company (and having an executed Guarantee from each of the Guarantors
endorsed thereon) and authenticated by the Trustee as hereinafter provided and
shall bear the legend set forth in Exhibit B. The aggregate principal amount of
the Global Notes may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant
to Section 3.17 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A-1 (the
"Physical Notes").
All Notes offered and sold in reliance on Regulation S shall
remain in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; PROVIDED, HOWEVER, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by the Company and the Guarantors have been so complied with.
Two Officers shall sign, or one Officer shall sign, and one
Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Notes for the Company, and the
Guarantees for the Guarantors, by manual or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a Note
or a Guarantee, as the case may be, was an Officer or Assistant Secretary at the
time of such execution but no longer holds that office or position at the time
the Trustee authenticates the Note, the Note shall nevertheless be valid.
The Trustee shall authenticate (i) Initial Notes for original
issue in an aggregate principal amount not to exceed $165,000,000, (ii) Private
Exchange Notes from time to time only in exchange for a like principal amount of
Initial Notes and (iii) Unrestricted Notes from time to time only in exchange
for (A) a like principal amount of Initial Notes or (B) a like principal amount
of Private Exchange Notes, in each case upon a written order of the Company in
the form of an Officers' Certificate of the Company. Each such written order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes,
Private Exchange Notes or Unre-
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stricted Notes and whether (subject to this Section 3.04) the Notes are to be
issued as Physical Notes or Global Notes and such other information as the
Trustee may reasonably request. The aggregate principal amount of Notes
outstanding at any time may not exceed $165,000,000, except as provided in
Section 3.07.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes will have
the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 3.05. TEMPORARY NOTES.
Until definitive Notes are prepared and ready for delivery, the
Company may execute and upon a Company Order the Trustee shall authenticate and
deliver temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes, in any authorized denominations, but may have variations that
the Company reasonably considers appropriate for temporary Notes as conclusively
evidenced by the Company's execution of such temporary Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay but in no event later than the
date that the Exchange Offer is consummated. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of like tenor and of
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
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Section 3.06. TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 10.02 being sometimes
referred to herein as the "Note Register") in which, subject to such reasonable
regulations as the Registrar may prescribe, the Company shall provide for the
registration of Notes and of transfers and exchanges of Notes. The Trustee is
hereby initially appointed Registrar for the purpose of registering Notes and
transfers of Notes as herein provided.
Subject to Sections 3.16 and 3.17, when Notes are presented to the
Registrar or a co-Registrar with a request from the Holder of such Notes to
register the transfer or exchange for an equal principal amount of Notes of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested; PROVIDED, HOWEVER, that every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer or exchange in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. Whenever any Notes are so
presented for exchange, the Company and any Guarantor shall execute, and the
Trustee shall authenticate and deliver, the Notes and Guarantees which the
Holder making the exchange is entitled to receive. No service charge shall be
made to the Noteholder for any registration of transfer or exchange. The
Company may require from the Noteholder payment of a sum sufficient to cover any
transfer taxes or other governmental charge that may be imposed in relation to a
transfer or exchange, but this provision shall not apply to any exchange
pursuant to Sections 9.06, 10.11, 10.16 or 13.06 hereof (in which events the
Company will be responsible for the payment of all such taxes which arise solely
as a result of the transfer or exchange and do not depend on the tax status of
the Holder). The Trustee shall not be required to exchange or register the
transfer of any Note for a period of 15 days immediately preceding the first
mailing of notice of redemption of Notes to be redeemed or of any Note selected,
called or being called for redemption except, in the case of any Note where
public notice has been given that such Note is to be redeemed in part, the
portion thereof not to be redeemed.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book-entry system maintained by
the Holder of such Global Note (or
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its agent), and that ownership of a beneficial interest in the Note shall be
required to be reflected in a book-entry system.
Section 3.07. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note of any series claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall execute and upon a Company Order, the
Trustee shall authenticate and deliver a replacement Note of like tenor and
principal amount, bearing a number not contemporaneously outstanding, and the
Guarantors shall execute a replacement Guarantee, if the Holder of such Note
furnishes to the Company and to the Trustee evidence reasonably acceptable to
them of the ownership and the destruction, loss or theft of such Note and an
indemnity bond shall be posted by such Holder, sufficient in the judgment of the
Company or the Trustee, as the case may be, to protect the Company, the Trustee
or any Agent from any loss that any of them may suffer if such Note is replaced.
The Company may charge such Holder for the Company's and any Guarantor's
expenses in replacing such Note (including (i) expenses of the Trustee charged
to the Company and (ii) any tax or other governmental charge that may be
imposed) and the Trustee may charge the Company for the Trustee's expenses in
replacing such Note.
Every replacement Note and Guarantee issued pursuant to this
Section in lieu of any destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company and each Guarantor,
whether or not the destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
Section 3.08. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, 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:
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(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as provided in this subsection (a). 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 proposed payment 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 Note
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 therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) 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 Notes 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 (b), such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Section 3.09. PERSONS DEEMED OWNERS.
Prior to and at the time of due presentment for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in
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whose name any Note is registered in the Note Register as the owner of such Note
for the purpose of receiving payment of principal of, premium, if any, and
(subject to Section 3.08) interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 3.10. CANCELLATION.
All Notes surrendered for payment, 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 Notes previously
authenticated and delivered hereunder which the Company or such Guarantor may
have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Trustee. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer or exchange, redemption or payment. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section 3.10, except as
expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be destroyed and certification of their destruction delivered to the
Company unless by a Company Order the Company shall direct that the canceled
Notes be returned to it. The Trustee shall provide the Company a list of all
Notes that have been canceled from time to time as requested by the Company. If
the Company or any Affiliate of the Company acquires any Notes (other than by
redemption pursuant to Section 13.07 or an Offer pursuant to Section 10.11 or
10.16), such acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Notes unless and until such Notes are
delivered to the Trustee for cancellation.
Section 3.11. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity of any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal, premium, if any, or interest
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date, date established for the payment of Defaulted Interest or at
the Stated Maturity, as the case may be. In such event, no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date, Redemption Date, date established for the payment of Defaulted
Interest or Stated Maturity, as the case may be, to the next succeeding Business
Day and, with respect to any Interest Pay-
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ment Date, interest for the period from and after such Interest Payment Date
shall accrue with respect to the next succeeding Interest Payment Date.
Section 3.12. CUSIP AND CINS NUMBERS.
The Company in issuing the Notes may use "CUSIP" and "CINS"
numbers (if then generally in use), and if so, the Trustee shall use the CUSIP
or CINS numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP or CINS
number, as the case may be, printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee in writing of any change
in the CUSIP or CINS number of any type of Notes.
Section 3.13. PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Company in making any such payment. Money held
in trust by the Paying Agent need not be segregated except as required by law
and except if the Company, any Guarantor or any of their respective Affiliates
is acting as Paying Agent, and in no event shall the Paying Agent be liable for
any interest on any money received by it hereunder. The Company at any time may
require the Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default, upon a Company Order to the Paying Agent, require such
Paying Agent to pay forthwith all money so held by it to the Trustee and to
account for any funds disbursed. Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Section 3.14. TREASURY NOTES.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver, consent or
notice, Notes owned by the Company or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee actually knows are so
owned shall be so considered. The Company shall notify the Trustee, in writing,
when it or any of its Affiliates repurchases or otherwise acquires Notes, of the
aggregate principal amount of such Notes so repurchased or otherwise acquired.
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Section 3.15. DEPOSITS OF MONIES.
Prior to 11:30 a.m. New York City time on each Interest Payment
Date, maturity date, Change of Control Purchase Date and Asset Sale Offer
Purchase Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, maturity date, Change of Control Purchase Date
and Asset Sale Offer Purchase Date, as the case may be, in a timely manner which
permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date, maturity date, Change of Control Purchase Date and Asset Sale
Offer Purchase Date, as the case may be.
Section 3.16. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit B.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Sections 3.04 and 3.17. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for any Global
Note, or that it will cease to be a "Clearing Agency" under the Exchange Act,
and in either case 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 Registrar has received a written request from the Depository
to issue Physical Notes.
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(c) In connection with any transfer or exchange of a portion of
the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and principal amount of authorized denominations.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes 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 Depository in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount at maturity of
Physical Notes of like tenor of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to subparagraph (b), (c) or
(d) of this Section 3.16 shall, except as otherwise provided by Section 3.17,
bear the Private Placement Legend.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 3.17. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-U.S. PERSONS. The following additional
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Note to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Initial
Note, whether or not such Note bears the Private Placement Legend, if (x)
the requested transfer is after the second anniversary of the Issue Date;
PROVIDED, HOWEVER, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Note, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the
Securities Act without registering such Initial Notes thereunder or
(y) the proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto;
(ii) if the proposed transferee is an Agent Member and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an in-
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terest in the Regulation S Global Note upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any required
legal opinions and certifications, the Registrar shall register the
transfer and reflect on its books and records the date and an increase in
the principal amount of the Regulation S Global Note in an amount equal
to the principal amount of Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred;
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any required
legal opinions and certifications, the Registrar shall register the
transfer and reflect on its books and records the date and (A) a decrease
in the principal amount of the Global Note from which such interests are
to be transferred in an amount equal to the principal amount of the Notes
to be transferred and (B) an increase in the principal amount of the
Regulation S Global Note in an amount equal to the principal amount of
the Global Note to be transferred; and
(iv) until the 41st day after the Issue Date (the "Restricted
Period"), an owner of a beneficial interest in the Regulation S Global
Note may not transfer such interest to a transferee that is a U.S. Person
or for the account or benefit of a U.S. Person within the meaning of Rule
902(o) of the Securities Act. During the Restricted Period, all
beneficial interests in the Regulation S Global Note shall be transferred
only through Cedel or Euroclear, either directly if the transferor and
transferee are participants in such systems, or indirectly through
organizations that are participants.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial Note to
a QIB (excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Initial
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the second anniversary of the Issue
Date; PROVIDED, HOWEVER, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Note, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the
Securities Act without registering such Initial Note thereunder or
(y) such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
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been made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Note
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a 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 Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in the 144A Global Note, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall register
the transfer and reflect on its book and records the date and an increase
in the principal amount of the 144A Global Note in an amount equal to the
principal amount of Physical Notes to be transferred, and the Trustee
shall cancel the Physical Note so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its books and records the date and (A) a decrease in the
principal amount of the Global Note from which interests are to be
transferred in an amount equal to the principal amount of the Notes to be
transferred and (B) an increase in the principal amount of the 144A
Global Note in an amount equal to the principal amount of the Global Note
to be transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) the circumstances contemplated
by paragraph (a)(i)(x) of this Section 3.17 exist, (ii) there is delivered to
the 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 or (iii) such Note has been sold pursuant to an effective
registration statement under the Securities Act.
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(d) OTHER TRANSFERS. If a Holder proposes to transfer a Note
constituting a Restricted Note pursuant to any exemption from the registration
requirements of the Securities Act other than as provided for by Section
3.17(a), (b) and (c), the Registrar shall only register such transfer or
exchange if such transferor delivers an Opinion of Counsel satisfactory to the
Company and the Registrar that such transfer is in compliance with the
Securities Act and the terms of this Indenture; PROVIDED, HOWEVER, that the
Company may, based upon the opinion of its counsel, instruct the Registrar by a
Company Order not to register such transfer in any case where the proposed
transferee is not a QIB or Non-U.S. Person.
(e) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.16 or this Section
3.17. 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 prior written notice to the Registrar.
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. 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 Notes, elect to have either Section 4.02 or Section 4.03 be
applied to all of the Outstanding Notes (the "Defeased Notes"), upon compliance
with the conditions set forth below in this Article Four.
Section 4.02. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.02, the Company and each Guarantor shall be deemed
to have been discharged from their obligations with respect to the Defeased
Notes and the related Guarantees on the date the conditions set forth below are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Defeased Notes, which shall thereafter be deemed
to
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be "Outstanding" only for the purposes of Section 4.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, 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 Notes to receive, solely from
the trust funds described in Section 4.04 and as more fully set forth in such
section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (b) the Company's obligations with
respect to such Defeased Notes under Sections 3.05, 3.06, 3.07, 10.02 and
10.03, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, including, without limitation, the Trustee's rights under Section
6.07, and (d) this Article Four. Subject to compliance with this Article Four,
the Company may exercise its option under this Section 4.02 notwithstanding the
prior exercise of its option under Section 4.03 with respect to the Notes.
Section 4.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.03, the Company and each Guarantor shall be
released from their obligations under any covenant or provision contained in
Sections 10.05 through 10.08 and 10.10 through 10.22 and the provisions of
Article Eight and Article Fourteen shall not apply, with respect to the Defeased
Notes, on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), and the Defeased Notes shall thereafter be
deemed not to be "Outstanding" for the purposes of any direction, waiver,
consent or declaration or Act of Holders (and the consequences of any thereof)
in connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Defeased Notes, the Company and each Guarantor
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in Sections 10.05 through 10.08 and 10.10
through 10.22 or Article Eight, 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 5.01(c), (d), (e) (other than a Default of Event
of Default thereunder arising by reason of the covenant defeasance itself), (g),
or (k), but, except as specified above, the remainder of this Indenture and such
Defeased Notes shall be unaffected thereby.
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Section 4.04. CONDITIONS TO DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to application of either
Section 4.02 or Section 4.03 to the Defeased Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 6.09 who shall agree to comply with the
provisions of this Article Four applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of such
Notes, (a) cash in United States dollars in an amount, or (b) U.S.
Government Obligations which through the scheduled payment of principal,
premium, if any, and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (c) a combination thereof, in any such
case, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and interest on the
Defeased Notes at the Stated Maturity of such principal or installment of
principal, premium, if any, or interest; PROVIDED, HOWEVER, that the
Company may only make such deposit if Article Fourteen does not prohibit
payments on the Notes at the time of the deposit; PROVIDED FURTHER,
HOWEVER, that the Trustee shall have been irrevocably instructed to apply
such cash or the proceeds of such U.S. Government Obligations to said
payments with respect to the Notes;
(2) No Default shall have occurred and be continuing on the
date of such deposit or, insofar as Sections 5.01(h), (i) or (j) are
concerned, at any time during the period ending on the ninety-first day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period);
(3) Neither the Company nor any Subsidiary of the Company is an
"insolvent Person" within the meaning of any applicable Bankruptcy Law on
the date of such deposit or at any time during the period ending on the
ninety-first day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(4) Such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest in violation of
Section 6.08 and for purposes of
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the Trust Indenture Act with respect to any securities of the Company or
any Guarantor;
(5) 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 or any
Guarantor is a party or by which it is bound;
(6) 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;
(7) The Company shall have delivered to the Trustee an Opinion
of 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;
(8) 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;
(9) 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 Notes on the date of such deposit or at any time ending
on the 91st day after the date of such deposit;
(10) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (which counsel shall
practice in the United States), each stating that (i) all conditions
precedent provided for relating to either the defeasance under Section
4.02 or the covenant defeasance under Section 4.03 (as the case may be)
have been complied with as contemplated by this Section 4.04 and (ii) if
any other Indebtedness of the Company or any Guarantor shall then be
outstanding or committed, such defeasance or covenant defeasance will not
violate the provisions of the agreements or instruments evidencing such
Indebtedness;
(11) In the case of an election under Section 4.02, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or
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(y) 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 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; and
(12) In the case of an election under Section 4.03, the Company
shall have delivered to the Trustee an Opinion of Counsel 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;
Opinions required to be delivered under this Section shall be
delivered by independent counsel (other than as set forth above) and may have
such qualifications as are customary for opinions of the type required and
reasonably acceptable to the Trustee, and counsel delivering such opinion may
rely on certificates of the Company or government officials customary for
opinions of the type required.
Section 4.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the proviso of the last paragraph of Section 10.03, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (other than the Company) as the Trustee may determine,
to the Holders of such Notes 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
deposited with the Trustee or a Paying Agent pursuant to this Article Four shall
not be subject to Article Fourteen.
The Company shall pay and indemnify the Trustee and hold it
harmless against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 4.04 or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
Defeased Notes.
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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 money or U.S. Government Obligations held by it as provided in
Section 4.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
Section 4.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 4.02 or 4.03, 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 obligations of the Company and of any Guarantor under this Indenture, the
Notes and the Guarantees shall be revived and reinstated as though no deposit
had occurred pursuant to Section 4.02 or 4.03, as the case may be, until such
time as the Trustee or Paying Agent is permitted to apply all such money and
U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case
may be; PROVIDED, HOWEVER, that if the Company makes any payment of principal,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money and U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 5.01. 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 order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default in the payment of the principal of or premium, if
any, when due and payable, on any of the Notes (at its Stated Maturity,
upon optional redemption, acceleration, required purchase, sinking fund,
scheduled principal payment or otherwise); or
(b) default in the payment of an installment of interest on any
of the Notes, when due and payable, continued for 30 days or more; or
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(c) the Company or any Guarantor fails to comply with any of its
obligations described under Article 8 or Sections 10.11 or 10.16; or
(d) the Company or any Guarantor fails to perform or observe any
other term, covenant or agreement contained in the Notes, the Guarantees
or this Indenture (other than a default specified in (a), (b) or
(c) above) for a period of 30 days after written notice of such failure
requiring the Company to remedy the same shall have been given (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 Notes then
outstanding; or
(e) default or defaults under one or more agreements, indentures
or instruments under which the Company, any Guarantor or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $17,500,000
individually or in the aggregate and either (a) such Indebtedness is
already due and payable in full or (b) such default or defaults result in
the acceleration of the maturity of such Indebtedness; or
(f) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other than
by reason of the termination of this Indenture or the release of any such
Guarantee in accordance with Sections 10.18 or 12.05); or
(g) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$17,500,000 (in excess of the coverage under applicable insurance
policies (after giving effect to any deductibles) under which a
financially sound and reputable insurer has admitted liability) either
individually or in the aggregate shall have been rendered against the
Company, any Guarantor or any Restricted Subsidiary or any of their
respective properties and shall not have been 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,
order or decree, by reason of a pending appeal or otherwise, shall not be
in effect; or
(h) the Company, any Guarantor or any Material Subsidiary of the
Company pursuant to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the making of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case
against it;
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(iii) consents to the appointment of a Custodian of it or
for any substantial part of its property;
(iv) makes a general assignment for the benefit of its
creditors;
(v) files an answer or consent seeking reorganization or
relief;
(vi) shall admit in writing its inability to pay its
debts generally; or
(vii) consents to the filing of a petition in bankruptcy;
or
(i) a court of competent jurisdiction in any involuntary case or
proceeding enters a Bankruptcy Order against the Company, any Guarantor
or any Material Subsidiary, and such Bankruptcy Order remains unstayed
and in effect for 60 consecutive days; or
(j) a Custodian shall be appointed out of court with respect to
the Company, any Guarantor or any Material Subsidiary or with respect to
all or any substantial part of the assets or properties of the Company,
any Guarantor or any Material Subsidiary; or
(k) any holder of at least $17,500,000 in aggregate principal
amount of Indebtedness of the Company, any Guarantor or any Restricted
Subsidiary shall commence judicial proceedings to foreclose upon assets
of the Company, any Guarantor or any of its Restricted Subsidiaries
having a Fair Market Value, individually or in the aggregate, in excess
of $17,500,000 or shall have exercised any right under applicable law or
applicable security documents to take ownership of any such assets in
lieu of foreclosure.
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than as specified in Sections
5.01(h), (i) or (j) with respect to the Company) shall occur and be continuing,
the Trustee, by notice to the Company, or the holders of at least 25% in
aggregate principal amount of the Notes then Outstanding, by notice to the
Trustee and the Company, may declare the principal of, premium, if any, and
accrued interest on all of the outstanding Notes due and payable immediately,
upon which declaration all such amounts payable in respect of the Notes will
become and be immediately due and payable. If an Event of Default specified in
Sections 5.01(h), (i) or (j) with respect to the Company occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the outstanding Notes will IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
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At any time 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 the
Outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration 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 Notes, (iii) the principal of and premium, if
any, on any Outstanding Notes which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate borne
by the Outstanding Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate borne by
the Outstanding Notes, and
(b) all Events of Default, other than the non-payment of
principal of, premium, if any, and interest on the Notes that has become
due solely by such declaration of acceleration, have been cured or waived
as provided in Section 5.13.
No such rescission shall affect any subsequent Default or impair
any right consequent thereon.
Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company and each Guarantor covenant that if an Event of
Default specified in Section 5.01(a) or 5.01(b) shall have occurred and be
continuing, the Company and each Guarantor will, jointly and severally, upon
demand of the Trustee, pay to the Trustee, for the benefit of the Holders of
such Notes, the whole amount then due and payable on such Notes for principal,
premium, if any, and interest, with interest upon the overdue principal,
premium, if any, and, to the extent that payment of such interest shall be
legally enforceable, upon overdue installments of interest, at the rate then
borne by the Notes; 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 and each Guarantor fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may, but is not obligated under this paragraph to, institute a
judicial proceeding for the collection of the sums so due and unpaid and may,
but is not obligated under this paragraph to, prosecute such proceeding to
judgment or final decree, and may, but is not obligated under this paragraph to,
enforce the same against the Company, any Guarantor or any other obligor upon
the Notes
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and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any Guarantor or any other obligor
upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion but is not obligated under this paragraph to, (i) 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,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted herein, including,
without limitation, seeking recourse against any Guarantor or (ii) proceed to
protect and enforce any other proper remedy, including, without limitation,
seeking recourse against any Guarantor. 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 5.04. TRUSTEE MAY FILE PROOFS OF CLAIMS.
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 upon the
Notes, including each Guarantor or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal 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, premium, if any, and interest owing and unpaid in respect of
the Notes 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, fees, 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, 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 6.07 hereof.
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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 Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture, the Notes or
any Guarantee may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
fees, expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Notes in respect of
which such judgment has been recovered.
Section 5.06. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium,
if any, or interest, upon presentation of the Notes and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to the holders of Senior Indebtedness to the extent
required by Article Fourteen.
Third: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Fourth: to Holders for principal and premium, if any, amounts
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and premium, if any; and
Fifth: the balance, if any, to the Company.
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The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
5.06.
Section 5.07. LIMITATION ON SUITS.
No holder of any of the Notes has any right to institute any
proceeding with respect to this Indenture or any remedy thereunder, unless
(i) the holders of at least 25% in aggregate principal amount
of the Outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as
Trustee under the Notes and this Indenture,
(ii) the Trustee has failed to institute such proceeding within
15 days after receipt of such notice and offer of indemnity, and
(iii) the Trustee, within such 15-day period, has not received
directions inconsistent with such written request by Holders of a
majority in aggregate principal amount of the Outstanding Notes. Such
limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if
any, or interest on such Note on or after the respective due dates
expressed in such Note;
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 to, any provision of
this Indenture, any Note 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 Note or any Guarantee, except in the manner provided in this Indenture and
for the equal and ratable benefit of all the Holders.
Section 5.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, but subject
to Article Fourteen, the Holder of any Note shall have the right, which is
absolute and unconditional, to receive cash payment of the principal of,
premium, if any, and (subject to Section 3.08 hereof) interest on such Note on
the respective Stated Maturities expressed in such Note (or, in the case of
redemption, a Change of Control Offer or Asset Sale Offer, on the Redemption
Date, Change of Control Purchase Date or Asset Sale Offer Purchase Date,
respectively) 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 5.09. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture, any Note 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, each of the Guarantor, 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 5.10. 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 5.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article Five 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 5.12. CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, PROVIDED, HOWEVER, that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture, any Note or any Guarantee or expose the
Trustee to personal liability; and
(b) subject to Section 315 of the TIA, the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with
such direction.
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Section 5.13. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past Default or Event of Default hereunder and its consequences,
except a Default or Event of Default:
(a) in the payment of the principal of, premium, if any, or
interest on any Note or
(b) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected thereby.
Upon any such waiver, such Default or Event of Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
Section 5.14. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
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 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the respective Redemption Dates).
Section 5.15. 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
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Company or any Guarantor from paying all or any portion of the principal of,
premium, if any, or interest on the Notes contemplated herein or in the Notes or
which may affect the covenants or the performance of this Indenture; and each of
the Company 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.
ARTICLE SIX
THE TRUSTEE
Section 6.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith 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; but in the case of any such certificates or opinions which by
provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that 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.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 6.01.
Section 6.02. NOTICE OF DEFAULTS.
Within 30 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Note 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 Note, 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 6.03. CERTAIN RIGHTS OF TRUSTEE.
Subject to Section 6.01 hereof and the provisions of Section 315
of the Trust Indenture Act:
(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 Board Resolution of the Company or any Guarantor may be sufficiently
evidenced by a Board Resolution thereof;
(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 reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by the Trustee in compliance with such request or direction;
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(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 its own negligence, bad faith
or willful misconduct;
(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, other evidence of indebtedness or other paper or document
unless requested in writing so to do by the Holders of not less than a
majority in aggregate principal amount of the Notes then Outstanding;
PROVIDED, HOWEVER, 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 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 and its
Subsidiaries, personally or by agent or attorney; and
(g) 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 6.04. TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF NOTES OR
APPLICATION OF PROCEEDS THEREOF.
The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes or of any Guarantee except that
the Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Notes and perform its obligations hereunder and that
the statements made by it in a Statement of Eligibility and Qualification on
Form T-1, if any, to be supplied to the Company are true and accurate subject to
the qualifications set forth therein. The Trustee shall not be accountable for
the use or application by the Company of Notes or the proceeds thereof.
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Section 6.05. TRUSTEE AND AGENTS MAY HOLD NOTES; COLLECTIONS; ETC.
The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes, with the same rights it would have if it were not the Trustee,
Paying Agent, Registrar or such other agent and, subject to Sections 6.08 and
6.13 hereof and Sections 310 and 311 of the Trust Indenture Act, 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, Registrar or such other agent.
Section 6.06. 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 herein or by law. Except for funds or securities deposited pursuant to
Article Four, the Trustee shall be required to invest all moneys received by it,
until used or applied as herein provided, in Cash Equivalents in accordance with
the Company's directions. The Trustee shall not be under any liability for
interest on any moneys received by it hereunder, except as otherwise agreed in
writing with the Company.
Section 6.07. COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND
ITS PRIOR CLAIM.
The Company and each Guarantor covenant and agree:
(a) 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 shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee and each predecessor Trustee upon
its request for all reasonable expenses, fees, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the
provisions of this Indenture (including the reasonable compensation,
fees, 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; and
(c) to indemnify the Trustee and each predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense incurred
without negligence, bad faith
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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
6.07.
The obligations of the Company and each Guarantor under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, fees,
disbursements and advances shall constitute an additional obligation hereunder
and shall survive the satisfaction and discharge of this Indenture.
Section 6.08. CONFLICTING INTERESTS.
The Trustee shall be subject to and comply with the provisions of
Section 310(b) of the Trust Indenture Act.
Section 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1) and (2)
and which shall have a combined capital and surplus of at least $25,000,000, and
have a Corporate Trust Office in the Borough of Manhattan in The City of New
York, State of New York; provided that, to the extent such capital and surplus
is not at least $100,000,000, such Trustee shall be a direct or indirect
subsidiary of a bank holding company which bank holding company shall have a
combined capital and surplus of at least $100,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of any Federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, 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, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 6.10. 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 6.11.
(b) The Trustee, or any trustee or trustees hereinafter
appointed, may at any time resign by giving written notice thereof to the
Company at least 20 Business Days
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prior to the date of such proposed resignation. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by written
instrument executed by authority of the Board of Directors of the Company, a
copy of 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 20 Business 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 Note 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 a successor
Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Notes, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act in accordance with Section 6.08
hereof after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09
hereof 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 Note 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 or
rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) the Holder of any Note who has been a bona fide Holder of a Note 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.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution of its Board of Directors, shall promptly
appoint a successor Trustee. If, within
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one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Notes delivered to the Company
and the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of the Notes
and accepted appointment in the manner hereinafter provided, the Holder of any
Note who has been a bona fide Holder for at least six months may on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Notes as their names and addresses appear in the Note Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Section 6.11. 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 amounts due it pursuant to Section 6.07,
such retiring Trustee shall duly assign, transfer and deliver to the successor
Trustee all moneys and property at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers, duties and obligations of the retiring Trustee. 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 Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
Upon acceptance of appointment by any successor Trustee as
provided in this Section 6.11, the successor, at the expense of the Company,
shall give notice thereof to the Holders of the Notes, by mailing such notice to
such Holders at their addresses as they shall appear on the Note Register. If
the acceptance of appointment is substantially contempora-
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neous with the resignation, then the notice called for by the preceding sentence
may be combined with the notice called for by Section 6.10.
Section 6.12. MERGER, CONVERSION, AMALGAMATION, CONSOLIDATION OR
SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated or amalgamated, or any corporation
resulting from any merger, conversion, amalgamation or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided such
corporation shall be eligible under this Article Six to serve as Trustee
hereunder.
In case at the time such successor to the Trustee under this
Section 6.12 shall succeed to the trusts created by this Indenture any of the
Notes 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 Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes 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 Notes or in
this Indenture provided that the certificate of the Trustee shall have been
authenticated.
Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY AND GUARANTORS.
If and when the Trustee shall be or become a creditor of the
Company or any Guarantor (or other obligor on the Notes), the Trustee shall be
subject to the provisions of the TIA regarding the collection of claims against
the Company or any such Guarantor (or any such other obligor). A Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent set forth therein.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. PRESERVATION OF INFORMATION; COMPANY TO FURNISH
TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
(a) The Trustee shall preserve the names and addresses of the
Noteholders and otherwise comply with TIA Section 312(a). If the Trustee is not
the Registrar, the Company shall furnish or cause the Registrar to furnish to
the Trustee before each Interest Payment Date, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Noteholders.
Neither the Company nor the Trustee shall be under any responsibility with
regard to the accuracy of such list.
(b) The Company will furnish or cause to be furnished to the
Trustee
(i) semi-annually, not more than 15 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
(ii) at such other times as the Trustee may reasonably request
in writing, within 30 days after receipt by the Company of any such
request, a list of similar form and content 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 Registrar, no
such list need be furnished pursuant to this Subsection 7.01(b).
SECTION 7.02. COMMUNICATIONS OF HOLDERS.
Holders may communicate with other Holders with respect to their
rights under this Indenture or under the Notes pursuant to Section 312(b) of the
Trust Indenture Act. The Company and the Trustee and any and all other Persons
benefited by this Indenture shall have the protection afforded by Section 312(c)
of the Trust Indenture Act.
Section 7.03. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the first
May 15 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Note Register, a brief
report dated as of such May 15, in accordance with, and to the extent required
under Section 313 of the Trust Indenture Act. At the time of its mailing to
Holders, a copy of each such report shall be filed by the Trustee with the Com-
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pany, the Commission and with each stock exchange on which the Notes are listed.
The Company shall notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.04. REPORTS BY COMPANY AND EACH GUARANTOR.
The Company and each Guarantor shall:
(a) file with the Commission, the copies of 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) required to be filed with Commission
pursuant to Section 13 or Section 15 of the Exchange Act, whether or not
the Company or any Guarantor has a class of securities registered under
the Exchange Act;
(b) file with the Trustee, within 15 days after it files or
would be required to file the information specified in subsection (a) of
this Section 7.04 with the Commission, copies of such information;
(c) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company and each Guarantor with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(d) transmit by mail to all Holders, as their names and
addresses appear in the Note Register, concurrently with the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company and each Guarantor
pursuant to subsections (a) and (c) of this Section as may be required
by rules and regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company will not, in a single transaction or through a series
of related transactions, merge or consolidate with or into, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and the Company
will not permit any of the Restricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
re-
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lated transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries) to any other Person or Persons, unless at the time and after
giving effect thereto:
(i) either (A)(1) if the transaction or transactions is a
merger or consolidation involving the Company, the Company shall be the
Surviving Person of such merger or consolidation or (2) if the
transaction or transactions is a merger or consolidation involving a
Restricted Subsidiary, such Restricted Subsidiary shall be the Surviving
Person of such merger or consolidation, or (B)(1) the Surviving Person
shall be a corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia,
and (2)(x) in the case of a transaction involving the Company, the
Surviving Person shall expressly assume, by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and this
Indenture and the Registration Rights Agreement and, in each case, the
Notes, this Indenture and the Registration Rights Agreement shall remain
in full force and effect, or (y) in the case of a transaction involving a
Restricted Subsidiary that is a Guarantor, the Surviving Person shall
expressly assume by a supplemental indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of
such Restricted Subsidiary under its Guarantee and this Indenture and the
Registration Rights Agreement and, in each case, such Guarantee and this
Indenture and the Registration Rights Agreement shall remain in full
force and effect;
(ii) immediately after giving effect to such transaction or
series of transactions on a PRO FORMA basis, no Default or Event of
Default shall have occurred and be continuing;
(iii) if the Company is then subject to Section 10.12, the
Company, or the Surviving Person, as the case may be, immediately after
giving effect to such transaction or series of transactions on a PRO
FORMA basis (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 10.12
hereof; and
(iv) at the time of the transaction if any of the property or
assets of the Company or any of its Restricted Subsidiaries would
thereupon be become subject to any Lien, the provisions of Section 10.17
are complied with.
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If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of clauses (iii) and (iv) of
this Section.
No Guarantor (other than a Guarantor whose Guarantee is to be
released in accordance with the terms of its Guarantee and this Indenture as
provided in paragraph (c) of Section 10.18 or Section 12.05) shall, in any
transaction or series of related transactions, consolidate with or merge with or
into another Person, whether or not such Person is affiliated with such
Guarantor and whether or not such Guarantor is the Surviving Person, unless (i)
the Surviving Person (if other than such Guarantor) is a corporation organized
and validly existing under the laws of the United States, any State thereof or
the District of Columbia; (ii) the Surviving Person (if other than such
Guarantor) expressly assumes by a supplemental indenture all the obligations of
such Guarantor under its Guarantee and the performance and observance of every
covenant of this Indenture and the Registration Rights Agreement to be performed
or observed by such Guarantor; and (iii) immediately after giving effect to such
transaction or series of related transactions on a PRO FORMA basis, no Default
or Event of Default shall have occurred and be continuing.
In connection with any consolidation, merger, transfer, lease or
other disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements of this
Indenture. In addition, each Guarantor, in the case of a transaction described
in the first paragraph of this Section 8.01, unless it is the other party to the
transaction or unless its Guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Guarantee will continue to apply to
the obligations of the Company or the Surviving Person under this Indenture.
Section 8.02. SUCCESSOR SUBSTITUTED.
Upon any consolidation, combination or merger, or any sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or any Guarantor
in accordance with Section 8.01 hereof in which the Company or a Guarantor is
not the Surviving Person, such Surviving Person 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, the Notes, the Guarantee of
such Guarantor and the Registration Rights Agreement with the same effect as if
such successor had
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been named as the Company or such Guarantor, as the case may be, herein, and in
the Notes and, thereafter, except in the case of (a) a lease or (b) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company or such Guarantor, the Company or such Guarantor, as
the case may be, shall be discharged from all obligations and covenants under
this Indenture, the Notes, the Guarantees and the Registration Rights Agreement,
as applicable.
For all purposes of this Indenture and the Notes (including this
Article Eight and Sections 10.12, 10.14 and 10.17 hereof), Subsidiaries of any
Surviving Person will, upon such transaction or series of related transactions
described in this Article Eight, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to Section 10.21 and all Indebtedness, and all
Liens on property or assets, of the Company and the Restricted Subsidiaries in
existence immediately prior to such transaction or series of related
transactions will be deemed to have been incurred upon such transaction or
series of related transactions.
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01. SUPPLEMENTAL INDENTURES, AGREEMENTS AND WAIVERS
WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company and the
Guarantors, when authorized by a Board Resolution of the Board of Directors of
the Company and each Guarantor, and the Trustee, at any time and from time to
time, may amend, waive, modify or supplement this Indenture or the Notes or the
Guarantees for any of the following purposes:
(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 herein and in the Notes and/or in any
Guarantee, as the case may be, in accordance with Article Eight;
(b) to add to the covenants of the Company or any Guarantor for
the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or any Guarantor, as applicable, herein, in
the Notes or in any Guarantee, as the case may be;
(c) to cure any ambiguity or to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, in the Notes, or in any Guarantee;
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(d) to comply with the requirements of the Commission in order
to maintain the qualification of this Indenture under the Trust Indenture
Act;
(e) to secure the Notes or to add a Guarantor pursuant to the
requirements of Section 10.18 hereof or otherwise;
(f) to evidence and provide the acceptance of the appointment
of a successor Trustee hereunder; or
(g) to make any other provisions with respect to matters or
questions arising under this Indenture, the Notes or any Guarantee;
PROVIDED, that in the case of clause (b), (c) or (g), such provisions shall not
adversely affect the interests of any of the holders of the Notes and the
Company shall have delivered to the Trustee an Opinion of Counsel to such
effect.
Section 9.02. SUPPLEMENTAL INDENTURES, AGREEMENTS AND WAIVERS WITH CONSENT OF
HOLDERS.
Amendments and modifications of this Indenture or the Notes may be
made by the Company, the Guarantors and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; PROVIDED, HOWEVER, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby,
(a) change the maturity of the principal of, or any installment
of interest on, any such Note or alter the optional redemption or
repurchase provisions of any such Note or this Indenture in a manner
adverse to the Holders of the Notes;
(b) reduce the principal amount of (or the premium of) any such
Note;
(c) reduce the rate of or extend the time for payment of
interest on any such Note;
(d) change the place or currency of payment of principal of (or
premium), or interest on, any such Note;
(e) modify any provisions of this Indenture relating to the
waiver of past defaults (other than to add sections of this Indenture or
the Notes subject thereto) or the right of the holders of Notes to
institute suit for the enforcement of any payment on or with respect to
any such Note or any Guarantee or the modification and amendment
provisions of this Indenture and the Notes (other than to add sections of
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this Indenture or the Notes which may not be amended, supplemented or
waived without the consent of each Holder therein affected);
(f) reduce the percentage of the principal amount of
outstanding Notes necessary for amendment to or waiver of compliance with
any provision of this Indenture or the Notes or for waiver of any Default
in respect thereof;
(g) waive a default in the payment of principal of, premium, if
any, or interest on, or redemption payment with respect to, the Notes
(except a rescission of acceleration of the Notes by the holders thereof
as provided in this Indenture and a waiver of the payment default that
resulted from such acceleration);
(h) modify the ranking or priority of any Note or the Guarantee
of any Guarantor;
(i) following the occurrence of a Change of Control or Asset
Sale, modify the provisions of any covenant (or the related definitions)
in this Indenture requiring the Company to make and consummate a Change
of Control Offer in respect of such Change of Control or Asset Sale Offer
in respect of an Asset Sale or modify any of the provisions or
definitions with respect thereto in a manner materially adverse to the
Holders of Notes affected thereby;
(j) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with this
Indenture; or
(k) make any change to Article Fourteen that adversely affects
the Holders.
Upon the written request of the Company and each Guarantor
accompanied by a copy of a Board Resolution of the Board of Directors of the
Company and each Guarantor authorizing the execution of any such supplemental
indenture or other agreement, instrument or waiver, 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 other agreement, instrument or waiver.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture or
other agreement, instrument or waiver, but it shall be sufficient if such Act
shall approve the substance thereof.
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Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES, AGREEMENTS AND
WAIVERS.
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 Section
6.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel and
an Officers' Certificate from each obligor under the Notes entering into such
supplemental indenture, agreement, instrument or waiver, each stating that the
execution of such supplemental indenture, agreement, instrument or waiver (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 Subsidiary of the Company. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture,
agreement, instrument or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture, the Notes, any Guarantee or otherwise.
Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture, the Notes, if applicable, and/or the applicable
Guarantee shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture, the Notes, if applicable, and/or
the applicable Guarantee, as the case may be, for all purposes; every Holder of
Notes theretofore or thereafter authenticated and delivered hereunder shall be
bound thereby.
Section 9.05. 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 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors of the Company, to any such supplemental indenture may be prepared
and executed by the Company and each Guarantor and authenticated and delivered
by the Trustee upon a Company Order in exchange for Outstanding Notes.
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Section 9.07. RECORD DATE.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
supplemental indenture, agreement or instrument or any waiver, and shall
promptly notify the Trustee of any such record date. If a record date is fixed,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
supplemental indenture, agreement or instrument or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective with
respect to such supplemental indenture, agreement or instrument or waiver which
is entered into more than 90 days after such record date.
Section 9.08. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by
a Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if a notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as
to his Note or portion of a Note 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 10.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
Subject to the provisions of Article Fourteen, the Company will
duly and punctually pay the principal of, premium, if any, and interest on the
Notes in accordance with the terms of the Notes, this Indenture and the
Registration Rights Agreement.
Section 10.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain, in the Borough of Manhattan in The City
of New York, State of New York, an office or agency where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The office of the
Trustee at its Corporate Trust Office will be such office or agency of the
Company, unless the Company shall designate and maintain some
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other office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York, State of New York)
where the Notes may be presented or surrendered for any or all such purposes,
and may from time to time rescind such designation; PROVIDED, HOWEVER, that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York, State of New
York for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such other office or agency.
Section 10.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company or any of its Affiliates shall at any time act as
its own Paying Agent, it will, on or before each due date of the principal of,
premium, if any, or interest on any of the Notes, 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 Notes, 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 Holders
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 will agree with the Trustee,
subject to the provisions of this Section 10.03, that such Paying Agent will:
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(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Notes in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company or any
Guarantor (or any other obligor upon the Notes) in the making of any
payment of principal of, premium, if any, or interest on the Notes;
(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
liabilities 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 will 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 Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company upon receipt of a Company Request therefor, or (if then held by
the Company) will be discharged from such trust; and the Holder of such Note
will 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, will 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, at the option of the Company
in the New York Times or the Wall Street Journal (national edition), notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
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Section 10.04. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of the
Company and each of the Restricted Subsidiaries; PROVIDED, HOWEVER, that the
Company will not be required to preserve any such right, license or franchise if
the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
the Restricted Subsidiaries as a whole and that the loss thereof is not adverse
in any material respect to the Holders; PROVIDED FURTHER, that the foregoing
will not prohibit a sale, transfer or conveyance of a Subsidiary of the Company
or any of its assets in compliance with the terms of this Indenture.
Section 10.05. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all material taxes,
assessments and governmental charges levied or imposed (i) upon the Company or
any of its Restricted Subsidiaries or (ii) upon the income, profits or property
of the Company or any of the Restricted Subsidiaries and (b) all material lawful
claims for labor, materials and supplies, which, if unpaid, could reasonably be
expected to become a Lien upon the property of the Company or any of the
Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company will 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 for which appropriate provision has been made.
Section 10.06. MAINTENANCE OF PROPERTIES.
The Company will cause all material properties owned by the
Company or any of the Restricted Subsidiaries or used or held for use in the
conduct of their respective businesses to be maintained and kept in good
condition, repair and working order 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 judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 10.06 will prevent (a) the Company from discontinuing
the maintenance of any of such properties if such discontinuance is, in the
judgment of the Company (as evidenced, in each instance where the fair market
value of such property or properties exceeds $10,000,000, by a Board Resolution
of the Company), desirable in the conduct of its business or the business of any
of the Restricted Subsidiaries and is not disadvantageous in any material
respect to the
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Holders or (b) a sale, transfer, merger, consolidation or conveyance of assets
in compliance with Article Eight or Section 10.16.
Section 10.07. INSURANCE.
The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, and workers' compensation
insurance.
Section 10.08. BOOKS AND RECORDS.
The Company will keep proper books of record and account, in which
full and correct entries will be made of all financial transactions and the
assets and business of the Company and each Restricted Subsidiary of the Company
in material compliance with GAAP.
Section 10.09. GUARANTEES.
Each of the Guarantors and the Company will, and the Company will
cause each of the Guarantors to, ensure at all times that, unless otherwise
permitted by this Indenture, each Guarantee will remain in full force and
effect.
Section 10.10. PROVISION OF FINANCIAL STATEMENTS.
For so long as the Notes are outstanding, whether or not the
Company or any Guarantor is subject to Section 13(a) or 15(d) of the Exchange
Act, or any successor provision thereto, the Company will, to the extent
permitted by Commission practice and applicable law and regulations, 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), or any successor provision
thereto, 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 Dates")
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, whether or not permitted or required to be filed with the Commission,
(i) transmit or cause to be transmitted by mail to all Holders of Notes, 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 Commis-
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sion pursuant to Section 13(a) or 15(d) of the Exchange Act, or any successor
provision thereto, 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. In addition, for so long as any Notes remain
Outstanding, the Company will furnish to the Holders of Notes and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to
any beneficial Holder of Notes, if not obtainable from the Commission,
information of the type that would be filed with the Commission pursuant to the
foregoing provisions, upon the request of any such Holder. If any Guarantor's
or other 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 10.11. CHANGE OF CONTROL.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company will, within 20
Business Days after the Change of Control Date, make an offer to purchase (a
"Change of Control Offer") all of the then Outstanding Notes at a purchase price
(the "Change of Control Purchase Price") in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
purchase date. The Company will purchase all Notes properly tendered into the
Change of Control Offer and not withdrawn. Failure of the Company to repurchase
all of the Notes properly tendered for purchase and not withdrawn will
constitute an Event of Default under Section 5.01(c).
In order to effect such Change of Control Offer, the Company will,
not later than the 20th Business Day after the Change of Control Date, mail to
each Holder of Notes notice of the Change of Control Offer, which notice will
govern the terms of the Change of Control Offer and will state, among other
things, the procedures that holders must follow to accept the Change of Control
Offer. The Change of Control Offer shall be kept open for a period of at least
20 Business Days and until 5:00 p.m., New York City time, on the last day of the
period (the "Change of Control Purchase Date"). The notice, which shall govern
the terms of the Change of Control Offer, shall include such disclosures as are
required by law and shall state:
(a) that the Change of Control Offer is being made pursuant to
this Section 10.11 and that all Notes tendered into the Change of Control
Offer will be ac-
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cepted for payment; and that the Change of Control Offer shall remain
open for a period of 20 Business Days or such longer period as may be
required by applicable law;
(b) the purchase price (including the amount of accrued
interest, if any) for each Note, the Change of Control Purchase Date and
the date on which the Change of Control Offer expires;
(c) that any Note not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of
the purchase price, any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of
Control Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to a
Change of Control Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Change of Control Purchase Date and must
complete any form letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holders, the
principal amount of Notes the Holders delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(g) that Holders whose Notes are purchased only in part will be
issued Notes of like tenor equal in principal amount to the unpurchased
portion of the Notes surrendered;
(h) the instructions that Holders must follow in order to
tender their Notes; and
(i) information concerning the business of the Company, the
most recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act (or, if the Company is not
required to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 10.10), a description of material
developments in the Company's business, information with respect to pro
forma historical financial information after giving effect to such Change
of Control and such other information concerning the circumstances and
relevant facts re-
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garding such Change of Control and Change of Control Offer as would, in
the good faith judgment of the Company, be material to a Holder of Notes
in connection with the decision of such Holder as to whether or not it
should tender Notes pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof in integral multiples of $1,000
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent money, in immediately available funds, sufficient to pay the purchase
price of all Notes or portions thereof so tendered and accepted and (iii)
deliver to the Trustee the Notes so accepted together with an Officers'
Certificate setting forth the Notes or portions thereof tendered to and accepted
for payment by the Company. The Paying Agent will promptly mail or deliver to
the Holders of Notes so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Note of like tenor equal in principal amount to any unpurchased
portion of the Note surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Change of Control Offer not later than the
first Business Day following the Change of Control Purchase Date.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations and any applicable requirements of any securities exchange on
which the Notes are listed, in connection with the repurchase of Notes pursuant
to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
10.11, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 10.11 by virtue thereof.
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 the third paragraph of this Section 10.11 exceeds the aggregate Change
of Control Purchase Price of the Notes 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, promptly after the Business Day following
the Change of Control Purchase Date the Trustee shall return any such excess to
the Company together with interest, if any, thereon.
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Section 10.12. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, issue, guarantee
or in any manner become liable for or with respect to, contingently or otherwise
(in each case, to "incur"), the payment of any Indebtedness (including any
Acquired Indebtedness), PROVIDED, HOWEVER, that (i) the Company or a Guarantor
may incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted
Subsidiary (which is not a Guarantor) may incur Acquired Indebtedness, if, in
either case, immediately after giving PRO FORMA effect thereto, the Consolidated
Fixed Charge Coverage Ratio of the Company is at least equal to 2.00:1.
Notwithstanding the foregoing, the Company and, to the extent
specifically set forth below, the Guarantors and the Restricted Subsidiaries may
incur each and all of the following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company or any Guarantor (without
duplication) under the Revolving Credit Facility or any other Bank Credit
Facility in an aggregate principal amount at any one time outstanding not
to exceed $500,000,000, less any permanent reductions made pursuant to
the provision described in the second paragraph of Section 10.16;
(ii) Indebtedness of the Company pursuant to the Notes and
Indebtedness of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness (other than Indebtedness under the Revolving
Credit Facility, the Notes and the Guarantees) of the Company or any
Restricted Subsidiary outstanding on the date of this Indenture, except
Indebtedness to be repaid as described under "Use of Proceeds" in the
Offering Memorandum;
(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 hereto as Exhibit E and is subordinated in accordance
with provisions set forth in this 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 Guarantor owing to and held by the
Company or another Guarantor; PROVIDED, that any such Indebtedness for
borrowed money is made pursuant to an intercompany note in the form
attached hereto as Exhibit E; PROVIDED
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FURTHER, that (a) any disposition, pledge or transfer of any such
Indebtedness to a Person (other than the Company or a Guarantor) 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 Guarantor, which has Indebtedness owing to the Company or any other
Guarantor, ceases to be a Guarantor shall be deemed to be the incurrence
of Indebtedness by such Guarantor that is not permitted by this clause
(v);
(vi) guarantees by any Restricted Subsidiary incurred in
compliance with the provisions of the covenant described in Section
10.18;
(vii) Indebtedness of the Company or any Restricted Subsidiary
under Interest Rate Agreements covering Indebtedness of the Company or
such Restricted Subsidiary (which Indebtedness (a) bears interest at
fluctuating interest rates and (b) is otherwise permitted to be incurred
under this Section 10.12) to the extent the notional principal amount of
the obligations under such Interest Rate Agreements does not exceed the
principal amount of the Indebtedness to which such obligations relate;
(viii) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements or Commodity Price Protection Agreements
relating to (a) Indebtedness of the Company or such Restricted Subsidiary
and/or (b) obligations to purchase or sell assets or properties, in each
case, incurred in the ordinary course of business of the Company;
PROVIDED, HOWEVER, that such Currency Agreements or Commodity Price
Protection Agreements, as the case may be, do not increase the
Indebtedness or other obligations of the Company outstanding other than
as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness of the Company or any Guarantor represented by
Capitalized 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 (ix) not to exceed $10,000,000
per year; PROVIDED, that immediately after any such incurrence pursuant
to this clause (ix), the aggregate amount of Indebtedness outstanding
pursuant to this clause (ix) shall not exceed 2.0% of the Consolidated
Net Sales of the Company in the most recent four full fiscal quarters for
which financial statements of the Company are available; PROVIDED
FURTHER, that the principal amount of any Indebtedness permitted under
this clause (ix) did not in each case at the time of incurrence exceed
the Fair Market Value,
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as determined by the Company or such Guarantor in good faith, of the
acquired or constructed asset or improvement so financed;
(x) reimbursement obligations under letters of credit and
letters of credit, in each case, to support (A) workers compensation
obligations not to exceed $10,000,000 in the aggregate at any time
outstanding and (B) bankers acceptances, performance bonds, surety bonds,
performance guarantees and supplier obligations not to exceed $10,000,000
in the aggregate at any time outstanding, in the case of each of such
clause (A) and (B) of the Company or any Guarantor, in each case, in the
ordinary course of business consistent with past practice;
(xi) guarantees by the Company of Indebtedness of any Guarantor;
PROVIDED that such Indebtedness of such Guarantor is permitted by the
terms of this Indenture;
(xii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness described in clauses (i), (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 subordinated to the Notes at least
to the same extent as the Indebtedness being refinanced and (B) such
refinancing does not reduce the Average Life to Stated Maturity or the
Stated Maturity of such Indebtedness;
(xiii) guarantees which are permitted under clause (ix) of
paragraph (b) of Section 10.14; and
(xiv) Indebtedness of the Company or any Guarantor in addition to
that described in clauses (i) through (xiii) 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 $35,000,000 outstanding at any one time.
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment
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Grade Rating, the Company and the Restricted Subsidiaries will not be subject to
the provisions of this Section 10.12.
Section 10.13. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 45 days after the
end of the first three fiscal quarters of the Company and 90 days after the end
of each fiscal year of the Company ending after the date hereof, a written
statement signed by the chief executive officer and either the principal
financial officer or principal accounting officer of the Company, stating
(i) that a review of the activities of the Company during the preceding fiscal
quarter or year, as applicable, has been made under the supervision of the
signing officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
(ii) that, to the knowledge of each officer signing such certificate, the
Company has kept, observed, performed and fulfilled each and every covenant and
condition contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions, conditions and covenants hereof
(or, if a Default shall have occurred, describing all such Defaults of which
such officers may have knowledge, their status and what action the Company is
taking or proposes to take with respect thereto). When any 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 Restricted
Subsidiary gives any notice or takes any other action with respect to a claimed
Default, the Company will promptly notify the Trustee of such Default, notice or
action and will deliver to the Trustee by registered or certified mail or by
telegram, or facsimile transmission followed by hard copy by registered or
certified mail an Officers' Certificate specifying such event, notice or other
action within five Business Days after the Company becomes aware of such
occurrence and what action the Company is taking or proposes to take with
respect thereto.
Section 10.14. 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 or make any other distribution
or payment on or in respect of Capital Stock of the Company or any
payment to the direct or indirect holders (in their capacities as such)
of Capital Stock of the Company (other than dividends or distributions
payable solely in shares of Qualified Capital Stock of the Company or in
options, warrants or other rights to acquire shares of such Qualified
Capital Stock); or
(ii) purchase, redeem, defease or otherwise acquire or retire
for value, directly or indirectly, any Capital Stock of the Company
(other than any such Capital
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Stock owned by the Company or any Wholly-Owned Restricted Subsidiary) or
options, warrants or other rights to acquire such Capital Stock; or
(iii) make any principal payment on, or purchase, repurchase,
redeem, defease, retire or otherwise acquire for value, prior to any
scheduled maturity, scheduled repayment, scheduled sinking fund payment
or other Stated Maturity, any Subordinated Indebtedness (other than any
Subordinated Indebtedness owed to and held by the Company or a
Guarantor); or
(iv) make any Investment (other than any Permitted Investment)
in any Person (other than in the Company, any Restricted Subsidiary or a
Person that becomes a Restricted Subsidiary, or is merged with or into or
consolidated with the Company or a Restricted Subsidiary (provided the
Company or a Restricted Subsidiary is the survivor), as a result of or in
connection with such Investment)
(any of the foregoing actions described in clauses (i) through (iv), 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, shall be the Fair Market Value of the asset(s) proposed to be transferred
by the Company or such Restricted Subsidiary, as the case may be, in each case,
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; (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
of Section 10.12, and (3) after giving effect to the proposed Restricted
Payment, the aggregate amount of all such Restricted Payments declared or made
after the Issue Date, does not exceed $5,000,000 plus the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of
the Company during the period (treated as one accounting period)
beginning on the first day of the fiscal quarter beginning after the
Issue Date 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 deficit, minus
100% of such deficit);
(B) the aggregate Net Cash Proceeds received after the Issue
Date by the Company from the issuance or sale (other than to any of the
Restricted Subsidiaries) of Qualified Capital Stock of the Company or
from the exercise of 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
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Capital Stock or Subordinated Indebtedness as set forth in clause (ii) or
(iii) of paragraph (b) below and excluding the net cash proceeds from any
issuance and sale of Capital Stock or from any such exercises, in each
case, financed, directly or indirectly, using funds borrowed from the
Company or any Restricted Subsidiary until and to the extent such
borrowing is repaid);
(C) the aggregate Net Cash Proceeds received after the Issue
Date 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, without
duplication, the aggregate of Net Cash Proceeds from their original
issuance, less any principal and sinking fund payments made thereon;
(D) in the case of the disposition or repayment of any
Investment (other than an Investment made pursuant to clause (viii) of
paragraph (b) below) constituting a Restricted Payment made after the
Issue Date, an amount (to the extent not included in Consolidated Net
Income) equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment which was treated as
a Restricted Payment, in either case, less the cost of disposition of
such Investment and net of taxes; and
(E) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with Section 10.21, the
Fair Market Value of the interest of the Company and the Restricted
Subsidiaries in such Subsidiary, provided that such amount shall not in
any case exceed the Designation Amount with respect to such Restricted
Subsidiary upon its Designation.
(b) Notwithstanding the foregoing, and in the case of clauses
(ii) through (viii) below, so long as no Default or Event of Default shall have
occurred and be continuing or would arise therefrom, 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 (A) at such date of declaration such payment
was permitted by the provisions of this Indenture and (B) 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 10.14;
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(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 to
any Person (other than to a Restricted Subsidiary) of, 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 (B) of paragraph (a) of this Section 10.14;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the Net Cash Proceeds of a
substantially concurrent issuance and sale for cash to any Person (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 (B) of paragraph (a) of this Section 10.14;
(iv) the repurchase, redemption, defeasance, retirement,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) in exchange for, or
out of the Net Cash Proceeds of a substantially concurrent issuance and
sale for cash to any Person (other than to a Restricted Subsidiary) of,
new Subordinated Indebtedness of such Person; PROVIDED, that any such new
Subordinated Indebtedness (1) shall be in a principal amount that does
not exceed the principal amount so repurchased, redeemed, defeased,
retired, acquired or paid (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 repurchase, redemption, defeasance, retirement,
acquisition or payment pursuant to the terms of the Indebtedness being
repurchased, redeemed, defeased, retired, acquired or paid or (II) the
amount of premium or other payment actually paid at such time to
repurchase, redeem, defease, retire, acquire or pay the Indebtedness,
plus, in either case, the amount of expenses of the Company incurred in
connection with such repurchase, redemption, defeasance, retirement,
acquisition or payment; (2) has an Average Life to Stated Maturity equal
to or greater than the Average Life to Stated Maturity of the
Subordinated Indebtedness being repurchased, redeemed, defeased, retired,
acquired or paid; (3) has no Stated Maturity earlier than the Stated
Maturity for the final scheduled principal payment of the Notes; and
(4) is expressly subordinated
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in right of payment to the Notes at least to the same extent as the
Subordinated Indebtedness to be repurchased, redeemed, defeased, retired,
acquired or paid;
(v) the repurchase of any Pari Passu Indebtedness (x) at a
purchase price not greater than 101% of the principal amount of such Pari
Passu Indebtedness in the event of a Change of Control pursuant to a
provision similar to Section 10.11; PROVIDED that prior to, or
contemporaneously with, such repurchase the Company has made the Change
of Control Offer if required by, and as provided under, Section 10.11 and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer and (y) at a purchase price not greater than
100% of the principal amount of such Pari Passu Indebtedness in the event
of an Asset Sale pursuant to a provision similar to Section 10.16;
PROVIDED, that prior to such repurchase the Company has made an Asset
Sale Offer if required by, and as provided in Section 10.16 and has
repurchased all Notes validly tendered for payment in connection with
such Asset Sale Offer;
(vi) the purchase of restricted stock from employees of the
Company upon the termination of employment of such employees, pursuant to
the terms of a restricted stock plan approved by the Company's Board of
Directors, in an amount not to exceed $1,000,000 in any fiscal year;
(vii) the payment of cash dividends on the Company's Common Stock
of up to $3,000,000 in the aggregate in any fiscal quarter;
(viii) Investments by the Company or a Restricted Subsidiary in
any Person established by the Company or a Restricted Subsidiary in
conjunction with customers or suppliers of the Company which Person is
engaged in the distribution and sale of food and related products or the
facilitation of goods and services in the food industry such that,
immediately after the making of any such Investment pursuant to this
clause (viii), the aggregate outstanding amount of all such Investments
made pursuant to this clause (viii) shall not exceed 1.0% of the
Consolidated Net Sales of the Company for the most recent four fiscal
quarters for which financial statements are available; and
(ix) guarantees of obligations of, or loans to, customers in the
ordinary course of business consistent with past practice, such that
immediately after the issuing of any such guarantee or the making of any
such loan pursuant to this clause (ix), the aggregate amount of all such
guarantees or loans made under this clause (ix) that are outstanding
would not exceed 4.0% of the Consolidated Net Sales of the Company for
the most recent four full fiscal quarters for which financial statements
of the
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Company are available; PROVIDED, that renewals of loans made in
compliance with this clause (ix) shall be permitted.
(c) In computing the amount of Restricted Payments previously
made for purposes of clause (3) of paragraph (a) of this Section 10.14,
Restricted Payments under clauses (i) (as described in subclause (B) of such
clause), (v), (vi), (vii), (viii) and (ix) of paragraph (b) of this Section
10.14 shall be included.
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of this Section 10.14.
Section 10.15. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, conduct any business or
enter into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with, or for the benefit of, any Affiliate of the Company
or of a Restricted Subsidiary (other than the Company or a Guarantor) 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 and (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
such transaction or series of transactions has been approved by a majority of
the Board of Directors of the Company, including a majority of the Disinterested
Directors of the Company or, in the event there is only one Disinterested
Director, by such Disinterested Director; PROVIDED the Company or any Restricted
Subsidiary need not comply with the preceding clause (b) if the Company delivers
to the Trustee a written opinion of an Independent Financial Advisor 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); PROVIDED that such transaction has been approved in the manner
described in clause (b) above, (ii) the payment of dividends otherwise permitted
by the terms of this Indenture, (iii) indemnification agreements for the benefit
of officers, directors and employees
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and (iv) transactions with any Securitization Subsidiary made in the ordinary
course of business on terms customary for such transactions.
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of this Section 10.15.
Section 10.16. LIMITATION ON SALE OF ASSETS.
The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless (i) at
least 80% of the consideration from such Asset Sale is received in cash or Cash
Equivalents 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. Notwithstanding the foregoing, the
Company need not comply with the preceding clause (i) in connection with any
Asset Sale involving stores (and related fixtures and inventory) to a customer
in exchange for a secured note on a basis consistent with past practice so long
as the aggregate outstanding amount of all such notes does not exceed 4.0% of
Consolidated Tangible Assets immediately after giving effect to any such Asset
Sale.
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 which is required to be prepaid, or if no such Indebtedness under
the Senior Indebtedness is then outstanding, the Company or such Restricted
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 Issue Date or in businesses reasonably related thereto; PROVIDED that the
Net Cash Proceeds of any Asset Sale in the case of a sale of a store or stores
or warehouse or warehouses shall be deemed to have been applied to the extent of
any capital expenditures made to acquire or construct a replacement store or
acquire, construct or expand a warehouse, in each case within 180 days preceding
the date of such Asset Sale; PROVIDED FURTHER that with respect to the sale of a
store or stores, the replacement store shall be in the general vicinity of the
store or stores being replaced.
To the extent all or part of the Net Cash Proceeds of any Asset
Sale are not applied, or the Company determines not to so apply such Net Cash
Proceeds, within 365
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days of such Asset Sale as described in the immediately preceding paragraph
(such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall,
within 20 days after such 365th day or at any earlier time after such Asset
Sale, make an offer to purchase (the "Asset Sale Offer") all outstanding Notes
and any Pari Passu Indebtedness the terms of which require such an offer to be
made up to a maximum principal amount (expressed as a multiple of $1,000) of
Notes and such Pari Passu Indebtedness equal to such Unutilized Net Cash
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Asset Sale
Offer Purchase Date; PROVIDED, HOWEVER, that the Asset Sale Offer may be
deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in
excess of $10,000,000, at which time the entire amount of such Unutilized Net
Cash Proceeds, and not just the amount in excess of $10,000,000, shall be
applied as required pursuant to this paragraph. An Asset Sale Offer will be
required to be kept open for a period of at least 20 business days.
With respect to any Asset Sale Offer effected pursuant to this
Section 10.16, among the Notes and such Pari Passu Indebtedness, to the extent
the aggregate principal amount of Notes and such Pari Passu Indebtedness
tendered pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash
Proceeds to be applied to the repurchase thereof, such Notes and such Pari Passu
Indebtedness shall be purchased PRO RATA based on the aggregate principal amount
of such Notes and such Pari Passu Indebtedness tendered. To the extent the
Unutilized Net Cash Proceeds exceed the aggregate amount of Notes and such Pari
Passu Indebtedness tendered pursuant to such Asset Sale Offer, the Company may
retain and utilize any portion of the Unutilized Net Cash Proceeds not applied
to repurchase the Notes and such Pari Passu Indebtedness for any purpose
consistent with the other terms of this Indenture and such excess amount of
Unutilized Net Cash Proceeds shall not be included in any future determination
of Unutilized Net Cash Proceeds.
Notice of an Asset Sale Offer shall be mailed by the Company not
more than 20 days after the obligation to make such Asset Sale Offer arises to
the Holders of Notes at their last registered addresses with a copy to the
Trustee and the Paying Agent. The Asset Sale Offer shall remain open from the
time of mailing for at least 20 Business Days or such longer period as may be
required by applicable law and until 5:00 p.m., New York City time, on the last
day of the period (the "Asset Sale Offer Purchase Date"). The notice, which
shall govern the terms of the Asset Sale Offer, shall include such disclosures
as are required by law and shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 10.16 and that all Notes in integral multiples of $1,000 tendered
into the Asset Sale Offer shall be accepted for payment; PROVIDED,
HOWEVER, that if the aggregate principal amount of Notes and Pari Passu
Indebtedness tendered in the Asset Sale Offer exceeds the Unutilized Net
Cash Proceeds, the Company shall select the Notes to be pur-
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chased on a PRO RATA basis based upon the aggregate principal amount of
such Pari Passu Indebtedness and Notes tendered by each Holder; and that
the Asset Sale Offer shall remain open for a period of 20 Business Days
or such longer period as may be required by applicable law;
(b) the purchase price (including the amount of accrued
interest, if any) for each Note, the Asset Sale Offer Purchase Date and
the date on which the Asset Sale Offer expires;
(c) that any Note not tendered for payment shall continue to
accrue interest in accordance with the terms thereof;
(d) that, unless the Company shall default in the payment of
the purchase price, any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale Offer
Purchase Date;
(e) that Holders electing to have Notes purchased pursuant to
an Asset Sale Offer shall be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Asset Sale Offer Purchase Date and must
complete any form letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(f) that any Holder of Notes shall be entitled to withdraw its
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Asset Sale Offer Purchase Date, a facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Notes the Holder delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(g) that Holders whose Notes are purchased only in part shall
be issued Notes of like tenor equal in principal amount to the
unpurchased portion of the Notes surrendered;
(h) the instructions that Holders must follow in order to
tender their Notes; and
(i) information concerning the business of the Company, the
most recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act (or, if the Company is not
permitted to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 10.10), a description of material
developments in the Company's business, information with re-
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spect to pro forma historical financial position and results of
operations after giving effect to such Asset Sale and such other
information concerning the circumstances and relevant facts regarding
such Asset Sale and Asset Sale Offer as would, in the good faith judgment
of the Company, be material to a Holder of Notes in connection with the
decision of such Holder as to whether or not it should tender Notes
pursuant to the Asset Sale Offer.
On the Asset Sale Offer Purchase Date, the Company shall (i)
accept for payment (subject to pro ration as described in the second preceding
paragraph) Notes or portions thereof in integral multiples of $1,000 tendered
pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in
immediately available funds, sufficient to pay the purchase price of all Notes
or portions thereof so tendered and accepted and (iii) deliver to the Trustee
the Notes so accepted together with an Officers' Certificate setting forth the
Notes or portions thereof tendered to and accepted for payment by the Company.
The Paying Agent shall promptly mail or deliver to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Note of like
tenor equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer not later than the first Business Day following
the Asset Sale Offer Purchase Date.
In the event that the Company makes an Asset Sale Offer, the
Company shall comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act, and any other applicable securities laws or
regulations and any applicable requirements of any securities exchange on which
the Notes are listed. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of this Section 10.16, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 10.16 by virtue
thereof.
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of this Section 10.16.
Section 10.17. LIMITATION ON LIENS.
The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume, suffer to exist or
affirm any Lien of any kind securing any (a) Pari Passu Indebtedness or
Subordinated Indebtedness (including any assump-
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tion, guarantee or other liability with respect thereto by any Restricted
Subsidiary) upon any of its property or assets (including any intercompany
notes), whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds, income or profits therefrom, or assign or convey any right to receive
proceeds, 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 became
Indebtedness pursuant to a transaction permitted under Article Eight 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 Section 10.12 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 the Restricted Subsidiaries or (b) any Senior
Indebtedness which is not incurred in compliance with the terms of this
Indenture.
Section 10.18. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES.
(a) The Company will not cause or 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 this 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
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extent as the Notes are subordinated to Senior Indebtedness of the Company under
this Indenture.
(b) The Company will not cause or 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 this 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 Section 10.17, (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 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, but subject to the
provisions of Section 8.01, 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 this
Indenture (including, but not limited to, Section 10.16) 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 guarantee
by such Restricted Subsidiary (including any deemed release upon payment in full
of all obligations under such Indebtedness). The Company may, at any time,
cause a Subsidiary to become a Guarantor by executing and delivering a
supplemental indenture providing for the guarantee of payment of the Notes by
such Subsidiary on the basis provided in this Indenture.
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Section 10.19. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not sell and will not cause or permit any
Restricted Subsidiary of the Company to issue, sell or transfer any Preferred
Stock of any Restricted Subsidiary (other than to the Company or to a
Wholly-Owned Restricted Subsidiary) 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 Restricted 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).
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of this Section 10.19.
Section 10.20. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective or enter into any agreement with any Person that would
cause to become effective, any consensual encumbrance or restriction of any
kind, on the ability of any Restricted Subsidiary to (i) pay dividends, in cash
or otherwise, or make any other distribution on or in respect of its Capital
Stock or any other interest or participation in, or measured by, its profits, to
the Company or any other Restricted Subsidiary, (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 encumbrance or restriction existing under any agreement in effect
on the Issue Date; (b) any encumbrance or restriction, with respect to a
Subsidiary that is not a Restricted Subsidiary of the Company on the Issue Date,
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; PROVIDED, HOWEVER, that such encumbrances and
restrictions are not applicable to the Company or any other Restricted
Subsidiary, or the properties or assets of the Company or any other Restricted
Subsidiary; (c) customary provisions restricting the subletting or assignment of
any lease or the assignment of any other contract to which the Company or any
Restricted Subsidiary is a party, which lease or contract is entered into in the
ordinary course of business consistent with past practice; (d) any encumbrance
or restriction contained in con-
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tracts for sales of assets permitted by Section 10.16, PROVIDED, that such
encumbrance or restriction relates only to assets being sold pursuant to the
contract containing such encumbrance or restriction; (e) any encumbrance or
restriction customarily contained in any security agreement or mortgage which
security agreement or mortgage creates a Lien permitted under this Indenture;
PROVIDED, that such encumbrance or restriction relates only to assets subject to
such Lien; and (f) 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), (b), (c), (d) and
(e), or in this clause (f), 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.
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of this Section 10.20.
Section 10.21. LIMITATIONS ON UNRESTRICTED SUBSIDIARIES.
The Company may designate after the Issue Date any Subsidiary
(other than a Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the provision described
under paragraph (a) of Section 10.14 in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's interest in such
Subsidiary on such date; and
(iii) the Company would be permitted under this Indenture to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 10.12 at the time of such Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed
to have made an Investment constituting a Restricted Payment pursuant to
Section 10.14 for all purposes of this Indenture in the Designation Amount.
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The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, at any time (x) provide credit support for or subject
any of its property or assets (other than the Capital Stock of any Unrestricted
Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Capital Stock of an
Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any time guarantee
or otherwise provide credit support for any obligation of the Company or any
Restricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall
automatically be deemed to be Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture; and
(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred while such
Subsidiary was an Unrestricted Subsidiary would be permitted by Section
10.15 as if such transaction (or series of related transactions) had
occurred at the time of such Revocation.
All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions
If no Default or Event of Default has occurred and is continuing,
after the ratings assigned to the Notes by both Rating Agencies are equal to or
higher than Investment Grade Ratings, and notwithstanding that the Notes may
later cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of clauses (ii) and (iii) of
the first and fourth paragraphs of this Section 10.21.
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Section 10.22. 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, the
Guarantors and any other obligor on the Notes will furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with,
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates and/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 with respect to compliance with a
condition or covenant provided for in this Indenture will include:
(i) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 10.23. LIMITATION ON INCURRENCE OF 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 or junior 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 or junior, in right of payment to the
Notes or such Guarantee at least to the same extent as the Notes or such
Guarantee are subordinate
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or junior in right of payment to Senior Indebtedness or Senior Indebtedness of
such Guarantor, as the case may be.
Section 10.24. APPLICATION OF FALL-AWAY COVENANTS.
After the Notes have been assigned an Investment Grade Rating by
both Rating Agencies and the Company and the Guarantors shall no longer be
subject to the agreements and covenants contained in clauses (iii) and (iv) of
the first paragraph of Section 8.01, Sections 10.12, 10.14, 10.15, 10.16, 10.19,
10.20 and clauses (ii) and (iii) of the first and fourth paragraphs of Section
10.21 as therein provided, such provisions shall no longer have application for
any purpose of this Indenture (including, without limitation, for purposes of
Article Five, Article Eight, Article Nine, Article Ten and Article Twelve
hereof).
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE
Section 11.01. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to
surviving rights or registration of transfer or exchange of Notes herein
expressly provided for) and the Trustee, on written demand of and at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when either
(a) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.07 hereof and (ii) Notes
for whose payment money has 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 10.03) have
been delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company or
any Guarantor has irrevocably deposited or caused to be deposited with
the Trustee in trust an amount of money in dollars sufficient to pay and
discharge the entire Indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for the principal of, premium, if any,
and interest to the date of such deposit;
(ii) the Company or any Guarantor has paid or caused to be paid
all other sums payable hereunder by the Company and the Guarantor; and
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(iii) the Company and each of the Guarantors have delivered to
the Trustee (a) irrevocable instructions to apply the deposited money
toward payment of the Notes at the Stated Maturities and the Redemption
Dates thereof, and (b) an Officers' Certificate and an Opinion of Counsel
each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied
with and that such satisfaction and discharge will 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 the Company, any
Guarantor or any Subsidiary is bound.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 6.07 and, if money
shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 11.01, the obligations of the Trustee under Section 11.02 and the last
paragraph of Section 10.03 shall survive.
Section 11.02. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.03,
all money deposited with the Trustee pursuant to Section 11.01 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Notes for whose payment such money has been deposited
with the Trustee.
ARTICLE TWELVE
GUARANTEE OF NOTES
Section 12.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby jointly and severally absolutely and
unconditionally guarantees to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the invalidity, illegality, or unenforceability of this Indenture, the Notes
or any extension, compromise, waiver or release in respect of any obligation of
the Company or any other Guarantor under any Note, this Indenture or any
modification or amendment of or supplement to this Indenture, that: (a) the
principal of, premium, if any, and interest on the Notes will be duly and
punctually paid in full when due, whether at maturity, upon redemption, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the
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Notes and all other obligations of the Company or the Guarantor to the Holders
or the Trustee hereunder or thereunder (including fees, expenses or other) and
all other Indenture Obligations will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
Indenture Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
Stated Maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed, or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Guarantor shall be obligated
to pay, or to perform or cause the performance of, the same immediately. An
Event of Default under this Indenture or the Notes shall constitute an event of
default under this Guarantee, and shall entitle the Holders of Notes to
accelerate the obligations of the Guarantor hereunder in the same manner and to
the same extent as the obligations of the Company.
Each Guarantor hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, any release of any other Guarantor, the recovery of any
judgment against the Company, any action to enforce the same, whether or not a
Guarantee is affixed to any particular Note, or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
Each Guarantor hereby waives the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that its Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes, this Indenture and this Guarantee. This
Guarantee is a guarantee of payment and not of collection. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (a) subject to this Article
Twelve, the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article Five hereof for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Five
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Note Guarantor for the purpose of this Guarantee.
<PAGE>
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Section 12.02. SUBORDINATION OF GUARANTEES.
The obligations of any Guarantor under its Guarantee will be
subordinated, to the same extent as the obligations of the Company in respect of
the Notes, to the prior payment in full in cash or, to the extent permitted
under the agreements governing the Senior Indebtedness being prepaid, Cash
Equivalents, of all Senior Indebtedness of such Guarantor, which will include
any guarantee issued by such Guarantor of any Senior Indebtedness.
Section 12.03. EXECUTION AND DELIVERY OF GUARANTEE.
To further evidence the Guarantee set forth in Section 12.01, each
Guarantor hereby agrees that a notation of such Guarantee in the form annexed
hereto as Exhibit D shall be endorsed on each Note authenticated and delivered
by the Trustee and executed by either manual or facsimile signature of an
Officer of each Guarantor.
Each of the Guarantors hereby agrees that its Guarantee set forth
in Section 12.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture
or a Guarantee no longer holds that office at the time the Trustee authenticates
such Note or at any time thereafter, such Guarantor's Guarantee of such Note
shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
Section 12.04. ADDITIONAL GUARANTORS.
Any Person that was not a Guarantor on the date of this Indenture
may become a Guarantor by executing and delivering to the Trustee (a) a
supplemental indenture in form and substance satisfactory to the Trustee, which
subjects such Person to the provisions (including the representations and
warranties) of this Indenture as a Guarantor, (b) in the event that as of the
date of such supplemental indenture any Registrable Securities are outstanding,
an instrument in form and substance satisfactory to the Trustee which subjects
such Person to the provisions of the Registration Rights Agreement with respect
to such outstanding Registrable Securities, and (c) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such Person and constitutes the legal, valid and binding obligation of such
Person (subject to such customary assumptions and exceptions as may be
acceptable to the Trustee in its reasonable discretion).
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Section 12.05. RELEASE OF A GUARANTOR.
Subject to Section 8.01(a), upon the sale, exchange, transfer or
other disposition (by merger or otherwise), other than a lease, of a Subsidiary
of the Company that is a Guarantor of all of the Capital Stock of such
Subsidiary or all, or substantially all, the assets of such Subsidiary, to any
Person that is not an Affiliate of the Company, and which sale or other
disposition is otherwise in compliance with the terms of this Indenture
(including, without limitation, Section 10.16), such Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under this Article Twelve without any further action required on the part of the
Trustee or any Holder. The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request of the Company accompanied by
an Officers' Certificate certifying as to the compliance with this Section and
the Company's rights of redemption in accordance with the terms of the Notes in
this Section 12.05. Any Guarantor not so released will remain liable for the
full amount of principal of, premium, if any, and interest on the Notes as
provided in this Article Twelve.
Section 12.06. WAIVER OF SUBROGATION.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Notes or this Indenture and
such Guarantor's obligations under this Guarantee and this Indenture, in any
such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy against the Company, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and any amounts owing to the Trustee or the Holders of Notes under the
Notes, this Indenture, or any other document or instrument delivered under or in
connection with such agreements or instruments, shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied to the Notes, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
12.06 is knowingly made in contemplation of such benefits.
<PAGE>
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Section 12.07. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT REGARDING DISSOLUTION, ETC. OF GUARANTORS.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article Twelve, the Trustee, subject to the provisions of
Section 6.01, and the Holders, shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve; PROVIDED,
HOWEVER, that the foregoing shall apply only if such court has been fully
apprised of the provisions of this Article Twelve.
Section 12.08. ARTICLE TWELVE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article Twelve 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 Twelve in addition to or in place of the Trustee.
Section 12.09. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article Twelve shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
Section 12.10. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Guarantor that is a Subsidiary of the Company, and by its
acceptance hereof each Holder, hereby confirms that it is the intention of all
such parties that the Guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Guarantor hereby irrevocably agree that the obligations of such
Guarantor under this Guarantee shall be limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities of such
Guarantor, and
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after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations under this Article
Twelve, will result in the obligations of such Guarantor under its Guarantee not
constituting such fraudulent transfer or conveyance.
Section 12.11. CONTRIBUTION FROM OTHER GUARANTORS.
Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor in a pro
rata amount based on the net assets of each Guarantor, determined in accordance
with GAAP, so long as the exercise of such right does not impair the rights of
holders of Notes under any Guarantee.
Section 12.12. OBLIGATIONS REINSTATED.
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Company or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
Section 12.13. NO OBLIGATION TO TAKE ACTION AGAINST THE COMPANY.
Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies or to take any other steps under
any security for this Indenture Obligations or against the Company or any other
Person or any property of the Company or any other Person before the Trustee is
entitled to demand payment and performance by any or all Guarantors of their
liabilities and obligations under their Guarantees or under this Indenture.
Section 12.14. DEALING WITH THE COMPANY AND OTHERS.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
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(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or
otherwise deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Company or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or
from any security upon such part of the Indenture Obligations as the
Holders may see fit or change any such application in whole or in part
from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders
or the Trustee may see fit.
ARTICLE THIRTEEN
REDEMPTIONS AND OFFERS TO PURCHASE
Section 13.01. NOTICE TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Section 13.07 it
shall furnish to the Trustee, at least 30 days but not more than 60 days before
notice of any redemption is to be mailed to Holders (or such shorter times as
may be satisfactory to the Trustee), an Officers' Certificate stating that the
Company has elected to redeem Notes pursuant to Section 13.07, the date notice
of redemption is to be mailed to Holders, the redemption date, the aggregate
principal amount of Notes to be redeemed, the redemption price for such Notes,
the amount of accrued and unpaid interest on such Notes as of the redemption
date and the manner in which Notes are to be selected for redemption if less
than all Outstanding Notes are to be redeemed. If the Trustee is not the
Registrar, the Company shall, concurrently with delivery of its notice to the
Trustee of a redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of, and the
aggregate principal amount of Notes held by each Holder.
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If the Company is required to offer to purchase Notes pursuant to
Sections 10.11 or 10.16, it shall furnish to the Trustee, at least two Business
Days before notice of the corresponding Offer is to be mailed to Holders, an
Officers' Certificate setting forth that the Offer is being made pursuant to
Sections 10.11 or 10.16, as the case may be, the Change of Control Purchase Date
or the Asset Sale Offer Purchase Date, the maximum principal amount of Notes the
Company is offering to purchase pursuant to such Offer, the purchase price for
such Notes, and the amount of accrued and unpaid interest on such Notes as of
the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, as
the case may be.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
Section 13.02. SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
In the event that less than all of the Notes are to be redeemed at
any time, selection of Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a PRO RATA basis, by lot or by such method as
the Trustee will deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; PROVIDED,
FURTHER, HOWEVER, that any such redemption made with the net proceeds of a
Public Equity Offering shall be made on a PRO RATA basis or on as nearly a PRO
RATA basis as practicable (subject to the procedures of The Depository Trust
Company or any other depositary). Notice of redemption will be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
will state the portion of the principal amount thereof to be redeemed. A new
Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
Section 13.03. NOTICE OF REDEMPTION.
(a) At least 30 days but not more than 60 days before any
redemption date, the Company shall mail a notice of redemption by first class
mail to each Holder of Notes or portions thereof that are to be redeemed. With
respect to any redemption of Notes, the notice shall identify the Notes or
portions thereof to be redeemed and shall state: (1) the redemption date; (2)
the redemption price for the Notes and the amount of unpaid and accrued interest
on such Notes as of the date of redemption; (3) the paragraph of the Notes
pursuant to which the Notes called for redemption are being redeemed; (4) if any
Note is being redeemed in part, the portion of the principal
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amount of such Note to be redeemed and that, after the redemption date, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued; (5) the name and address of the Paying Agent;
(6) that Notes called for redemption must be surrendered to the Paying Agent to
collect the redemption price for, and any accrued and unpaid interest on, such
Notes; (7) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date; and (8) that no representation is made as to the correctness or
accuracy of the CUSIP number listed in such notice and printed on the Notes.
(b) At the Company's request, the Trustee shall (at the
Company's expense) give the notice of any redemption to Holders; PROVIDED,
HOWEVER, that the Company shall deliver to the Trustee, at least 45 days prior
to the date of redemption and at least 10 days prior to the date that notice of
the redemption is to be mailed to Holders, an Officers' Certificate that (i)
requests the Trustee to give notice of the redemption to Holders, (ii) sets
forth the information to be provided to Holders in the notice of redemption, as
set forth in the preceding paragraph, and (iii) sets forth the aggregate
principal amount of Notes to be redeemed and the amount of accrued and unpaid
interest thereon as of the redemption date. If the Trustee is not a Registrar,
the Company shall, concurrently with any such request, cause the Registrar to
deliver to the Trustee a certificate (upon which the Trustee may rely) setting
forth the name of, the address of, and the aggregate principal amount of Notes
held by, each Holder; PROVIDED FURTHER that any such Officers' Certificate may
be delivered to the Trustee on a date later than permitted under this Section
13.03(b) if such later date is acceptable to the Trustee.
Section 13.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption
become due and payable on the redemption date at the price set forth in the
Note.
Section 13.05. DEPOSIT OF REDEMPTION PRICE.
(a) On or prior to any redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of, and accrued interest on, all Notes to be redeemed on that
date. After any redemption date, the Trustee or the Paying Agent shall promptly
return to the Company any money that the Company deposited with the Trustee or
the Paying Agent in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Notes to be redeemed.
(b) If the Company complies with the preceding paragraph,
interest on the Notes to be redeemed will cease to accrue on such Notes on the
applicable redemption date, whether or not such Notes are presented for payment.
If a Note is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and
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unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business of such record date. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, premium, if any, and interest from the redemption
date until such principal, premium and interest is paid, at the rate of interest
provided in the Notes, the Registration Rights Agreement and Section 10.01.
Section 13.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the Company's
expense a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 13.07. OPTIONAL REDEMPTION.
Except as set forth below, the Notes are not redeemable at the
Company's option. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after May 1, 2003, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon, if any, to the date of redemption, if redeemed during
the 12-month period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
Year REDEMPTION PRICE
---- ----------------
<S> <C>
2003..................................... 104.250%
2004..................................... 102.833%
2005..................................... 101.417%
2006 and thereafter...................... 100.000%
</TABLE>
On or prior to May 1, 2001, the Company may, at its option, use
the net proceeds of a Public Equity Offering to redeem up to 35% of the
originally issued aggregate principal amount of the Notes, at a redemption price
in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at
least $107,250,000 in aggregate principal amount of Notes is outstanding
following such redemption. Notice of any such redemption must be given not later
than 60 days after the consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering"
means any underwritten public offering of Capital Stock (other than Redeemable
Capital Stock) of the Company made on a primary basis by the Company pursuant to
a registration statement filed with and declared effective by the Commission in
accordance with the Securities Act.
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On and after the redemption date, interest will cease to accrue on
Notes or portions thereof called for redemption so long as the Company has
deposited with the Paying Agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to this Indenture.
Section 13.08. PROCEDURES RELATING TO MANDATORY OFFERS.
(a) On the Change of Control Purchase Date or the Asset Sale
Offer Purchase Date, as the case may be, for any Offer the Company will (i) in
the case of an Offer resulting from a Change of Control, accept for payment all
Notes or portions thereof tendered pursuant to such Offer and, in the case of an
Offer resulting from one or more Asset Sales, accept for payment the maximum
principal amount of Notes or portions thereof tendered pursuant to such Offer
that can be purchased out of Unutilized Net Cash Proceeds from such Asset Sales
to the extent provided in Section 10.16, (ii) deposit with the Paying Agent the
aggregate purchase price of all Notes or portions thereof accepted for payment
and any accrued and unpaid interest on such Notes as of the Purchase Date, and
(iii) deliver, or cause to be delivered, to the Trustee all Notes tendered
pursuant to the Offer, together with an Officers' Certificate setting forth the
name of each Holder that tendered Notes and the principal amount of the Notes or
portions thereof tendered by each such Holder.
(b) With respect to any Offer, (i) if less than all of the
Notes tendered pursuant to an Offer are to be accepted for payment by the
Company for any reason consistent with this Indenture, the Trustee shall select
on or prior to the Change of Control Purchase Date or the Asset Sale Offer
Purchase Date, as the case may be, the Notes or portions thereof to be accepted
for payment pursuant to Section 13.02, and (ii) if the Company deposits with the
Paying Agent on or prior to the Change of Control Purchase Date or the Asset
Sale Offer Purchase Date, as the case may be, an amount sufficient to purchase
all Notes accepted for payment, interest shall cease to accrue on such Notes on
the Purchase Date; PROVIDED, HOWEVER, that if the Company fails to deposit an
amount sufficient to purchase all Notes accepted for payment, the deposited
funds shall be used to purchase on a PRO RATA basis all Notes accepted for
payment and interest shall continue to accrue on all Notes not purchased.
(c) Promptly after consummation of an Offer, (i) the Paying
Agent shall mail to each Holder of Notes or portions thereof accepted for
payment an amount equal to the purchase price for, plus any accrued and unpaid
interest on, such Notes, (ii) with respect to any tendered Note not accepted for
payment in whole or in part, the Trustee shall return such Note to the Holder
thereof, and (iii) with respect to any Note accepted for payment in part, the
Trustee shall authenticate and mail to each such Holder a new Note equal in
principal amount to the unpurchased portion of the tendered Note.
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(d) The Company will (i) publicly announce the results of the
Offer to Holders not later than the first Business Day after each Change of
Control Purchase Date or Asset Sale Offer Purchase Date, as the case may be, and
(ii) as set forth in the penultimate paragraph of each of Section 10.11 and
Section 10.16, comply with the applicable tender offer rules and all other
securities laws and regulations in connection with any Offer.
ARTICLE FOURTEEN
SUBORDINATION
Section 14.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees,
any provisions of this Indenture or the Notes to the contrary notwithstanding,
that all obligations owed under and in respect of the Notes are subordinated in
right of payment, to the extent and in the manner provided in this Article
Fourteen, to the prior payment in full of all Senior Indebtedness of the
Company, and that the subordination of the Notes pursuant to this Article
Fourteen is for the benefit of all holders of all Senior Indebtedness of the
Company, whether outstanding on the Issue Date or incurred thereafter.
Section 14.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment or distribution of cash, securities or
other property of the Company to creditors upon any insolvency or liquidation
proceeding with respect to the Company or its property or securities, the
holders of any Senior Indebtedness of the Company will be entitled to receive
payment in full, in cash or, to the extent permitted under the agreements
governing the Senior Indebtedness, Cash Equivalents, of all obligations due in
respect of such Senior Indebtedness before the Holders will be entitled to
receive any payment or distribution with respect to the Notes (excluding any
payment or distribution of, or repurchase or redemption in exchange for,
securities permitted by clause (b) of this Section 14.02), and until all
obligations with respect to such Senior Indebtedness of the Company are paid in
full, in cash or, to the extent permitted under the agreements governing the
Senior Indebtedness, Cash Equivalents, any payment or distribution to which the
Holders would be entitled shall be made to the holders of the Company's Senior
Indebtedness (pro rata to such holders on the basis of the amounts of Senior
Indebtedness held by them). Upon any insolvency or liquidation proceeding with
respect to the Company, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of, or repurchase or redemption in exchange for,
securities permitted by clause (b) of this Section 14.02), to which the Holders
or the Trustee
<PAGE>
-113-
would be entitled to except for the provisions of this Indenture shall be paid
by the Company, any Custodian or other Person making such payment or
distribution, or by the Holders or by the Trustee if received by them, directly
to the holders of the Company's Senior Indebtedness (pro rata to such holders on
the basis of the amounts of Senior Indebtedness held by them) or their
Representatives, as their interests may appear, for application to the payment
of all outstanding Senior Indebtedness of the Company until all such Senior
Indebtedness has been paid in full in cash, after giving effect to all other
payments or distributions to, or provisions made for, holders of the Company's
Senior Indebtedness.
(b) A distribution may consist of cash, securities or other
property, by set-off or otherwise. For purposes of this Article Fourteen, the
words "cash, securities or other property" shall not include any distribution of
securities of the Company or any other corporation provided for in any
reorganization proceeding under any Bankruptcy Law if (i) such securities
constitute Reorganization Securities, (ii) such distribution was authorized by
an order or decree of a court of competent jurisdiction, and (iii) such order
gives effect to (and states in such order or decree that effect has been given
to) the subordination of such securities to all Senior Indebtedness of the
Company not paid in full in connection with such reorganization; provided that
(a) all such Senior Indebtedness is assumed by the reorganized corporation, and
(b) the rights of the holders of any such Senior Indebtedness are not, without
the consent of such holders, altered by such reorganization, which consent shall
be deemed to have been given if the holders of such Senior Indebtedness (or
their representative), individually or as a class, shall have approved such
reorganization.
(c) Notwithstanding anything to the contrary in this Indenture,
any disposition by or involving the Company, or the liquidation or dissolution
of the Company following any disposition, shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 14.02
if such disposition is permitted under Article Eight.
Section 14.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
(a) During the continuance of any default in the payment of any
Designated Senior Indebtedness pursuant to which the maturity thereof may
immediately be accelerated beyond any applicable grace period and after receipt
by the Trustee from representatives of holders of such Designated Senior
Indebtedness of written notice of such default, no payment or distribution of
any assets of the Company of any kind or character (excluding any payment or
distribution of securities set forth in Section 14.02(b)) shall be made on
account of the principal of, premium, if any, or interest on, or the purchase,
redemption or other acquisition of, the Notes unless and until such default has
been cured or waived or has ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full.
<PAGE>
-114-
(b) During the continuance of any non-payment default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may immediately be accelerated (a "Non-payment Default") and (x) after
the receipt by the Trustee from the representatives of holders of such
Designated Senior Indebtedness of a written notice of such Non-payment Default
or (y) if the Non-payment Default results from the acceleration of the Notes,
from the date of such acceleration, no payment or distribution of any assets of
the Company of any kind or character (excluding any payment or distribution of
securities set forth in Section 14.02(b)) shall be made by the Company on
account of the principal of, premium, if any, or interest on, or the purchase,
redemption or other acquisition of, the Notes for the period specified below
(the "Payment Blockage Period").
The Payment Blockage Period will commence upon (x) the receipt of
notice of a Non-payment Default by the Trustee from the representatives of
holders of Designated Senior Indebtedness or (y) if the Non-payment Default
results from the acceleration of the Notes, upon such acceleration, and will end
on the earliest to occur of the following events: (i) 179 days shall have
elapsed (A) since the receipt of such notice of a Non-payment Default or (B) if
the Non-payment Default results from the acceleration of the Notes, since such
acceleration (in each case, provided that such Designated Senior Indebtedness
shall not have been accelerated and the Company has not defaulted with respect
to the payment of such Designated Senior Indebtedness), (ii) such default is
cured or waived or ceases to exist or such Designated Senior Indebtedness is
discharged or (iii) such Payment Blockage Period shall have been terminated by
written notice to the Company or the Trustee from the representatives of holders
of Designated Senior Indebtedness initiating such Payment Blockage Period.
After the end of any Payment Blockage Period the Company shall promptly resume
making any and all required payments in respect of the Notes, including any
missed payments. Notwithstanding anything in the subordination provisions of
the Indenture or the Notes to the contrary, (x) in no event shall a Payment
Blockage Period extend beyond 179 days from the date such Payment Blockage
Period was commenced, (y) there shall be a period of at least 186 consecutive
days in each 365-day period when no Payment Blockage Period is in effect and (z)
not more than one Payment Blockage Period with respect to the Notes may be
commenced within any period of 365 consecutive days. A Non-payment Default with
respect to Designated Senior Indebtedness that existed or was continuing on the
date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period cannot 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 and
subsequently recurs.
<PAGE>
-115-
Section 14.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify each holder of the Company's
Designated Senior Indebtedness or their representatives of the acceleration and
provide copies of such notice to the Trustee.
Section 14.05. WHEN DISTRIBUTIONS MUST BE PAID OVER.
If the Company shall make any payment to the Trustee on account of
the principal of, or premium, if any, or interest on, the Notes, or any other
obligation in respect to the Notes, or the Holders shall receive from any source
any payment on account of the principal of, or premium, if any, or interest on,
the Notes or any obligation in respect of the Notes, at a time when such payment
is prohibited by this Article Fourteen, the Trustee or such Holders shall hold
such payment in trust for the benefit of, and shall pay over and deliver to, the
holders of the Company's Senior Indebtedness (PRO RATA as to each of such
holders on the basis of the respective amounts of such Senior Indebtedness held
by them) or their representative or the trustee under the indenture or other
agreement (if any) pursuant to which such Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all outstanding Senior Indebtedness of the Company until all such Senior
Indebtedness has been paid in full in cash, after giving effect to all other
payments or distributions to, or provisions made for, the holders of the
Company's Senior Indebtedness.
With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform only such obligations on its part as are
specifically set forth in this Article Fourteen, and no implied covenants or
obligations with respect to any holders of the Company's Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of the Company's Senior
Indebtedness, and shall not be liable to any holders of such Senior Indebtedness
if the Trustee shall pay over or distribute to, or on behalf of, Holders or the
Company or any other Person money or assets to which any holders of such Senior
Indebtedness are entitled pursuant to this Article Fourteen.
Section 14.06. NOTICE.
Neither the Trustee nor the Paying Agent shall at any time be
charged with the knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee or Paying Agent under this Article
Fourteen, unless the Trustee or the requisite Holders have given notice of
acceleration of the Notes or unless and until the Trustee or Paying Agent shall
have received written notice thereof from the Company or one or
<PAGE>
-116-
more holders of the Company's Senior Indebtedness or a representative of any
holders of such Senior Indebtedness; and, prior to the receipt of any such
written notice, the Trustee or Paying Agent shall be entitled to assume
conclusively that no such facts exist. The Trustee shall be entitled to rely on
the delivery to it of written notice by a Person representing itself to be a
holder of the Company's Senior Indebtedness (or a representative thereof) to
establish that such notice has been given.
The Company shall promptly notify the Trustee and the Paying Agent
in writing of any facts it knows that would cause a payment of principal of, or
premium, if any, or interest on, the Notes or any other obligation in respect of
the Notes to violate this Article Fourteen, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Indebtedness of
the Company provided in this Article Fourteen or the rights of holders of such
Senior Indebtedness under this Article Fourteen.
Section 14.07. SUBROGATION.
After all Senior Indebtedness of the Company has been paid in full
in cash and until the Notes are paid in full, Holders shall be subrogated
(equally and ratably with all other Pari Passu Indebtedness) to the rights of
holders of such Senior Indebtedness to receive distributions applicable to such
Senior Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of such Senior Indebtedness. A
distribution made under this Article Fourteen to holders of the Company's Senior
Indebtedness that otherwise would have been made to Holders is not, as between
the Company and Holders, a payment by the Company on its Senior Indebtedness.
Section 14.08. RELATIVE RIGHTS.
The provisions of this Article Fourteen are and are intended
solely for the purpose of defining the relative rights of Holders and holders of
the Company's Senior Indebtedness. Nothing in this Indenture shall: (1)
impair, as between the Company and Holders, the Company's Indenture Obligations,
which are absolute and unconditional, to pay principal of, and premium, if any,
and interest on, the Notes in accordance with their terms; (2) affect the
relative rights of Holders and the Company's creditors other than their rights
in relation to holders of the Company's Senior Indebtedness; or (3) prevent the
Trustee or any Holder from exercising its available remedies upon a Default or
Event of Default, subject to the rights of holders of the Company's Senior
Indebtedness, if any, under this Article Fourteen.
Nothing contained in this Article Fourteen or elsewhere in this
Indenture or in any Note is intended to or shall impair, as between the Company
and the Holders, the Indenture Obligations of the Company, which are absolute
and unconditional, to pay to the
<PAGE>
-117-
Holders the principal of, and premium, if any, and interest on, the Notes as and
when the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Company's Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon Default under
this Indenture, subject to the rights, if any, under this Article Fourteen of
the holders of such Senior Indebtedness.
The failure to make a payment on account of principal of, or
interest on the Notes by reason of any provision of this Article Fourteen shall
not be construed as preventing the occurrence of an Event of Default under
Section 5.01.
Section 14.09. THE COMPANY AND HOLDERS MAY NOT IMPAIR SUBORDINATION.
(a) No right of any holder of the Company's Senior Indebtedness
to enforce the subordination as provided in this Article Fourteen shall at any
time or in any way be prejudiced or impaired by any act or failure to act by the
Company or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture or the Notes or any other agreement regardless of
any knowledge thereof with which any such holder may have or be otherwise
charged.
(b) Without in any way limiting Section 14.09(a), the holders
of any Senior Indebtedness of the Company may, at any time and from time to
time, without the consent of or notice to any Holders, without incurring any
liabilities to any Holder and without impairing or releasing the subordination
and other benefits provided in this Indenture or the Holders' obligations to the
holders of such Senior Indebtedness, even if any Holder's right of reimbursement
or subrogation or other right or remedy is affected, impaired or extinguished
thereby, do any one or more of the following: (i) amend, renew, exchange,
extend, modify, increase or supplement in any manner such Senior Indebtedness or
any instrument evidencing or guaranteeing or securing such Senior Indebtedness
or any agreement under which such Senior Indebtedness is outstanding (including,
but not limited to, changing the manner, place or terms of payment or changing
or extending the time of payment of, or renewing, exchanging, amending,
increasing or altering, (1) the terms of such Senior Indebtedness, (2) any
security for, or any guarantee of, such Senior Indebtedness, (3) any liability
of any obligor on such Senior Indebtedness (including any guarantor) or any
liability issued in respect of such Senior Indebtedness); (ii) sell, exchange,
release, surrender, realize upon, enforce or otherwise deal with in any manner
and in any order any property pledged, mortgaged or otherwise securing such
Senior Indebtedness or any liability of any obligor thereon, to such holder, or
any liability issued in respect thereof; (iii) settle or compromise any such
Senior Indebtedness or any other liability of any obligor of such Senior
Indebtedness to such holder or any security
<PAGE>
-118-
therefor or any liability issued in respect thereof and apply any sums by
whomsoever paid and however realized to any liability (including, without
limitation, payment of any of the Company's Senior Indebtedness) in any manner
or order; and (iv) fail to take or to record or otherwise perfect, for any
reason or for no reason, any lien or security interest securing such Senior
Indebtedness by whomsoever granted, exercise or delay in or refrain from
exercising any right or remedy against any obligor or any guarantor or any other
Person, elect any remedy and otherwise deal freely with any obligor and any
security for such Senior Indebtedness or any liability of any obligor to the
holders of such Senior Indebtedness or any liability issued in respect of such
Senior Indebtedness.
Section 14.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made, or a notice given, to
holders of Senior Indebtedness of the Company, the distribution may be made and
the notice given to their representative, if any. If any payment or
distribution of the Company's assets is required to be made to holders of any of
the Company's Senior Indebtedness pursuant to this Article Fourteen, the Trustee
and the Holders shall be entitled to rely upon any order or decree of any court
of competent jurisdiction, or upon any certificate of a representative of such
Senior Indebtedness or a custodian, in ascertaining the holders of such Senior
Indebtedness entitled to participate in any such payment or distribution, the
amount to be paid or distributed to holders of such Senior Indebtedness and all
other facts pertinent to such payment or distribution or to this Article
Fourteen.
Section 14.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on the
Notes unless prior to any payment date it or the requisite Holders have given
notice of acceleration of the Notes or it has received written notice of facts
that would cause a payment of principal of, or premium, if any, or interest on,
the Notes to violate this Article Fourteen. Only the Company, a representative
of Senior Indebtedness, or a holder of Senior Indebtedness that has no
representative may give such notice.
To the extent permitted by the TIA, the Trustee in its individual
or any other capacity may hold Indebtedness of the Company (including Senior
Indebtedness) with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 14.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the
<PAGE>
-119-
subordination as provided in this Article Fourteen, and appoints the Trustee as
such Holder's attorney-in-fact for any and all such purposes (including, without
limitation, the timely filing of a claim for the unpaid balance of the Note that
such Holder holds in the form required in any bankruptcy, reorganization,
insolvency or receivership proceeding and causing such claim to be approved).
If a proper claim or proof of debt in the form required in such
proceeding is not filed by or on behalf of all Holders prior to 30 days before
the expiration of the time to file such claims or proofs, then the holders or a
representative of any Senior Indebtedness of the Company are hereby authorized,
and shall have the right (without any duty), to file an appropriate claim for
and on behalf of the Holders.
Section 14.13. PAYMENT.
A payment on account of or with respect to any Note shall include,
without limitation, any direct or indirect payment of principal, premium or
interest with respect to or in connection with any optional redemption or
purchase provisions, any direct or indirect payment payable by reason of any
other Indebtedness or obligation being subordinated to the Notes, and any direct
or indirect payment or recovery on any claim as a Holder relating to or arising
out of this Indenture or any Note, or the issuance of any Note, or the
transactions contemplated by this Indenture or referred to herein.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the day and year first above written.
COMPANY: NASH-FINCH COMPANY
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: President
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Vice President, Secretary &
General Counsel
GUARANTORS: NASH DECAMP COMPANY
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: Attorney-in-fact
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Attorney-in-fact
T.J. MORRIS COMPANY
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: President
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Secretary
<PAGE>
[Signature page to Nash Finch Indenture]
SUPER FOOD SERVICES, INC.
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: Vice President
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Secretary
FORREST TRANSPORTATION SERVICES, INC.
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: Attorney-in-fact
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Attorney-in-fact
GTL TRUCK LINES, INC.
By: /s/ Alfred N. Flaten
--------------------------
Name: Alfred N. Flaten
Title: Vice President
By: /s/ Norman R. Soland
--------------------------
Name: Norman R. Soland
Title: Secretary
<PAGE>
[Signature page to Nash Finch Indenture]
PIGGLY WIGGLY NORTHLAND CORPORATION
By: /s/ Alfred N. Flaten
----------------------------
Name: Alfred N. Flaten
Title: President
By: /s/ Norman R. Soland
----------------------------
Name: Norman R. Soland
Title: Secretary
GILLETTE DAIRY OF THE BLACK
HILLS, INC.
By: /s/ Charles F. Ramsbacher
----------------------------
Name: Charles F. Ramsbacher
Title: Vice President
By: /s/ Norman R. Soland
-----------------------------
Name: Norman R. Soland
Title: Secretary
NEBRASKA DAIRIES, INC.
By: /s/ Charles F. Ramsbacher
------------------------------
Name: Charles F. Ramsbacher
Title: Vice President
By: /s/ Norman R. Soland
------------------------------
Name: Norman R. Soland
Title: Secretary
<PAGE>
-123-
TRUSTEE: U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By: /s/ K. Barrett
-------------------------------
Name: Kathe Barrett
Title: Trust Officer
<PAGE>
EXHIBIT A-1
[FORM OF NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
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 THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DATE ON WHICH
NASH-FINCH COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (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, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEG-
A-1-1
<PAGE>
END; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE
REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (D) OR (E) 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 CERTIFICATION OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1-2
<PAGE>
NASH-FINCH COMPANY
_________________
8-1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
CUSIP No. __________
No. ___________ $
NASH-FINCH COMPANY, a corporation incorporated under the laws of the
State of Delaware (herein called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on May 1, 2008, at the office or agency
of the Company referred to below, and to pay interest thereon on May 1 and
November 1 (each an "Interest Payment Date"), of each year, commencing on
November 1, 1998, accruing from the Issue Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 8-1/2% per annum, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the April 15 and
October 15 (each a "Regular Record Date"), 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 then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan in The City of New York, State of New York,
or at such other office or agency of the Company as may be maintained for such
purpose, in such coin or currency of the United
A-1-3
<PAGE>
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 Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or any Guarantee
described on the reverse side hereof, or be valid or obligatory for any purpose.
[Remainder of Page Intentionally Left Blank]
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: NASH-FINCH COMPANY
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8-1/2% Senior Subordinated Notes due 2008, Series
A, referred to in the within-mentioned Indenture.
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------
Authorized Officer
A-1-5
<PAGE>
[REVERSE OF NOTE]
1. INDENTURE. This Note is one of a duly authorized issue of Notes
of the Company designated as its 8-1/2% Senior Subordinated Notes due 2008,
Series A (herein called the "Initial Notes"). The Notes are limited (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $165,000,000, which may be issued under an indenture (herein called
the "Indenture") dated as of April 24, 1998, by and among the Company, each of
the guarantors named in the Indenture, as guarantors (herein called the
"Guarantors"), and U.S. Bank Trust National Association, 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 Trustee, the
Guarantors and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The Notes include the Initial
Notes, the Private Exchange Securities and the Unrestricted Notes (including the
Exchange Notes referred to below), issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement. The Initial Notes, the Private
Exchange Securities and the Unrestricted Notes are treated as a single class of
securities under the Indenture.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company or any
Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place, and rate, and in
the coin or currency, herein prescribed.
2. GUARANTEES. This Note is initially entitled to the benefits of
the certain senior subordinated Guarantees of the Guarantors and may thereafter
be entitled to certain other senior subordinated Guarantees made for the benefit
of the Holders. Reference is hereby made to Article Twelve of the Indenture and
to the Guarantees endorsed on this Note for a statement of the respective
rights, limitations of rights, duties and obligations thereunder of the
Guarantors, the Trustee and the Holders.
A-1-6
<PAGE>
3. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement by and among the Company, the Guarantors and the Initial Purchasers,
the Company and the Guarantors will be obligated to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note together with the Guarantees hereof endorsed hereon for 8-1/2% Senior
Subordinated Notes due 2008, Series B, of the Company (herein called the
"Exchange Notes") and the Guarantees endorsed thereon, which have been
registered under the Securities Act, in like principal amount and having
identical terms as the Notes (other than as set forth in this paragraph) and the
Guarantees endorsed hereon, respectively. The Holders of Notes shall be
entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
4. REDEMPTION. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 1, 2003, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the date of
redemption, if redeemed during the 12-month period beginning on May 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . 104.250%
2004 . . . . . . . . . . . . . . . . . . . 102.833%
2005 . . . . . . . . . . . . . . . . . . . 101.417%
2006 and thereafter. . . . . . . . . . . . 100.000%
</TABLE>
On or prior to May 1, 2001, the Company may, at its option, use the
net proceeds of a Public Equity Offering to redeem up to 35% of the originally
issued aggregate principal amount of the Notes, at a redemption price in cash
equal to 108.5% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at
least $107,250,000 in aggregate principal amount of Notes is outstanding
following such redemption. Notice of any such redemption must be given not
later than 60 days after the consummation of the Public Equity Offering.
5. OFFERS TO PURCHASE. Sections 10.11 and 10.16 of the Indenture
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to certain conditions and limitations contained
therein, the Company shall make an offer to purchase all or a portion of the
Notes in accordance with the procedures set forth in the Indenture.
A-1-7
<PAGE>
6. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the principal of all of the Outstanding Notes, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. DEFEASANCE. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company and the Guarantors on this Note and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
8. AMENDMENTS AND WAIVERS. The Indenture permits, with certain
exceptions as provided therein, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
at the time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Notes at
the time Outstanding, on behalf of the Holders of all the Notes, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults and Events of Default under the Indenture and this Note and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
9. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable
only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan in The City of New York, State 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 Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
A-1-8
<PAGE>
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
10. PERSONS DEEMED OWNERS. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. TERMINATION OF CERTAIN COVENANTS. After the Notes have been
assigned an Investment Grade Rating by both Rating Agencies, and notwithstanding
that the Notes may later cease to have an Investment Grade Rating, the Company
and the Restricted Subsidiaries will no longer be subject to the provisions of
Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clauses (ii) and (iii) of
the first and fourth paragraphs of Section 10.21 and clauses (iii) and (iv) of
the first paragraph of Section 8.01 of the Indenture; PROVIDED, that no Default
or Event of Default has occurred and is continuing at the time the Notes have
been assigned such rating.
12. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH NOTE GUARANTEE
SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture. Requests may be made to:
Nash-Finch Company, P.O. Box 355, Minneapolis, Minnesota 55440-0355, Attention:
Secretary.
A-1-9
<PAGE>
ASSIGNMENT FORM
If you, the holder, want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the date two years (or such shorter period of time as
permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) after the later of the original issuance date appearing on the face
of this Note (or any Predecessor Note) or the last date on which the Company or
any Affiliate of the Company or any Guarantor was the owner of this Note (or any
Predecessor Note), the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[CHECK ONE]
/ / (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
OR
A-1-10
<PAGE>
/ / (b) this Note is being transferred other than in accordance with (a) above
and documents, including a transferor certificate substantially in the
form of Exhibit C to the Indenture in the case of a transfer pursuant
to Regulation S, are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obligated to register this Note in the name of
any Person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 3.17 of the
Indenture shall have been satisfied.
- --------------------------------------------------------------------------------
Date: Your signature:
------------------ -----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
By:
-------------------------------
NOTICE: To be executed by an
executive officer
Signature Guarantee:
-------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
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 (including the information
specified in Rule 144A(d)(4)) 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: By:
------------------------- --------------------------------
NOTICE: To be executed by an
executive officer
A-1-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.11 or 10.16 of the Indenture, check the appropriate box:
Section 10.11 / / Section 10.16 / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.11 or 10.16 of the Indenture, state the amount:
$
---------------
---------------
Date: Your signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
By:
------------------------------
NOTICE: To be executed by an
executive officer
Signature Guarantee:
-----------------------
A-1-12
<PAGE>
EXHIBIT A-2
[FORM OF NOTE]
NASH-FINCH COMPANY
_________________
8-1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
CUSIP No. __________
No. ___________ $
NASH-FINCH COMPANY, a corporation incorporated under the laws of the
State of Delaware (herein called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on May 1, 2008, at the office or agency
of the Company referred to below, and to pay interest thereon on May 1 and
November 1 (each an "Interest Payment Date"), of each year, commencing on
November 1, 1998, accruing from the Issue Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 8-1/2% per annum, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture referred to on the
reverse hereof, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the April 15 and
October 15 (each a "Regular Record Date"), 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 then applicable interest rate borne by the Notes, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the office or agency of the Company maintained for that
purpose in the Borough of
A-2-1
<PAGE>
Manhattan in The City of New York, State of New York, or at such other office or
agency of the Company as may be maintained for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that payment
of interest may be made at the option of the Company by check mailed to the
address of the Person entitled thereto as such address shall appear on the Note
Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or any Guarantee
described on the reverse side hereof, or be valid or obligatory for any purpose.
[Remainder of Page Intentionally Left Blank]
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: NASH-FINCH COMPANY
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8-1/2% Senior Subordinated Notes due 2008, Series
B, referred to in the within-mentioned Indenture.
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------------
Authorized Officer
A-2-3
<PAGE>
[REVERSE OF NOTE]
1. INDENTURE. This Note is one of a duly authorized issue of Notes
of the Company designated as its 8-1/2% Senior Subordinated Notes due 2008
Series B (herein called the "Unrestricted Notes"). The Notes are limited
(except as otherwise provided in the Indenture referred to below) in aggregate
principal amount to $150,000,000, which may be issued under an indenture (herein
called the "Indenture") dated as of April 24, 1998, by and among the Company,
each of the Guarantors named in the Indenture, as guarantors (herein called the
"Guarantors"), and U.S. Bank Trust National Association, 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 Trustee, the
Guarantors and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered. The Notes include the Initial
Notes, the Private Exchange Securities and the Unrestricted Notes (including the
Exchange Notes), issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement. The Initial Notes, the Private Exchange
Securities and the Unrestricted Notes are treated as a single class of
securities under the Indenture.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms.
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company or any
Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place, and rate, and in
the coin or currency, herein prescribed.
2. GUARANTEES. This Note is initially entitled to the benefits of
the certain senior subordinated Guarantees of the Guarantors and may thereafter
be entitled to certain other senior subordinated Guarantees made for the benefit
of the Holders. Reference is hereby made to Article Twelve of the Indenture and
to the Guarantees endorsed on this Note for a statement of the respective
rights, limitations of rights, duties and obligations thereunder of the
Guarantors, the Trustee and the Holders.
3. REDEMPTION. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 1, 2003, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid inter-
A-2-4
<PAGE>
est thereon, if any, to the date of redemption, if redeemed during the 12-month
period beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . 104.250%
2004 . . . . . . . . . . . . . . . . . . . 102.833%
2005 . . . . . . . . . . . . . . . . . . . 101.417%
2006 and thereafter. . . . . . . . . . . . 100.000%
</TABLE>
On or prior to May 1, 2001, the Company may, at its option, use the
net proceeds of a Public Equity Offering to redeem up to 35% of the originally
issued aggregate principal amount of the Notes, at a redemption price in cash
equal to 108.5% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at
least $107,250,000 in aggregate principal amount of Notes is outstanding
following such redemption. Notice of any such redemption must be given not
later than 60 days after the consummation of the Public Equity Offering.
4. OFFERS TO PURCHASE. Sections 10.11 and 10.16 of the Indenture
provide that upon the occurrence of a Change of Control and following certain
Asset Sales, and subject to certain conditions and limitations contained
therein, the Company shall make an offer to purchase all or a portion of the
Notes in accordance with the procedures set forth in the Indenture.
5. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the principal of all of the Outstanding Notes, plus all accrued and
unpaid interest, if any, to and including the date the Notes are paid, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
6. DEFEASANCE. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company and the Guarantors on this Note and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
7. AMENDMENTS AND WAIVERS. The Indenture permits, with certain
exceptions as provided therein, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders under
the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
at the time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the Notes at
the time Outstanding, on behalf of the Holders of all the Notes, to waive com-
A-2-5
<PAGE>
pliance by the Company with certain provisions of the Indenture and certain past
Defaults and Events of Default under the Indenture and this Note and their
consequences. Any such consent or waiver by or on behalf of the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note.
8. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable
only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan in The City of New York, State 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 Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
9. PERSONS DEEMED OWNERS. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
10. TERMINATION OF CERTAIN COVENANTS. After the Notes have been
assigned an Investment Grade Rating by both Rating Agencies, and notwithstanding
that the Notes may later cease to have an Investment Grade Rating, the Company
and the Restricted Subsidiaries will no longer be subject to the provisions of
Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clauses (ii) and (iii) of
the first and fourth paragraphs of Section 10.21, and clauses (iii) and (iv) of
the first paragraph of Section 8.01 of the Indenture; PROVIDED, that no Default
or Event of Default has occurred and is continuing at the time the Notes have
been assigned such rating.
A-2-6
<PAGE>
11. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH NOTE GUARANTEE
SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of this Indenture. Requests may be made to:
Nash-Finch Company, P.O. Box 355, Minneapolis, Minnesota 55440-0355, Attention:
Secretary.
A-2-7
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date: Your signature:
----------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
By:
------------------------------
NOTICE: To be executed by an
executive officer
Signature Guarantee:
----------------------
A-2-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.11 or 10.16 of the Indenture, check the appropriate box:
Section 10.11 / / Section 10.16 / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.11 or 10.16 of this Indenture, state the amount:
$-------------
-------------
Date: Your signature:
-------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
By:
-------------------------------
NOTICE: To be executed by an
executive officer
Signature Guarantee:
---------------------
A-2-9
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE 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. THIS NOTE IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF
THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN 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 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.
B-1
<PAGE>
EXHIBIT C
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------------
______________, ____
U.S. Bank Trust National Association
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Richard Prokosch/Assistant Vice President
Re: Nash-Finch Company (the "Company")
8-1/2% Senior Subordinated Notes due 2008 (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 U.S. Securities Act of
1933, as amended (the "Securities Act"), 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 offer 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;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities;
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<PAGE>
(6) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional
conditions therein, including (if applicable) sending a confirmation or
other notice stating that the Securities may be offered and sold during the
restricted period specified in Rule 903(c)(2) or (3), as applicable, in
accordance with the provisions of Regulation S; pursuant to registration of
the Securities under the Securities Act; or pursuant to an available
exemption from the registration requirements under the Securities Act; and
(7) if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) are applicable thereto, we confirm that such sale has
been made in accordance with such provisions.
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
C-2
<PAGE>
EXHIBIT D
FORM OF NOTE GUARANTEE
For value received, the undersigned hereby fully and unconditionally
guarantees to the Holder of this Note the cash payments in United States dollars
of principal of, premium, if any, and interest on this Note in the amounts and
at the time when due and interest on the overdue principal, premium, if any, and
interest, if any, on this Note, if lawful, and the payment or performance of all
other obligations of the Company under the Indenture or the Notes, to the Holder
of this Note and the Trustee, all in accordance with and subject to the terms
and limitations of this Note, Article Twelve of the Indenture and this
Guarantee. This Guarantee will become effective in accordance with Article
Twelve of the Indenture and its terms shall be evidenced therein. The validity
and enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Note. Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Indenture dated as of
April 24, 1998, by and among Nash-Finch Company, the undersigned and U.S. Bank
Trust National Association, as Trustee, as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article Twelve of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS NOTE GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. THE SUBSIDIARY GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE NON-
EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE INDENTURE, THE NOTES OR THIS NOTE GUARANTEE.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
D-1
<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantor has caused this
Guarantee to be duly executed.
Dated:
[NAME OF GUARANTOR]
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT E
[FORM OF INTERCOMPANY NOTE]
,
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 NASH-FINCH COMPANY, a Delaware corporation (the
"Company"), the Guarantors listed therein and U.S. BANK TRUST NATIONAL
ASSOCIATION, as trustee, dated April 24, 1998 (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.
E-1
<PAGE>
(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.
SECTION 1.03. SUBORDINATION.
All Loans made to the Company or 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
Notes, the Guarantees or any other Indebtedness ranking senior to or pari passu
with the Notes or the Guarantees as provided herein; PROVIDED, that with respect
to a Subsidiary in any specific instance, such Restricted Subsidiary is also an
obligor under the Indenture, the Notes, the Guarantees or such other Senior
Indebtedness 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 Facility or any refinancing of the Revolv
ing Credit Facility 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 will 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
E-2
<PAGE>
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 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 Notes, the Guarantees or any other Indebtedness
ranking pari passu with or senior to, the Notes or any Guarantees, shall be
third-party beneficiaries to this intercompany note 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 notes are included
for convenience of reference only and shall not constitute a part of this
intercompany note for any 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.
E-3
<PAGE>
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).
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:
----------------------------------
Amount Maturity Amount of Unpaid
of Borrowing/ of Borrowing/ Principal Paid Principal Notation
Date Principal Principal or Prepaid Balance Made by Interest
E-4
<PAGE>
Exhibit 5.1
[Letterhead of Oppenheimer Wolff & Donnelly LLP]
May 22, 1998
Nash-Finch Company
7600 France Avenue South
P.O. Box 355
Minneapolis, MN 55440-0355
Re: Registration Statement On Form S-4
Ladies and Gentlemen:
We have acted as counsel to Nash-Finch Company, a Delaware corporation (the
"Company"), in connection with 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 $165,000,000 aggregate principal
amount of the Company's 8 1/2% Senior Subordinated Notes due 2008, 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 1/2% Senior Subordinated
Notes due 2008, Series A (the "Series A Notes") and related guarantees, all as
described in the Registration Statement.
The Exchange Notes are to be issued in exchange for Series A Notes pursuant
to an indenture (the "Indenture") dated as of April 24, 1998 between the
Company, the Guarantors and U.S. Bank Trust National Association, as Trustee
(the "Trustee") and the related Registration Rights Agreement among the Company,
the Guarantors, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt
Burns Securities Inc. and Piper Jaffray 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 Series
A 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 generally 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>
We express no opinion herein other than as to the laws of the State of
Minnesota, the federal laws of the United States and the Delaware General
Corporation Law.
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/ Oppenheimer Wolff & Donnelly LLP
<PAGE>
Exhibit 10.21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NASH-FINCH COMPANY
(a Delaware corporation)
Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
Dated: April 20, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Representations and Warranties by the Issuers. . . . . . . . 3
(a) REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 3
(i) Similar Offerings.. . . . . . . . . . . . . . . . . . . 3
(ii) Offering Memorandum.. . . . . . . . . . . . . . . . . . 3
(iii) Incorporated Documents. . . . . . . . . . . . . . . . . 4
(iv) Independent Accountants.. . . . . . . . . . . . . . . . 4
(v) Financial Statements. . . . . . . . . . . . . . . . . . 4
(vi) No Material Adverse Change in Business. . . . . . . . . 5
(vii) Good Standing of the Company. . . . . . . . . . . . . . 5
(viii) Good Standing of Subsidiaries.. . . . . . . . . . . . . 5
(ix) Capitalization. . . . . . . . . . . . . . . . . . . . . 6
(x) Authorization of Agreement. . . . . . . . . . . . . . . 6
(xi) Authorization of the Indenture and the Registration
Rights Agreement.. . . . . . . . . . . . . . . . . . 6
(xii) Authorization of the Securities.. . . . . . . . . . . . 7
(xiii) Description of the Operative Documents. . . . . . . . . 8
(xiv) Absence of Defaults and Conflicts.. . . . . . . . . . . 8
(xv) Absence of Labor Dispute. . . . . . . . . . . . . . . . 9
(xvi) Absence of Proceedings. . . . . . . . . . . . . . . . . 9
(xvii) Possession of Intellectual Property.. . . . . . . . . . 10
(xviii) Absence of Further Requirements.. . . . . . . . . . . . 10
(xix) Possession of Licenses and Permits. . . . . . . . . . . 10
(xx) Title to Property.. . . . . . . . . . . . . . . . . . . 11
(xxi) Tax Returns.. . . . . . . . . . . . . . . . . . . . . . 11
(xxii) Insurance.. . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) Solvency. . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiv) Related Party Transactions. . . . . . . . . . . . . . . 12
(xxv) Suppliers.. . . . . . . . . . . . . . . . . . . . . . . 12
(xxvi) Environmental Laws. . . . . . . . . . . . . . . . . . . 12
(xxvii) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 13
(xxviii) Investment Company Act. . . . . . . . . . . . . . . . . 13
(xxix) Registration Rights.. . . . . . . . . . . . . . . . . . 13
(xxx) Accounting Controls.. . . . . . . . . . . . . . . . . . 14
(xxxi) Rule 144A Eligibility.. . . . . . . . . . . . . . . . . 14
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(xxxii) No General Solicitation.. . . . . . . . . . . . . . . . 14
(xxxiii) No Registration Required. . . . . . . . . . . . . . . . 14
(xxxiv) Reporting Company.. . . . . . . . . . . . . . . . . . . 14
(xxxv) No Directed Selling Efforts.. . . . . . . . . . . . . . 15
(xxxvi) Material Contracts. . . . . . . . . . . . . . . . . . . 15
(xxxvii) Regulations G, T, U and X . . . . . . . . . . . . . . . 15
(b) OFFICER'S CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2. Sale and Delivery to Initial Purchasers; Closing . . . . . . 15
(a) SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) QUALIFIED INSTITUTIONAL BUYER . . . . . . . . . . . . . . . . . . 16
(d) DENOMINATIONS; REGISTRATION . . . . . . . . . . . . . . . . . . . 16
SECTION 3. Covenants of the Issuers . . . . . . . . . . . . . . . . . . 17
(a) OFFERING MEMORANDUM . . . . . . . . . . . . . . . . . . . . . . . 17
(b) NOTICE AND EFFECT OF MATERIAL EVENTS. . . . . . . . . . . . . . . 17
(c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. . . . . . . . . 18
(d) Qualification of Securities for Offer and Sale. . . . . . . . . . 18
(e) RATING OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 18
(f) DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) RESTRICTION OF SALE OF SECURITIES . . . . . . . . . . . . . . . . 19
(i) PORTAL DESIGNATION. . . . . . . . . . . . . . . . . . . . . . . . 19
(j) PERIODIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . 20
(a) EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 21
SECTION 5. Conditions of Initial Purchasers' Obligations. . . . . . . . 21
(a) OPINION OF COUNSEL FOR COMPANY. . . . . . . . . . . . . . . . . . 21
(b) OPINION OF COUNSEL FOR INITIAL PURCHASERS . . . . . . . . . . . . 22
(c) OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . 23
(d) ACCOUNTANTS' COMFORT LETTER . . . . . . . . . . . . . . . . . . . 23
(e) BRING-DOWN COMFORT LETTER . . . . . . . . . . . . . . . . . . . . 23
(f) MAINTENANCE OF RATING . . . . . . . . . . . . . . . . . . . . . . 23
(g) PORTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(h) INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . 23
(j) ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 24
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<S> <C>
(k) TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 24
SECTION 6. Subsequent Offers and Resales of the Securities. . . . . . . 24
(a) OFFER AND SALE PROCEDURES . . . . . . . . . . . . . . . . . . . . 24
(i) Offers and Sales only to Qualified Institutional
Buyers or Non-U.S. Persons.. . . . . . . . . . . . 24
(ii) No General Solicitation.. . . . . . . . . . . . . . . . 25
(iii) Purchases by Non-Bank Fiduciaries.. . . . . . . . . . . 25
(iv) Subsequent Purchaser Notification.. . . . . . . . . . . 25
(v) Minimum Principal Amount. . . . . . . . . . . . . . . . 25
(vi) Restrictions on Transfer. . . . . . . . . . . . . . . . 25
(vii) Delivery of Offering Memorandum.. . . . . . . . . . . . 26
(b) COVENANTS OF THE ISSUERS. . . . . . . . . . . . . . . . . . . . . 26
(i) Due Diligence . . . . . . . . . . . . . . . . . . . . . 26
(ii) Integration . . . . . . . . . . . . . . . . . . . . . . 26
(iii) Rule 144A Information.. . . . . . . . . . . . . . . . . 26
(iv) Restriction on Resales. . . . . . . . . . . . . . . . . 27
(c) RESALE PURSUANT TO RULE 903 OF REGULATION S OR RULE 144A. . . . . 27
(d) REPRESENTATIONS AND WARRANTIES OF INITIAL PURCHASERS. . . . . . . 28
SECTION 7. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 28
(a) INDEMNIFICATION OF INITIAL PURCHASERS . . . . . . . . . . . . . . 28
(b) INDEMNIFICATION OF ISSUERS, DIRECTORS AND OFFICERS. . . . . . . . 29
(c) ACTIONS AGAINST PARTIES; NOTIFICATION . . . . . . . . . . . . . . 30
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. . . . . . . . 30
SECTION 8. Contribution . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10. Termination of Agreement . . . . . . . . . . . . . . . . . . 32
(a) TERMINATION; GENERAL. . . . . . . . . . . . . . . . . . . . . . . 32
(b) LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11. Default by One or More of the Initial Purchasers . . . . . . 33
SECTION 12. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 13. Information Supplied by the Initial Purchasers . . . . . . . 34
SECTION 14. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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SECTION 15. GOVERNING LAW AND TIME . . . . . . . . . . . . . . . . . . . 35
SECTION 16. Effect of Headings . . . . . . . . . . . . . . . . . . . . . 35
SECTION 17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 35
SCHEDULES
Schedule A - List of Guarantors
Schedule B - List of Initial Purchasers
Schedule C - List of Non-Guarantor Subsidiaries
Schedule D - Pricing Information
EXHIBITS
Exhibit A-1 - Form of Opinion of Issuer's Outside Counsel
Exhibit A-2 - Form of Opinion of Issuer's Internal Counsel
</TABLE>
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<PAGE>
NASH-FINCH COMPANY
(a Delaware corporation)
$165,000,000
Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
April 20, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Nesbitt Burns Securities Inc.
Piper Jaffray Inc.
as Representatives of the several Initial Purchasers
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:
Each of Nash-Finch Company, a Delaware corporation (the "Company"), and each
of the Guarantors listed on Schedule A hereto (the "Guarantors" and together
with the Company, the "Issuers") confirms its agreement with Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
each of the other Initial Purchasers named in Schedule B hereto
(collectively, the "Initial Purchasers," which term shall also include any
initial purchaser substituted as hereinafter provided in Section 11 hereof),
for whom Merrill Lynch, Nesbitt Burns Securities Inc. and Piper Jaffray Inc.
are acting as representatives (in such capacity, the "Representatives"), with
respect to 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 B of $165,000,000 aggregate principal
amount of the Company's 8 1/2% Senior Subordinated Notes due 2008 (the
"Notes"), which Notes will be unconditionally and jointly and severally
guaranteed (the "Guarantees" and together with the Notes, the "Securities")
on a senior subordinated basis by the Guarantors. The Securities are to be
issued pursuant to an indenture dated as of April 24, 1998 (the "Indenture")
among the Company, the Guarantors and U.S. Bank Trust National Association,
as trustee (the "Trustee"). Securities 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. Capital-
<PAGE>
2
ized terms used herein without definition have the respective meanings specified
in the Offering Memorandum referred to below.
The Issuers understand that the Initial Purchasers propose to make an
offering of the Securities 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 to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities 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 and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities 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 Issuers have prepared and delivered to each Initial Purchaser
copies of a preliminary offering memorandum dated April 2, 1998 (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 April 20, 1998 (the "Final Offering
Memorandum"), each for use by such Initial Purchaser in connection with its
solicitation of, purchases of, or offering of, the Securities. "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 to
the Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Securities. Not later than April 21, 1998, the Initial
Purchasers shall have received the Final Offering Memorandum in form and
substance satisfactory to them. Each of the Issuers hereby confirms that it has
authorized the use of the Offering Memorandum in connection with the offer and
resale of the Securities by the Initial Purchasers.
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 are incorporated by reference in the 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.
<PAGE>
3
The holders of the Securities (including the Initial Purchasers and
subsequent transferees) will be entitled to the benefits of the registration
rights agreement (the "Registration Rights Agreement") to be dated as of the
Closing Time (as defined in Section 2(b) hereof), among the Company, the
Guarantors and the Initial Purchasers, pursuant to which the Issuers will agree
(i) to file, 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 and to use their best efforts
to cause such registration statement to become effective within 90 days of the
Closing Time and (ii) under certain circumstances set forth therein, to file
with the Commission a shelf registration statement pursuant to Rule 415 under
the 1933 Act relating to the resale of the Securities by holders thereof or, if
applicable, relating to the resale of Private Exchange Securities (as defined in
the Registration Rights Agreement) by the Initial Purchasers pursuant to an
exchange of the Securities for Private Exchange Securities, and to use their
best efforts to cause such shelf registration statement to be declared
effective. This agreement (this "Agreement"), the Indenture, the Securities,
the Exchange Securities, the Private Exchange Securities (as defined in the
Registration Rights Agreement), the DTC Agreement and the Registration Rights
Agreement are referred to collectively as the "Operative Documents."
SECTION 1. REPRESENTATIONS AND WARRANTIES BY THE ISSUERS.
(a) REPRESENTATIONS AND WARRANTIES. Each of the Issuers, jointly and
severally, represents and warrants to each Initial Purchaser as of the date
hereof and as of the Closing Time referred to in Section 2(b) hereof, and agrees
with each Initial Purchaser, as follows:
(i) SIMILAR OFFERINGS. Neither the Issuers nor any of their
respective affiliates, as such term is defined in Rule 501(b) under the
1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any
offer to buy, sold or offered to sell or otherwise negotiated in respect
of, or will solicit any offer to buy or offer to sell or otherwise
negotiate in respect of, 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 in a manner that would require the Securities to be
registered under the 1933 Act.
(ii) OFFERING MEMORANDUM. The Preliminary Offering Memorandum as
of its date did not, and the Final Offering Memorandum as of the date
hereof 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 con-
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4
formity with information furnished to the Company in writing by any Initial
Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum.
(iii) INCORPORATED DOCUMENTS. The Offering Memorandum as
delivered from time to time shall incorporate by reference the most recent
Annual Report of the Company on Form 10-K filed with the Commission and
each Quarterly Report of the Company on Form 10-Q and each Current Report
of the Company on Form 8-K filed with the Commission since the filing of
the end of the fiscal year to which such Annual Report relates. The
documents incorporated 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
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read together
with the other information in the Offering Memorandum, at the date of the
Offering Memorandum and at the Closing Time, do 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.
(iv) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Offering
Memorandum are independent public accountants with respect to the Issuers
and their respective subsidiaries within the meaning of Regulation S-X
under the 1933 Act.
(v) FINANCIAL STATEMENTS. The financial statements, together
with the related schedules and notes, included in the Offering Memorandum
presents fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except, with respect to such consistent basis, as may be otherwise
indicated in the notes to such financial statements). The supporting
schedules, if any, included in the Offering Memorandum present fairly, in
accordance with GAAP, the information required to be stated therein. The
selected financial data and the summary financial information included in
the Offering Memorandum 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. The pro forma financial
information included in the Offering Memorandum presents fairly the
information shown therein, has been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
information and has been
<PAGE>
5
properly compiled on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(vi) 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, (A) there has been no
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and its
Subsidiaries (as defined below) considered as one enterprise, whether or
not arising in the ordinary course of business, (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) except for regular quarterly dividends on the common stock, par
value $1.66-2/3 per share, of the Company (the "Common Stock") in amounts
per share that are consistent with past practice, there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(vii) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to enter into and perform its
obligations under the Operative Documents; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing 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, individually or in the aggregate, would not result in a
material adverse effect on the condition, financial or otherwise, or on the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise (a "Material Adverse Effect").
(viii) GOOD STANDING OF SUBSIDIARIES. The entities listed on
Schedule A hereto and the entities listed on Schedule C hereto are the only
subsidiaries, direct or indirect, of the Company (collectively, the
"Subsidiaries"). Each Subsidiary has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate 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 to transact business and is in good standing in each
jurisdiction in which such qualification is
<PAGE>
6
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, individually or in the aggregate, would not result in a
Material Adverse Effect; except as otherwise disclosed in the Offering
Memorandum or on Schedule A or Schedule C, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through Subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of the Subsidiaries was issued in
violation of any preemptive or similar rights of any securityholder of such
Subsidiary. No Subsidiary of the Company which is not a Guarantor is a
guarantor or other otherwise obligated under the Revolving Credit Facility
(as defined in the Offering Memorandum). The Subsidiaries of the Company
which are not Guarantors, considered in the aggregate as a single
subsidiary, do not constitute a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X.
(ix) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the financial statements,
including the notes thereto, included in the Offering Memorandum (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant to
employee or director benefit plans referred to in the Offering Memorandum
or pursuant to the exercise of convertible securities or options referred
to in the Offering Memorandum). All of 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; 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.
(x) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by each of the Issuers.
(xi) AUTHORIZATION OF THE INDENTURE, THE REGISTRATION RIGHTS
AGREEMENT AND THE DTC AGREEMENT. Each of the Indenture, the Registration
Rights Agreement and the DTC Agreement has been duly authorized by each of
the Issuers, will have been duly executed and delivered by each of the
Issuers at the Closing Time and, when executed and delivered by each of the
Issuers and, with respect to the Indenture, by the Trustee and, with
respect to the Registration Rights Agreement, by the Initial Purchasers,
will constitute a valid and binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and
<PAGE>
7
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law).
(xii) AUTHORIZATION OF THE SECURITIES. The Notes, the Exchange
Securities and the Private Exchange Securities have been duly authorized by
the Company and the Company has all requisite corporate power and authority
to execute, issue and deliver the Notes, the Exchange Securities and the
Private Exchange Securities and to incur and perform its respective
obligations provided for therein; the Guarantees have been duly authorized
by each of the Guarantors and each of the Guarantors has all requisite
corporate power and authority to execute, issue and deliver the Guarantees
and to incur and perform their respective obligations provided for therein.
At the Closing Time, the Notes will have been duly executed by the Company
and, when authenticated, issued and delivered in the manner provided for in
the Indenture and delivered against payment of the purchase price therefor
as provided in this Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law),
and will be in the form contemplated by, and entitled to the benefits of,
the Indenture. At the Closing Time, the Guarantees of each Guarantor will
have been duly endorsed on the Notes by each such Guarantor and, when the
Notes are authenticated, issued and delivered in the manner provided for in
the Indenture and delivered against payment of the purchase price therefor
as provided in this Agreement, upon such endorsement, the Guarantees will
constitute valid and binding obligations of the Guarantors, enforceable
against the Guarantors in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture. The
Exchange Securities and the Private Exchange Securities have been duly
authorized and when executed, authenticated, issued and delivered by the
Company and each of the Guarantors in exchange for the Securities pursuant
to the Exchange Offer (as defined in the Registration Rights Agreement),
will constitute valid and binding obligations of each of the Issuers,
enforceable against the Issuers in accordance with their terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at
<PAGE>
8
law), and will be in the form contemplated by, and entitled to the benefits
of, the Indenture.
(xiii) DESCRIPTION OF THE OPERATIVE DOCUMENTS. The Securities, the
Registration Rights Agreement and the Indenture will conform in all
material respects to the respective statements relating thereto contained
in the Offering Memorandum and will be in the respective forms previously
delivered to the Initial Purchasers. The Exchange Securities and the
Private Exchange Securities (if issued) will conform in all material
respects to the statements relating thereto contained in the Offering
Memorandum at the time it becomes effective.
(xiv) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor
any of its Subsidiaries is (a) in violation of its charter or by-laws or
(b) 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 its Subsidiaries is
a party or by which or any or them may be bound, or to which any of the
property or assets of the Company or any of its Subsidiaries is subject
(collectively, "Agreements and Instruments") except, with respect to this
clause (b), for such defaults that, individually or in the aggregate, would
not result in a Material Adverse Effect; and the execution, delivery and
performance of each of the Operative Documents and any other agreement or
instrument entered into or issued or to be entered into or issued by the
Company or the Guarantors in connection with the transactions contemplated
hereby or thereby or in the Offering Memorandum and the consummation of the
transactions contemplated herein and in the Offering Memorandum (including
the issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Offering Memorandum under
the caption "Use of Proceeds" and the issuance and delivery of the Exchange
Securities and the Private Exchange Securities, if any) and compliance by
each of the Issuers with its respective obligations hereunder and
thereunder have been duly authorized by all necessary corporate 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 a violation of or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its 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 its 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 its Subsidiaries or any of their respective assets or
properties. As used herein, a "Repayment Event" means any event or
condition
<PAGE>
9
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 its Subsidiaries.
(xv) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any of its Subsidiaries exists or, to the
knowledge of any of the Issuers, is imminent, and none of the Issuers is
aware of any existing or imminent labor disturbance by the employees or any
of its of any of its Subsidiaries' principal suppliers, manufacturers,
customers or contractors, which, in either case, individually or in the
aggregate, would result in a Material Adverse Effect.
(xvi) ABSENCE OF PROCEEDINGS. Except as disclosed in the Offering
Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or by any court or government agency or body, domestic or foreign,
now pending, or, to the knowledge of any of the Issuers, threatened,
against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, would result in a Material Adverse
Effect, or which, individually or in the aggregate, would materially and
adversely affect the properties or assets of the Company or any of its
Subsidiaries or the consummation of the transactions contemplated by this
Agreement or the performance by the Issuers of their respective obligations
under the Operative Documents. The aggregate of all pending legal or
governmental proceedings to which the Company or any of its Subsidiaries 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, individually or in
the aggregate, would not result in a Material Adverse Effect.
(xvii) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
Subsidiaries own or possess, 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 its 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 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 its Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, individually or in the aggregate, would result in
a Material Adverse Effect.
<PAGE>
10
(xviii) ABSENCE OF FURTHER REQUIREMENTS. 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 in connection with the offering, issuance or sale
of the Securities, the Exchange Securities or the Private Exchange
Securities, for the performance by the Issuers of their respective
obligations under the Operative Documents, or the consummation of the
transactions contemplated hereby or thereby or for the due execution or
delivery by the Issuers of the Operative Documents, except as may be
required (A) in connection with the registration of the Exchange Securities
or the Private Exchange Securities under the 1933 Act or the qualification
of the Indenture under the 1939 Act (as defined below) in each case
pursuant to the Registration Rights Agreement or (B) pursuant to state
securities or "blue sky" laws.
(xix) POSSESSION OF LICENSES AND PERMITS. The Company and its
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply, individually
or in the aggregate, would not 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, individually or in
the aggregate, would not have a Material Adverse Effect; and neither the
Company nor any of its Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.
(xx) TITLE TO PROPERTY. The Company and its Subsidiaries have
good and marketable title to all real property owned by the Company and its
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, individually or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as
one enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Offering Memorandum, are in full force
and effect, and neither the Company
<PAGE>
11
nor any of its 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 its Subsidiaries under any of the leases or subleases mentioned
above, or affecting or questioning the rights of the Company or any
Subsidiary thereof to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xxi) TAX RETURNS. The Company and its Subsidiaries have filed
all federal, state, local and foreign tax returns that are required to be
filed or have duly requested extensions thereof and have paid all taxes
required to be paid by any of them and any related assessments, fines or
penalties, except for any such tax, assessment, fine or penalty that is
being contested in good faith and by appropriate proceedings and for which
adequate reserves have been made in accordance with GAAP; and adequate
charges, accruals and reserves have been provided for in the financial
statements included in the Offering Memorandum in respect of all federal,
state, local and foreign taxes for all periods as to which the tax
liability of the Company or any of its Subsidiaries has not been finally
determined or remains open to examination by applicable taxing authorities.
(xxii) INSURANCE. The Company and its 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.
(xxiii) SOLVENCY. Each of the Issuers is, and immediately after the
Closing Time will be, Solvent. As used herein, the term "Solvent" means,
with respect to each Issuer, as the case may be, on a particular date, that
on such date (A) the fair market value of the assets of each Issuer is
greater than the total amount of liabilities (including contingent
liabilities) of such Issuer, (B) the present fair salable value of the
assets of each Issuer is greater than the amount that will be required to
pay the probable liabilities of such Issuer on its debts as they become
absolute and mature, (C) each Issuer is able to realize upon its assets and
pay its debts and other liabilities, including contingent obligations, as
they mature, and (D) each Issuer does not have unreasonably small capital.
(xxiv) RELATED PARTY TRANSACTIONS. No relationship, direct or
indirect, exists between or among any of the Issuers or any Affiliates of
the Issuers, 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.
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12
(xxv) SUPPLIERS. No supplier of merchandise to the Company or any
of its Subsidiaries has ceased shipments of merchandise to the Company or
any of its Subsidiaries, other than in the normal and ordinary course of
business consistent with past practices, which cessation, individually or
in the aggregate, would result in a Material Adverse Effect.
(xxvi) ENVIRONMENTAL LAWS. Except as described in the Offering
Memorandum and except such matters as, individually or in the aggregate,
would not result in a Material Adverse Effect, (A) neither the Company nor
any of its Subsidiaries is in violation of, or has received any notice that
it is subject to liability under, any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, or rule of common law or
any judicial or administrative interpretation thereof including any
judicial or administrative order, decree, judgment or injunction, relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, indoor air, surface water, groundwater,
land surface or subsurface strata and natural resources) or wildlife,
including, without limitation, those relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances or constituents, petroleum or petroleum products or
any other substances or materials subject to regulation under Environmental
Laws (collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "Environmental Laws"),
(B) the Company and its Subsidiaries have, or have filed timely application
for, all permits, licenses, authorizations and approvals required under any
applicable Environmental Laws, all of which are in full force and effect,
and are each in compliance with their requirements, (C) there are no
pending or, to the knowledge of the Company, threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance, violation or potential responsibility or
liability, investigation or proceedings pursuant to any Environmental Law
against the Company or any of its Subsidiaries, or to the knowledge of the
Company, any of their respective predecessors-in-interest for which the
Company or any of its Subsidiaries is liable and (D) there are no past or
present events, conditions or circumstances which would reasonably be
expected to form the basis of an order to conduct response or corrective
action, or an action, suit or proceeding by any private party or
governmental agency, against or affecting, or requiring capital or
operating expenditures by, the Company or any of the Subsidiaries pursuant
to any Environmental Laws.
(xxvii) ERISA. Except as described in the Offering Memorandum,
neither the Company nor any of its Subsidiaries has incurred any liability
for any prohibited transaction or funding deficiency or any complete or
partial withdrawal liability with
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13
respect to any pension, profit sharing or other plan which is subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
to which the Company or any of its Subsidiaries makes or ever has made a
contribution and in which any employee of the Company or any such
Subsidiary is or has ever been a participant, which in the aggregate would
have a Material Adverse Effect. With respect to such plans, each of the
Company and its Subsidiaries is in compliance in all respects with all
applicable provisions of ERISA, except where the failure to so comply,
individually or in the aggregate, would not have a Material Adverse Effect.
(xxviii) INVESTMENT COMPANY ACT. None of the Issuers is, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum, none will 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").
(xxix) REGISTRATION RIGHTS. There are no holders of securities
(debt or equity) of any of the Issuers, or holders of rights including,
without limitation, preemptive rights, warrants or options to obtain
securities of any of the Issuers, who in connection with the issuance, sale
and delivery of the Securities and the Exchange Securities and the Private
Exchange Securities, if any, and the execution, delivery and performance of
this Agreement and the Registration Rights Agreement, have the right to
request any of the Issuers to register securities held by them under the
1933 Act.
(xxx) 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.
(xxxi) RULE 144A ELIGIBILITY. The Securities 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.
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14
(xxxii) NO GENERAL SOLICITATION. None of the Issuers, any of their
respective Affiliates or any person acting on its or any of their behalf
(other than the Initial Purchasers, as to whom the Issuers make no
representation) has engaged or will engage, in connection with the offering
of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxxiii) NO REGISTRATION REQUIRED. Subject to compliance by the
Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers and to each Subsequent Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Securities under the 1933 Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "1939 Act").
(xxxiv) REPORTING COMPANY. The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the 1934 Act.
(xxxv) NO DIRECTED SELLING EFFORTS. With respect to those
Securities sold in reliance on Regulation S, (A) none of the Issuers, any
of their respective Affiliates or any person acting on their behalf (other
than the Initial Purchasers, as to whom the Issuers make no representation)
has engaged or will engage in any directed selling efforts within the
meaning of Regulation S and (B) each of the Issuers, any of their
respective Affiliates and any person acting on their behalf (other than the
Initial Purchasers, as to whom the Issuers make no representation) has
complied and will comply with the offering restrictions requirement of
Regulation S.
(xxxvi) MATERIAL CONTRACTS. Except for the contracts listed as
Exhibit 10 to the Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998, and the contracts disclosed in the Offering
Memorandum, neither the Company nor any of its Subsidiaries is party to any
contract, agreement or understanding that is material to the business of
the Company or its Subsidiaries, considered as one enterprise.
(xxxvii) REGULATIONS G, T, U AND X. Neither the consummation of
the transactions contemplated hereby nor the sale, issuance, execution or
delivery of the Securities, nor the application of the proceeds therefrom
(if applied as described in the Offering Memorandum under the caption "Use
of Proceeds"), will violate Regulation G (12 C.F.R. Part 207), T (12 C.F.R.
Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
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15
(xxxviii) Neither the Company nor any of its Subsidiaries nor any of
their respective directors, officers or controlling persons has taken,
directly or indirectly, any action designed, or which might reasonably be
expected to cause or result, under the 1934 Act, in, or which has
constituted, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities, the
Exchange Securities or the Private Exchange Securities.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its Subsidiaries delivered to the Representatives or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by each of the Issuers to each Initial Purchaser as to the matters covered
thereby.
SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Issuers, jointly and severally, agree to sell to each Initial Purchaser,
severally and not jointly, and each Initial Purchaser, severally and not
jointly, agrees to purchase from the Issuers, at the price set forth in
Schedule D, the aggregate principal amount of Securities set forth in Schedule B
opposite the name of such Initial Purchaser, plus any additional principal
amount of Securities which such Initial Purchaser may become obligated to
purchase pursuant to the provisions of Section 11 hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York, or at such other place as shall be
agreed upon by Merrill Lynch and the Issuers, at 9:00 A.M. (eastern time) on the
fourth business day after the date hereof (unless postponed in accordance with
the provisions of Section 11), or such other time not later than ten business
days after such date as shall be agreed upon by Merrill Lynch and the Issuers
(such time and date of payment and delivery being herein called the "Closing
Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
Merrill Lynch for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized Merrill Lynch, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities 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 to be purchased by any
Initial Purchaser
<PAGE>
16
whose funds have not been received by the Closing Time, but such payment shall
not relieve such Initial Purchaser from its obligations hereunder.
(c) QUALIFIED INSTITUTIONAL BUYER. Each Initial Purchaser severally
and not jointly represents and warrants to, and agrees with, the Issuers 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
shall be in such denominations ($1,000 or integral multiples thereof) and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time. The certificates representing
the Securities shall be registered in the name of Cede & Co. pursuant to the DTC
Agreement and shall be made available for inspection, checking and packaging by
the Initial Purchasers in The City of New York not later than 10:00 A.M. on the
last business day prior to the Closing Time.
SECTION 3. COVENANTS OF THE ISSUERS. Each of the Issuers, jointly
and severally, covenants with each Initial Purchaser as follows:
(a) OFFERING MEMORANDUM. The Issuers, 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 Issuers will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (x) any filing made by any of the Issuers of information relating to the
offering of the Securities 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 by the Initial Purchasers as
evidenced by a notice in writing from the Initial Purchasers to the Company
(from the date hereof to such completion, the "Offering Period"), any material
changes in or affecting the conditions, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its Subsidiaries which
(i) make any statement in the Offering Memorandum false or misleading or
(ii) are not disclosed in the Offering Memorandum. In such event or if during
the Offering Period any event shall occur or condition shall exist as a result
of which it is necessary, in the reasonable opinion of any of the Issuers, their
counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend
or supplement the Offering Memorandum in order that the Offering Memorandum, as
then amended or supplemented, not include any untrue statement of a material
fact or omit to state a material fact
<PAGE>
17
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing or to comply with applicable law, the Issuers
will (subject to Section 3(c) hereof) forthwith amend or supplement the Offering
Memorandum by preparing and furnishing, at the expense of the Issuers, to each
Initial Purchaser an amendment or amendments of, or a supplement or supplements
to, the Offering Memorandum (in form and substance reasonably satisfactory to
the Representatives and to counsel for the Initial Purchasers) so that, as so
amended or supplemented, the 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 or to comply
with applicable law, as the case may be. The Issuers will furnish to the
Initial Purchasers such number of copies of such amendment or supplement as the
Initial Purchasers may reasonably request. Each of the Issuers agrees to notify
the Initial Purchasers in writing to suspend use of the Offering Memorandum as
promptly as practicable after the occurrence of an event specified in this
paragraph (b), and the Initial Purchasers hereby agree upon receipt of such
notice from the Issuers to suspend use of the Offering Memorandum until the
Issuers have amended or supplemented the Offering Memorandum to correct such
misstatement or omission or to effect such compliance.
(c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. The Issuers
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 prior written consent of the Initial Purchasers. Neither
the consent of the Initial Purchasers, 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 FOR OFFER AND SALE. The Issuers will
use their best efforts, in cooperation with the Initial Purchasers, to qualify
the Securities for offering and sale under the applicable securities laws of
such jurisdictions as the Representatives may designate and will maintain such
qualifications in effect as long as required for the sale of the Securities;
PROVIDED, HOWEVER, that the Issuers 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. The Issuers will file such statements and
reports as may be required by the laws of each jurisdiction in which the
Securities have been qualified as above provided. The Issuers shall promptly
advise the Initial Purchasers of the receipt by any of the Issuers of any
notification with respect to the suspension of the qualification or exemption
from qualification of the Securities for offering or sale in any jurisdiction or
the institution, threatening or contemplation of any proceeding for such
purpose.
<PAGE>
18
(e) RATING OF SECURITIES. The Issuers shall take all reasonable
action necessary to enable Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's") to
provide their respective credit ratings of the Securities.
(f) DTC. The Issuers will cooperate with the Representatives and use
their respective best efforts to permit the Securities to be eligible for
clearance and settlement through the facilities of DTC.
(g) USE OF PROCEEDS. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds".
(h) RESTRICTION OF SALE OF SECURITIES. During a period of 180 days
from the date of the Offering Memorandum, the Issuers will not, and will not
permit their respective Subsidiaries to, without the prior written consent of
Merrill Lynch, directly or indirectly, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant for the sale of or otherwise dispose
of, any other debt securities of the Company or securities of the Company that
are convertible into, or exchangeable for, the Securities or such other debt
securities, other than the Exchange Securities referred to in the Registration
Rights Agreement, or file a registration statement with respect to the
foregoing.
(i) PORTAL DESIGNATION. The Company will use its best efforts to
permit the Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities Dealers,
Inc. ("NASD") relating to trading in the PORTAL Market.
(j) PERIODIC REPORTS. The Issuers will, so long as the Securities or
Exchange Securities or Private Exchange Securities are outstanding, furnish to
the Trustee on a timely basis, pursuant to the Indenture, whether or not the
Company has a class of securities registered under the 1934 Act (i) audited
year-end consolidated financial statements of the Company (including a balance
sheet, income statement and statement of changes of cash flow) prepared in
accordance with GAAP and substantially in the form required under Regulation S-X
under the 1933 Act and the information described in Item 303 of Regulation S-K
under the 1933 Act with respect to such period and (ii) unaudited quarterly
consolidated financial statements of the Company (including a balance sheet,
income statement and statement of cash flows) prepared in accordance with GAAP
and substantially in the form required by Regulation S-X under the 1933 Act and
the information described in Item 303 of Regulation S-K under the 1933 Act with
respect to such period and will furnish to the Initial Purchasers copies of all
such reports and information, together with such other
<PAGE>
19
documents, reports and information as shall be furnished by the Company to the
holders of the Securities or to the Trustee. In the event the Company is not
subject to Section 13 or 15(d) of the 1934 Act, the Company will furnish to
holders of Securities and prospective purchasers of Securities designated by
such holders, upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under the 1933
Act to permit compliance with Rule 144A in connection with resales of the
Securities. For so long as the Securities or Exchange Securities or Private
Exchange Securities are outstanding, the Issuers will furnish to the Initial
Purchasers copies of all annual reports, quarterly reports or 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 Issuers generally to the holders of
the Securities or to securityholders of their publicly issued securities
generally.
(k) INTERIM REPORTS. Prior to the Closing Time, the Company will
furnish on a confidential basis to the Initial Purchasers, if and promptly after
they have been prepared, a copy of any unaudited interim consolidated financial
statements of the Company for any period subsequent to the period covered by the
most recent financial statements of the Company appearing in the Offering
Memorandum which have been prepared in the ordinary course of business.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, the Issuers agree, jointly and severally, to pay and
bear all costs and expenses incident to the performance of their respective
obligations under this Agreement, including (i) the preparation, printing and
any filing of the Preliminary Offering Memorandum and the Final Offering
Memorandum (including financial statements and any schedules or exhibits and any
document incorporated therein by reference) and of each amendment or supplement
thereto and the cost of furnishing copies thereof to the Initial Purchasers and
their counsel, (ii) the preparation, printing and delivery to the Initial
Purchasers of this Agreement, any Agreement among Initial Purchasers, the
Indenture, the Registration Rights Agreement, the DTC Agreement and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, printing,
issuance and delivery of the certificates for the Securities, the Exchange
Securities and the Private Exchange Securities to the Initial Purchasers,
including any charges of DTC in connection therewith, (iv) the fees and
disbursements of the Issuers' counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(d) hereof and any filing for review of the offering, if
requested, with the National Association of Securities Dealers, Inc., including
filing fees and the reasonable fees and disbursements of counsel for the Ini-
<PAGE>
20
tial 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, the
Exchange Securities and the Private Exchange Securities, (vii) any fees payable
in connection with the rating of the Securities, the Exchange Securities and the
Private Exchange Securities, (viii) any fees and expenses payable in connection
with the initial and continued designation of the Securities, the Exchange
Securities and the Private Exchange Securities as PORTAL securities and to
permit the Securities, the Exchange Securities and the Private Exchange
Securities to be eligible for clearance through DTC all expenses (including
travel expenses) of the Issuers in connection with any meetings with prospective
investors in the Securities, and (ix) one-half of the expenses related to the
charter or use of any aircraft used in connection with any meetings with
prospective investors in the Securities. Except as expressly provided in this
Section 4, the Issuers shall not be responsible for the out-of-pocket expenses
of the Initial Purchasers, including the fees and disbursements of counsel for
the Initial Purchasers.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by
Merrill Lynch in accordance with the provisions of Section 5 or Section 10(a)(i)
hereof, the Issuers, 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 Issuers contained in
Section 1 hereof or in certificates of any officer of the Company or any of its
Subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Issuers of their covenants and other obligations hereunder, and to the
following further conditions.
(a) OPINIONS OF COUNSEL FOR COMPANY. At the Closing Time, the
Representatives shall have received the favorable opinions, dated as of the
Closing Time, of each of Oppenheimer Wolff & Donnelly LLP, counsel for the
Issuers and Norman R. Soland, Vice President, Secretary and General Counsel 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 letter for
each of the other Initial Purchasers, to the effect set forth in Exhibits A-1
and A-2 hereto, respectively, and to such further effect as counsel to the
Initial Purchasers may reasonably request.
(b) OPINION OF COUNSEL FOR INITIAL PURCHASERS. At the Closing Time,
the Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Cahill Gordon & Reindel, counsel for the Initial Purchasers,
together with signed or repro-
<PAGE>
21
duced copies of such letter for each of the other Initial Purchasers with
respect to the matters set forth in paragraphs (iii), (iv), (v), (vi), (vii),
(viii) and (xii) of Exhibit A-1 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, 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 Representatives. 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 and its Subsidiaries
and certificates of public officials.
In addition, such counsel for the Initial Purchasers shall
additionally state that such counsel has participated in conferences with
officers and other representatives of the Issuers and representatives of the
independent accountants for the Issuers at which conferences the contents of the
Offering Memorandum and related matters were discussed and, although given the
limitations inherent in the role of outside counsel and the character of
determinations involved in the preparation of the Offering Memorandum, such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Offering
Memorandum and has made no independent check or verification thereof, on the
basis of the foregoing, no facts have come to the attention of such counsel
which would lead such counsel to believe that the Offering Memorandum, at the
date thereof or as of the Closing Time, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief with respect to the financial statements, including the notes thereto, or
any other financial or statistical data found in or derived from the internal
accounting and other records of the Company and its Subsidiaries set forth or
referred to in the Offering Memorandum).
(c) OFFICERS' CERTIFICATE. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the 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, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, and equivalent officials of each Guarantor, dated as of the
Closing Time, to the effect that (i) there has been no such material adverse
change or development, (ii) the representations and warranties in Section 1
hereof are true and correct with the same force and effect as though expressly
made at and as of the Closing Time, and (iii) each of the Company and each of
the
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22
Guarantors, as the case may be, has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Closing Time.
(d) ACCOUNTANTS' COMFORT LETTER. At the time of the execution of
this Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives and counsel to the Initial Purchasers, together with signed or
reproduced copies of such letter for each of the 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. Ernst &
Young LLP shall provide in a separate writing a consent to 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
Representatives 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 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 B1 by Moody's, BB+ by S&P, and BB by Duff
& Phelps, and the Issuers shall have delivered to the Representatives a letter
dated the Closing Time, from each such rating agency, or other evidence
satisfactory to the Representatives, confirming that the Securities have such
ratings; and since the date of this Agreement, there shall not have occurred a
downgrading in the rating assigned to the Securities or any of the other debt
securities of any of the Issuers by any "nationally recognized statistical
rating agency," as that term is defined by the Commission for purposes of Rule
436(g)(2) under the 1933 Act, 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 or any of the other
securities of any of the Issuers.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(h) INDENTURE. Each of the Issuers and the Trustee shall have
entered into the Indenture, in form and substance satisfactory to the
Representatives and counsel to the Initial Purchasers.
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23
(i) REGISTRATION RIGHTS AGREEMENT. Each of the Issuers and the
Initial Purchasers shall have entered into the Registration Rights Agreement, in
form and substance satisfactory to the Representatives and counsel to the
Initial Purchasers.
(j) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance and
sale of the Securities 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 Issuers in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Representatives and counsel
for the Initial Purchasers.
(k) 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 Merrill Lynch 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, 7, 8, 9 and 12 through 17, inclusive, shall survive any
such termination and remain in full force and effect.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
(a) OFFER AND SALE PROCEDURES. Each of the Initial Purchasers and
each of the Issuers hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Securities:
(i) OFFERS AND SALES ONLY TO QUALIFIED INSTITUTIONAL BUYERS OR
NON-U.S. PERSONS. Offers and sales of the Securities shall only be made to
(A) persons whom the offeror or seller reasonably believes to be Qualified
Institutional Buyers and (B) non-U.S. persons outside the United States, as
defined in Regulation S under the 1933 Act, to whom the offeror or seller
reasonably believes offers and sales of the Securities may be made in
reliance upon Regulation S under the 1933 Act. Each Initial Purchaser
agrees that it will not offer, sell or deliver any of the Securities in any
jurisdiction outside the United States except under circumstances that will
result in compliance with the applicable laws thereof, and that it will
take at its own expense (except as otherwise provided herein) whatever
action is required to permit its purchase and resale of the Securities in
such jurisdictions.
(ii) NO GENERAL SOLICITATION. No general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) will be
used in the United States in connection with the offering or sale of the
Securities.
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24
(iii) PURCHASES BY NON-BANK FIDUCIARIES. In the case of a
non-bank Subsequent Purchaser of any of the Securities acting as a
fiduciary for one or more third parties, each third party shall, in the
judgment of the applicable Initial Purchaser, be a Qualified Institutional
Buyer or a non-U.S. person outside the United States.
(iv) SUBSEQUENT PURCHASER NOTIFICATION. Each Initial Purchaser
will take reasonable steps to inform, and cause each of its U.S. Affiliates
to take reasonable steps to inform, persons acquiring Securities from such
Initial Purchaser or affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
1933 Act, (B) are being sold to them without registration under the 1933
Act in reliance on Rule 144A or in accordance with another exemption from
registration under the 1933 Act, as the case may be, and (C) may not be
offered, sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Regulation S, or (3) inside
the United States in accordance with (x) Rule 144A to a person whom the
seller reasonably believes is a Qualified Institutional Buyer that is
purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale
or transfer is being made in reliance on Rule 144A or (y) pursuant to
another available exemption from registration under the 1933 Act.
(v) MINIMUM PRINCIPAL AMOUNT. No sale of the Securities to any
one Subsequent Purchaser will be for less than U.S. $100,000 principal
amount and none of the Securities will be issued in a smaller principal
amount. If the Subsequent Purchaser is a non-bank fiduciary acting on
behalf of others, each person for whom it is acting must purchase at least
U.S. $100,000 principal amount of the Securities.
(vi) RESTRICTIONS ON TRANSFER. The transfer restrictions and the
other provisions set forth in the Offering Memorandum under the heading
"Notice to Investors", including the legend required thereby, shall apply
to the Securities except as otherwise agreed by the Company and the Initial
Purchasers. Following the sale of the Securities by the Initial Purchasers
to Subsequent Purchasers pursuant to and in compliance with the terms
hereof, the Initial Purchasers shall not be liable or responsible to the
Issuers for any losses, damages or liabilities suffered or incurred by the
Issuers, including any losses, damages or liabilities under the 1933 Act,
arising from or relating to any resale or transfer of any Security
occurring after such sale by the Initial Purchasers.
(vii) DELIVERY OF OFFERING MEMORANDUM. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection
<PAGE>
25
with its original distribution of the Securities, a copy of the Offering
Memorandum, as amended and supplemented at the date of such delivery.
(b) COVENANTS OF THE ISSUERS. Each of the Issuers, jointly and
severally, covenants with each Initial Purchaser as follows:
(i) DUE DILIGENCE. In connection with the original distribution
of the Securities, the Issuers, jointly and severally, agree that, prior to
any offer or resale of the Securities by the Initial Purchasers, the
Initial Purchasers and counsel for the Initial Purchasers shall have the
right to make reasonable inquiries into the business of the Company and its
Subsidiaries. The Issuers, jointly and severally, also agree to provide
answers to each prospective Subsequent Purchaser of Securities who so
requests concerning the Company and its Subsidiaries (to the extent that
such information is available or can be acquired and made available to
prospective Subsequent Purchasers without unreasonable effort or expense
and to the extent the provision thereof is not prohibited by applicable
law) and the terms and conditions of the offering of the Securities, as
provided in the Offering Memorandum.
(ii) INTEGRATION. The Issuers, jointly and severally, agree that
they will not and will cause their respective Affiliates not to solicit any
offer to buy or make any offer or sale of, or otherwise negotiate in
respect of, securities of the Company 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 would render invalid (for the purpose of (i) the sale of the
Securities by the Issuers to the Initial Purchasers, (ii) the resale of the
Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the
resale of the Securities 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.
(iii) RULE 144A INFORMATION. The Issuers, jointly and severally,
agree that, in order to render the Securities eligible for resale pursuant
to Rule 144A under the 1933 Act, while any of the Securities remain
outstanding, they will make available, upon request, to any holder of
Securities or prospective purchasers of Securities the information
specified in Rule 144A(d)(4), unless the Issuers 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 herein referred to as "Additional
Information").
(iv) RESTRICTION ON RESALES. Until the expiration of two years
after the original issuance of the Securities, the Issuers will not, and
will cause their Affiliates not to, resell any Securities which are
"restricted securities" (as such term is de-
<PAGE>
26
fined under Rule 144(a)(3) under the 1933 Act), that have been acquired by
any of them, whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers
in the ordinary course of business in unsolicited broker's transactions).
(c) RESALE PURSUANT TO RULE 903 OF REGULATION S OR RULE 144A. Each
Initial Purchaser understands that the Securities have not been and will not be
registered under the 1933 Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the 1933 Act or pursuant to an exemption from
the registration requirements of the 1933 Act. Each Initial Purchaser severally
represents and agrees that, except as permitted by Section 6(a) above, it has
offered and sold Securities and will offer and sell Securities (i) as part of
their distribution at any time and (ii) otherwise until forty days after the
later of the date upon which the offering of the Securities commences and the
Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under
the 1933 Act or another applicable exemption from the registration provisions of
the 1933 Act. Accordingly, neither the Initial Purchasers, their affiliates nor
any persons acting on their behalf have engaged or will engage in any directed
selling efforts with respect to Securities, and the Initial Purchasers, their
affiliates and any person acting on their behalf have complied and will comply
with the offering restriction requirements of Regulation S. Each Initial
Purchaser agrees that, at or prior to confirmation of a sale of Securities
(other than a sale of Securities pursuant to Rule 144A) it will have sent to
each distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it or through it during the
restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons (i) as part of their distribution
at any time and (ii) otherwise until forty days after the later of the
date upon which the offering of the Securities commenced and the date
of closing, except in either case in accordance with Regulation S,
Rule 144A under the Securities Act or another exemption from the
registration requirements of the 1933 Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in the above paragraph have the meanings given to them by Regulation
S.
(d) REPRESENTATIONS AND WARRANTIES OF INITIAL PURCHASERS. Each
Initial Purchaser severally represents and agrees that it has not entered and
will not enter into any
<PAGE>
27
contractual arrangements with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the Company.
SECTION 7. INDEMNIFICATION.
(a) INDEMNIFICATION OF INITIAL PURCHASERS. The Issuers agree,
jointly and severally, to indemnify and hold harmless each Initial Purchaser,
its Affiliates and each person, if any, who controls any Initial Purchaser or
any of its Affiliates 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, joint or several, 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), 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;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, 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 7(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
(in addition to any local counsel)), 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 by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto); PROVIDED, FURTHER, that the Issuers will
not be liable to any Initial Purchaser, its Affiliates or any person controlling
such Initial Purchaser with respect to any such untrue statement or alleged un-
<PAGE>
28
true statement or omission or alleged omission made in any Preliminary Offering
Memorandum to the extent that the Issuers shall sustain the burden of proving
that any such loss, liability, claim, damage or expense resulted from (A) the
fact that such Initial Purchaser, in contravention of a requirement of this
Agreement or applicable law, sold Notes to a person to whom such Initial
Purchaser failed to send or give, at or prior to the Closing Time, a copy of the
Final Offering Memorandum as then amended or supplemented if (i) the Issuers
have previously furnished copies thereof (sufficiently in advance of the Closing
Time to allow for distribution by the Closing Time) to the Initial Purchasers
and the loss, liability, claim, damage or expense of such Initial Purchaser,
Affiliate or person controlling such Initial Purchaser resulted from an untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in or omitted from the Preliminary Offering Memorandum
which was corrected in the Final Offering Memorandum as, if applicable, amended
or supplemented prior to the Closing Time, and such Offering Memorandum was
required by law to be delivered at or prior to the written confirmation of sale
to such person, and (ii) such failure to give or send such Final Offering
Memorandum by the Closing Time to such person would have constituted the sole
defense to the claim asserted by such person and the claims asserted by such
person do not include allegations of any other untrue statement or omission made
in the Preliminary Offering Memorandum which was not corrected in the Final
Offering Memorandum, which allegation is upheld by a final judgment or (B) the
use of the Offering Memorandum during a period when the use of the Offering
Memorandum has been suspended in accordance with Section 3(b) hereof (provided
that the Initial Purchasers received prior notice of such suspension).
(b) INDEMNIFICATION OF ISSUERS, DIRECTORS AND OFFICERS. Each Initial
Purchaser, severally and not jointly, agrees to indemnify and hold harmless the
Issuers, their directors and each person, if any, who controls the Issuers
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 7, 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 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
7(a) above,
<PAGE>
29
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 7(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 7 or Section
8 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 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after 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 8. CONTRIBUTION. If the indemnification provided for in
Section 7 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
Issuers on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities 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 Issuers on the one hand and of
<PAGE>
30
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 Issuers on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities 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 pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Issuers 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 Issuers or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
Each of the Issuers and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 8 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 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased by it were offered to the
Subsequent Purchasers 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.
<PAGE>
31
For purposes of this Section 8, 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 person, if any, who controls the Issuers 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 Issuers. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the principal amount of Securities set forth opposite their respective names
in Schedule B hereto and not joint.
SECTION 9. 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 its
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 to the Initial
Purchasers and the payment therefor by the Initial Purchasers.
SECTION 10. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. Merrill Lynch may terminate this
Agreement, by notice to the Company, 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, or in the 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, or (ii) 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 Merrill Lynch, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in any securities
of the Company has been suspended or materially limited by the Commission or the
Nasdaq National Market, or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the Nasdaq National Market has been
suspended or materially 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
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
<PAGE>
32
(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, 7, 8, 9 and 12 through 17, inclusive, shall survive such termination and
remain in full force and effect.
SECTION 11. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If
one or more of the Initial Purchasers shall fail at the Closing Time to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), Merrill Lynch shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, or any other Initial Purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, Merrill Lynch shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
each of the non-defaulting Initial Purchasers shall be obligated, severally
and not jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
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 Merrill Lynch or the Issuers 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 11.
SECTION 12. 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 Merrill Lynch at North Tower, World
Financial Center, New York, New York 10281-1201, attention: High Yield
Corporate Finance; notices to the Issuers shall be directed to them at
Nash-Finch Company, 7600 France Avenue South, P.O. Box 355, Minneapolis,
<PAGE>
33
Minnesota 55440-0355, attention: Norman R. Soland, Vice President, Secretary and
General Counsel.
SECTION 13. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The
statements set forth in the last paragraph on the front cover page and in the
second paragraph (other than the first sentence thereof) and the fifth
paragraph, the last sentence of the sixth paragraph, and the ninth paragraph
under the heading "Plan of Distribution" in the Offering Memorandum (in each
case, to the extent such statements relate to the Initial Purchasers) constitute
the only information furnished by the Initial Purchasers to the Issuers for use
in the Offering Memorandum for the purposes of Sections 1, 7 and 8 hereof.
SECTION 14. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers and the Issuers 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 and the Issuers and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
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 and Issuers
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 from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 16. 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.
SECTION 17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and, when each party has executed a counterpart, all such
counterparts taken together shall constitute one and the same agreement.
[Signature Pages Follow]
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company 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,
NASH-FINCH COMPANY
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: President
NASH DECAMP COMPANY
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: Attorney-in-fact
T.J. MORRIS COMPANY
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: President
SUPER FOOD SERVICES, INC.
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: Vice President
<PAGE>
FORREST TRANSPORTATION
SERVICES, INC.
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: Attorney-in-fact
GTL TRUCK LINES, INC.
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: Vice President
PIGGLY WIGGLY NORTHLAND
CORPORATION
By: /s/ Alfred N. Flaten
-----------------------------------
Name: Alfred N. Flaten
Title: President
GILLETTE DAIRY OF THE BLACK
HILLS, INC.
By: /s/ Charles F. Ramsbacher
-----------------------------------
Name: Charles F. Ramsbacher
Title: Vice President
NEBRASKA DAIRIES, INC.
By: /s/ Charles F. Ramsbacher
-----------------------------------
Name: Charles F. Ramsbacher
Title: Vice President
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
NESBITT BURNS SECURITIES INC.
PIPER JAFFRAY INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ [ILLEGIBLE]
---------------------------------
Authorized Signatory
For themselves and as Representatives of the other Initial Purchasers named in
Schedule B hereto.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Guarantors Ownership Percentage
---------- --------------------
<S> <C>
Nash DeCamp Company 100%
T.J. Morris Company 100%
Super Food Services, Inc. 100%
Forrest Transportation Services, Inc. 100%
GTL Truck Lines, Inc. 100%
Piggly Wiggly Northland Corporation 100%
Gillette Dairy of the Black Hills, Inc. 66.7%
Nebraska Dairies, Inc. 66.7%
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . $115,500,000
Nesbitt Burns Securities Inc. . . . . . . . . . . . . . . . . $ 24,750,000
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . . . . . $ 24,750,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $165,000,000
------------
------------
</TABLE>
<PAGE>
SCHEDULE C
<TABLE>
<CAPTION>
Non-Guarantor Subsidiary Ownership Percentage
------------------------ --------------------
<S> <C>
Fame Marketing Corp. 100%
Gray Bear, Inc. 100%
Kentucky Food Stores, Inc. 100%
Super Foods, Inc. 100%
Nash Finch Funding Corp. 100%
Agricola Nadco Limitada 99%
Monroeville Foods, Inc. 59%
New Castle Foods, Inc. 90%
Whitton Enterprises, Inc. 66.67%
</TABLE>
<PAGE>
SCHEDULE D
NASH-FINCH COMPANY
$165,000,000 Senior Subordinated Notes Due 2008
1. The initial offering price of the Securities shall be 99.20% 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 shall be 97.075% of the principal amount thereof.
3. The interest rate on the Securities shall be 8 1/2% per annum.
4. The Securities will mature on May 1, 2008. Interest on the Notes
will be payable semi-annually on each May 1 and November 1, commencing
November 1, 1998.
5. The Securities will be redeemable at the option of the Company,
in whole or in part, at any time on or after May 1, 2003, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the date of redemption, if
redeemed during the 12-month period beginning on May 1 of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . 104.250%
2004 . . . . . . . . . . . . . . . . . . . . . . . . 102.833%
2005 . . . . . . . . . . . . . . . . . . . . . . . . 101.417%
2006 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
6. On or prior to May 1, 2001, the Company may, at its option, use
the net proceeds of a Public Equity Offering (as defined in the Offering
Memorandum) to redeem up to 35% of the originally issued aggregate principal
amount of the Securities, at a redemption price in cash equal to 108.5% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of redemption; PROVIDED, HOWEVER, that not less than $107.25 million in
aggregate principal amount of Securities is outstanding following such
redemption.
<PAGE>
EXHIBIT A-1
FORM OF OPINION OF OPPENHEIMER WOLFF &
DONNELLY LLP TO BE DELIVERED PURSUANT TO SECTION 5(a)
April __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Nesbitt Burns Securities Inc.
Piper Jaffray Inc.
As Representatives of the several Initial Purchasers
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:
We have acted as counsel to Nash-Finch Company, a Delaware corporation (the
"Company"), and the Guarantors (as defined below) in connection with the sale of
$165,000,000 in principal amount of the Company's 8-1/2% Senior Subordinated
Notes due 2008 to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Initial
Purchasers"), pursuant to the Purchase Agreement, dated as of April 20, 1998 by
and among the Company, the guarantors listed on Schedule A thereto (the
"Guarantors") and the Initial Purchasers (the "Purchase Agreement"). This
opinion is furnished to you pursuant to Section 5(a) of the Purchase Agreement.
Capitalized terms used in this opinion that are not otherwise defined herein
shall have the meaning given to such terms in the Purchase Agreement.
In acting as counsel for the Company and the Guarantors and arriving at the
opinions expressed below, we have reviewed, among other documents, the following
agreements and instruments:
(a) the Offering Memorandum;
(b) the Purchase Agreement;
(c) the Registration Rights Agreement;
(d) the DTC Agreement;
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 2
(e) the Indenture;
(f) the Notes;
(g) the Guarantees;
(h) the form of Exchange Securities; and
(i) the form of Private Exchange Securities.
We have also examined and relied upon originals or copies of such other
documents and records of the Company and the Guarantors, certificates of
officers and representatives of the Company, certificates of public officials
and other documents we have deemed necessary or appropriate as a basis for the
opinions expressed below. As to various questions of fact material to such
opinions, we have, when relevant facts were not independently established,
relied upon certificates of officers of the Company and the Guarantors and upon
representations of the Company and the Guarantors contained in the Purchase
Agreement, without independent verification or investigation.
With regard to documents executed by parties other than the Company or the
Guarantors, we have assumed that such documents have been duly executed and
delivered by such other parties and are the valid and binding obligations of and
enforceable against such other 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 qualifications and limitations
stated herein, it is our opinion that:
(i) The Purchase Agreement has been duly authorized, executed and
delivered by each of the Issuers.
(ii) The DTC Agreement has been duly authorized, executed and
delivered by each of the Issuers and is a valid and binding agreement of
each of the Issuers, enforceable against each of the Issuers in accordance
with its terms.
(iii) The Indenture has been duly authorized, executed and delivered
by each of the Issuers and constitutes a valid and binding agreement of
each of the Issuers, enforceable against each of the Issuers in accordance
with its terms.
(iv) The Notes are in the form contemplated by the Indenture, have
been duly authorized by each of the Issuers and, when executed by each of
the Issuers and
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 3
authenticated by the Trustee in the manner provided in the Indenture and
delivered against payment of the purchase price therefor, will constitute
valid and binding obligations of each of the Issuers, enforceable against
each of the Issuers in accordance with their terms and entitled to the
benefits of the Indenture.
(v) The Guarantees have been duly authorized by each of the
Guarantors and when executed and delivered by each of the Guarantors in
accordance with the provisions of the Indenture (assuming the due
authorization, execution and delivery of the Indenture, and the due
authentication of the Notes, in each case by the Trustee), will constitute
valid and binding obligations of each of the Guarantors, enforceable
against each of the Guarantors in accordance with their terms and entitled
to the benefits of the Indenture.
(vi) The Registration Rights Agreement has been duly authorized,
executed and delivered by each of the Issuers and constitutes a valid and
binding agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms.
(vii) The Exchange Securities and the Private Exchange Securities
have been duly authorized by each of the Issuers and, when executed by each
of the Issuers and authenticated in the manner provided for in the
Indenture and delivered in exchange for the Securities in accordance with
the terms of the Registration Rights Agreement, will constitute valid and
binding obligations of each of the Issuers, enforceable against each of the
Issuers in accordance with their terms and entitled to the benefits of the
Indenture.
(viii) The Securities, the Exchange Securities, the Registration
Rights Agreement and the Indenture conform in all material respects to the
descriptions thereof contained in the Offering Memorandum.
(ix) The information in the Offering Memorandum under "Offering
Memorandum Summary - The Offering," "Description of Certain Other
Indebtedness," "Description of the Notes" and "Exchange Offer; Registration
Rights," to the extent that it constitutes matters of law, summaries of
legal matters or legal conclusions, has been reviewed and fairly and
accurately summarizes such matters in all material respects.
(x) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or any of its Subsidiaries are a party
are accurate in all material respects; to our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments that would be required to be described in a
registration statement on Form S-1 under the 1933 Act that are not
described or referred to in the Offering Memorandum other than those
described or referred to therein or incorporated by reference therein, and
the descriptions thereof or
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 4
references thereto are correct and fairly and accurately summarize such
agreements and instruments in all material respects.
(xi) 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 in connection with the
offering, issuance or sale of the Securities, the Exchange Securities or
the Private Exchange Securities, if any, the resale of the Securities by
the Initial Purchasers in accordance with the Purchase Agreement, the
authorization, execution or delivery of the Operative Documents, the
performance by the Company of its obligations under the Operative Documents
or the consummation of the transactions contemplated thereby, except as may
be required (A) in connection with the registration of the Exchange
Securities or the Private Exchange Securities, if any, under the 1933 Act
or the qualification of the Indenture under the 1939 Act pursuant to the
Registration Rights Agreement or (B) pursuant to state securities or "blue
sky" laws (as to which we express no opinion).
(xii) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in the Purchase Agreement, it is not
necessary in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers under, or in connection with the initial resale
of such Securities by the Initial Purchasers to each Subsequent Purchaser,
in each case, in the manner contemplated by the Purchase Agreement and the
Offering Memorandum, to register the Securities under the 1933 Act or to
qualify the Indenture under the 1939 Act.
(xiii) The issuance, sale and delivery of the Securities, the
Exchange Securities and the Private Exchange Securities, if any, the
execution, delivery and performance of the Purchase Agreement, the
Registration Rights Agreement, the Indenture and the Securities and the
consummation of the transactions contemplated in the Operative Documents
and in the Offering Memorandum (including the use of the proceeds from the
sale of the Securities as described in the Offering Memorandum under the
caption "Use Of Proceeds") and compliance by the Issuers with their
obligations under the Operative Documents do not, and at the Closing Time
will not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment
Event 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 its
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 filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 3, 1998 or which,
after inquiry, the Company has informed us will be filed as
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 5
exhibits to its Quarterly Report on Form 10-Q for the quarter ended March
28, 1998, to which the Company or any of its Subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any of its Subsidiaries is subject, nor will such
action result in any violation of the provisions of (i) the charter or
by-laws of the Company or any of its Subsidiaries, (ii) any applicable law,
statute, rule or regulation, in each case of the United States, the State
of Minnesota, the State of New York or the General Corporate Laws of the
State of Delaware or (iii) any judgment, order, writ or decree known to us
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of the Guarantors or
any of their respective properties, assets or operations.
(xiv) None of the Issuers is an "investment company" or an entity "
controlled" by an "investment company," as such terms are defined in the
1940 Act.
(xv) When the Securities are issued and delivered pursuant to the
Purchase Agreement, such Securities will not be of the same class (within
the meaning of Rule 144A) as securities of any of the Issuers which are
listed on a national securities exchange registered under Section 6 of the
1934 Act or quoted in a U.S. automated inter-dealer quotation system.
(xvi) Neither the consummation of the transactions contemplated
hereby nor the sale, issuance, execution or delivery of the Securities will
violate Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
We have participated in conferences with representatives of the
Initial Purchasers, officers and other representatives of the Company and the
Guarantors and representatives of Ernst & Young LLP, independent certified
public accountants for the Company, at which 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 (other than as set out in
our opinions above), on the basis of the foregoing, no facts have come to our
attention that would lead us to believe that the Offering Memorandum (except for
financial statements and schedules and other financial data included or
incorporated by reference therein, as to which we make no statement), at the
time the Offering Memorandum was issued, 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 (except for financial statements and
schedules and other financial data included or incorporated by reference
therein, as to which we make no statement), at the time any such amended or
supplemented Offering Memorandum was issued or at the Closing Time, contained
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 6
or contains an untrue statement of a material fact or omitted or omits 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.
In addition to the qualifications and limitations set forth above, the opinions
expressed herein are subject to the following qualifications and limitations:
(1) We express no opinion with respect to laws other than those of the
State of Minnesota, the State of New York, the General Corporate Laws
of the State of Delaware and the federal laws of the United States of
America, and we assume no responsibility as to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction.
(2) To the extent that the opinions given above relate to the
enforceability of any agreement or other document referred to herein,
the opinions are subject to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or
transfer and other laws affecting the rights of creditors generally or
the availability of specific performance, injunctive relief and other
equitable remedies, and to general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or at
law).
(3) Where we render an opinion based upon factual matters "known to us,"
or "to our knowledge," it is based solely upon inquiries of this
firm's attorneys who have worked on matters involving the Company or
the Guarantors, an examination of our files and of documents made
available to us by the Company or the Guarantors, and inquiries of
officers of the Company or the Guarantors. We have relied on
certificates executed by officers of the Company or the Guarantors
covering certain of such matters.
(4) In giving the opinions expressed above, we have assumed that any party
seeking to enforce the obligations under the Registration Rights
Agreement, the DTC Agreement, the Indenture, the Notes, the Guarantees
and the Exchange Securities in a Minnesota State court has at all
times been, and will continue at all times to be, exempt from the
filing requirements of Minnesota Statutes, Section 290.371 as it
relates to the filing of a Notice of Business Activities Report or, if
not exempt, has duly filed, and will continue to duly file, all such
Notice of Business Activities Reports.
<PAGE>
Merrill Lynch & Co.
April 24, 1998
Page 7
We are furnishing this opinion to you solely for your benefit in connection with
the above-described transaction. It is not to be used, circulated, quoted or
otherwise referred to for any other purpose, and no one other than you is
entitled to rely on this opinion. This opinion speaks only as of the date above
written, and we hereby expressly disclaim any duty to update any of the
statements made herein.
Very truly yours,
<PAGE>
EXHIBIT A-2
FORM OF OPINION OF NORMAN R. SOLAND
TO BE DELIVERED PURSUANT TO SECTION 5(a)
April ___, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Nesbitt Burns Securities Inc.
Piper Jaffray Inc.
As Representatives of the several Initial Purchasers
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:
I have acted as counsel to Nash-Finch Company, a Delaware corporation (the
"Company"), and the Guarantors (as defined below) in connection with the sale of
$165,000,000 in principal amount of the Company's 8-1/2% Senior Subordinated
Notes due 2008 to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Initial
Purchasers"), pursuant to the Purchase Agreement, dated as of April 20, 1998 by
and among the Company, the guarantors listed on Schedule A thereto (the
"Guarantors") and the Initial Purchasers (the "Purchase Agreement"). This
opinion is furnished to you pursuant to Section 5(a) of the Purchase Agreement.
Capitalized terms used in this opinion that are not otherwise defined herein
shall have the meaning given to such terms in the Purchase Agreement.
In acting as counsel for the Company and the Guarantors and arriving at the
opinions expressed below, I have reviewed, among other documents, the following
agreements and instruments:
(a) the Offering Memorandum;
(b) the Purchase Agreement;
(c) the Registration Rights Agreement;
(d) the DTC Agreement;
(e) the Indenture;
(f) the Notes;
<PAGE>
Merrill Lynch & Co.
April ___, 1998
Page 2
(g) the Guarantees;
(h) the form of Exchange Securities; and
(i) the form of Private Exchange Securities.
I have also examined and relied upon originals or copies of such other
documents and records of the Company and the Guarantors, certificates of
officers and representatives of the Company, certificates of public officials
and other documents I have deemed necessary or appropriate as a basis for the
opinions expressed below. As to various questions of fact material to such
opinions, I have, when relevant facts were not independently established, relied
upon certificates of officers of the Company and the Guarantors and upon
representations of the Company and the Guarantors contained in the Purchase
Agreement, without independent verification or investigation.
With regard to documents executed by parties other than the Company or the
Guarantors, I have assumed that such documents have been duly executed and
delivered by such other parties and are the valid and binding obligations of and
enforceable against such other parties. I have also assumed the authenticity of
all documents submitted to me as originals, the genuineness of all signatures,
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.
Based on the foregoing, and subject to the qualifications and limitations
stated herein, it is my opinion that:
(i) Each of the Issuers has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its respective
state of incorporation.
(ii) Each of the Issuers has the corporate power and authority to
own, lease and operate its assets and properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under each of the Operative Documents. Each of the
Operative Documents has been duly authorized by each Issuer that is a party
thereto.
(iii) Each of the Issuers is duly qualified as a foreign corporation
to transact business and is in good standing 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 or to be in good standing would not result in a Material Adverse
Effect.
<PAGE>
Merrill Lynch & Co.
April ___, 1998
Page 3
(iv) 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 the Purchase Agreement or
pursuant to reservations, agreements, employee or director benefit plans or
the exercise of 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 nonassessable; 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.
(v) Each Subsidiary which is not a Guarantor has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
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 to transact business and is in good standing 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 or to be in good standing would not
result in a Material Adverse Effect; all of the issued and outstanding
capital stock of each Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and, to my knowledge, except as
set forth in the Offering Memorandum or as disclosed in the Purchase
Agreement, is owned by the Company, directly or through subsidiaries, free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(vi) There is not pending or, to my knowledge, threatened, any
action, suit, proceeding, inquiry or investigation, to which the Company or
any Subsidiary is a party, or to which the property of the Company or any
Subsidiary thereof is subject, before or brought by any court or
governmental agency or body, which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect, or which,
individually or in the aggregate, might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in any Operative Documents or
the performance by the Issuers of their obligations thereunder or the
transactions contemplated by the Offering Memorandum or that would be
required to be described in a registration statement on Form S-1 under the
1933 Act.
<PAGE>
Merrill Lynch & Co.
April ___, 1998
Page 4
(iv) The information in the Offering Memorandum under "Risk Factors
- Risk of Environmental Liability" and "Business - Legal Proceedings," to
the extent that it constitutes matters of law, summaries of legal matters
or legal proceedings, or legal conclusions, has been reviewed by me and
fairly and accurately summarizes such matters in all material respects.
(viii) All descriptions in the Offering Memorandum of contracts and
other documents to which the Company or any of its Subsidiaries are a party
are accurate in all material respects; to my knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments that would be required to be described in a
registration statement on Form S-1 under the 1933 Act that are not
described or referred to in the Offering Memorandum other than those
described or referred to therein or incorporated by reference therein, and
the descriptions thereof or references thereto are correct and fairly and
accurately summarize such agreements and instruments in all material
respects.
(ix) Neither the Company nor any of its Subsidiaries is in
violation of its charter or by-laws and, to my knowledge, no default by any
of the Issuers exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which any of them may be bound or
to which any of their respective properties or assets is subject; and, to
my knowledge, none of the Issuers is in breach or violation of any law,
statute, rule or regulation, or any judgment, decree or order or
governmental or regulatory agency or other body having jurisdiction over
any of the Issuers or any of their respective property or assets.
(x) The issuance, sale and delivery of the Securities, the
Exchange Securities and the Private Exchange Securities, if any, the
execution, delivery and performance of the Purchase Agreement, the
Registration Rights Agreement, the Indenture and the Securities and the
consummation of the transactions contemplated in the Operative Documents
and in the Offering Memorandum (including the use of the proceeds from the
sale of the Securities as described in the Offering Memorandum under the
caption "Use Of Proceeds") and compliance by the Issuers with their
obligations under the Operative Documents do not, and at the Closing Time
will not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment
Event 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 its
Subsidiaries pursuant to any contract, indenture, mortgage, deed of trust,
loan or credit agreement,
<PAGE>
Merrill Lynch & Co.
April ___, 1998
Page 5
note, lease or any other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any of
its Subsidiaries is subject, nor will such action result in any violation
of the provisions of (i) the charter or by-laws of the Company or any of
its Subsidiaries, (ii) any applicable law, statute, rule or regulation, in
each case of the United States, the State of Minnesota or the General
Corporate Laws of the State of Delaware or (iii) any judgment, order, writ
or decree known to us of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of
the Guarantors or any of their respective properties, assets or operations.
I have participated in conferences with representatives of the Initial
Purchasers, officers and other representatives of the Company and the Guarantors
and representatives of Ernst & Young LLP, independent certified public
accountants for the Company, at which the contents of the Offering Memorandum
and related matters were discussed, and although I do not pass upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum (other than as set out in my
opinions above), on the basis of the foregoing, no facts have come to my
attention that would lead me to believe that the Offering Memorandum (except for
financial statements and schedules and other financial data included or
incorporated by reference therein, as to which I make no statement), at the time
the Offering Memorandum was issued, 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 (except for financial statements and
schedules and other financial data included or incorporated by reference
therein, as to which I make no statement), at the time any such amended or
supplemented Offering Memorandum was issued or at the Closing Time, contained or
contains an untrue statement of a material fact or omitted or omits 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.
In addition to the qualifications and limitations set forth above, the opinions
expressed herein are subject to the following qualifications and limitations:
(1) I express no opinion with respect to laws other than those of the
State of Minnesota, the General Corporate Laws of the State of
Delaware and the federal laws of the United States of America, and I
assume no responsibility as to the applicability thereto, or the
effect thereon, of the laws of any other jurisdiction.
<PAGE>
Merrill Lynch & Co.
April ___, 1998
Page 6
(2) To the extent that the opinions given above relate to the
enforceability of any agreement or other document referred to herein,
the opinions are subject to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or
transfer and other laws affecting the rights of creditors generally or
the availability of specific performance, injunctive relief and other
equitable remedies, and to general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or at
law).
(3) Where I render an opinion based upon factual matters "known to me," or
"to my knowledge," it is based solely upon inquiries of officers of
the Company or the Guarantors and an examination of my files and of
documents made available to me by the Company or the Guarantors. I
have relied on certificates executed by officers of the Company or the
Guarantors covering certain of such matters.
I am furnishing this opinion to you solely for your benefit in connection
with the above-described transaction. It is not to be used, circulated, quoted
or otherwise referred to for any other purpose, and no one other than you is
entitled to rely on this opinion. This opinion speaks only as of the date above
written, and I hereby expressly disclaim any duty to update any of the
statements made herein.
Very truly yours,
<PAGE>
Exhibit 12.1
<TABLE>
<CAPTION>
NASH FINCH COMPANY
Computation of Earnings to Fixed Charges
for the twelve weeks ended March 28, 1998 and March 22, 1997
and for the five years ended January 3, 1998
Ratio of Earnings to Fixed Charges Twelve weeks ended Fiscal Year Ended
---------------------- ---------------------------------------------------------------
March 28, March 22, January 3, December 28, December 30, December 31, January 1,
Earnings: 1998 1997 1998 1996 1995 1994 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before Income Tax and
Extraordinary Charge $ 4,493 $ 5,259 $ (234) $ 33,667 $ 28,595 $ 25,810 $ 26,678
Fixed Charges
Interest Expense $ 6,860 $ 7,321 $ 32,845 $ 14,894 $ 10,793 $ 11,384 $ 10,114
Interest Portion of Rent Expense $ 2,855 $ 2,562 $ 13,151 $ 10,311 $ 8,395 $ 8,761 $ 8,380
Total Fixed Charges $ 9,715 $ 9,883 $ 45,996 $ 25,205 $ 19,188 $ 20,145 $ 18,494
Earnings Available for Fixed Charges $ 14,208 $ 15,142 $ 45,762 $ 58,872 $ 47,783 $ 45,955 $ 45,172
Ratio of Earnings to fixed charges 1.46 1.53 1.00 2.34 2.49 2.28 2.44
</TABLE>
Page 1
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 26, 1998, in the Registration Statement on
Form S-4 and related Prospectus of Nash Finch Company for the registration
of $165,000,000 of it's Senior Subordinated Notes.
We also consent to the incorporation by reference therein of our report dated
March 26, 1998 with respect to the financial statement schedule of Nash
Finch Company for the years ended January 3, 1998, December 28, 1996, and
December 30, 1995 included in the Annual Report (Form 10-K) for 1997 filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
March 26, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
FORMERLY KNOWN AS
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
NASH-FINCH COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 41-0431960
(State of Incorporation) (I.R.S. Employer
Identification No.)
7600 France Avenue South
P.O. Box 355
Minneapolis, MN 55440-0355
(Address of Principal Executive Offices) (Zip Code)
8 1/2% SENIOR SUBORDINATED NOTES, SERIES B
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. 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.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining is
incorporated by reference to Registration Number 333-42147.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within
three years prior to the date of filing this statement, or what persons are
owners of 10% or more of the voting securities of the obligors, or
affiliates, are based upon information furnished to the Trustee by the
obligors. While the Trustee has no reason to doubt the accuracy of any such
information, it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association f/k/a First Trust National
Association, an Association organized and existing under the laws of the
United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Saint Paul and State of Minnesota on the 15th day of May, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
f/k/a FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
--------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ Kathe M. Barrett
- ---------------------------
Kathe M. Barrett
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION f/k/a FIRST TRUST
NATIONAL ASSOCIATION hereby consents that reports of examination of the
undersigned by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Dated: May 15, 1998
U.S. BANK TRUST NATIONAL ASSOCIATION
f/k/a FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
----------------------------------
Richard H. Prokosch
Assistant Vice President
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
NASH FINCH COMPANY
OFFER TO EXCHANGE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
FOR ANY AND ALL OF THE OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED
U.S. BANK TRUST NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
BY MAIL BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER
(registered or certified mail (612) 244-1537
recommended):
U.S. Bank Trust Confirm by Telephone U.S. Bank Trust
National Association or for Information Call: National Association
180 East 5th Street ( ) 180 East 5th Street
Saint Paul, MN 55101 Saint Paul, MN 55101
Attention:Specialized Finance Attention:Specialized Finance
Fourth Floor Fourth Floor
</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
, 1998 (the "Prospectus") of Nash Finch Company (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 1/2% Senior
Subordinated Notes due 2008, 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 1/2% Senior Subordinated Notes due
2008, Series A (the "Series A Notes") . The term "Expiration Date" shall mean
5:00 p.m., New York City time, on , 1998, 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 Series A 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.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
<CAPTION>
NAME(S) AND AGGREGATE
ADDRESS(ES) OF CERTIFICATE OR PRINCIPAL AMOUNT PRINCIPAL
REGISTERED OWNER(S) REGISTRATION REPRESENTED BY AMOUNT
(PLEASE FILL IN) NUMBERS* SERIES A 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 Series A Notes. All tenders must be in integral
multiples of $1,000.
</TABLE>
This Letter of Transmittal is to be used (i) if certificates of Series A
Notes are to be forwarded herewith, (ii) if delivery of Series A 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 Series A 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 Series A 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 Series A
Notes must complete this letter in its entirety.
<PAGE>
/ / CHECK HERE IF TENDERED SERIES A 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 SERIES A NOTES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER THEIR SERIES A NOTES AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE MUST TENDER THEIR SERIES A
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 SERIES A 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 ...................................................................
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 Series A
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of such Series A 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 Series A 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 Series A 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 Series A Notes and to acquire Exchange Notes issuable upon the exchange of
such tendered Series A Notes, and that when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Series A
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 Series A 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 Series
A 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 Series A Notes or transfer ownership of such Series A Notes on the
account books maintained by a book-entry transfer facility. The undersigned
further agrees that acceptance of any tendered Series A 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 Series A 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 Series A Notes tendered
hereby and, in such event, the Series A Notes not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned.
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 Series A 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 Series A Notes, and any Series A 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 Series A 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).
<PAGE>
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)
REGISTERED HOLDER(S) OF SERIES A 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
Series A Notes or on a security position listing as the owner of the Series A
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: .......................................................................
<PAGE>
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 NOT
SUBJECT TO BACKUP WITHHOLDING.
<TABLE>
<S> <C> <C>
PAYOR'S NAME: NASH FINCH COMPANY
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE ------------------------------
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND SOCIAL SECURITY NUMBER
DATING BELOW. OR
------------------------------
EMPLOYER IDENTIFICATION NUMBER
DEPARTMENT OF THE TREASURY PART 2 -- CHECK THE BOX IF YOU ARE NOT PART 3 --
INTERNAL REVENUE SERVICE SUBJECT TO BACKUP WITHHOLDING UNDER THE
PROVISIONS OF SECTION 3406(A)(1)(C) OF THE
PAYOR'S REQUEST FOR TAXPAYER INTERNAL REVENUE CODE BECAUSE (1) YOU ARE AWAITING
IDENTIFICATION NUMBER ("TIN") EXEMPT FROM BACKUP WITHHOLDING, (2) YOU TIN / /
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 THIS FORM IS TRUE, CORRECT AND
COMPLETE.
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.
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
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. All physically
delivered Series A Notes or confirmation of any book-entry transfer to the
Exchange Agent's account at a book-entry transfer facility of Series A 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
Series A 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 Series A 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 Series
A Notes, and (i) whose Notes are not immediately available, or (ii) who cannot
deliver their Series A 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 Series A Notes, the
certificate or registration number(s) of such Series A Notes and the
principal amount of Series A 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 Series A Notes to be
tendered in proper form for transfer (or a confirmation of book-entry
transfer of such Series A 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 Series A Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Series A
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 Series A Notes according to the
guaranteed delivery procedures set forth above. Any Holder who wishes to tender
Series A Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Series A Notes prior to the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
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 Series A 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 Series A Note for the
principal amount of Series A Notes submitted but not tendered will be sent to
such Holder as soon as practicable after the Expiration Date. All Series A Notes
delivered to the Exchange Agent will be deemed to have been tendered in full
unless otherwise indicated.
Any Series A Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date, after which tenders of Series A Notes
are irrevocable. To withdraw a tender of Series A 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 Series A Notes to be withdrawn (the "Depositor"), (ii) identify
the Series A Notes to be withdrawn (including the certificate or registration
number(s) and principal amount of such Series A Notes, or, in the case of Series
A 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 Series A Notes register the transfer of
such Series A Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which such Series A 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 Series A 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 Series A 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 Series A Notes so withdrawn
are validly rendered. Any Series A 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 Series A 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 Series A Notes.
If any of the Series A 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 Series A 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 Series A 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 Series A
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 Series A Notes (which term, for the purposes described herein, shall include
a participant in the Depository whose name appears on a security listing as the
owner of the Series A Notes) listed and tendered hereby, no endorsements of the
tendered Series A Notes or separate written instruments of transfer or exchange
are required. In any other case, the
<PAGE>
registered Holder (or acting Holder) must either properly endorse the Series A
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 Series A Notes, and, with respect to a participant in the
Depository whose name appears on a security position listing as the owner of
Series A Notes, exactly as the name of the participant appears on such security
position listing), with the signature on the Series A Notes or bond power
guaranteed by an Eligible Institution (except where the Series A 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 Series A 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 Series A Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Series A 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 Series A Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Series A 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 Series A Notes tendered, or if tendered Series A 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 Series A 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 Series A 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 Series A
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 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
Norman R. Soland, Vice President, Secretary and General Counsel, Nash Finch
Company, 7600 France Avenue South, P.O. Box 355, Minneapolis, Minnesota
55440-0355.
10. VALIDITY AND FORM. All questions as to the validity, form, eligibility
(including time of receipt), acceptance of tendered Series A Notes and
withdrawal of tendered Series A 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 Series A Notes not properly
tendered or any Series A 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
Series A 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 Series A 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 Series A Notes, nor shall
any of them incur any liability for failure to give such notification. Tenders
of Series A Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Series A 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 Series A Notes, unless otherwise
provided herein, as soon as practicable following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Series A 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 Series A 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 Series A 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 interest
or dividends or (iii) the Internal Revenue Service has notified such Holder that
he or she is no longer subject to backup withholding.
<PAGE>
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 Series A
Notes. If Series A 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
SERIES A NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
8 1/2% SENIOR SUBORDINATED NOTES DUE 2008
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
NASH FINCH COMPANY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Nash Finch Company (the "Company") made pursuant to the
Prospectus, dated , 1998 (the "Prospectus"), if certificates for the
outstanding 8 1/2% Senior Subordinated Notes due 2008, Series A, of the Company
(the "Series A 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 U.S. Bank Trust National Association (the "Exchange Agent") as
set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Series A 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.
U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
------------------------
<TABLE>
<S> <C> <C>
BY MAIL BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER
(registered or certified mail (612) 244-1537
recommended):
U.S. Bank Trust U.S. Bank Trust
National Association National Association
180 East 5th Street 180 East 5th Street
Saint Paul, MN 55101 Saint Paul, MN 55101
Attention:Specialized Finance Confirm by Telephone Attention:Specialized Finance
Fourth Floor or for Information Call: Fourth Floor
</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>
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 Series A 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 Series A 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>
<S> <C>
X ------------------------------------------ -------------------------------------------
X ------------------------------------------ -------------------------------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
</TABLE>
Area Code and Telephone Number:
----------------------------------------------
Must be signed by the holder(s) of Series A Notes as their name(s) appear(s)
on certificates for Series A 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 Series A Notes will be delivered by
book-entry transfer to The Depository Trust Company, provide account number.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
Account Number:
- ---------------------------------------------------------------------------
<PAGE>
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 Series A Notes being tendered hereby or confirmation of
book-entry transfer of such Series A 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 SERIES A NOTES WITH THIS FORM. CERTIFICATES
OF SERIES A NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.3
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 GIVE THE SOCIAL
SECURITY OR SECURITY OR
TAXPAYER TAXPAYER
INDENTIFICATION INDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------- -----------------------------------------------------
<C> <S> <C> <C> <C> <C>
1. An individual's The individual 7. Corporate account The corporation
2. account. The actual owner of
Two or more the account or, if
individuals (joint combined funds, the
account) first individual on
the account(1)
3. Custodian account of The minor(2) 8. Partnership account The partnership
a minor (Uniform Gift held in the name of
to Minors Act) the business
4. a. The usual The 9. Association, club or The organization
revocable savings grantor-trustee(1) other tax exempt
trust account organization
(grantor is also
trustee)
b. So-called trust The actual owner(l) 10. A broker or The broker or
account that is not a registered nominee nominee
legal or valid trust
under state law
5. Sole proprietorship The owner(3) 11. Account with the The public entity
account Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district or prison)
that receives
agricultural program
payments
6. A valid trust, estate Legal entity
or 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>
- ----------------------------------------------------- -----------------------------------------------------
</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>
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, 604lA(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.
